TFS Financial CORP

Previous wording

Consumers, businesses, and governments alike are navigating an elevated level of economic uncertainty as inflation remains elevated, the labor market is showing signs of weakness, and current global trade policies are being deliberated by the markets. The FRS implemented three consecutive 25 basis point rate cuts between September and the end of December 2025. It is possible that the easing cycle will continue in 2026; however, uncertainty can lead to volatility in interest rates and spreads, and create a challenging operating environment. Taking all of this into consideration, we remain committed to our mission, business model, and strategic approach. Specifically, (1) our capital ratios remain a primary source of financial strength; (2) our core deposits remain stable and the majority of our deposit accounts fall within FDIC insurance limits; (3) we maintain adequate access to contingent sources of liquidity; and (4) our risk management practices around an array of financial disciplines are robust and commensurate to an institution of our size and complexity.

Current wording

Consumers, businesses, and governments alike are navigating an elevated level of economic uncertainty, as inflation remains elevated, the labor market is showing signs of weakness, and markets continue to deliberate the implications of global trade policies and the conflict in the Middle East. The FRS implemented three consecutive 25 basis point rate cuts between September and the end of December 2025. It is less likely that the easing cycle will continue in 2026; however, uncertainty can lead to volatility in interest rates and spreads, and create a challenging operating environment. Taking all of this into consideration, we remain committed to our mission, business model, and strategic approach. Specifically, (1) our capital ratios remain a primary source of financial strength; (2) our core deposits remain stable and the majority of our deposit accounts are within FDIC insurance limits; (3) we maintain adequate access to contingent sources of liquidity; and (4) our risk management practices around an array of financial disciplines are robust and commensurate to an institution of our size and complexity.

Previous wording

Capital ratios remain a source of financial strength for the Company and the Association as all capital ratios, including the Company's Common Equity Tier 1 Capital ratio of 17.35%, exceed the regulatory requirement to be considered "Well Capitalized". Additional details on our capital ratios are reported in the Liquidity and Capital Resources section of this Item 2.

Current wording

Capital ratios remain a source of financial strength for the Company and the Association as all capital ratios, including the Company's Common Equity Tier 1 Capital ratio of 17.22%, exceed the regulatory requirement to be considered "Well Capitalized". Additional details on our capital ratios are reported in the Liquidity and Capital Resources section of this Item 2.

Previous wording

The Company maintains high-quality core deposits distributed primarily across our Ohio and Florida branch network in products tailored toward consumers seeking non-transactional savings. As of December 31, 2025, 95.8% of our $9.49 billion retail deposit base consists of accounts structured under the FDIC insured limit of $250,000. The Company has the ability to fund 100% of all uninsured deposit balances through sources described later in this Item 2 under the heading Liquidity and Capital Resources.

Current wording

The Company maintains high-quality core deposits distributed primarily across our Ohio and Florida branch network in products tailored toward consumers seeking non-transactional savings. As of March 31, 2026, 95.8% of our $9.33 billion retail deposit base consists of accounts structured under the FDIC insured limit of $250,000. The Company has the ability to fund 100% of all uninsured deposit balances through sources described later in this Item 2 under the heading Liquidity and Capital Resources.

Previous wording

The Company retains ample and diverse sources of liquidity and funding, beyond deposits. At December 31, 2025, our combined additional borrowing capacity under the Association's blanket pledge arrangements with the FHLB of Cincinnati and the FRB Cleveland along with our ability to purchase Fed Funds through arrangements with other institutions totaled $2.79 billion. We also hold marketable securities that could be sold and converted to cash. Further details about liquidity and funding are described in the section labelled Maintaining Access to Adequate Liquidity and Diverse Funding Sources to Support our Growth of this Item 2.

Current wording

The Company retains ample and diverse sources of liquidity and funding, beyond deposits. At March 31, 2026, our combined additional borrowing capacity under the Association's blanket pledge arrangements with the FHLB of Cincinnati and the FRB Cleveland along with our ability to purchase Fed Funds through arrangements with other institutions totaled $2.47 billion. We also hold marketable securities that could be sold and converted to cash. Further details about liquidity and funding are described in the section labelled Maintaining Access to Adequate Liquidity and Diverse Funding Sources to Support our Growth of this Item 2.

Previous wording

At December 31, 2025, the Company’s Tier 1 (leverage) capital totaled $1.87 billion, or 10.75%, of net average assets and 17.35% of risk-weighted assets, while the Association’s Tier 1 (leverage) capital totaled $1.71 billion, or 9.81%, of net average assets and 15.82% of risk-weighted assets. Each of these measures is in excess of the requirements in effect at December 31, 2025, for designation as “well capitalized” under regulatory prompt corrective action provisions. Refer to the Liquidity and Capital Resources section of this Item 2 for additional discussion regarding regulatory capital requirements.

Current wording

At March 31, 2026, the Company’s Tier 1 (leverage) capital totaled $1.88 billion, or 10.77%, of net average assets and 17.22% of risk-weighted assets, while the Association’s Tier 1 (leverage) capital totaled $1.73 billion, or 9.94%, of net average assets and 15.89% of risk-weighted assets. Each of these measures is in excess of the requirements in effect at March 31, 2026, for designation as “well capitalized” under regulatory prompt corrective action provisions. Refer to the Liquidity and Capital Resources section of this Item 2 for additional discussion regarding regulatory capital requirements.

