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TF

TFS Financial CORP (TFSL)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 FY2025 delivered stable profitability with net income of $21.5M and EPS of $0.08; net interest income rose to $75.0M (+4.2% q/q) as net interest margin expanded 6 bps to 1.81%, a nine-quarter high .
  • EPS was in line with Wall Street consensus (Q3: $0.08 vs $0.08*) and “Revenue” was modestly below consensus (Q3: $80.5M actual vs $81.2M*), while earlier quarters beat on both EPS and “Revenue” (Q1 EPS/revenue beats; Q2 EPS in-line, revenue beat)*. Values retrieved from S&P Global.
  • Balance sheet grew: loans held for investment increased $235.9M q/q (to $15.60B) driven by home equity loans/lines (+$260.9M q/q to $4.58B), while deposits fell slightly (-$56.1M q/q) and FHLB borrowings increased (+$295.7M q/q) to fund loan growth .
  • Dividend policy remained intact at $0.2825/share; the MHC obtained member approval on July 8, 2025 to waive dividends for the next 12 months (subject to Federal Reserve non‑objection), maintaining capital flexibility .
  • Potential stock reaction catalysts: sustained NIM expansion, robust equity lending growth, and capital strength (Tier 1 leverage 10.86%; CET1 17.75%; Total capital 18.61%) .

What Went Well and What Went Wrong

What Went Well

  • Net interest margin improved 6 bps q/q to 1.81% (nine-quarter high), with interest rate spread up 5 bps to 1.50%, reflecting higher loan yields and disciplined deposit costs .
  • Home equity lending momentum: combined equity loans and lines rose $260.9M q/q to $4.58B; originations have grown 17% from 2024 YTD, supporting net interest income growth .
  • Capital strength: well-capitalized under Basel III, Tier 1 leverage 10.86%, CET1/Tier 1 17.75%, Total capital 18.61%; dividend continuity, with MHC member approval to waive dividends through July 8, 2026 (pending non‑objection) .
  • Management tone: “This quarter’s performance further reinforces my optimism…our net interest margin improved…a nine quarter high…our Tier 1 capital ratio of nearly 11% shows that we are well capitalized, and further demonstrates our strength and stability.” — CEO Marc A. Stefanski .

What Went Wrong

  • Non-interest expense rose $2.1M q/q (+4.1%) to $53.2M, driven by higher marketing (+$1.2M) and other expenses (+$1.0M) including origination-related costs (appraisal, credit reports, down payment assistance) .
  • Deposits declined $56.1M q/q (<1%), with outflows in savings, checking, and money markets, partially offset by CD growth (+$20.4M); reliance on FHLB borrowings increased $295.7M q/q to fund asset growth .
  • Credit metrics modestly softened: allowance for credit losses increased $2.4M to $102.4M (0.66% of loans), with delinquencies up to $34.3M (0.22%) and non-accruals up to $37.3M (0.24%); economic factors used in loss estimation deteriorated slightly .

Financial Results

Income Statement and EPS (quarterly)

Metric ($USD Millions unless noted)Q1 2025Q2 2025Q3 2025
Net Interest Income$68.328 $72.049 $74.994
Non-Interest Income$6.503 $7.068 $7.048
Provision for Credit Losses($1.500) $1.500 $1.500
Total Non-Interest Expense$47.941 $51.088 $53.185
Income Before Taxes$28.390 $26.529 $27.357
Net Income$22.426 $21.021 $21.513
Diluted EPS ($)$0.08 $0.07 $0.08

Margins and Profitability (quarterly)

MetricQ1 2025Q2 2025Q3 2025
Net Interest Margin %1.66% 1.75% 1.81%
Interest Rate Spread %1.34% 1.45% 1.50%
Return on Avg Assets % (annualized)0.53% 0.49% 0.50%
Return on Avg Equity % (annualized)4.68% 4.35% 4.49%

Balance Sheet and Lending KPIs

MetricQ1 2025Q2 2025Q3 2025
Total Assets ($B)$17.06 $17.11 $17.38
Deposits ($B)$10.21 $10.40 $10.34
Borrowed Funds ($B)$4.66 $4.59 $4.88
Loans Held for Investment, Net ($B)$15.34 $15.36 $15.60
Home Equity Loans & Lines ($B)$4.32 $4.32 $4.58
Residential Core Mortgages ($B)$11.21 $10.99 $10.97
Non-Accrual Loans ($M)$36.5 $37.0 $37.3
Total Delinquencies ($M)$31.9 $31.6 $34.3
ACL ($M) and % of Loans$97.8; 0.64% $99.9; 0.65% $102.4; 0.66%
Tier 1 Leverage Ratio10.89% 10.92% 10.86%
CET1/Tier 1 Ratios18.31%/18.31% 18.18%/18.18% 17.75%/17.75%
Total Capital Ratio19.15% 19.04% 18.61%

