What changed in this filing

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Item 1. Business

2022-11-22 compared with 2021-11-24 · 181 added, 389 removed, 988 unchanged (37% of the section changed)

5 unchanged sentences

● statements concerning trends in our provision for credit losses and charge-offs on loans and off-balance sheet exposures;

● statements regarding the trends in factors affecting our financial condition and results of operations, including asset quality of our loan and investment portfolios;

● statements regarding the trends in factors affecting our financial condition and results of operations, including credit quality of our loan and investment portfolios;

● estimates of our risks and future costs and benefits.

These forward-looking statements are subject to significant risks, assumptions and uncertainties, including, among other things, the following important factors that could affect the actual outcome of future events:

● significantly increased competition among depository and other financial institutions;

● inflation and changes in the interest rate environment that reduce our interest margins or reduce the fair value of financial instruments;

● significantly increased competition among depository and other financial institutions, including with respect to our ability to charge overdraft fees;

● inflation and changes in the interest rate environment that reduce our interest margins or reduce the fair value of financial instruments, or our ability to originate loans;

● general economic conditions, either globally, nationally or in our market areas, including employment prospects, real estate values and conditions that are worse than expected;

22 unchanged sentences

● the inability of third-party providers to perform their obligations to us;

● civic unrest;

● the effects of global or national war, conflict or acts of terrorism;

● civil unrest;

● cyber-attacks, computer viruses and other technological risks that may breach the security of our websites or other systems to obtain unauthorized access to confidential information, destroy data or disable our systems;

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As the holding company of the Association, we are authorized to pursue other business activities permitted by applicable laws and regulations for savings and loan holding companies, which include making equity investments and the acquisition of banking and financial services companies.

Our cash flow depends primarily on earnings from the investment of the portion of the net offering proceeds we retained, and any dividends we receive from the Association and Third Capital, Inc.

Our cash flow depends primarily on earnings from the investment of proceeds we retained from the initial offering, and any dividends we receive from the Association and Third Capital, Inc.

All of our officers are also officers of the Association.

9 unchanged sentences

has no separate operations other than as the holding company for its operating subsidiaries, and as a minority investor or partner in other entities.

As of September 30, 2021, the only remaining entity which Third Capital, Inc.

As of September 30, 2022, the only remaining entity in which Third Capital, Inc.

has an investment in is Third Cap Associates, Inc., an Ohio corporation that owns 49% and 60% of two title agencies that provide escrow and settlement services in the States of Ohio and Florida, primarily to customers of the Association.

1 unchanged sentence

recorded net income of $1.7 million.

Third Capital Inc.

had a partial ownership in Hazelmere Investment Group I, Ltd., a limited liability company that engaged in net lease transactions of commercial buildings.

In October 2019, the limited liability company sold the remaining two commercial office buildings it owned and the company was dissolved in the fiscal year ended September 30, 2020.

The properties had a net book value of $19.3 million at September 30, 2019 included in premises, equipment and software, net and other assets.

THIRD FEDERAL SAVINGS AND LOAN ASSOCIATION OF CLEVELAND

9 unchanged sentences

Brokered CDs and longer-term advances from the FHLB of Cincinnati as well as shorter-term advances from the FHLB of Cincinnati, hedged to longer effective durations by interest rate exchange contracts, are also used as cost-effective funding alternatives.

In addition to residential real estate mortgage loans, the Association

originates residential construction loans to individuals for the construction of their personal residences by a qualified builder.

In addition to residential real estate mortgage loans, the Association originates residential construction loans to individuals for the construction of their personal residences by a qualified builder.

The Association also offers home equity loans and lines of credit subject to certain property and credit performance conditions.

The Association retains in its portfolio a large portion of the loans that it originates.

The Association also purchases residential real estate mortgage loans through a correspondent lending partnership.

Loans that the Association sells consist primarily of long-term, fixed-rate residential real estate mortgage loans.

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Information on that website is not and should not be considered a part of this document.

The Association conducts its operations from its main office in Cleveland, Ohio, and from 37 additional, full-service branches and seven loan production offices located throughout the states of Ohio and Florida.

In Ohio, the Association maintains 21 full-service offices located in the northeast Ohio counties of Cuyahoga, Lake, Lorain, Medina and Summit, three loan production offices located in the central Ohio counties of Franklin and Delaware (Columbus, Ohio) and four loan production offices located in the southern Ohio counties of Butler and Hamilton (Cincinnati, Ohio).

The Association conducts its operations from its main office in Cleveland, Ohio, and from 37 additional, full-service branches and five loan production offices located throughout the states of Ohio and Florida.

In Ohio, the Association maintains 21 full-service offices located in the northeast Ohio counties of Cuyahoga, Lake, Lorain, Medina and Summit, one regional loan production office located in the central Ohio (Columbus, Ohio) and four loan production offices located in the southern Ohio counties of Butler and Hamilton (Cincinnati, Ohio).

In Florida, the Association maintains 16 full-service branches located in the counties of Pasco, Pinellas, Hillsborough, Sarasota, Lee, Collier, Palm Beach and Broward.

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As of that date, the Association had $6.7 billion of deposits in the State of Ohio, and ranked tenth among all financial institutions in the state in terms of deposits, with a market share of 1.28%.

As of June 30, 2021 (the latest date for which information is publicly available), the Association had $2.7 billion of deposits in the State of Florida, and ranked 32 nd among all financial institutions in terms of deposits, with a market share of 0.34%.

As of June 30, 2022 (the latest date for which information is publicly available), the Association had $2.6 billion of deposits in the State of Florida, and ranked 36th among all financial institutions in terms of deposits, with a market share of 0.29%.

This market share data excludes deposits held by credit unions, whose deposits are not insured by the FDIC.

Many financial institutions, including institutions that compete in our markets, have targeted retail deposit gathering as a more attractive funding source than borrowings, and have become more active and more competitive in their deposit product pricing.

The combination of reduced demand for borrowed funds, more competition with respect to rates paid to depositors, and low savings rates that lead to reduced appeal for investors that have traditionally allocated a portion of their portfolios to insured savings accounts, has created an increasingly difficult marketplace for attracting deposits, which could adversely affect future operating results.

From October 2020 through August 31, 2021 (the latest date for which information is publicly available), per data furnished by MarketTrac ® , the Association had the third largest market share of conventional purchase mortgage loans originated in Cuyahoga County, Ohio.

For the same period, it also had the fourth largest market share of conventional purchase mortgage loans originated in the seven northeast Ohio counties which comprise the Cleveland and Akron metropolitan statistical areas.

The combination of reduced demand for borrowed funds and more competition with respect to rates paid to depositors has created an increasingly difficult marketplace for attracting deposits, which could adversely affect future operating results.

From October 2021 through August 2022 (the latest date for which information is publicly available), per data furnished by MarketTrac ® , the Association had the largest market share of conventional purchase mortgage loans originated in Cuyahoga County, Ohio.

For the same period, it also had the second largest market share of conventional purchase mortgage loans originated in the seven northeast Ohio counties which comprise the Cleveland and Akron metropolitan statistical areas.

In addition, based on the same statistics, the Association has consistently been one of the twenty largest lenders in both Franklin County (Columbus, Ohio) and Hamilton County (Cincinnati, Ohio) since it entered those markets in 1999.

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At September 30, 2022, our ratio of shareholders’ equity to total assets was 11.7%.

Our liquidity alternatives include management and monitoring of the level of liquid assets held in our portfolio as well as the maintenance of alternative wholesale funding sources.

For the year ended September 30, 2021, our liquidity ratio averaged 6.66% (which we compute as the sum of cash and cash equivalents plus unpledged investment securities for which ready markets exist, divided by total assets) and, through the Association, we had the ability to immediately borrow an additional $502.5 million from the FHLB of Cincinnati under existing credit arrangements along with $245.7 million from the Federal Reserve Bank of Cleveland.