Previous wording

The following table sets forth the principal balances and yields as of December 31, 2025, for all ARM loans segregated by the next scheduled interest rate reset date:

Current wording

The following table sets forth the principal balances and yields as of March 31, 2026, for primarily Smart Rate ARM loans segregated by the next scheduled interest rate reset date:

Previous wording

At December 31, 2025 and September 30, 2025, mortgage loans held for sale, all of which were long-term, fixed-rate first mortgage loans and substantially all of which were held for sale to Fannie Mae, totaled $14.4 million and $57.7 million, respectively.

Current wording

At March 31, 2026 and September 30, 2025, mortgage loans held for sale, all of which were long-term, fixed-rate first mortgage loans and substantially all of which were held for sale to Fannie Mae, totaled $5.1 million and $57.7 million, respectively.

Previous wording

We actively market home equity lines of credit, which carry an adjustable rate of interest indexed to the prime rate which provides interest rate sensitivity to that portion of our assets and is a meaningful strategy to manage our interest rate risk profile. Increasing our investments in loans with variable rates of interest help to better match the maturities and interest rates of our assets and liabilities, thereby reducing the exposure of our net interest income to changes in market interest rates. We strive to grow the home equity line of credit portfolio through offering competitive rates, marketing efforts and by utilizing partners to attract more home equity line of credit customers. At December 31, 2025, the principal balance of home equity lines of credit (including those in repayment) that are structured to reset with each prime rate adjustment totaled $4.24 billion. Our home equity lending is discussed in the Lending Activities section of this Item 2.

Current wording

We actively market home equity lines of credit, which carry an adjustable rate of interest indexed to the prime rate which provides interest rate sensitivity to that portion of our assets and is a meaningful strategy to manage our interest rate risk profile. Increasing our investments in loans with variable rates of interest help to better match the maturities and interest rates of our assets and liabilities, thereby reducing the exposure of our net interest income to changes in market interest rates. We strive to grow the home equity line of credit portfolio through offering competitive rates, marketing efforts and by utilizing partners to attract more home equity line of credit customers. At March 31, 2026, the principal balance of home equity lines of credit (including those in repayment) that are structured to reset with each prime rate adjustment totaled $4.36 billion. Our home equity lending is discussed in the Lending Activities section of this Item 2.

Previous wording

During the three months ended December 31, 2025, $109.6 million of agency-compliant, long-term (15 to 30 years), fixed-rate mortgage loans were sold, or committed to be sold, primarily to Fannie Mae on a servicing retained basis. Of these sold or committed loans, $80.6 million were originated as agency-compliant first mortgage loans, $12.4 million were acquired through a correspondent lending partnership, and $16.7 million were originated under Fannie Mae's Home Ready initiative. At

Current wording

During the six months ended March 31, 2026, $204.1 million of agency-compliant, long-term (15 to 30 years), fixed-rate mortgage loans were sold, or committed to be sold, primarily to Fannie Mae on a servicing retained basis. Of these sold or committed loans, $142.9 million were originated as agency-compliant first mortgage loans, $36.8 million were acquired through a correspondent lending partnership, and $24.4 million were originated under Fannie Mae's Home Ready initiative. At

Previous wording

December 31, 2025, loans classified as held for sale totaled $14.4 million. At December 31, 2025, we serviced $2.19 billion of loans we originated or acquired and later sold to investors.

Current wording

March 31, 2026, loans classified as held for sale totaled $5.1 million. At March 31, 2026, we serviced $2.21 billion of loans we originated or acquired and later sold to investors.

Previous wording

We continue to consider liquidity and balance sheet management, as well as secondary market pricing, in evaluating the opportunity to sell loans. Loan sales are discussed in more detail within the Liquidity and Capital Resources section of this Item 2.

Current wording

We continue to consider liquidity, interest rate risk and balance sheet management, as well as secondary market pricing, in evaluating the opportunity to sell loans. Loan sales are discussed in more detail within the Liquidity and Capital Resources section of this Item 2.

Previous wording

In an effort to limit our credit risk exposure and keep it consistent with the low risk appetite approved by the Board of Directors, the credit eligibility criteria is evaluated to ensure a successful homeowner has the primary source of repayment, followed by a collateral position that allows for a secondary source of repayment, if needed. Products that do not result in an effective mix of repayment ability are not offered. We believe we use stringent, conservative lending standards for underwriting to reduce our credit risk. For first mortgage loans originated during the current quarter, the average credit score was 772 and the average LTV was 71% at origination. Our current delinquency levels reflect the higher credit standards to which we subject all new originations. As of December 31, 2025, loans originated or acquired had a balance of $15.83 billion, of which $36.8 million, or 0.23%, were delinquent.

Current wording

In an effort to limit our credit risk exposure and keep it consistent with the low risk appetite approved by the Board of Directors, the credit eligibility criteria is evaluated to ensure a successful homeowner has the primary source of repayment, followed by a collateral position that allows for a secondary source of repayment, if needed. Products that do not result in an effective mix of repayment ability are not offered. We believe we use stringent, conservative lending standards for underwriting to reduce our credit risk. For first mortgage loans originated during the current quarter, the average credit score was 775 and the average LTV was 71% at origination. Our current delinquency levels reflect the higher credit standards to which we subject all new originations. As of March 31, 2026, loans originated or acquired had a balance of $15.82 billion, of which $38.3 million, or 0.24%, were delinquent.

