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 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.

Current wording

Consumers, businesses, and governments alike are navigating an elevated level of economic uncertainty, as inflation remains elevated 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. Current market sentiments have shifted from anticipated policy easing to the possibility of rate hikes. Uncertainty and volatility in interest rates and spreads, can 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 17.22%, 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.

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 16.88%, 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 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.

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 June 30, 2026, 95.6% of our $9.07 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 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.

Current wording

The Company retains ample and diverse sources of liquidity and funding, beyond deposits. At June 30, 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 $1.85 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

Controlling Our Interest Rate Risk Exposure. Historically, our greatest risk has been our exposure to changes in market interest rates. When we hold longer-term, fixed-rate assets, funded by liabilities with shorter-term re-pricing characteristics, we are exposed to potentially adverse impacts from changing interest rates, and most notably rising interest rates. Generally, and particularly over extended periods of time that encompass full economic cycles, interest rates associated with longer-term assets, like fixed-rate mortgages, have been higher than interest rates associated with shorter-term funding sources, like deposits. This difference has been an important component of our net interest income and is fundamental to our operations.

Current wording

Controlling Our Interest Rate Risk Exposure. Historically, our greatest risk has been our exposure to changes in market interest rates. When we hold longer-term, fixed-rate assets, funded by liabilities with shorter-term re-pricing characteristics, we are exposed to potentially adverse impacts from changing interest rates. Generally, and particularly over extended periods of time that encompass full economic cycles, interest rates associated with longer-term assets, like fixed-rate mortgages, have been higher than interest rates associated with shorter-term funding sources, like deposits. This difference has been an important component of our net interest income and is fundamental to our operations.

Previous wording

A challenge to our business model occurs when there are rapid and substantial changes in short-term rates or there is an extended inverted yield curve where short-term rates exceed long-term rates. When short-term rates drop, our home equity line of credit portfolio, indexed to the prime rate, reprices immediately, whereas interest rates on certificate of deposit accounts and borrowings generally reprice at maturity. An inverted yield curve impacts our balance sheet even after it becomes positive because our assets, originated at historically low yields, pay down at slower rates than our sources of funding, creating the risk that a portion of our liabilities are at costs higher than the yields we earn on a portion of our assets. These economic environments may result in decreases in our net interest income and our net interest margin.

Current wording

A challenge to our business model occurs when there are rapid and substantial changes in short-term rates or there is a prolonged inverted yield curve where short-term rates exceed long-term rates. When short-term rates change, our home equity line of credit portfolio, indexed to the prime rate, reprices immediately, whereas interest rates on certificate of deposit accounts and borrowings generally reprice at maturity. An inverted yield curve impacts our balance sheet even after it becomes positive because our assets, originated at historically low yields, pay down at slower rates than our sources of funding, creating the risk that a portion of our liabilities are at costs higher than the yields we earn on a portion of our assets. These economic environments may result in decreases in our net interest income and our net interest margin.

Previous 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.

Current wording

At June 30, 2026, the Company’s Tier 1 (leverage) capital totaled $1.89 billion, or 10.72%, of net average assets and 16.88% of risk-weighted assets, while the Association’s Tier 1 (leverage) capital totaled $1.76 billion, or 9.99%, of net average assets and 15.73% of risk-weighted assets. Each of these measures is in excess of the requirements in effect at June 30, 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

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.

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 June 30, 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 $4.49 billion. Our home equity lending is discussed in the Lending Activities section of this Item 2.

Previous wording

As a complement to our strategies to shorten the duration of our fixed rate interest-earning assets, as described above, we also seek to lengthen the duration of our interest-bearing funding sources. These efforts include monitoring the relative costs of alternative funding sources such as retail certificates of deposit, brokered certificates of deposit, longer-term (e.g. three years or greater) fixed-rate advances from the FHLB of Cincinnati, and shorter-term (e.g. one or three months) funding, the durations of which are extended by correlated interest rate exchange contracts ("swap"). Funding sources are discussed in more detail within this Item 2 in the sections entitled Maintaining Access to Adequate Liquidity and Diverse Funding Sources to Support our Growthand Liquidity and Capital Resources. All of our swaps are subject to collateral pledges and require specific structural features to qualify for hedge accounting treatment. Hedge accounting treatment directs that periodic mark-to-market adjustments be recorded in other comprehensive income (loss) in the equity section of the balance sheet, rather than being included in operating results of the income statement. The Association's intent is that any swap to which it may be a party will qualify for hedge accounting treatment.