For the fiscal year ended September 30, 2022, our liquidity ratio averaged

5.64% (which we compute as the sum of cash and cash equivalents plus unpledged investment securities for which ready markets exist, divided by total assets).

Management’s Discussion and Analysis of Financial Condition and Results of Operation - Liquidity and Capital Resources .

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Fourth, we periodically include advertisements in local newspapers and online that display our strong capital levels and history of service.

We also continue to emphasize our traditional tagline—“STRONG * STABLE * SAFE”—in our advertisements and branch displays.

We also continue to emphasize our traditional tagline—“STRONG * STABLE * SAFE”—in our advertisements, website, online presence and branch displays.

Finally, for customers who adhere to the old adage of trust but verify, we refer them to the safety/security rankings of a nationally recognized, independent rating organization that specializes in the evaluation of financial institutions, which has awarded the Association its highest rating for more than one hundred consecutive quarters.

During the fiscal years ended September 30, 2020 and 2021, the COVID-19 pandemic presented a significant challenge to our customers, associates and communities.

Our response to this challenge continues to support our customer and marketplace confidence.

Management’s Discussion and Analysis of Financial Condition and Results of Operation-Overview .

Lending Activities

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Further, the Company originates residential construction loans to individuals (for the construction of their personal residences by a qualified builder) in Ohio and Florida.

The Company also offers home equity lines of credit in 25 states and the District of Columbia and home equity loans in eight states.

The Company also purchases fixed-rate first mortgage loans originated in Ohio and Pennsylvania through a correspondent lending partnership.

Additionally, the Company offers home equity lines of credit in 25 states and the District of Columbia and home equity loans in eight states.

Refer to Item 7.

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September 30,

2021 2020 2019 2018 2017

Amount Percent Amount Percent Amount Percent Amount Percent Amount Percent

Amount Percent Amount Percent

(Dollars in thousands)

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Total 11,539,859 80.4% 10,215,275 81.2%

Residential Home

Today Total (1) 63,823 0.6 75,166 0.6 84,942 0.6 94,933 0.7 108,964 0.9

Home equity loans and

lines of credit

Residential Home Today Total (1) 53,255 0.4 63,823 0.6

Home equity loans and lines of credit

Ohio 706,641 630,815

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Total loans receivable 14,352,014 100.0% 12,576,665 100.0%

Deferred loan expenses

(fees), net 44,859 42,459 41,976 38,566 30,865

Deferred loan expenses , net 50,221 44,859

Loans in process (72,273) (48,200)

Allowance for credit

losses on loans (64,289) (46,937) (38,913) (42,418) (48,948)

Allowance for credit losses on loans (72,895) (64,289)

Total loans receivable, net $ 14,257,067 $ 12,509,035

7 unchanged sentences

By fiscal year of origination Amortized Converted

2021 2020 2019 2018 2017 Prior Cost Basis To Term Total

September 30, 2021

September 30, 2022 2022 2021 2020 2019 2018 Prior Cost Basis To Term Total

Real estate loans:

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741+ 29,159 9,792 — — — — — — 38,951

1,120 — — — — — — — 1,120

Total Construction 37,810 10,668 — — — — — — 48,478

7 unchanged sentences

By fiscal year of origination Amortized Converted

2021 2020 2019 2018 2017 Prior Cost Basis To Term Total

September 30, 2021

September 30, 2022 2022 2021 2020 2019 2018 Prior Cost Basis To Term Total

Real estate loans:

20 unchanged sentences

80-89.9% 31,158 2,712 — — — — — — 33,870

1,120 — — — — — — — 1,120

Total Construction 37,810 10,668 — — — — — — 48,478

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2024-2027 391,041 180 45,214 1,500 — 437,935

2028-2037 2,265,157 38,562 136,792 8,588 1,466 2,450,565

2038 and beyond 8,873,791 14,510 2,444,598 111,671 — 11,444,570

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At September 30, 2022, there were no “interest only” residential real estate mortgage loans held in the Company's portfolio.

The Company generally originates both fixed- and adjustable-rate mortgage loans in amounts up to the maximum conforming loan limits as established by the FHFA, which are currently $548,250 and $822,375, respectively, for single-family homes in most of our lending markets.

The Company also originates loans in amounts that exceed the lending limit for conforming loans, which the Company refers to as “jumbo loans.” The Company generally underwrites jumbo loans in a manner similar to conforming loans.

The Company generally originates both fixed- and adjustable-rate mortgage loans in amounts up to $1 million, for single-family homes in most of our lending markets.

The loans originated for larger dollar amounts are generally referred to as “jumbo loans.” The Company generally underwrites jumbo loans in a manner similar to conforming loans.

Jumbo loans are not uncommon in the Company’s market areas.

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All of the Company’s adjustable-rate mortgage loans are subject to periodic and lifetime limitations on interest rate changes.

All adjustable-rate mortgage loans have initial and periodic caps of two percentage points on interest rate changes, with a cap of

five or six percentage points for the life of the loan.

The Association has never offered “Option ARM” loans, where borrowers can pay less than the interest owed on their loan, resulting in an increased principal balance during the life of the loan.

All adjustable-rate mortgage loans have initial and periodic caps of two percentage points on interest rate changes, with a cap of five or six percentage points for the life of the loan.

The Company has never offered “Option ARM” loans, where borrowers can pay less than the interest owed on their loan, resulting in an increased principal balance during the life of the loan.

The Company has always considered the promotion of home ownership a primary goal.

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At the time of sale, the loans are free from encumbrances except for the mortgages filed by the Company which, with other underwriting documents, are subsequently assigned and delivered to Fannie Mae and others.

During the fiscal years ended September 30, 2021 and 2020, the Company recognized servicing fees, net of amortization, related to these servicing rights of $3.3 million and $3.4 million million, respectively.

During the fiscal years ended September 30, 2022 and 2021, the Company recognized servicing fees, net of amortization, related to these servicing rights of $4.3 million and $3.3 million, respectively.

As of September 30, 2022 and 2021, the principal balance of loans serviced for others totaled $2.05 billion and $2.26 billion, respectively.

During the fiscal year ended September 30, 2021, the Company repurchased $23.5 million of loans previously sold to Fannie Mae, as a result of incomplete loan origination documents, resulting in a return of $1.1 million of previously recognized gains.

Of that amount, $0.6 million was capitalized as part of the fair market value of the repurchased loans and $0.5 million was charged as an expense against the repurchase reserve.

At September 30, 2022, substantially all of the loans serviced for Fannie Mae and others were performing in accordance with their contractual terms and management believes that it had no material repurchase obligations associated with these loans at that date.

However, at September 30, 2021, an accrual for $0.5 million has been maintained for potential repurchase or loss reimbursement requests.

The Company actively monitors its interest rate risk position to determine its desired level of investment in fixed-rate mortgages.

The historically low mortgage interest rates during fiscal 2020 and 2021 have re-emphasized the strategic importance of the sales of first mortgage loans in our management of interest rate risk.

However, at September 30, 2022, a reserve of $0.4 million has been maintained to cover potential losses on repurchases or reimbursements that may arise in connection with representations and warranties made at time of sale.

The Company requires title insurance on all of its residential real estate mortgage loans.

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For home purchase loans with LTV ratios at origination in excess of 85% but equal to or less than 90%, the Company generally requires private mortgage insurance.

During fiscal year 2020, the Company began to offer a new product allowing up to 90% LTV with no mortgage insurance for superior credit borrowers.

The Company offers a loan product allowing up to 95% LTV with no mortgage insurance for superior credit borrowers.

LTV ratios in excess of 85% are not available for refinance transactions except for adjustable-rate, first mortgage loans and Home Ready loans.

The Home Ready product requires private mortgage insurance on purchase transactions between 80.01% and 97% LTV and refinance transactions between 80.01% and 95% LTV.