Previous wording

One aspect of our credit risk concern relates to high concentrations of our loans that are secured by residential real estate in specific states, particularly Ohio and Florida, where a large portion of our historical lending has occurred. At December 31, 2025, approximately 58.6% and 16.7% of the combined total of our residential Core and construction loans were held for investment in Ohio and Florida, respectively, and approximately 22.1% and 21.0% of our home equity loans and lines of credit were secured by properties in Ohio and Florida, respectively. In an effort to moderate the concentration of our credit risk exposure in individual states, we have utilized direct mail marketing, our internet site and our customer service call center to extend our lending activities to other attractive geographic locations. Currently, in addition to Ohio and Florida, we are actively lending in 26 other states and the District of Columbia, and as a result of that activity, the concentration ratios of the combined total of our residential Core and construction loans held for investment in Ohio and Florida have trended downward from their September 30, 2010, levels when the concentrations were 79.1% in Ohio and 19.0% in Florida. Of the total mortgage loans originated in the three months ended December 31, 2025, 20.2% are secured by properties in states other than Ohio or Florida.

Current wording

One aspect of our credit risk concern relates to high concentrations of our loans that are secured by residential real estate in specific states, particularly Ohio and Florida, where a large portion of our historical lending has occurred. At March 31, 2026, approximately 58.7% and 16.7% of the combined total of our residential Core and construction loans were held for investment in Ohio and Florida, respectively, and approximately 21.6% and 20.8% of our home equity loans and lines of credit were secured by properties in Ohio and Florida, respectively. In an effort to moderate the concentration of our credit risk exposure in individual states, we have utilized direct mail marketing, our internet site and our customer service call center to extend our lending activities to other attractive geographic locations. Currently, in addition to Ohio and Florida, we are actively lending in 26 other states and the District of Columbia, and as a result of that activity, the concentration ratios of the combined total of our residential Core and construction loans held for investment in Ohio and Florida have trended downward from their September 30, 2010, levels when the concentrations were 79.1% in Ohio and 19.0% in Florida. Of the total mortgage loans originated in the six months ended March 31, 2026, 22.5% are secured by properties in states other than Ohio or Florida.

Previous wording

Maintaining Access to Adequate Liquidity and Diverse Funding Sources to Support our Growth. For most insured depositories, customer and community confidence are critical to their ability to maintain access to adequate liquidity and to conduct business in an orderly manner. We believe that a well capitalized institution is one of the most important factors in nurturing customer and community confidence. At December 31, 2025, the Association’s ratio of Tier 1 (leverage) capital to net average assets (a basic industry measure that deems 5.00% or above to represent a “well capitalized” status) was 9.81%. The Association's Tier 1 (leverage) capital ratio at December 31, 2025, included the negative impact of a $65 million cash dividend payment that the Association made to the Company, its sole shareholder, in December 2025. Because of its intercompany nature, this dividend payment did not impact the Company's consolidated capital ratios which are reported in the Liquidity and Capital Resources section of this Item 2. We expect to continue to remain a well capitalized institution.

Current wording

Maintaining Access to Adequate Liquidity and Diverse Funding Sources to Support our Growth. For most insured depositories, customer and community confidence are critical to their ability to maintain access to adequate liquidity and to conduct business in an orderly manner. We believe that a well capitalized institution is one of the most important factors in nurturing customer and community confidence. At March 31, 2026, the Association’s ratio of Tier 1 (leverage) capital to net average assets (a basic industry measure that deems 5.00% or above to represent a “well capitalized” status) was 9.94%. The Association's Tier 1 (leverage) capital ratio at March 31, 2026, included the negative impact of a $65 million cash dividend payment that the Association made to the Company, its sole shareholder, in December 2025. Because of its intercompany nature, this dividend payment did not impact the Company's consolidated capital ratios which are reported in the Liquidity and Capital Resources section of this Item 2. We expect to continue to remain a well capitalized institution.

Previous wording

In managing its level of liquidity, the Company monitors available funding sources, which include attracting new deposits (including brokered deposits), borrowing from others, the conversion of assets to cash and the generation of funds through profitable operations. The Company has traditionally relied on retail deposits as its primary means in meeting its funding needs. To attract deposits, we typically offer rates that are competitive with the rates on similar products offered by other financial institutions. At December 31, 2025, deposits totaled $10.37 billion (including $879.4 million of brokered CDs), while borrowings totaled $4.94 billion and borrowers’ advances and servicing escrows totaled $175.9 million, combined. In evaluating funding sources, we consider many factors, including cost, collateral, duration and optionality, current availability, expected sustainability, impact on operations and capital levels.

Current wording

In managing its level of liquidity, the Company monitors available funding sources, which include attracting new deposits (including brokered deposits), borrowing from others, the conversion of assets to cash and the generation of funds through profitable operations. The Company has traditionally relied on retail deposits as its primary means in meeting its funding needs. To attract deposits, we typically offer rates that are competitive with the rates on similar products offered by other financial institutions. At March 31, 2026, deposits totaled $10.19 billion (including $863.7 million of brokered CDs), while borrowings totaled $5.14 billion and borrowers’ advances and servicing escrows totaled $125.7 million, combined. In evaluating funding sources, we consider many factors, including cost, collateral, duration and optionality, current availability, expected sustainability, impact on operations and capital levels.

