TFS Financial Corporation (TFSL): history, ownership, mission, how it works & makes money

A Brief History of TFS Financial Corporation

TFS Financial Corporation, incorporated in 2007, is the holding company for Third Federal Savings and Loan Association of Cleveland. The company primarily engages in the business of mortgage lending and savings products.

Financial Performance Overview

As of June 30, 2024, TFS Financial Corporation reported total assets of $17.03 billion, reflecting an increase of $117 million, or 0.7%, from $16.92 billion at September 30, 2023. This increase was primarily driven by a rise in cash and cash equivalents, which surged by $93.7 million, or 20.1%, to $560.4 million.

Loan Portfolio and Commitments

The company’s loan portfolio includes residential mortgage loans, home equity loans, and lines of credit. As of June 30, 2024, total residential core loans amounted to $11.57 billion. Commitments for home equity loans and lines of credit reached $1.62 billion for the nine months ended June 30, 2024, compared to $1.24 billion in the same period of the prior year.

Equity and Shareholder Information

As of June 30, 2024, TFS Financial Corporation's total shareholders' equity was $1.92 billion, a decrease of $12.3 million or 0.6% from $1.93 billion at September 30, 2023. The decrease was primarily due to dividends declared amounting to $44.2 million against net income of $61.4 million.

Regulatory Compliance and Capital Requirements

TFS Financial Corporation maintains compliance with various regulatory capital requirements, including those set by the Basel III capital framework. The company’s risk-based capital ratios remain healthy, ensuring adequate capital to absorb potential losses.

Future Outlook

As TFS Financial Corporation continues to adapt to changing market conditions, it remains committed to managing its growth, capital initiatives, and liquidity effectively. The company’s strategic focus on mortgage lending and deposit growth positions it well for future challenges and opportunities.

A Who Owns TFS Financial Corporation (TFSL)

Ownership Structure

TFS Financial Corporation, the parent company of Third Federal Savings and Loan Association, has a significant ownership stake held by its mutual holding company structure. As of 2024, approximately 80.9% of the outstanding shares are owned by the Third Federal Savings and Loan Association of Cleveland, MHC (the "MHC"). This mutual holding company structure influences the governance and operational strategies of TFS Financial Corporation.

Shareholder Equity

As of June 30, 2024, the total shareholders' equity for TFS Financial Corporation is reported at $1.92 billion, showing a decrease from $1.93 billion at September 30, 2023. The decrease is attributed to dividends paid and changes in accumulated other comprehensive income.

Institutional Ownership

Institutional ownership data shows that as of mid-2024, various institutional investors hold a portion of TFS Financial Corporation's stock. Key institutional shareholders include:

• BlackRock, Inc. - approximately 5.2% ownership
• The Vanguard Group, Inc. - approximately 4.6% ownership
• Dimensional Fund Advisors LP - approximately 3.8% ownership

Recent Stock Performance

As of June 30, 2024, TFS Financial Corporation's stock (TFSL) is trading at around $22.00 per share, reflecting an increase of 15% from the previous fiscal year. The stock's performance is influenced by the company's stable earnings growth and dividend policy.

Dividends and Earnings Per Share

The company declared a dividend of $0.2825 per common share for the quarter ended June 30, 2024. The earnings per share (EPS) for the three months ended June 30, 2024, is reported at $0.07, compared to $0.06 for the same period in 2023.

Conclusion on Ownership and Governance

TFS Financial Corporation's unique ownership structure, with a significant stake held by its mutual holding company, and a diversified institutional investor base, provides a stable foundation for its governance and business strategy. The financial metrics as of June 30, 2024, indicate a resilient performance despite the slight decrease in total shareholders' equity.

TFS Financial Corporation (TFSL) Mission Statement

Overview of Mission Statement

TFS Financial Corporation's mission is focused on providing exceptional financial services to customers while maintaining a commitment to strong community engagement and sustainable growth. The company emphasizes integrity, transparency, and a customer-centric approach in all its operations.

Core Values

• Customer Commitment: Prioritizing the needs of customers by providing high-quality financial products and services.
• Community Engagement: Actively participating in local communities to foster trust and support economic development.
• Integrity: Conducting business with honesty and fairness.
• Innovation: Continuously improving products and services through innovative solutions.

Financial Performance Metrics (as of June 30, 2024)

As part of its mission, TFS Financial Corporation focuses on delivering strong financial performance. Key financial metrics include:

Strategic Objectives

TFS Financial Corporation aims to achieve specific strategic objectives aligned with its mission:

• Enhance Customer Experience: Implementing technology to streamline services and improve customer satisfaction.
• Increase Market Share: Expanding product offerings and geographic reach to attract new customers.
• Maintain Financial Stability: Focusing on risk management and sustainable growth to ensure long-term profitability.