Beginning in fiscal year 2020, the Company originated home purchase loans under a new high LTV product where initial LTV ratios are as high as 90% with no mortgage insurance.

As of September 30, 2021, the Company had a total of $54.6 million of loans outstanding that were originated through this high LTV program.

Prior to 2008, the Company also originated loans under a high LTV program.

These loans had initial LTV ratios as high as 95%.

Borrowers did not obtain private mortgage insurance with respect to these loans, but the Company had negotiated with a private mortgage insurance

carrier for pooled private mortgage insurance coverage.

As of September 30, 2021, the Company had $18.6 million of loans outstanding that were originated through this high LTV program, $16.3 million of which the Company has insured through the private mortgage insurance carrier.

Both of these programs originated with higher interest rates than the Company's other residential real estate loans and to qualify for these programs, the loan applicant must satisfy more stringent underwriting criteria (credit score, income qualification, and other criteria).

As of September 30, 2022, the Company had a total of $225.7 million of loans outstanding that were originated through the high LTV program.

This program involves loans originated with higher interest rates than the Company's other residential real estate loans, and to qualify for this program the loan applicant must satisfy more stringent underwriting criteria (credit score, income qualification, and other criteria).

Home Equity Loans and Home Equity Lines of Credit .

4 unchanged sentences

At September 30, 2022 and 2021, home equity loans totaled $261.0 million, or 1.8%, and $244.9 million, or 1.9%, respectively, of total loans receivable (which included $97.0 million and $141.3 million, respectively, of home equity lines of credit which were in the amortization period and no longer eligible to be drawn upon and $12.2 million and $7.7 million of bridge loans), and home equity lines of credit totaled $2.37 billion, or 16.5%, and $1.97 billion, or 15.7%, respectively, of total loans receivable.

Additionally, at September 30, 2022 and 2021, the undrawn amounts of home equity lines of credit totaled $4.08 billion and $3.20 billion, respectively.

A bridge loan permits a borrower to utilize the existing equity in their current home to fund the purchase of a new home before the current home is sold.

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The Company charges a closing fee with respect to bridge loans.

Additionally, at September 30, 2021 and 2020, the unadvanced amounts of home equity lines of credit totaled $3.20 billion and $2.55 billion, respectively.

The Company originated its home equity loans and home equity lines of credit without application fees (except for bridge loans) or borrower-paid closing costs.

Home equity loans were offered with fixed interest rates, were fully amortizing and had terms of up to 30 years.

The Company’s home equity lines of credit were offered with adjustable rates of interest indexed to the Prime Rate, as reported in The Wall Street Journal .

The Company originates its home equity loans and home equity lines of credit without application fees (except for bridge loans) or borrower-paid closing costs.

Home equity loans are offered with fixed interest rates, are fully amortizing and have terms of up to 30 years.

The Company’s home equity lines of credit are offered with adjustable rates of interest indexed to the Prime Rate, as reported in The Wall Street Journal .

The following table sets forth credit exposure, principal balance, percent delinquent 90 days or more, the mean CLTV percent at the time of origination and the current mean CLTV percent of our home equity loans, home equity lines of credit and bridge loan portfolio as of September 30, 2022.

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Current Mean CLTV on home equity lines of credit in the repayment period is calculated using the principal balance.

At September 30, 2021, 39.8% of our home equity lending portfolio was either in a first lien position (23.5%), in a subordinate (second) lien position behind a first lien that we held (13.6%) or behind a first lien that was held by a loan that we

originated, sold and now service for others (2.7%).

At September 30, 2022, 36.9% of our home equity lending portfolio was either in a first lien position (20.4%), in a subordinate (second) lien position behind a first lien that we held (13.9%) or behind a first lien that was held by a loan that we originated, sold and now service for others (2.6%).

At September 30, 2022, 13.7% of our home equity line of credit portfolio in the draw period was making only the minimum payment on the outstanding line balance.

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(1) Market data necessary for stratification is not readily available.

As shown in the table below, the principal balance of home equity lines of credit in the draw period that have a current mean CLTV over 80% or unknown is $10.4 million, or 0.5% at September 30, 2021.

As shown in the table above, the principal balance of home equity lines of credit in the draw period that have a current mean CLTV over 80% or unknown is $4.1 million, or 0.2% at September 30, 2022.

In recognition of previous 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.

The following table sets forth the breakdown of current mean CLTV percentages for our home equity lines of credit in the draw period as of September 30, 2021.

Exposure Principal

Balance Percent

of Total Principal Balance Percent

Origination(2) Current

(Dollars in thousands)

Home equity lines of credit in draw period (by current mean CLTV):

< 80% $ 5,134,659 $ 1,959,003 99.5 % 0.07 % 60 % 50 %

80 - 89.9% 29,944 8,638 0.4 % — % 80 % 80 %

90 - 100% 1,018 169 — % — % 58 % 94 %

> 100% 755 197 — % 28.06 % 63 % 119 %

Unknown (1) 4,050 1,394 0.1 % — % 54 % (1)

$ 5,170,426 $ 1,969,401 100.0 % 0.07 % 60 % 50 %

______________________

(1) Market data necessary for stratification is not readily available.

(2) Mean CLTV percent at origination for all home equity lines of credit is based on the committed amount.

(3) Current Mean CLTV is based on best available first mortgage and property values as of September 30, 2021.

Property values are estimated using HPI data published by the FHFA.

Current Mean CLTV percent for home equity lines of credit in the draw period is calculated using the committed amount.

Current Mean CLTV on home equity lines of credit in the repayment period is calculated using the principal balance.

Construction Loans.

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Construction financing generally involves greater credit risk than long-term financing on improved, owner-occupied real estate.

Risk of loss on a construction loan depends largely upon the accuracy of the initial estimate of the value of the property

at completion of construction compared to the estimated cost (including interest) of construction and other assumptions.

Risk of loss on a construction loan depends largely upon the accuracy of the initial estimate of the value of the property at completion of construction compared to the estimated cost (including interest) of construction and other assumptions.

If the estimate of construction cost proves to be inaccurate, the Company may be required to advance additional funds beyond the amount originally committed in order to protect the value of the property.

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Loan Originations, Purchases, Sales, Participations and Servicing.

Lending activities are conducted by the Company’s loan personnel (all of whom are non-commissioned associates) operating at our main and branch office locations and at our loan production offices.

Lending activities are primarily conducted by the Company’s loan personnel (all of whom are non-commissioned associates) operating at our main and branch office locations and at our loan production offices.

All loans that the Company originates are underwritten pursuant to its policies and procedures, which, for real estate loans, are consistent with the ability to repay guidance provided by the CFPB.

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The Company’s residential real estate mortgage loan originations are generated by its in-house loan representatives, by direct mail solicitations, by referrals from existing or past customers, by referrals from local builders and real estate brokers, from calls to its telephone call center and from the internet.

Except for loans originated in accordance with the guidelines of Fannie Mae's Home Ready program, which loans are originated with the intent to sell, the Company decides whether to retain, sell or securitize the loans that it originates, after evaluating current and projected market interest rates, its interest rate risk objectives, its liquidity needs and other factors.

A combination of high loan origination levels, historically low mortgage interest rates and attractive Fannie Mae loan sale prices led to a continued high level of loan sales during fiscal 2021.

The Company also purchases fixed-rate first mortgage loans through a correspondent lending partnership.

A vast majority of all loans originated are done so with the intent to hold.

The Company later determines whether to sell or securitize the loans that it holds, after evaluating current and projected market interest rates, its interest rate risk objectives, its liquidity needs and other factors.

During the fiscal year ended September 30, 2022, the Company sold, or committed to sell, to Fannie Mae, in either whole loan or security form, $128.1 million of long-term, fixed-rate residential real estate mortgage loans, all on a servicing retained basis.