Previous wording

While our retail deposit customers provide our primary source of funding, we maintain many alternative funding sources. First, we pledge available real estate mortgage loans with the FHLB of Cincinnati and the FRB-Cleveland. At December 31, 2025, the Association had the ability to borrow a maximum of $6.80 billion from the FHLB of Cincinnati and $478.8 million from the FRB-Cleveland Discount Window. As of December 31, 2025, our capacity for additional borrowing from the FHLB of Cincinnati was $2.03 billion. Second, we have the ability to purchase overnight Fed Funds up to $435.0 million through various arrangements with other institutions, of which $285.0 million is available as of December 31, 2025. Third, we invest in high quality marketable securities that exhibit limited market price variability and, to the extent that they are not needed as collateral for borrowings, can be sold in the institutional market and converted to cash. At December 31, 2025, our investment securities portfolio totaled $454.5 million. Fourth, selling loans in the secondary market is a regular source of liquidity. During the three months ended December 31, 2025, we sold, or committed to sell $109.6 million in loans primarily to Fannie Mae. Finally, cash flows from operating activities have been a regular source of funds. During the three months ended December 31, 2025 and 2024, cash flows from operations provided $58.7 million and $45.5 million, respectively.

Current wording

While our retail deposit customers provide our primary source of funding, we maintain many alternative funding sources. First, we pledge available real estate mortgage loans with the FHLB of Cincinnati and the FRB-Cleveland. At March 31, 2026, the Association had the ability to borrow a maximum of $6.69 billion from the FHLB of Cincinnati and $451.5 million from the FRB-Cleveland Discount Window. As of March 31, 2026, our capacity for additional borrowing from the FHLB of Cincinnati was $1.57 billion. Second, we have the ability to purchase overnight Fed Funds up to $455.0 million through various arrangements with other institutions. Third, we invest in high quality marketable securities that exhibit limited market price variability and, to the extent that they are not needed as collateral for borrowings, can be sold in the institutional market and converted to cash. At March 31, 2026, our investment securities portfolio totaled $454.6 million. Fourth, selling loans in the secondary market is a regular source of liquidity. During the six months ended March 31, 2026, we sold, or committed to sell $204.1 million in loans primarily to Fannie Mae. Finally, cash flows from operating activities have been a regular source of funds. During the six months ended March 31, 2026 and 2025, cash flows from operations provided $76.4 million and $66.8 million, respectively.

Previous wording

Monitoring and Controlling Our Operating Expenses. We continue to focus on managing operating expenses. Our ratio of annualized non-interest expense to average assets was 1.29% for the three months ended December 31, 2025, and 1.13% for the three months ended December 31, 2024. As of December 31, 2025, our average assets per full-time employee and our average deposits per full-time employee were $18.1 million and $10.7 million, respectively. We believe that each of these measures compares favorably with industry averages. Our relatively high average deposits (exclusive of brokered CDs) held at our branch offices ($263.7 million per branch office as of December 31, 2025) contributes to our expense management efforts by limiting the overhead costs of serving our customers. We will continue our efforts to control operating expenses to help offset margin compression.

Current wording

Monitoring and Controlling Our Operating Expenses. We continue to focus on managing operating expenses. Our ratio of annualized non-interest expense to average assets was 1.28% for the six months ended March 31, 2026, and 1.16% for the six months ended March 31, 2025. As of March 31, 2026, our average assets per full-time employee and our average deposits per full-time employee were $17.9 million and $10.6 million, respectively. We believe that each of these measures compares favorably with industry averages. Our relatively high average deposits (exclusive of brokered CDs) held at our branch offices ($262.8 million per branch office as of March 31, 2026) contributes to our expense management efforts by limiting the overhead costs of serving our customers. We will continue our efforts to control operating expenses to help offset the risk of margin compression and to support profitable growth of the business.

Previous wording

We provide for credit losses based on a life of loan methodology. Accordingly, all credit losses are charged to, and all recoveries are credited to, the related allowance. Additions to the allowance for credit losses are provided by charges to income based on various factors which, in our judgment, deserve current recognition in estimating lifetime credit losses. We regularly review the loan portfolio and off-balance sheet exposures and make provisions (or releases) for losses in order to maintain the allowance for credit losses in accordance with U.S. GAAP. Our allowance for credit losses is a general valuation allowance (GVA) on our portfolio made up of:

Current wording

We provide for credit losses based on a life of loan methodology. Accordingly, all credit losses are charged to, and all recoveries are credited to, the related allowance. Additions to the allowance for credit losses are provided by charges to income based on various factors which, in our judgment, deserve current recognition in estimating lifetime credit losses. We regularly review the loan portfolio and off-balance sheet exposures and make provisions (or releases) for losses in order to maintain the allowance for credit losses in accordance with U.S. GAAP. Our allowance for credit losses is a GVA on our portfolio made up of:

Previous wording

The qualitative GVAs expand our ability to identify and estimate probable losses and are based on our evaluation of the following factors, some of which are consistent with factors that impact the determination of quantitative GVAs. For example, delinquency statistics (both current and historical) are used in developing the quantitative GVAs, while the trending of the delinquency statistics is considered and evaluated in the determination of the qualitative GVAs. Factors impacting the determination of qualitative GVAs include, among other:

Current wording

The qualitative GVAs expand our ability to identify and estimate probable losses and are based on our evaluation of the following factors, some of which are consistent with factors that impact the determination of quantitative GVAs. For example, delinquency statistics (both current and historical) are used in developing the quantitative GVAs, while the trending of the delinquency statistics is considered and evaluated in the determination of the qualitative GVAs. Factors impacting the determination of qualitative GVAs include, among others:

Previous wording

•changes in the quality of the loan review system;

Current wording

•changes in the scope or quality of the loan review system;

Previous wording

Home equity loans and lines of credit generally have higher credit risk than traditional residential mortgage loans. These loans and credit lines are usually in a second lien position and when combined with the first mortgage, result in generally higher overall loan-to-value ratios. In a stressed housing market with high delinquencies and decreasing housing prices, these higher loan-to-value ratios represent a greater risk of loss to the Company. A borrower with more equity in the property has a vested interest in keeping the loan current when compared to a borrower with little or no equity in the property. Given the higher risk inherent in home equity loans and lines of credit and our experience during periods of weak housing markets and potential uncertainty with respect to future employment levels and economic prospects, we conduct an expanded loan level evaluation of our home equity loans and lines of credit, including bridge loans used to aid borrowers in buying a new home before selling their old one, which are delinquent 90 days or more. This expanded evaluation is in addition to our traditional evaluation procedures. We have established an allowance for our unfunded commitments on this portfolio, which is recorded in other liabilities. Our home equity loans and lines of credit portfolio continues to comprise a significant portion of our gross charge-offs. At December 31, 2025, we had an amortized cost of $4.28 billion in home equity lines of credit and $815.7 million in home equity loans outstanding, of which $6.1 million, or 0.12%, were delinquent 90 days or more.

Current wording

Home equity loans and lines of credit generally have higher credit risk than traditional residential mortgage loans. These loans and credit lines are usually in a second lien position and when combined with the first mortgage, result in generally higher overall loan-to-value ratios. In a stressed housing market with high delinquencies and decreasing housing prices, these higher loan-to-value ratios represent a greater risk of loss to the Company. A borrower with more equity in the property has a vested interest in keeping the loan current when compared to a borrower with little or no equity in the property. Given the higher risk inherent in home equity loans and lines of credit and our experience during periods of weak housing markets and potential uncertainty with respect to future employment levels and economic prospects, we conduct an expanded loan level evaluation of our home equity loans and lines of credit, including bridge loans used to aid borrowers in buying a new home before selling their old one, which are delinquent 90 days or more. This expanded evaluation is in addition to our traditional evaluation procedures. We have established an allowance for our unfunded commitments on this portfolio, which is recorded in other liabilities. Our home equity loans and lines of credit portfolio continues to comprise a significant portion of our gross charge-offs. At March 31, 2026, we had an amortized cost of $4.40 billion in home equity lines of credit and $883.1 million in home equity loans outstanding, of which $5.5 million, or 0.10%, were delinquent 90 days or more.

Previous wording

We continue to evaluate loans becoming delinquent for potential losses and record provisions for the estimate of those losses. We reported net recoveries in each quarter for the past seven years, primarily due to improvements in the values of properties used to secure loans that were fully or partially charged off after the 2008 collapse of the housing market. Charge-offs are recognized on loans identified as collateral-dependent and subject to individual review when the collateral value does not sufficiently support full repayment of the obligation. Recoveries are recognized on previously charged-off loans as borrowers perform their repayment obligations or as loans with improved collateral positions reach final resolution. During the three months ended December 31, 2025 and December 31, 2024, recoveries exceeded loan charge-offs by $0.7 million and $1.4 million, respectively. During the three months ended December 31, 2025 and December 31, 2024, gross charge-offs were $0.4 million and $0.3 million, respectively. Delinquent loans continue to be evaluated for potential losses and provisions are recorded for the estimate of potential losses of those loans.

Current wording

We continue to evaluate loans becoming delinquent for potential losses and record provisions for the estimate of those losses. We reported net recoveries in each quarter for the past seven years, primarily due to improvements in the values of properties used to secure loans that were fully or partially charged off after the 2008 collapse of the housing market. Charge-offs are recognized on loans identified as collateral-dependent and subject to individual review when the collateral value does not sufficiently support full repayment of the obligation. Recoveries are recognized on previously charged-off loans as borrowers perform their repayment obligations or as loans with improved collateral positions reach final resolution. During the three months ended March 31, 2026 and March 31, 2025, recoveries exceeded loan charge-offs by $0.8 million and $0.7 million, respectively. During the three months ended March 31, 2026 and March 31, 2025, gross charge-offs were $0.3 million at both dates. Delinquent loans continue to be evaluated for potential losses and provisions are recorded for the estimate of potential losses of those loans.

Previous wording

During the three months ended December 31, 2025, the total allowance for credit losses decreased to $104.1 million, from $104.4 million at September 30, 2025. The total allowance for credit losses is comprised of the asset portion, which is applied to the loan portfolio and the liability portion, which is applied to off-balance sheet exposures, primarily related to undrawn equity exposures. During the three months ended December 31, 2025, the asset and liability portions of the total allowance increased to $75.0 million from $74.2 million and decreased to $29.1 million from $30.1 million, respectively. We recorded a $1.0 million net release of allowance for credit losses for the period, consisting a $1.0 million release of provision for credit losses on off-balance sheet exposures. There was no provision for credit losses on loans during the period.