Community Involvement Initiatives

The company is dedicated to community involvement through various initiatives:

• Local Sponsorships: Supporting local events and organizations to strengthen community ties.
• Financial Education Programs: Offering workshops to educate community members about personal finance and homeownership.
• Charitable Contributions: Donating to local charities and nonprofits to support community well-being.

Conclusion

In summary, TFS Financial Corporation's mission statement reflects its dedication to customer service, community engagement, and robust financial performance. The company's strategic objectives and community initiatives further reinforce its commitment to these principles.

How TFS Financial Corporation (TFSL) Works

Business Model

TFS Financial Corporation operates primarily through its subsidiary, Third Federal Savings and Loan Association. The company focuses on originating residential mortgage loans, home equity loans, and lines of credit. As of June 30, 2024, the total balance of loans originated or purchased was $15.29 billion, with 89% of assets consisting of residential real estate loans and home equity loans and lines of credit.

Financial Performance

For the nine months ended June 30, 2024, TFS Financial reported net income of $61.4 million, an increase from $55.7 million during the same period in 2023. This was driven by a decrease in non-interest expenses and an increase in the release of provisions for credit losses.

Interest Income and Expenses

Interest income on loans increased by $80.5 million, or 20%, to $491.3 million for the nine months ended June 30, 2024, compared to $410.8 million for the same period in 2023. This increase was attributed to a 54 basis point increase in the average yield on loans. Conversely, interest expense increased by $105.8 million, or 46%, to $335.8 million during the same period.

Deposits and Borrowings

As of June 30, 2024, total deposits increased by $576.2 million, or 6.1%, to $10.03 billion from $9.45 billion at September 30, 2023. The increase was primarily due to a $1.09 billion increase in certificates of deposit. Borrowings decreased by $444.3 million, or 8.4%, to $4.83 billion.

Liquidity Management

The company maintains a liquidity ratio averaging 6.19% for the three months ended June 30, 2024, above the minimum target of 5%. This ratio reflects the ability to meet current and future financial obligations.

Credit Losses and Provisions

The allowance for credit losses was $95.7 million, or 0.63% of total loans receivable, at June 30, 2024. The company recorded net recoveries of $3.6 million during the nine months ended June 30, 2024.

Non-Interest Income and Expenses

Non-interest income rose to $18.3 million for the nine months ended June 30, 2024, compared to $16.3 million for the same period in 2023. Non-interest expenses decreased by $8.3 million, or 5%, to $153.3 million during the same period.

Shareholder Equity

Total shareholders’ equity decreased to $1.92 billion at June 30, 2024, from $1.93 billion at September 30, 2023.

Market Position

As of June 30, 2024, TFS Financial Corporation had a Tier 1 capital ratio of 9.96%, indicating a well-capitalized status.

How TFS Financial Corporation (TFSL) Makes Money

Revenue Sources

TFS Financial Corporation primarily generates revenue through two main streams: interest income and non-interest income.

Interest Income

Interest income is derived from loans, mortgage-backed securities, and other interest-earning assets. For the nine months ended June 30, 2024, interest and dividend income increased to $545.6 million, an increase of 23% compared to $443.2 million in the same period of the previous year.

Loan Performance

Specifically, interest income on loans rose to $491.3 million, up 20% from $410.8 million in the prior year. This was attributed to a 54 basis point increase in the average yield on loans to 4.31%. The average balance of loans increased by $659.9 million to $15.19 billion.

Interest Expense

Interest expense also increased significantly due to rising rates. For the nine months ended June 30, 2024, interest expense increased by 46% to $335.8 million from $230.0 million. The interest expense on certificates of deposit (CDs) alone surged to $194.7 million, a 103% increase year-over-year.

Net Interest Income

Despite the rise in interest expenses, net interest income for the nine months ended June 30, 2024, was $212.2 million, slightly down from $215.2 million in the previous period. The overall net interest margin was 1.69%, down from 1.82%.

Non-Interest Income

Non-interest income has also contributed positively to TFS Financial's revenue. For the nine months ended June 30, 2024, non-interest income increased to $18.3 million, up 12% from $16.3 million. This increase was driven by a rise in net gains on the sale of loans and benefits from bank-owned life insurance.

Operational Efficiency

TFS Financial has also focused on controlling operating expenses. Total non-interest expenses decreased to $153.3 million for the nine months ended June 30, 2024, down from $161.6 million for the same period in the prior year. This reduction has been aided by lower marketing and other operational costs.

Conclusion on Financial Performance

In summary, TFS Financial Corporation's revenue generation strategy hinges on a combination of interest income from loans and securities, alongside a steady increase in non-interest income, while effectively managing interest expenses and operational costs.