In addition to sales of long-term, fixed-rate residential real estate mortgage loans, the Company has also previously sold to private parties, non-agency eligible, adjustable-rate loans on a servicing retained basis.

The Company has also previously sold to private parties, non-agency eligible, adjustable-rate loans on a servicing retained basis.

Those sales evidenced the saleability of our loans that are not originated in accordance with agency specified procedures, including adjustable-rate loans.

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Management’s Discussion and Analysis of Financial Condition and Results of Operation - Controlling Our Interest Rate Risk Exposure , only a portion of the Company's first mortgage loan originations are eligible for securitization and sale in Fannie Mae mortgage backed security form.

The balance of loans held for sale was $8.8 million at September 30, 2021, all of which were originated pursuant to the guidelines of Fannie Mae's Home Ready program.

The balance of loans held for sale was $9.7 million at September 30, 2022.

In fiscal year 2022, the Company started a new pilot program to originate loans with the intent to sell following a more traditional mortgage banking model including risk based pricing and loan level price adjustments.

The pilot is marketed under the name Mortgage Passport and is considered a division of the Association.

The impact to the Company from the pilot program for this fiscal year is considered immaterial and therefore no breakout is provided.

Historically, the Company has retained the servicing rights on all residential real estate mortgage loans that it has sold, and intends to continue this practice into the future.

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Delinquent Loans .

While we are not currently receiving payments on loans in active COVID-19 forbearance plans, the majority of these accounts are reported as current and accruing and are not currently included in the amortized cost of TDRs.

See further discussion under the Allowance for Credit Losses caption later in this section and also Note 5.

LOANS AND ALLOWANCE FOR CREDIT LOSSES of the NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

The following tables set forth the amortized cost in loan delinquencies by type, segregated by geographic location and severity of delinquency at the dates indicated.

The following tables set forth the amortized cost in loan delinquencies by type, segregated by geographic location and duration of delinquency at the dates indicated.

The majority of our Home Today loan portfolio is secured by properties located in Ohio and there are no other loans with delinquent balances.

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Total $ 9,052 $ 15,669 $ 24,721

Loans Delinquent For

30-89 Days 90 Days or More Total

(Dollars in thousands)

September 30, 2019

Real estate loans:

Residential Core

Ohio $ 8,519 $ 5,503 $ 14,022

Florida 930 1,305 2,235

Other 1,405 866 2,271

Total Residential Core 10,854 7,674 18,528

Residential Home Today 4,314 2,623 6,937

Home equity loans and lines of credit

Ohio 1,746 1,950 3,696

Florida 1,065 1,260 2,325

California 187 552 739

Other 1,189 2,035 3,224

Total Home equity loans and lines of credit 4,187 5,797 9,984

Total $ 19,355 $ 16,094 $ 35,449

Loans Delinquent For

30-89 Days 90 Days or More Total

(Dollars in thousands)

September 30, 2018

Real estate loans:

Residential Core

Ohio $ 7,622 $ 7,392 $ 15,014

Florida 906 2,455 3,361

Other 1,346 960 2,306

Total Residential Core 9,874 10,807 20,681

Residential Home Today 4,552 3,814 8,366

Home equity loans and lines of credit

Ohio 2,117 2,286 4,403

Florida 2,011 2,085 4,096

California 302 255 557

Other 2,037 1,307 3,344

Total Home equity loans and lines of credit 6,467 5,933 12,400

Total $ 20,893 $ 20,554 $ 41,447

Loans Delinquent For

30-89 Days 90 Days or More Total

(Dollars in thousands)

September 30, 2017

Real estate loans:

Residential Core

Ohio $ 6,850 $ 8,756 $ 15,606

Florida 1,671 2,507 4,178

Other 149 712 861

Total Residential Core 8,670 11,975 20,645

Residential Home Today 5,563 6,851 12,414

Home equity loans and lines of credit

Ohio 3,037 2,134 5,171

Florida 1,884 2,345 4,229

California 590 354 944

Other 859 575 1,434

Total Home equity loans and lines of credit 6,370 5,408 11,778

Total $ 20,603 $ 24,234 $ 44,837

Total loans seriously delinquent (i.e.

delinquent 90 days or more) decreased one basis point to 0.12% of total net loans at September 30, 2021, from 0.13% at September 30, 2020.

delinquent 90 days or more) decreased three basis points to 0.09% of total net loans at September 30, 2022, from 0.12% at September 30, 2021.

The percentage of seriously delinquent loans to total net loans decreased in the residential Core portfolio from 0.07% to 0.06%.

Such loans in the residential Home Today portfolio were 0.02% as of both dates, and in the home equity loans and lines of credit portfolio, 0.03% as of both dates.

Such loans in the residential Home Today portfolio decreased from 0.02% to 0.01%.

Home equity loans and lines of credit portfolio also decreased from 0.03% to 0.02%.

Non-performing Assets and Restructured Loans .

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LOANS AND ALLOWANCE FOR CREDIT LOSSES of the NOTES TO CONSOLIDATED FINANCIAL STATEMENTS .

A summary report of all loans 30 days or more past due is provided to the Company’s Board of Directors.

Loans are placed in non-accrual status when they are contractually 90 days or more past due or if collection of principal or interest in full is in doubt.

7 unchanged sentences

September 30,

2021 2020 2019 2018 2017

(Dollars in thousands)

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Total non-performing assets to total assets 0.23 % 0.32 %

TDRs (not included in non-accrual

loans above):

TDRs (not included in non-accrual loans above):

Real estate loans:

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____________________

(1) At September 30, 2021, 2020, 2019, 2018 and 2017 the totals include $25.7 million, $35.0 million, $52.1 million, $52.1 million and $47.0 million, respectively, in TDRs:

(1) At September 30, 2022 and 2021, the totals include $21.9 million and $25.7 million, respectively, in TDRs:

which are less than 90 days past due but included with non-accrual loans for a minimum period of six months from the restructuring date due to their non-accrual status prior to restructuring;

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or because all borrowers have filed Chapter 7 bankruptcy, and had not reaffirmed or been dismissed.

(2) At September 30, 2021, 2020, 2019, 2018 and 2017 the totals include $6.9 million, $7.2 million, $8.4 million, $10.5 million and $11.9 million in TDRs that are 90 days or more past due, respectively.

(2) At September 30, 2022 and 2021, the totals include $3.6 million and $6.9 million in TDRs that are 90 days or more past due, respectively.

Non-accrual loans continue to decline primarily due to a decrease in the population of TDRs in general and those moved to accruing after a sufficient period of demonstrated payment performance and, to a lesser extent, a decrease in loans 90 days or more past due.

Since many of the accounts exiting the non-accrual population are TDRs paying as agreed or paid in full and closed, we do not expect any material impact to interest income or the allowance once the non-accrual population stabilizes.

The gross interest income that would have been recorded during the years ended September 30, 2021 and September 30, 2020, on non-accrual loans, if they had been accruing during the entire period and TDRs if they had been current and performing in accordance with their original terms during the entire period, was $7.0 million and $7.9 million, respectively.

The interest income recognized on those loans included in net income for the years ended September 30, 2021 and September 30, 2020, was $4.4 million and $4.8 million, respectively.

At September 30, 2021 and September 30, 2020, the balance of accrued interest receivable includes $0.6 million and $2.4 million, respectively, of unpaid interest on active COVID-19 forbearance plans.

Collateral-Dependent Loans.

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The amortized cost of collateral-dependent loans includes accruing TDRs and loans that are returned to accrual status when contractual payments are less than 90 days past due.

These loans continue to be individually evaluated based on collateral

until, at a minimum, contractual payments are less than 30 days past due.

These loans continue to be individually evaluated based on collateral until, at a minimum, contractual payments are less than 30 days past due.

Also, the amortized cost of non-accrual loans includes loans that are not included in the amortized cost of collateral-dependent loans because they are included in loans collectively evaluated for credit loss.