Current wording

During the three months ended March 31, 2026, the total allowance for credit losses increased to $104.9 million, from $104.1 million at December 31, 2025. The total allowance for credit losses is comprised of the asset portion, which is applied to the loan portfolio and the liability portion, which is applied to off-balance sheet exposures, primarily related to undrawn equity exposures. During the three months ended March 31, 2026, the asset and liability portions of the total allowance decreased to $74.9 million from $75.0 million and increased to $30.0 million from $29.1 million, respectively. We recorded no provision expense for the allowance for credit losses for the period.

Previous wording

Because many variables are considered in determining the appropriate level of general valuation allowances, directional changes in individual considerations do not always align with the directional change in the balance of a particular component of the general valuation allowance. The slight decrease in the allowance for credit losses applied to the loan portfolio during the three months ended December 31, 2025, was primarily related to a lower net recovery forecast for total qualitative factors, while equity increases and mortgage decreases in loan loss dollars were offset for quantitative forecasts to remain relatively flat.

Current wording

Because many variables are considered in determining the appropriate level of GVAs, directional changes in individual considerations do not always align with the directional change in the balance of a particular component of the GVA. The slight decrease in the allowance for credit losses applied to the loan portfolio during the three months ended March 31, 2026, was primarily related to a slight decrease in mortgage loan loss dollars, partially offset by a lower net recovery forecast for total qualitative factors and an increase in equity loss forecasts due to growth in these portfolios.

Previous wording

The amortized cost of the residential Core portfolio decreased 1.4%, or $154.0 million, and its total allowance decreased 3.9%, or $1.6 million, as of December 31, 2025, compared to September 30, 2025. The amortized cost of the home equity lines of credit portfolio increased 4.3%, or $176.3 million, and its total allowance increased 4.4% to $23.0 million, from $22.1 million at September 30, 2025. The amortized cost of the home equity loans increased 8.0%, or $60.2 million, and its total allowance increased 7.2% to $15.7 million, from $14.6 million at September 30, 2025. As we are no longer originating loans under our Home Today program, there is an expected net recovery position for this portfolio which was $2.1 million at December 31, 2025 and $2.4 million at September 30, 2025. Under the CECL methodology, the life of loan concept allows for qualitative adjustments for the expected future recoveries of previously charged-off loans, which is driving the allowance balance for the Home Today loans to be negative. Refer to the"Activity in the Allowance for Credit Losses" and "Analysis of the Allowance for Credit Losses" tables in Note 4. LOANS AND ALLOWANCES FOR CREDIT LOSSES of the NOTES TO CONSOLIDATED FINANCIAL STATEMENTS for more information.

Current wording

The amortized cost of the residential Core portfolio decreased 1.7%, or $186.3 million, and its total allowance decreased 4.9%, or $1.9 million, as of March 31, 2026, compared to December 31, 2025. The amortized cost of the home equity lines of credit portfolio increased 2.8%, or $121.4 million, and its total allowance increased 1.5% to $23.4 million, from $23.0 million at December 31, 2025. The amortized cost of the home equity loans increased 8.3%, or $67.4 million, and its total allowance increased 8.4% to $17.0 million, from $15.7 million at December 31, 2025. As we are no longer originating loans under our Home Today program, there is an expected net recovery position for this portfolio which was $2.0 million at March 31, 2026 and $2.1 million at December 31, 2025. Under the CECL methodology, the life of loan concept allows for qualitative adjustments for the expected future recoveries of previously charged-off loans, which is driving the allowance balance for the Home Today loans to be negative. Refer to the"Activity in the Allowance for Credit Losses" and "Analysis of the Allowance for Credit Losses" tables in Note 4. LOANS AND ALLOWANCES FOR CREDIT LOSSES of the NOTES TO CONSOLIDATED FINANCIAL STATEMENTS for more information.

Previous wording

The following tables set forth the allowance for credit losses allocated by loan category, the percent of allowance in each category to the total allowance on loans, and the percent of loans in each category to total loans at the dates indicated. The allowance for credit losses allocated to each category is not necessarily indicative of future losses in any particular category and does not restrict the use of the allowance to absorb losses in other categories. The tables do not include allowances for credit losses on unfunded loan commitments, which are primarily related to undrawn home equity lines of credit.

Current wording

The following table sets forth the allowance for credit losses allocated by loan category, the percent of allowance in each category to the total allowance on loans, and the percent of loans in each category to total loans at the dates indicated. The allowance for credit losses allocated to each category is not necessarily indicative of future losses in any particular category and does not restrict the use of the allowance to absorb losses in other categories. The table does not include allowances for credit losses on unfunded loan commitments, which are primarily related to undrawn home equity lines of credit.

Previous wording

At December 31, 2025, the unpaid principal balance of the home equity loans and lines of credit portfolio consisted of $809.4 million in home equity loans (which included $18.0 million in bridge loans) and $4.24 billion in home equity lines of credit (which included $56.2 million of home equity lines of credit which are in repayment and no longer eligible to be drawn upon).

Current wording

At March 31, 2026, the home equity loan portfolio had an unpaid principal balance of $876.4 million, including $14.0 million in bridge loans, and home equity lines of credit had an unpaid principal balance of $4.36 billion of which $56.2 million were in repayment and no longer eligible to be drawn upon.

Previous wording

The principal balance of home equity lines of credit in the draw period that have a current CLTV over 80% or unknown, based on drawn amount, is $46.8 million, or 1.1% of the total, at December 31, 2025. In recognition of the past weakness in the housing market, we continue to conduct an expanded loan level evaluation of our home equity lines of credit which are delinquent 90 days or more.