Current wording

As a complement to our strategies to shorten the duration of our fixed rate interest-earning assets, as described above, we also seek opportunities to lengthen the duration of our interest-bearing funding sources. These efforts include monitoring the relative costs of alternative funding sources such as retail certificates of deposit, brokered certificates of deposit, longer-term (e.g. three years or greater) fixed-rate advances from the FHLB of Cincinnati, and shorter-term (e.g. one or three months) funding, the durations of which are extended by correlated interest rate exchange contracts ("swap"). Funding sources are discussed in more detail within this Item 2 in the sections entitled Maintaining Access to Adequate Liquidity and Diverse Funding Sources to Support our Growthand Liquidity and Capital Resources. All of our swaps are subject to collateral pledges and require specific structural features to qualify for hedge accounting treatment. Hedge accounting treatment directs that periodic mark-to-market adjustments be recorded in other comprehensive income (loss) in the equity section of the balance sheet, rather than being included in operating results of the income statement. The Association's intent is that any swap to which it may be a party will qualify for hedge accounting treatment.

Previous 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

Current wording

During the nine months ended June 30, 2026, $260.3 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, $196.2 million were originated as agency-compliant first mortgage loans, $37.1 million were acquired through a correspondent lending partnership, and $27.1 million were originated under Fannie Mae's Home Ready initiative. At

Previous 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.

Current wording

June 30, 2026, loans classified as held for sale totaled $14.5 million, compared to $57.7 million at September 30, 2025. At June 30, 2026, we serviced $2.17 billion of loans we originated or acquired and later sold to investors.

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 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.

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 761 and the average LTV was 69% at origination. Our current delinquency levels reflect the higher credit standards to which we subject all new originations. As of June 30, 2026, loans originated or acquired had a balance of $16.27 billion, of which $43.5 million, or 0.27%, 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 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.

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 June 30, 2026, approximately 58.8% and 16.3% 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 20.2% 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 nine months ended June 30, 2026, 24.7% 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 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.

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 June 30, 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 9.99%. The Association's Tier 1 (leverage) capital ratio at June 30, 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 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.

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 June 30, 2026, deposits totaled $9.99 billion (including $920.5 million of brokered CDs), while borrowings totaled $5.81 billion and borrowers’ advances and servicing escrows totaled $204.4 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 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.

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 June 30, 2026, the Association had the ability to borrow a maximum of $6.78 billion from the FHLB of Cincinnati and $423.2 million from the FRB-Cleveland Discount Window. At June 30, 2026, our capacity for additional borrowing from the FHLB of Cincinnati was $1.13 billion. Second, we have the ability to purchase overnight Fed Funds up to $445.0 million through various arrangements with other institutions. At June 30, 2026, our capacity to purchase additional Fed Funds was $295.0 million. 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 June 30, 2026, our investment securities portfolio totaled $482.4 million. Fourth, selling loans in the secondary market is a regular source of liquidity. During the nine months ended June 30, 2026, we sold, or committed to sell $260.3 million in loans primarily to Fannie Mae. Finally, cash flows from operating activities have been a regular source of funds. During the nine months ended June 30, 2026 and 2025, cash flows from operations provided $108.9 million and $93.5 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 1.28% 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.