The table below sets forth a reconciliation of the amortized costs and categories between non-accrual loans and collateral-dependent loans at the dates indicated.

For the years ended 2020, 2019, 2018 and 2017, the tables below set forth a reconciliation of the amortized cost and categories between non-accrual loans and impaired loans, under previously applicable GAAP.

For the Year Ended

The decrease in other accruing collateral-dependent loans at September 30, 2022 from September 30, 2021, was primarily related to forbearance plans that had been extended past 12 months that are now performing with no charge-off and no longer collateral-dependent.

For the Years Ended September 30,

(Dollars in thousands)

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Total Collateral-Dependent Loans $ 47,121 $ 83,854

For the Year Ended

2020 2019 2018 2017

(Dollars in thousands)

Non-Accrual Loans $ 53,369 $ 71,265 $ 77,752 $ 79,091

Accruing TDRs 99,124 96,917 102,816 103,126

Performing Impaired Loans 5,959 4,907 3,982 3,607

Loans Collectively Evaluated (3,235) (2,616) (3,756) (5,264)

Total Impaired Loans $ 155,217 $ 170,473 $ 180,794 $ 180,560

In response to the economic challenges facing many borrowers, we continue to restructure loans.

Loan restructuring is a method used to help families keep their homes and preserve our neighborhoods.

Loan restructuring is a method used to help families keep their homes and preserve neighborhoods.

This involves making changes to the borrowers’ loan terms through interest rate reductions, either for a specific period or for the remaining term of the loan;

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capitalization of delinquent payments in special situations;

or some combination of the above.

or some combination of the aforementioned.

Loans discharged through Chapter 7 bankruptcy are also reported as TDRs per OCC interpretive guidance.

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Substandard assets include those assets characterized by the distinct possibility that we will sustain some loss if the deficiencies are not corrected.

Assets classified as doubtful have all of the weaknesses inherent in those classified substandard with the added characteristic that the weaknesses present make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable or improbable.

Assets (or portions of assets) classified as loss are those considered uncollectible and of such little value that their

continuance as assets is not warranted.

Assets (or portions of assets) classified as loss are those considered uncollectible and of such little value that their continuance as assets is not warranted.

Assets that do not expose us to risk sufficient to warrant classification in one of the aforementioned categories, but which possess potential weaknesses that deserve management's attention and may result in further deterioration in their repayment prospects and/or the Company's credit position, are required to be designated as special mention.

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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.

The Company adopted CECL guidance ASC Topic 326:

Financial Instruments - Credit Losses on October 1, 2020.

Refer to Note 5.

LOANS AND ALLOWANCES FOR CREDIT LOSSES of the NOTES TO CONSOLIDATED FINANCIAL STATEMENTS for further discussion on CECL methodology.

Our allowance for credit losses consists of three components:

(1) individual valuation allowances (IVAs) established for any loans dependent on cash flows, such as performing TDRs, and before CECL on loans individually reviewed that represent further deterioration in the fair value of the collateral not yet identified as uncollectible;

(2) general valuation allowances (GVAs) for loans, which are comprised of quantitative GVAs, which are general allowances for credit losses for each loan type based on historical loan loss experience and qualitative GVAs, which are adjustments to the quantitative GVAs, maintained to cover uncertainties that affect our estimate of expected losses for each loan type;

(1) individual valuation allowances (IVAs) established for any loans dependent on cash flows, such as performing TDRs;

(2) general valuation allowances (GVAs) for loans, which are comprised of quantitative GVAs, general allowances for credit losses for each loan type based on historical loan loss experience and qualitative GVAs, which are adjustments to the quantitative GVAs, maintained to cover uncertainties that affect the estimate of expected credit losses for each loan type;

(3) GVAs for off-balance sheet credit exposures, which are comprised of expected lifetime losses on unfunded loan commitments to extend credit where the obligations are not unconditionally cancellable.

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• changes in the experience, ability or depth of lending management;

• changes in the volume or severity of past due loans, volume of non-accrual loans, or the volume and severity of adversely classified loans including the trending of delinquency statistics (both current and historical), historical loan loss experience and trends, the frequency and magnitude of multiple restructurings of loans previously the subject of

TDRs, and uncertainty surrounding borrowers’ ability to recover from temporary hardships for which short-term loan restructurings are granted;

• changes in the quality of the loan review system;

• changes in the value of the underlying collateral including asset disposition loss statistics (both current and historical) and the trending of those statistics, and additional charge-offs on individually reviewed loans;

• existence of any concentrations of credit;

• effect of other external factors such as the COVID-19 pandemic, competition, market interest rate changes or legal and regulatory requirements including market conditions and regulatory directives that impact the entire financial services industry;

• effect of other external factors such as competition, market interest rate changes or legal and regulatory requirements including market conditions and regulatory directives that impact the entire financial services industry;

• limitations within our models to predict life of loan net losses.

As of September 30, 2021, some of our borrowers have experienced unemployment or reduced income as a result of the COVID-19 global pandemic and have requested some type of loan payment forbearance.

We began offering short-term forbearance plans to borrowers affected by COVID-19 on March 13, 2020.

These forbearance plans that remain active totaled $21.8 million, or 0.17% of total loans receivable, at September 30, 2021, of which $19.4 million were related to first mortgage loans and $2.3 million were related to home equity loans and lines of credit.

Although we are not currently receiving payments on loans in active COVID-19 forbearance plans, the majority of these accounts are reported as current and accruing and are not currently included in the amortized cost of TDRs as the Company has elected to apply the temporary suspension of TDR requirements provided by the revised interagency statement and the CARES Act for eligible loan modifications.

Further details about active COVID-19 forbearance plans and post-forbearance loan workouts can be found in Note 5 .

LOANS AND ALLOWANCE FOR CREDIT LOSSES of the NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

When loan restructurings qualify as TDRs and the loans are performing according to the terms of the restructuring, we record an IVA based on the present value of expected future cash flows, which includes a factor for potential subsequent defaults, discounted at the effective interest rate of the original loan contract.

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The new valuation allowance on a loan that has multiple restructurings is calculated based on the present value of the expected cash flows, discounted at the effective interest rate of the original loan contract, considering the new terms of the restructured agreement.

Due to the immaterial amount of this exposure to date, we capture this exposure as a component of our qualitative GVA evaluation as the estimated change in the present value of cash flows on restructurings expected to subsequently restructure based on historical activity.

The estimated exposure for additional loss related to multiple loan restructurings is included as a component of our qualitative GVA.

Home equity loans and lines of credit generally have higher credit risk than traditional residential mortgage loans.

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This expanded evaluation is in addition to our traditional evaluation procedures.

As part of the adoption of CECL on October 1, 2020, we have established an allowance for our unfunded commitments on this portfolio, which is recorded in other liabilities.

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 September 30, 2021, we had an amortized cost of $2.24 billion in home equity loans and equity lines of credit outstanding, of which $4.2 million, or 0.2% were delinquent 90 days or more.

We evaluate the allowance for credit losses based upon the combined total of the quantitative and qualitative GVAs and IVAs.

We periodically evaluate the carrying value of loans and unfunded commitments and the allowance is adjusted accordingly.

At September 30, 2022, we had an amortized cost of $2.67 billion in home equity loans and home equity lines of credit outstanding, of which $2.3 million, or 0.1% were delinquent 90 days or more.

The allowance for credit losses is evaluated based upon the combined total of the quantitative and qualitative GVAs and IVAs.

Periodically, the carrying value of loans and factors impacting our credit loss analysis are evaluated and the allowance is adjusted accordingly.

While we use the best information available to make evaluations, future additions to the allowance may be necessary based on unforeseen changes in loan quality and economic conditions.

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The following table sets forth activity for credit losses segregated by geographic location for the periods indicated.

The majority of our Home Today loan portfolio is secured by properties located in Ohio and there were no charge-offs in the construction or other loans portfolios, therefore these portfolios were not segregated by state.