Current wording

The principal balance of home equity lines of credit in the draw period that have a current CLTV over 80% or unknown, based on drawn amount, is $38.5 million, or 0.9% of the total at March 31, 2026. In recognition of the past weakness in the housing market, we continue to conduct an expanded loan level evaluation of our home equity lines of credit which are delinquent 90 days or more.

Previous wording

At December 31, 2025, 22.3% of the home equity lending portfolio was either in a first lien position (11.7%), in a subordinate (second) lien position behind a first lien that we held (8.7%) or behind a first lien that was held by a loan that we originated, sold and now serviced for others (1.9%). At December 31, 2025, 11.9% of the home equity line of credit portfolio in the draw period were making only the minimum payment on the outstanding line balance. Minimum payments include both a principal and interest component.

Current wording

At March 31, 2026, 21.7% of the home equity lending portfolio was either in a first lien position (11.4%), in a subordinate (second) lien position behind a first lien that we held (8.4%) or behind a first lien that was held by a loan that we originated, sold and now serviced for others (1.9%). At March 31, 2026, 11.6% of the home equity line of credit portfolio in the draw period were making only the minimum payment on the outstanding line balance. Minimum payments include both a principal and interest component.

Previous wording

The following tables set forth the amortized cost in loan delinquencies by type, segregated by geographic location and duration of delinquency as of the dates indicated. The majority of our Home Today loan portfolio is secured by properties located in Ohio, and therefore not segregated by state. There were no other loans with delinquent balances. There were no delinquencies in the construction loan portfolio as of the dates presented.

Current wording

The following tables set forth the amortized cost in loan delinquencies by type, segregated by geographic location and duration of delinquency as of the dates indicated. The majority of our Home Today loan portfolio is secured by properties located in Ohio, and therefore not segregated by state. There were no delinquencies within the construction and other loans portfolios as of the dates presented.

Previous wording

Total loans seriously delinquent (i.e. delinquent 90 days or more) were 0.11% of total net loans at December 31, 2025, and September 30, 2025. The percentage of loans seriously delinquent in the residential Core portfolio remained at 0.07% for both periods. Serious delinquencies in the home equity lines of credit portfolio remained at 0.03% for both periods. Serious delinquencies in the Home Today and home equity loans portfolios at December 31, 2025 and September 30, 2025, respectively, are immaterial due to the low level of seriously delinquent loans as compared to the total net loans at each period.

Current wording

Total loans seriously delinquent (i.e. delinquent 90 days or more) were 0.11% of total net loans at March 31, 2026, and September 30, 2025. The percentage of loans seriously delinquent in the residential Core portfolio remained at 0.07% for both periods. Serious delinquencies in the home equity lines of credit portfolio remained at 0.03% for both periods. Serious delinquencies in the Home Today and home equity loan portfolios at March 31, 2026 and September 30, 2025, respectively, are immaterial due to the low level of seriously delinquent loans as compared to the total net loans at each period.

Previous wording

Although delinquencies in most portfolios remain at or near historic lows, recent economic trends and elevated interest rates on home equity lines of credit led to an upward trend in delinquencies in that portfolio. Interest rates on home equity lines of credit are tied to the prime rate of interest which remains elevated, resulting in higher and less affordable monthly payments for some borrowers.

Current wording

Although delinquencies in most portfolios remain at or near historic lows, recent economic trends and elevated interest rates on home equity lines of credit led to an upward trend in delinquencies in that portfolio. Interest rates on home equity lines of credit are tied to the prime rate of interest which remains elevated, despite the three recent FRS 25 basis point rate cuts, resulting in higher and less affordable monthly payments for some borrowers.

Previous wording

Total assets increased $42.4 million, or less than 1%, to $17.50 billion at December 31, 2025, from $17.46 billion at September 30, 2025. This change was mainly the result of increases in loans held for investment and prepaid expenses and other assets, partially offset by decreases in investment securities available for sale and loans held for sale.

Current wording

Total assets increased $23.4 million, or less than 1%, to $17.48 billion at March 31, 2026, from $17.46 billion at September 30, 2025. This change was mainly the result of increases in loans held for investment and prepaid expenses and other assets, offset by a decrease in mortgage loans held for sale.

Previous wording

Cash and cash equivalents increased $27.3 million, or 6.4%, to $456.7 million at December 31, 2025, from $429.4 million at September 30, 2025. Cash is managed to maintain the level of liquidity described later in the Liquidity and Capital Resources section.

Current wording

Cash and cash equivalents increased $7.9 million, or 1.8%, to $437.3 million at March 31, 2026, from $429.4 million at September 30, 2025. Cash is managed to maintain the level of liquidity described later in the Liquidity and Capital Resources section.

Previous wording

Investment securities, all of which are classified as available for sale, decreased $66.2 million, or 12.71%, to $454.5 million at December 31, 2025, from $520.7 million at September 30, 2025. The decrease was primarily due to maturities exceeding purchases during the quarter ended December 31, 2025. During the quarter ended December 31, 2025, a $50.0 million treasury security matured and was not replaced.

Current wording

Investment securities, all of which are classified as available for sale, decreased $66.1 million, or 12.69%, to $454.6 million at March 31, 2026, from $520.7 million at September 30, 2025. The decrease was primarily due to maturities exceeding purchases during the six-month period ended March 31, 2026, including a $50.0 million U.S. Treasury security that matured and was not replaced.

