TFS Financial (US:TFSL)2025-11-25 22:19Loan Portfolio and Performance - As of September 30, 2025, the total loan portfolio amounted to $15.67 billion, an increase from $15.34 billion in 2024, representing a growth of 2.2%[39] - Fixed-rate and adjustable-rate first mortgage residential loans totaled $10.84 billion, accounting for 69.1% of the loan portfolio[36] - Home equity lines of credit reached $4.06 billion, representing 25.9% of the loan portfolio, up from 21.7% in 2024[39] - Home equity loans increased to $749.5 million, which is 4.8% of the loan portfolio, compared to 3.6% in 2024[39] - The adjustable-rate first mortgage residential loans totaled $3.94 billion, making up 25.2% of the loan portfolio[36] - Total net real estate loans amounted to $15,729,403 thousand as of September 30, 2025, with a significant increase from previous years[45] - The Company reported $10,803,813 thousand in total loans receivable, with $4,062,798 thousand in home equity lines of credit[48] - The delinquency rate for loans originated under the Home Today program was 4.45% for loans 30 days or more past due, compared to 0.18% for Core loans[53] - Total loans seriously delinquent (90 days or more) were 0.11% of total net loans as of September 30, 2025, compared to 0.09% as of September 30, 2024[77] - The percentage of serious delinquencies in the residential Core portfolio increased from 0.06% to 0.07% year over year[77] - Total non-accrual loans increased to $38.706 million in 2025 from $33.610 million in 2024, representing 0.25% of total loans[81] - Total non-performing assets rose to $40.627 million in 2025 from $33.784 million in 2024, accounting for 0.23% of total assets[81] Credit Losses and Allowances - The allowance for credit losses on loans was $74.24 million, slightly increased from $70.00 million in 2024[39] - The allowance for credit losses is based on a life of loan methodology, with qualitative and quantitative general valuation allowances (GVAs) established[90] - The allowance for credit losses on loans increased to $74.2 million as of September 30, 2025, from $70.0 million in 2024, reflecting a net provision of $2.5 million for the year[101] - The total allowance for credit losses increased to $104.4 million as of September 30, 2025, from $97.8 million in 2024[101] - The allowance for credit losses on loans to non-accrual loans was 191.82% at the end of 2025, down from 208.28% in 2024[97] - The provision for credit losses on unfunded commitments was $2.3 million for the year ended September 30, 2025[101] - The total recoveries for the fiscal year ended September 30, 2025, were $5.2 million, compared to $6.0 million in 2024[97] Deposits and Borrowings - As of September 30, 2025, total deposits amounted to $10.45 billion, with checking accounts at $785.8 million and savings accounts at $1.17 billion[119] - The Association's certificates of deposit (CDs) totaled $8.47 billion, including $902.1 million in brokered CDs, with $5.64 billion having maturities of one year or less[119] - The average balance of checking accounts for fiscal year 2025 was $814.1 million, with a weighted average interest rate of 0.05%[121] - The average balance of savings and money market accounts was $1.24 billion, with a weighted average interest rate of 1.02%[121] - The Association's borrowings at September 30, 2025, totaled $4.87 billion, primarily from the FHLB of Cincinnati[123] - The maximum borrowing capacity with the FHLB of Cincinnati is $6.94 billion, with an additional capacity to borrow up to $505.4 million from the FRB-Cleveland[123] Capital and Regulatory Compliance - As of September 30, 2025, the Association exceeded all regulatory capital requirements to be considered "Well Capitalized" and maintained a capital conservation buffer[144] - The Association's capital standards require a common equity Tier 1 capital ratio of at least 4.5%, a Tier 1 capital ratio of at least 6%, and a total capital ratio of at least 8%[140] - The Association satisfied the Qualified Thrift Lender test, maintaining at least 65% of its portfolio assets in qualified thrift investments[146] - The Association's capital ratios include a Tier 1 (Leverage) Capital to Net Average Assets ratio of 10.11%, exceeding the required 5.00%[165] - As of September 30, 2025, the company is in compliance with consolidated regulatory capital requirements, including the capital conservation buffer[180] Employee and Operational Insights - The voluntary turnover rate for the twelve months ending September 30, 2025, is 3.8%, one of the lowest in the industry[188] - At September 30, 2025, 36% of current associates have been with the company for fifteen years or more, indicating strong employee retention[188] - The company employs 958 associates, with approximately 71% being women, reflecting a commitment to diversity[186] - The company actively promotes the health and wellness of associates through various programs and flexible work schedules[190] Market and Economic Factors - A significant portion of the residential mortgage loan portfolio is secured by one- to four-family real estate, increasing credit risk due to regional economic conditions[223] - Strong competition in the banking and financial services industry may limit the company's growth and profitability, as larger competitors can price loans more aggressively[230] - Cybersecurity risks have increased due to the proliferation of new technologies, which could adversely affect operations and reputation if breaches occur[232] - The company may face increased costs if required to repurchase mortgage loans sold in the secondary market due to borrower defaults or breaches of representations and warranties[225] - The soundness of other financial institutions could adversely affect the company due to interrelated financial services transactions, exposing it to credit risk[248] Strategic Initiatives - The implementation of a new core banking system is expected to be operational by July 2026, which is a major investment aimed at improving efficiency and customer experience[246] - The company focuses on residential mortgage loans, which generally provide lower interest rate returns compared to commercial loans[222] - The company may need to raise additional capital in the future, which could be challenging depending on market conditions[220] Dividend Policy and Stock Value - The ability to pay dividends is contingent on meeting regulatory capital requirements and total dividends not exceeding net income plus retained net income from the previous two years[250] - The value of the Company's common stock is significantly influenced by its ability to pay dividends, which depends on the availability of cash and earnings from the Association[251] - Third Federal Savings, MHC must notify the FRS of any proposed waiver of dividends, and a majority of eligible members must approve such waivers within twelve months prior to the declaration[252] - The FRS has non-objected to Third Federal Savings, MHC's dividend waivers in the past, but future approvals are not guaranteed, which could negatively impact stock value[252]