The majority of our Home Today loan portfolio is secured by properties located in Ohio, and therefore was not segregated by state.

At or For the Years Ended September 30,

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Total recoveries 11,107 10,388 10,549

Net recoveries (charge-offs) 5,175 5,024 6,495 4,470 4,153

Net recoveries 9,657 5,175 5,024

Provision (release) for credit losses on loans (1,051) (11,918) 3,000

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Allowance balance for all credit losses (end of the year) $ 99,916 $ 89,259 $ 46,937

Net recoveries to average loans outstanding 0.04 % 0.04 % 0.05 % 0.04 % 0.03 %

Allowance for credit losses to non-accrual loans at end

of the year 145.96 % 87.95 % 54.60 % 54.56 % 61.89 %

Allowance for credit losses to non-accrual loans at end of the year 204.73 % 145.96 % 87.95 %

Allowance for credit losses to the total amortized cost in loans at end of the year 0.51 % 0.51 % 0.36 %

We continue to evaluate loans becoming delinquent for potential losses and record provisions for the estimate of those losses.

Although the volume of delinquent loans are at record lows, we expect a moderate level of charge-offs to continue as delinquent loans are resolved in the future and uncollected balances are charged against the allowance.

Due to charge-offs incurred during periods of economic adversity and on accounts discharged in bankruptcy, as borrowers continue to make payments, recoveries are recognized.

Net recoveries may be higher during periods of increased refinance activity and housing values.

Depending on those outside factors, net recoveries may continue in the near future.

Changes in the housing and jobs markets could also impact the timing of future recoveries.

The ultimate resolution of remaining COVID-19 forbearance plans may also impact the level of charge-offs in the future.

For more information regarding our response to COVID-19, see Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations .

Allocation of Allowance for Credit Losses.

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.

This table does not include allowance for credit losses on unfunded loan commitments, which are primarily related to undrawn home equity lines of credit.

At September 30,

The following table sets forth additional information with respect to net recoveries (charge-offs) by category for the periods indicated.

For the Years Ended September 30,

2022 2021 2020

Amount Percent of

Allowance Percent of

Total Loans Amount Percent of

Allowance Percent of

Total Loans Amount Percent of

Allowance Percent of

(Dollars in thousands)

Net recoveries (charge-offs) to average loans outstanding during the year

Real estate loans:

Residential Core 0.02 % — % 0.01 %

Residential Home

Today 15 — 0.6 5,654 12.0 0.6 4,209 10.8 0.6

Home equity loans

and lines of credit 19,454 30.3 17.6 18,898 40.3 17.0 14,946 38.4 16.5

Construction 297 0.5 0.6 4 — 0.4 5 — 0.4

Allowance for credit losses on loans $ 64,289 100.0 % 100.0 % $ 46,937 100.0 % 100.0 % $ 38,913 100.0 % 100.0 %

Residential Home Today 0.02 % 0.02 % 0.01 %

Home Equity loans and lines of credit 0.03 % 0.02 % 0.02 %

Total net recoveries (charge-offs) to average loans outstanding 0.07 % 0.04 % 0.04 %

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 last four 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 of the obligations or as loans with improved collateral positions reach final resolution.

Gross charge-offs decreased and delinquent loans continue to be evaluated for potential losses, and provisions are recorded for the estimate of potential losses of those loans.

Subject to changes in the economic environment, a moderate level of charge-offs are expected as delinquent loans are resolved in the future and uncollected balances are charged against the allowance.

Allocation of Allowance for Credit Losses.

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.

This table does not include allowance for credit losses on unfunded loan commitments, which are primarily related to undrawn home equity lines of credit.

At September 30,

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Allowance for credit losses on loans $ 72,895 100.0 % 100.0 % $ 64,289 100.0 % 100.0 %

During the year ended September 30, 2021, the total allowance for credit losses increased, to $89.3 million from $46.9 million at September 30, 2020, primarily related to the adoption of CECL on October 1, 2020.

The total allowance for credit losses at adoption was $93.1 million, composed of $71.0 million of allowance for credit losses on loans and $22.1 million of allowance for credit losses on off-balance sheet exposures.

We recorded a $9.0 million release for credit losses for the year, consisting of a $11.9 million release for credit losses on loans, partially offset by a $2.9 million provision for credit losses on off-balance sheet exposures, while recoveries exceeded loan charge-offs by $5.2 million.

Releases from the allowance for credit losses during the recent fiscal year were primarily due to recoveries exceeding charge-offs and improvements in the economic trends and forecasts used to estimate credit losses for the reasonable and supportable period under CECL.

During the fiscal year ended September 30, 2022, the total allowance for credit losses increased to $99.9 million, from $89.3 million at September 30, 2021.

We recorded a $1.0 million provision for credit losses for the year, consisting of a $1.1 million release for credit losses on loans, and a $2.1 million provision for credit losses on off-balance sheet exposures, while recoveries exceeded loan charge-offs by $9.7 million.

Refer to the " Activity in the Allowances for Credit Losses" and "Analysis of the Allowance for Credit Losses" tables in Note 5.

ALLOWANCES FOR CREDIT LOSSES, of the NOTES TO CONSOLIDATED FINANCIAL STATEMENTS for more information.

LOANS AND ALLOWANCES FOR CREDIT LOSSES of the NOTES TO CONSOLIDATED FINANCIAL STATEMENTS for more information.

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 impact of adopting a life of loan concept under CECL during the year also made directional change alignment difficult.

Changes during the year ended September 30, 2021 in the allowance for credit losses on loan balances are described below.

As of September 30, 2021 the allowance for credit losses on off-balance sheet credit exposures was $25.0 million, which was primarily related to undrawn equity exposures and commitments to originate mortgages.

Changes during the fiscal year ended September 30, 2022 in the allowance for credit losses on loan balances are described below.

During the fiscal year ended September 30, 2022, the total allowance for credit losses on

off-balance sheet exposures increased to $27.0 million, from $25.0 million at September 30, 2021, which was primarily related to undrawn equity exposures.

Other than the less significant construction and other loans segments, the changes related to the significant loan segments are described as follows:

• Residential Core – The amortized cost of this segment decreased 5.3% or $572.8 million, and its total allowance increased 98.9% or $22.1 million as of September 30, 2021 as compared to September 30, 2020.

The increase in total allowance is primarily related to the life of loan concept as part of the adoption of CECL on October 1, 2020, as most credit metrics showed improvement during the year.

• Residential Core – The amortized cost of this segment increased 13.0% or $1.3 billion, and its total allowance increased 20.2% or $9.0 million as of September 30, 2022 as compared to September 30, 2021.

Total delinquencies decreased 11.6% to $13.5 million at September 30, 2022 from $15.3 million at September 30, 2021.

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Net recoveries during the current year were $2.7 million as compared to net recoveries of $0.4 million during the year ended September 30, 2021.

Economic forecasts continued to show improvements as the allowance decreased from initial CECL adoption levels, but was partially offset by qualitative adjustments for borrowers who continue to need additional assistance, such as those that have extended their COVID-19 forbearance plans greater than 12 months.

With some deterioration in the economic forecasts and new growth in the portfolio, the allowance increased.

• Residential Home Today – The amortized cost of this segment decreased 16.7% or $10.6 million, as we no longer originate loans under the Home Today program.

There was no expected allowance or net recovery position for this segment at September 30, 2021, while the allowance was $5.7 million at September 30, 2020.

Under the CECL methodology, the life of loan concept allows for qualitative adjustments for the expected future recoveries of previously charged-off loans, which, along with the declining balance of the segment, resulted in the lack of allowance as of September 30, 2021.

The expected net recovery position for this segment was $1.0 million at September 30, 2022, while there was no allowance at September 30, 2021.

Total delinquencies decreased 25.3% to $3.0 million at September 30, 2022 from $4.0 million at September 30, 2021.