Current wording

Monitoring and Controlling Our Operating Expenses. We continue to focus on managing operating expenses while balancing those efforts with investments to improve technology and customer experience. Our ratio of annualized non-interest expense to average assets was 1.26% for the nine months ended June 30, 2026, and 1.19% for the nine months ended June 30, 2025. As of June 30, 2026, our average assets per full-time employee and our average deposits per full-time employee were $17.6 million and $10.3 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 ($266.4 million per branch office as of June 30, 2026) contributes to our expense management efforts by limiting the overhead costs of serving our customers. During the nine months ended June 30, 2026, we capitalized $7.7 million of development costs related to our conversion to a new core operating system, which reduced compensation and technology expenses recognized in the current year. Following implementation of the core operating system in July 2026, we anticipate compensation and technology expenses will increase. 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

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.

Current wording

Home equity lines of credit and home equity loans 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. At June 30, 2026, we had an amortized cost of $4.53 billion in home equity lines of credit, of which $6.1 million, or 0.13%, and $990.9 million in home equity loans outstanding, of which $1.4 million, or 0.15%, were delinquent 90 days or more.

Previous wording

The following table sets forth activity for credit losses segregated by geographic location for the periods indicated. The majority of our Residential Core and Home Today loan portfolios is secured by properties located in Ohio, and therefore were not segregated by state.

Current wording

The following table sets forth activity for credit losses segregated by product and geographic location for the periods indicated. The majority of our Residential Core and Home Today loan portfolios is secured by properties located in Ohio, and therefore were not segregated by state.

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 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.

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 June 30, 2026 and June 30, 2025, recoveries exceeded loan charge-offs by $0.7 million and $0.9 million, respectively. During the three months ended June 30, 2026 and June 30, 2025, gross charge-offs were $0.5 million and $0.2 million, respectively. 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 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.

Current wording

During the three months ended June 30, 2026, the total allowance for credit losses decreased to $102.0 million, from $104.9 million at March 31, 2026. 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 June 30, 2026, the asset portion of the total allowance decreased to $73.5 million from $74.9 million and the liability portion of the allowance decreased to $28.5 million from $30.0 million. These decreases reflect a net $3.5 million release of provision for credit losses, consisting of a $2.1 million release related to loans and a $1.4 million release related to off-balance sheet exposures.

Previous 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.

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. During the three months ended June 30, 2026, management refined the quantitative model for certain long-term fixed-rate home equity loan products, which resulted in a reduction in the allowance for credit losses allocated to the home equity loan portfolio despite continued growth in that portfolio. This reduction was also partially offset by higher growth-related allowance requirements in other loan portfolios.

Previous 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.

Current wording

The amortized cost of the residential Core portfolio increased 1.9%, or $202.8 million, and its total allowance increased 4.7%, or $1.7 million, as of June 30, 2026, compared to March 31, 2026. The amortized cost of the home equity lines of credit portfolio increased 2.9%, or $128.8 million, and its total allowance increased 6.9% to $25.0 million, from $23.4 million at March 31, 2026. The amortized cost of the home equity loans increased 12.2%, or $107.9 million, and its total allowance decreased 29.3% to $12.0 million, from $17.0 million at March 31, 2026. As we are no longer originating loans under our Home Today program, there is an expected net recovery position for this portfolio which was $1.7 million at June 30, 2026 and $2.0 million at March 31, 2026. 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

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.

Current wording

At June 30, 2026, the home equity loan portfolio had an unpaid principal balance of $983.7 million, including $20.7 million in bridge loans, and home equity lines of credit had an unpaid principal balance of $4.49 billion of which $57.0 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 $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.

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 $35.0 million, or 0.8% of the total at June 30, 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 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.

Current wording

At June 30, 2026, 21.2% of the home equity lending portfolio was either in a first lien position (11.1%), in a subordinate (second) lien position behind a first lien that we held (8.2%) or behind a first lien that was held by a loan that we originated, sold and now serviced for others (1.9%). At June 30, 2026, 12.0% 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

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.

Current wording

Total loans seriously delinquent (i.e. delinquent 90 days or more) were 0.12% of total net loans at June 30, 2026, and 0.11% at September 30, 2025. The percentage of seriously delinquent residential Core mortgage loans to total net loans remained at 0.07% for both periods. Serious delinquencies increased in the home equity lines of credit portfolio to 0.04% of total net loans at June 30, 2026, from 0.03% at September 30, 2025. Serious delinquencies in the Home Today and home equity loan portfolios as compared to total net loans are not material at June 30, 2026 and September 30, 2025.

