Finance

TFS Financial's Fourth-Quarter Profit Falls After Record Year

The Tip Desk · November 1, 2026 · 3 min read

Net income was $24.7 million in the quarter ended September 30, 2026, as a $2.0 million credit-loss provision and higher expenses offset a 9 bps lift in the net interest margin to 1.99%.

TFS Financial Corporation (TFSL), the holding company for Third Federal Savings and Loan Association of Cleveland, reported net income of $24.7 million for the quarter ended September 30, 2026, down $5.8 million, or 19.0%, from $30.5 million in the quarter ended June 30, 2026.

The Cleveland-based thrift still closed fiscal 2026 with record net income of $100.7 million, up 10.7% from $91.0 million a year earlier, as net interest income rose $29.1 million, or 9.9%, to $321.8 million for the year ended September 30, 2026.

Net interest income in the latest quarter increased $5.5 million, or 6.8%, to $86.9 million. The company said the gain was primarily attributable to a 17 basis point increase in the yield on interest-earning assets, primarily loans, partially offset by a nine basis point increase in the cost of interest-bearing liabilities. The interest rate spread improved eight basis points to 1.66%, and the net interest margin rose nine basis points to 1.99% from 1.90%, extending a multi-quarter expansion that had lifted the margin six basis points in the prior quarter.

The provision for credit losses flipped to a $2.0 million charge from a $3.5 million release in the June quarter. The company said the provision was driven by an increase in reserve requirements related to growth in the residential mortgage and home equity loan portfolios. The total allowance for credit losses increased $1.9 million to $103.9 million, or 0.63% of total loans receivable, from $102.0 million at June 30, 2026. Net charge-offs were $0.1 million, compared with net recoveries of $0.7 million in the prior quarter.

Total loan delinquencies increased $17.2 million to $60.7 million, or 0.37% of total loans receivable, from $43.5 million, or 0.27%, at June 30, 2026.

Non-interest income decreased $1.3 million, or 16.5%, to $6.6 million. Changes included a $0.2 million increase in loan fees and service charges, offset by decreases of $0.8 million from bank-owned life insurance contracts, $0.5 million in other non-interest income, primarily related to unrealized losses on interest rate lock commitments treated as derivatives, and a $0.2 million decrease in net gain on the sale of loans.

Non-interest expense increased $5.6 million, or 10.4%, to $59.7 million. Salaries and employee benefits increased $3.2 million primarily because payroll costs for the implementation of the new core banking system were no longer capitalized once the system began operating in July 2026. Other operating expenses increased $2.4 million primarily related to pension termination expense.

Loans held for investment, net, increased $236.3 million, or 1.5%, to $16.42 billion at September 30, 2026. Home equity loans and lines of credit increased $210.5 million to $5.68 billion, while residential mortgage loans increased $6.5 million to $10.70 billion. Residential mortgage loan originations and acquisitions were $479.3 million for the quarter, down from $616.4 million in the prior quarter.

Deposits increased $186.8 million, or 1.9%, to $10.18 billion. Certificates of deposit increased $317.3 million, which the company said primarily reflected its offering of competitive deposit rates, offset by a $105.7 million decrease in savings accounts and smaller declines in money market and checking. Borrowed funds decreased $73.7 million, or 1.3%, to $5.74 billion, reflecting a decrease in advances from the FHLB of Cincinnati, partially offset by increases in federal funds purchased.

The company declared a quarterly dividend of $0.3175 a share in the fourth fiscal quarter of 2026, versus $0.2825 a share in each of the first three fiscal quarters. At September 30, 2026, the Tier 1 leverage ratio was 10.53%, with Common Equity Tier 1 and Tier 1 ratios of 16.64% and a total capital ratio of 17.55%.

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