Estimates vs Actuals (S&P Global)

MetricQ1 2025Q2 2025Q3 2025
EPS Consensus Mean ($)*0.06*0.07*0.08*
EPS Actual ($)*0.08*0.07*0.08*
Revenue Consensus Mean ($M)*71.53*75.95*81.20*
Revenue Actual ($M)*76.33*77.62*80.54*

Values retrieved from S&P Global.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Dividend per ShareFY2025 quarterly$0.2825 (maintained through Q1–Q2) $0.2825 declared/paid in Q3 (first three fiscal quarters) Maintained
MHC Dividend WaiverJul 2024–Jul 2025Member-approved and Fed non‑objection (up to $1.13/share) Member approval on Jul 8, 2025 for waivers through Jul 8, 2026; non‑objection timing unknown Extended; pending Fed non‑objection
Operating GuidanceFY2025Not providedNot providedN/A

Earnings Call Themes & Trends

Note: The company did not host an earnings call for Q3 FY2025; commentary reflects press releases .

TopicPrevious Mentions (Q-2)Previous Mentions (Q-1)Current Period (Q3)Trend
Net Interest Margin TrajectoryNIM up ~9 bps q/q to 1.75% NIM 1.66%; margin compression managed NIM up 6 bps q/q to 1.81% (nine-quarter high) Improving
Lending Mix (Mortgage vs Equity)Equity lines +$193.7M q/q; mortgages -$175.9M Equity commitments $559M; mortgage originations $176.5M Equity lines +$260.9M q/q; mortgages -$25.0M More equity-driven
Funding Mix (Deposits vs FHLB)Deposits +$190.4M; FHLB -$69.0M Deposits +$12.2M; FHLB -$136.5M Deposits -$56.1M; FHLB +$295.7M Shift to wholesale
Credit QualityACL 0.65%; delinquencies 0.20% ACL 0.64%; delinquencies 0.21% ACL 0.66%; delinquencies 0.22%; slight deterioration Slightly weaker
Regulatory/DividendWell-capitalized; N/A new items Well-capitalized; dividend maintained MHC waiver member approval; Fed non‑objection pending; capital ratios robust Supportive capital

Management Commentary

  • “Equity lines of credit originations have grown 17% from 2024, and our net interest margin improved six basis points this quarter to 1.81%, a nine quarter high…Our Tier 1 capital ratio of nearly 11% shows that we are well capitalized” — Marc A. Stefanski, Chairman and CEO .
  • “Our second quarter earnings reflect our ability to successfully operate in any economic climate… commitments to originate and acquire… have increased 40% over last quarter.” — Marc A. Stefanski .
  • On dividend waivers: “We appreciate the overwhelming support from our members since 2014, and we are again asking them to vote FOR the dividend waiver…” — Marc A. Stefanski .

Q&A Highlights

  • No Q&A — the company did not host a conference call for Q3 FY2025 .

Estimates Context

  • Q3 EPS matched consensus ($0.08 vs $0.08*); “Revenue” modest miss ($80.5M vs $81.2M*). Earlier quarters: Q1 beat EPS/revenue; Q2 EPS in-line, revenue beat*. Values retrieved from S&P Global.
  • Implications: continued NIM tailwinds and equity lending mix support EPS stability; expense inflation and funding mix shift may temper top-line beats*. Values retrieved from S&P Global.

Key Takeaways for Investors

  • NIM expansion continues; trajectory from 1.66% → 1.75% → 1.81% suggests earnings resilience as higher-yielding loans replace lower-rate vintages .
  • Strong equity lending momentum drives asset growth; watch origination costs and credit trends as portfolios season .
  • Funding mix shifted toward FHLB in Q3 to support loan growth; monitor deposit pricing/mix and brokered levels to mitigate margin/liquidity risk .
  • Credit indicators modestly softened (ACL %, delinquencies, non-accruals); provisioning remained steady at $1.5M in Q2–Q3 after Q1 release, signaling conservative stance .
  • Capital ratios remain well above “well-capitalized” thresholds, supporting sustained dividends; MHC waiver approval reduces cash outflows, subject to Fed non‑objection timing .
  • Near term, catalysts include continued NIM improvement and equity lending growth; risks include non-interest expense pressures and deposit competition .
  • Medium term, balance sheet optimization (deposit franchise strength, retail CDs vs brokered, and swap-aligned borrowings) will drive margin durability and capital allocation .