Delinquencies greater than 90 days decreased 58.4% to $0.9 million at September 30, 2022 from $2.1 million at September 30, 2021.

There were net recoveries of $1.8 million and $1.3 million during the years ended September 30, 2021 and September 30, 2020,

• Home Equity Loans and Lines of Credit – The amortized cost of this segment decreased 0.8% or $17.1 million to $2.24 billion at September 30, 2021 from $2.26 billion at September 30, 2020.

There were net recoveries of $2.4 million and $1.8 million during the years ended September 30, 2022 and September 30, 2021, respectively.

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 current allowance balance for Home Today loans negative.

• Home Equity Loans and Lines of Credit – The amortized cost of this segment increased 18.9% or $424.2 million to $2.67 billion at September 30, 2022 from $2.24 billion at September 30, 2021.

The total allowance for this segment increased 3.0% to $20.0 million from $19.5 million at September 30, 2021.

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Net recoveries for this loan segment during the current year were $4.4 million as compared to $2.9 million for the year ended September 30, 2021.

The allowance for this segment increased from the September 30, 2020 balance as a result of the adoption of CECL, but the allowance balance has actually decreased from the initial CECL determined allowance for this segment of $24.2 million as of October 1, 2020.

Driving the decrease were improved economic forecasts and the continued decline in forbearance plans.

The increase in allowance for this segment is primarily due to new portfolio growth, along with some deterioration in the economic factors.

Loan losses on home equity loans and lines of credit continued to comprise a large component of our gross charge-offs for 2022 and are expected to continue to represent a large portion of our charge-offs for the foreseeable future based on the relatively higher credit risk of this product when compared to a first mortgage loan.

During the year ended September 30, 2021 the Company adopted the CECL allowance methodology as of October 1, 2020 using the modified retrospective approach, replacing the previous incurred loss methodology.

The allowance for credit losses now represents the estimate of lifetime loss in our loan portfolio and unfunded loan commitments.

The allowance for credit losses represents the estimate of lifetime loss in our loan portfolio and unfunded loan commitments.

Our analysis for evaluating the adequacy of and the appropriateness of our allowance for credit losses is continually refined as relevant information, relating to past events, current conditions and supportable forecasts become available.

During the years ended September 30, 2020, 2019, 2018 and 2017, no material changes were made to the incurred loss allowance methodology.

During the years ended September 30, 2022 and 2021, no material changes were made to the allowance for credit losses.

The Association’s Board of Directors is responsible for establishing and overseeing the Association’s investment policy.

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This policy dictates that investment decisions be made based on the safety of the investment, liquidity requirements, potential returns, the ability to provide collateral for pledging requirements, and consistency with our interest rate risk management strategy.

The Association’s Investment

Committee, which consists of the Association's chief operating officer, chief financial officer and other members of management, oversees the Association's investing activities and strategies.

The Association’s Investment Committee, which consists of the Association's chief operating officer, chief financial officer and other members of management, oversees the Association's investing activities and strategies.

The portfolio manager is responsible for making securities portfolio decisions in accordance with established policies.

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Government, and government-sponsored entities, which include Fannie Mae and Freddie Mac.

The policy also permits investments in mortgage-backed securities, including pass-through securities issued and guaranteed by Fannie Mae, Freddie Mac and Ginnie Mae as well as collateralized mortgage obligations and real estate mortgage investment conduits issued or backed by securities issued by these governmental agencies and government-sponsored entities.

The investment policy also permits investments in asset-backed securities, banker’s acceptances, money market funds, term federal funds, repurchase agreements and reverse repurchase agreements.

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We do not have a trading portfolio.

The fair value of our investment portfolio at September 30, 2021 consisted of $5.5 million in primarily fixed-rate securities guaranteed by Fannie Mae, and $416.2 million of REMICs collateralized only by securities guaranteed by Fannie Mae, Freddie Mac or Ginnie Mae.

Government and Federal Agency Obligations.

Government and federal agency securities generally provide lower yields than other investment options authorized in the Association's and Company's investment policies, we maintain these investments, to the extent appropriate, for liquidity purposes, as collateral for borrowings and as an interest rate risk hedge in the event of significant mortgage loan prepayments.

The fair value of our investment portfolio at September 30, 2022 consisted of $1.0 million in primarily fixed-rate securities guaranteed by Fannie Mae, $453.3 million of REMICs collateralized only by securities guaranteed by Fannie Mae, Freddie Mac or Ginnie Mae, and $3.6 million of U.S.

Government obligations.

Government Obligations.

Government securities generally provide lower yields than other investment options authorized in the Association's and Company's investment policies, we maintain these investments, to the extent appropriate, for liquidity purposes, as collateral for borrowings and as an interest rate risk hedge in the event of significant mortgage loan prepayments.

Mortgage-Backed Securities.

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In addition, mortgage-backed securities may be used to collateralize our specific liabilities and obligations.

Investments in mortgage-backed securities involve a risk that the timing of actual payments will be earlier or later than the timing estimated when the mortgage-backed security was purchased, which may require adjustments to the amortization of any premium or

accretion of any discount relating to such interests, thereby affecting the net yield on our securities.

We periodically review current prepayment speeds to determine whether prepayment estimates require modifications that could cause amortization or accretion adjustments.

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The cash flows from the underlying collateral are generally divided into “tranches” or classes that have descending priorities with respect to the distribution of principal and interest cash flows, while cash flows on pass-through mortgage-backed securities are distributed pro rata to all security holders.

The following table sets forth the amortized cost and fair value of our securities portfolio (excluding FHLB of Cincinnati common stock) at the dates indicated.

At September 30,

2021 2020 2019

Value Amortized

(Dollars in thousands)

Investments available for sale:

REMICs $ 415,149 $ 416,241 $ 441,419 $ 447,203 $ 544,042 $ 541,042

Fannie Mae certificates 5,393 5,542 5,965 6,235 6,563 6,822

Total investment securities available for sale $ 420,542 $ 421,783 $ 447,384 $ 453,438 $ 550,605 $ 547,864

Portfolio Maturities and Yields .

The composition and maturities of our securities portfolio at September 30, 2021 are summarized in the following table.

Maturities are based on the final contractual payment dates, and do not reflect the impact of prepayments or early redemptions that may occur.

There were no securities with a maturity of one year or less.

All of our securities at September 30, 2021 were taxable securities.

One Year Through

Five years More than

Five Years Through

Ten Years More than Ten

Years Total Securities

Cost Weighted

Yield Amortized

Cost Weighted

Yield Amortized

Cost Weighted

Yield Amortized

Value Weighted

(Dollars in thousands)

available for sale:

REMICs $ 14,304 1.91 % $ 33,580 1.02 % $ 367,265 0.90 % $ 415,149 $ 416,241 0.94 %

Fannie Mae certificates 4,069 1.57 % 1,324 6.28 % — — % 5,393 5,542 2.73 %

Total investment securities available for sale $ 18,373 1.83 % $ 34,904 1.22 % $ 367,265 0.90 % $ 420,542 $ 421,783 0.96 %

Sources of Funds

Deposits traditionally have been the primary source of funds for the Association’s lending and investment activities.

The Association also borrows, primarily from the FHLB of Cincinnati and the FRB-Cleveland Discount Window, to supplement cash flow, to lengthen the maturities of liabilities for interest rate risk management purposes and to manage its cost of funds.

Additional sources of funds are scheduled loan payments, maturing investments, loan prepayments, collateralized wholesale borrowings, income on other earning assets, the proceeds from loan sales, and brokered CDs.

As a result of favorable market conditions, proceeds from loan sales increased significantly during fiscal 2020 and 2021 and allowed for the retirement of some FHLB of Cincinnati borrowings.

The Association obtains deposits primarily from the areas in which its branch offices are located, as well as from its customer service call center, its internet website, and from brokered CDs.