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, despite the three recent FRS 25 basis point rate cuts, 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 moderately elevated, despite the three FRS 25 basis point rate cuts in late 2025, resulting in higher and possibly less affordable monthly payments for some borrowers.

Previous 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.

Current wording

Total assets increased $618.7 million, or 3.54%, to $18.08 billion at June 30, 2026, from $17.46 billion at September 30, 2025. This change was mainly the result of increases in loans held for investment and cash and cash equivalents.

Previous 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.

Current wording

Cash and cash equivalents increased $139.5 million, or 32.5%, to $568.9 million at June 30, 2026, from $429.4 million at September 30, 2025 due to normal fluctuations and liquidity management. 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 $66.1 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.

Current wording

Investment securities, all of which are classified as available for sale, decreased $38.3 million, or 7.36%, to $482.4 million at June 30, 2026, from $520.7 million at September 30, 2025. The decrease was primarily due to cash flows from security repayments and maturities exceeding purchases during the nine-month period ended June 30, 2026.

Previous 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.

Current wording

Mortgage loans held for sale decreased by $43.2 million, or 74.9%, to $14.5 million at June 30, 2026, from $57.7 million at September 30, 2025, due to lower volumes of loans designated for sale and a reduction in loans committed under forward sale agreements.

Previous 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.

Current wording

Loans held for investment, net of deferred loan fees and allowance for credit losses, increased $518.3 million, or 3.3%, to $16.18 billion at June 30, 2026, from $15.66 billion at September 30, 2025. During the nine months ended June 30, 2026, the home equity loans and lines of credit portfolio increased $660.5 million and residential core mortgage loans decreased $138.4 million.

Previous 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.

Current wording

The changes in loans held for investment were affected by the volume of loans originated, acquired and sold. During the nine months ended June 30, 2026, total first mortgage loan originations and acquisitions were $1.18 billion compared to $760.2 million for the nine months ended June 30, 2025. Of total residential mortgage loans originated and acquired during the current period, $988.7 million (83.5%) were purchase mortgage transactions and $133.5 million (11.3%) were adjustable-rate loans. Commitments originated for home equity loans and lines of credit were $1.70 billion for the nine-month period ended June 30, 2026, compared to $1.87 billion for the nine-month period ended June 30, 2025. Refer to Note 4. LOANS AND ALLOWANCES FOR CREDIT LOSSES of the NOTES TO CONSOLIDATED FINANCIAL STATEMENTS for additional information.

Previous wording

Federal Home Loan Bank stock increased $9.0 million, or 3.82% to $244.4 million at March 31, 2026, from $235.4 million at September 30, 2025. FHLB stock ownership requirements dictate the amount of stock owned at any given time.

Current wording

Federal Home Loan Bank stock increased $32.7 million, or 13.89% to $268.1 million at June 30, 2026, from $235.4 million at September 30, 2025. FHLB stock ownership requirements, established by the FHLB, dictate the minimum amount of stock owned at any given time.

Previous wording

Premises, equipment and software, net increased $3.4 million, or 8.50% to $43.4 million at March 31, 2026 from $40.0 million at September 30, 2025, due to increased software acquisitions.

Current wording

Premises, equipment and software, net, increased $5.6 million, or 14.00% to $45.6 million at June 30, 2026 from $40.0 million at September 30, 2025, due to increased software acquisitions.

Previous 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.

Current wording

Deposits decreased $454.6 million, or 4.4%, to $9.99 billion at June 30, 2026, from $10.45 billion at September 30, 2025. The decrease in deposits included a $1.19 billion decrease in the CD portfolio and a $29.7 million decrease in money market accounts, partially offset by a $752.0 million increase in savings accounts, and an $4.8 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. In addition, CD balances declined as a result of the competitive deposit pricing environment and the Company's strategic focus on managing funding costs at the risk of increasing customer attrition. At June 30, 2026, brokered CDs totaled $920.5 million and included $600.0 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 $398.5 million and $387.3 million at June 30, 2026 and September 30, 2025, respectively.