Previous wording

Mortgage loans held for sale decreased by $43.3 million, or 75.0%, to $14.4 million at December 31, 2025, from $57.7 million at September 30, 2025, due to a decrease in both loans committed to forward sales and loans identified for future sale.

Current wording

Mortgage loans held for sale decreased by $52.6 million, or 91.2%, to $5.1 million at March 31, 2026, from $57.7 million at September 30, 2025, due to a decrease in both loans committed to forward sales and loans identified for future sale.

Previous wording

Loans held for investment, net of deferred loan fees and allowance for credit losses, increased $78.4 million, or 0.5%, to $15.74 billion at December 31, 2025, from $15.66 billion at September 30, 2025. During the three months ended December 31, 2025, the home equity loans and lines of credit portfolio increased $236.0 million and residential core mortgage loans decreased $153.9 million as repayments and sales outpaced the volume of residential mortgage loans originated and acquired.

Current wording

Loans held for investment, net of deferred loan fees and allowance for credit losses, increased $79.0 million, or 0.5%, to $15.74 billion at March 31, 2026, from $15.66 billion at September 30, 2025. During the six months ended March 31, 2026, the home equity loans and lines of credit portfolio increased $424.4 million and residential core mortgage loans decreased $339.8 million.

Previous wording

The changes in loans held for investment were affected by the volume of loans originated, acquired and sold. During the three months ended December 31, 2025, total first mortgage loan originations were $315.4 million compared to $427.9 million for the quarter ended September 30, 2025, and $176.5 million for the three months ended December 31, 2024. Of total residential mortgage loans originated and acquired during the current period, $268.5 million (85.1%) were purchase transactions and $38.7 million (12.3%) were adjustable rate loans. Commitments originated for home equity loans and lines of credit were $531.1 million for the quarter ended December 31, 2025, compared to $645.4 million for the quarter ended September 30, 2025, and $559.0 million for the quarter ended December 31, 2024. Refer to Note 4. LOANS AND ALLOWANCES FOR CREDIT LOSSES of the NOTES TO CONSOLIDATED FINANCIAL STATEMENTS for additional information.

Current wording

The changes in loans held for investment were affected by the volume of loans originated, acquired and sold. During the six months ended March 31, 2026, total first mortgage loan originations were $567.1 million compared to $376.0 million for the six months ended March 31, 2025. Of total residential mortgage loans originated and acquired during the current period, $455.7 million (80.4%) were purchase mortgage transactions and $71.4 million (12.6%) were adjustable rate loans. Commitments originated for home equity loans and lines of credit were $1.10 billion for the six-month period ended March 31, 2026, compared to $1.20 billion for the six-month period ended March 31, 2025. Refer to Note 4. LOANS AND ALLOWANCES FOR CREDIT LOSSES of the NOTES TO CONSOLIDATED FINANCIAL STATEMENTS for additional information.

Previous wording

Other assets, including prepaid expenses, increased $46.7 million, or 41.8%, to $158.4 million at December 31, 2025, from $111.7 million at September 30, 2025. The increase was primarily the result of a $47.9 million increase in margin requirement on swap contracts after an investment security that had been posted as collateral matured during the three months ended December 31, 2025.

Current wording

Other assets, including prepaid expenses, increased $41.2 million, or 36.9%, to $152.9 million at March 31, 2026, from $111.7 million at September 30, 2025. The increase was primarily the result of a $47.9 million increase in margin requirement on swap contracts after an investment security that had been posted as collateral matured during the six months ended March 31, 2026, partially offset by a $3.5 million decrease in deferred income tax assets and a $4.0 million decrease in interest receivable on swap contracts.

Previous wording

Deposits decreased $74.9 million, or 0.7%, to $10.37 billion at December 31, 2025, from $10.45 billion at September 30, 2025. The decrease in deposits included a $494.2 million decrease in the CD portfolio and a $10.0 million decrease in money market accounts, partially offset by a $399.7 million increase in savings accounts, and a $27.5 million increase in checking accounts. The maturity of CDs that convert to tiered-interest savings accounts at maturity led to the movement between the CD and savings account portfolios between the periods compared. At December 31, 2025, brokered CDs totaled $879.4 million and included $550.0 million of one- to three-month certificates of deposit accounts aligned with pay-fixed interest rate swap contracts. Based on FDIC insurance limits by ownership structure, uninsured deposits were $401.5 million and $387.3 million at December 31, 2025 and September 30, 2025, respectively.

Current wording

Deposits decreased $259.6 million, or 2.5%, to $10.19 billion at March 31, 2026, from $10.45 billion at September 30, 2025. The decrease in deposits included a $965.2 million decrease in the CD portfolio and a $19.4 million decrease in money market accounts, partially offset by a $711.2 million increase in savings accounts, and a $8.7 million increase in checking accounts. The maturity of CDs that convert to tiered-interest savings accounts at maturity primarily led to the movement between the CD and savings account portfolios between the periods compared. At March 31, 2026, brokered CDs totaled $863.7 million and included $550.0 million of three-month certificates of deposit accounts aligned with pay-fixed interest rate swap contracts. Based on FDIC insurance limits by ownership structure, uninsured deposits were $391.2 million and $387.3 million at March 31, 2026 and September 30, 2025, respectively.