Previous wording

Borrowed funds increased $272.2 million, or 5.59%, to $5.14 billion at March 31, 2026, from $4.87 billion at September 30, 2025. The total balance of borrowed funds at March 31, 2026, consisted of $1.53 billion of long-term advances with a weighted average maturity of approximately 1.5 years, $2.98 billion of one- to three-month advances, aligned with interest rate swap contracts with a remaining weighted average effective maturity of approximately 2.8 years and $624.0 million in overnight borrowings, all from the FHLB.

Current wording

Borrowed funds increased $940.7 million, or 19.32%, to $5.81 billion at June 30, 2026, from $4.87 billion at September 30, 2025. The total balance of borrowed funds at June 30, 2026, consisted of $1.25 billion of long-term advances with a weighted average maturity of approximately 1.5 years, $3.05 billion of one- to three-month advances, aligned with interest rate swap contracts with a remaining weighted average effective maturity of approximately 2.6 years, and overnight borrowings of $1.34 billion, all from the FHLB, and $150 million of federal funds purchased.

Previous wording

Borrowers' advances for insurance and taxes decreased $16.7 million to $96.5 million at March 31, 2026, from $113.2 million at September 30, 2025. This change primarily reflects the cyclical nature of real estate tax payments that have been collected from borrowers and are in the process of being remitted to various taxing agencies.

Current wording

Borrowers' advances for insurance and taxes increased $46.6 million to $159.7 million at June 30, 2026, from $113.2 million at September 30, 2025. This change primarily reflects the cyclical nature of real estate tax payments that have been collected from borrowers and are in the process of being remitted to various taxing agencies.

Previous wording

Total shareholders’ equity increased $28.5 million, or 1.5%, to $1.92 billion at March 31, 2026, from $1.89 billion at September 30, 2025. The increase reflects $45.5 million of net income, reduced by dividends of $30.1 million. Other changes include a $12.4 million increase in accumulated other comprehensive income, primarily related to a net increase in unrealized gains on swap contracts, a positive net adjustment of $4.7 million related to stock compensation and employee stock ownership plans and $4.0 million of stock repurchases. During the six months ended March 31, 2026, a total of 288,196 shares of our common stock were repurchased at an average cost of 13.86 per share. The Company's eighth stock repurchase program allows for a total of 10,000,000 shares to be repurchased, with 4,655,890 shares remaining to be repurchased at March 31, 2026. As a result of a mutual member vote, Third Federal Savings, MHC, the mutual holding company that owns approximately 81.0% of the outstanding stock of the Company, was able to waive the receipt of its share of the dividend paid. Refer to Part II, Item 2.

Current wording

Total shareholders’ equity increased $63.5 million, or 3.4%, to $1.96 billion at June 30, 2026, from $1.89 billion at September 30, 2025. The increase reflects $76.1 million of net income, reduced by dividends of $45.2 million. Other changes include a $29.8 million increase in accumulated other comprehensive income, primarily related to a net increase in unrealized gains on swap contracts, a positive net adjustment of $7.8 million related to stock compensation and employee stock ownership plans and $5.0 million of stock repurchases. During the nine months ended June 30, 2026, a total of 355,241 shares of our common stock were repurchased at an average cost of 14.07 per share. The Company's eighth stock repurchase program allows for a total of 10,000,000 shares to be repurchased, with 4,588,845 shares remaining to be repurchased at June 30, 2026. As a result of a mutual member vote, Third Federal Savings, MHC, the mutual holding company that owns approximately 81.0% of the outstanding stock of the Company, was able to waive the receipt of its share of the dividend paid. Refer to Part II, Item 2. Unregistered Sales of Equity Securities and Use of Proceedsfor additional details regarding the repurchase of shares of common stock and the dividend waiver.