The Association also borrows, primarily from the FHLB of Cincinnati and the FRB-Cleveland Discount Window, to

supplement cash flow, to lengthen the maturities of liabilities for interest rate risk management purposes and to manage its cost of funds.

Additional sources of funds are scheduled loan payments, maturing investments, loan prepayments, collateralized wholesale borrowings, Fed Fund purchases, income on other earning assets, the proceeds from loan sales, and brokered deposits.

As a result of unfavorable market conditions, proceeds from loan sales decreased during fiscal year 2022, which resulted in an increase of borrowings from the FHLB of Cincinnati.

The Association obtains deposits primarily from the areas in which its branch offices are located, as well as from its customer service call center, its internet website, and from brokered deposits.

It relies on its competitive pricing, convenient locations, and customer service to attract and retain its non-brokered deposits.

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The following table sets forth the distribution of the Association’s average total deposit accounts, by account type, for the fiscal years indicated.

A deposit schedule by account type can be found in Note 9.

DEPOSITS of the NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

For the Years Ended September 30,

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Total Deposits $ 8,921,017 100.0 % 1.18 %

As of September 30, 2021, the aggregate amount of the Association’s outstanding CDs in amounts greater than or equal to $100,000 was approximately $3.16 billion.

As of September 30, 2022, the aggregate amount of the Association’s outstanding certificate of deposits in amounts greater than $250 thousand was approximately $247.6 million.

The following table sets forth the maturity of those CDs as of September 30, 2022.

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Over six months through one year 37,918

Over one year to three years 1,060,171

Over three years 256,313

More than one year 130,057

Total $ 247,572

At September 30, 2021, the Association had $3.09 billion of borrowings from the FHLB of Cincinnati.

During the fiscal year ended September 30, 2021, the Association’s only third-party borrowings consisted of loans, commonly referred to as “advances,” from the FHLB of Cincinnati.

Borrowings from the FHLB of Cincinnati are secured by the

Association’s investment in the common stock of the FHLB of Cincinnati as well as by a blanket pledge of its mortgage portfolio not otherwise pledged.

At September 30, 2022, the Association had $4.79 billion of borrowings outstanding, consisting of $4.56 billion from the FHLB of Cincinnati, $225.0 million of Fed Funds purchased, and $6.5 million of accrued interest.

Borrowings from the FHLB of Cincinnati are secured by the Association’s investment in the common stock of the FHLB of Cincinnati as well as by a blanket pledge of its mortgage portfolio not otherwise pledged.

Our current, maximum borrowing capacity with the FHLB of Cincinnati is $8.47 billion.

Based on the amount of collateral that is subject to the blanket pledge that secures advances, in addition to the existing available capacity, our capacity limit for additional borrowings from the FHLB of Cincinnati at September 30, 2021 was $4.34 billion.

The Association also has the ability to purchase overnight Fed Funds up to $595.0 million through arrangements with other institutions.

The ability to borrow from the FRB-Cleveland Discount Window is also available to the Association and is secured by a pledge of specific loans in the Association’s mortgage portfolio.

At September 30, 2021, the Association had the capacity to borrow up to $245.7 million from the FRB-Cleveland and had no amount outstanding as of that date.

The Association has utilized borrowings from the FHLB of Cincinnati to manage its on-balance sheet liquidity, to replace maturing, high rate CDs at a lower cost and to lengthen the maturity of our funding through the use of interest rate swaps discussed in Note 17.

DERIVATIVE INSTRUMENTS of the NOTES TO CONSOLIDATED FINANCIAL STATEMENTS .

At September 30, 2022, the Association had the capacity to borrow up to $168.0 million from the FRB-Cleveland.

A maturity schedule and available borrowing capacity schedule can be found in Note 10.

BORROWED FUNDS of the NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

The following tables sets forth information relating to a category of short-term borrowings for which the average balance outstanding during the period was at least 30% of shareholders' equity at the end of each period shown.

There were no FHLB borrowings 30 days and under during fiscal year 2021.

At or For the Fiscal Years Ended

September 30,

2022 2021 2020

(Dollars in thousands)

FHLB borrowings (30 days and under):

Borrowings (30 days and under):

Balance at end of year $ 2,000,000 $ — $ —

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(Dollars in thousands)

FHLB borrowings (90 days):

Borrowings (90 days or more):

Balance at end of year $ 1,550,000 $ 2,450,000 $ 2,975,000

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Weighted average interest rate at end of year 3.12 % 0.23 % 0.28 %

A maturity schedule, according to U.S.

GAAP, for FHLB borrowings is shown in Note 10.

BORROWED FUNDS of the NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

The following table sets forth the effective maturity of FHLB borrowings, ignoring the impact of deferred penalties and interest rate swaps discussed in Note 17.

DERIVATIVE INSTRUMENTS of the NOTES TO CONSOLIDATED FINANCIAL STATEMENTS .

Interest rate swaps are used to extend the duration of our liabilities, and when taking into consideration the balance of both the FHLB borrowings and the associated swap transactions hedging those borrowings, the weighted average cost of funds as of September 30, 2021 was 1.82%.

At September 30, 2021

Balance Percent Weighted Average Cost of Funds

(Dollars in thousands)

12 months or less $ 900,000 29.1 % 1.90 %

13 to 36 months 875,703 28.3 % 1.68 %

37 months or more 1,314,679 42.6 % 1.86 %

Total Borrowings $ 3,090,382 100.0 % 1.82 %

Federal Taxation

The Company and the Association are subject to federal income taxation in the same general manner as other corporations, with certain exceptions.

Prior to the completion of our initial public stock offering on April 20, 2007, the Company and the Association were included as part of Third Federal Savings, MHC’s consolidated tax group.

Prior to the completion of our initial public stock offering in 2007, the Company and the Association were included as part of Third Federal Savings, MHC’s consolidated tax group.

However, upon completion of the offering, the Company and the Association were no longer a part of Third Federal Savings, MHC’s consolidated tax group because Third Federal Savings, MHC no longer owned at least 80% of the common stock of the Company.

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The Company is a savings and loan holding company, and is required to file certain reports with, is subject to examination by, and otherwise must comply with the rules and regulations of, the FRS.

The Company is also subject to the rules and regulations of the Securities and Exchange Commission under the federal securities laws.

The Company is also subject to the rules and regulations of the SEC under the federal securities laws.

The Association is a federal savings association that is currently examined and supervised by the OCC and the CFPB, and is subject to examination by the FDIC under certain circumstances.

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The Association also is a member of and owns stock in the FHLB of Cincinnati, which is one of the eleven regional banks in the FHLB System.

The Association is also regulated to a lesser extent by the FRS, governing reserves to be maintained against deposits and other matters.

The Association is also regulated to a lesser extent by the FRS.

The OCC will examine the Association and prepare reports for the consideration of the Association’s Board of Directors on any operating deficiencies.

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Business Activities.

A federal savings association derives its lending and investment powers from the Home Owners’ Loan Act, as amended, and federal regulations.

A federal savings association derives its lending and investment powers from the Home Owners’ Loan Act, as amended ("HOLA"), and federal regulations.

Under these laws and regulations, the Association may invest in mortgage loans secured by residential real estate without limitations as a percentage of assets, and may invest in non-residential real estate loans up to 400% of capital in the aggregate.

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a common equity Tier 1 capital to risk-based assets ratio, a Tier 1 capital to risk-based assets ratio, a total capital to risk-based assets ratio, and a Tier 1 capital to total assets leverage ratio.

The existing capital requirements were effective January 1, 2015 and are the result of a final rule implementing regulatory amendments based on recommendations of the Basel Committee on Banking Supervision and certain requirements of the DFA.

The capital standards require the maintenance of common equity Tier 1 capital, Tier 1 capital and total capital to risk-weighted assets of at least 4.5%, 6% and 8%, respectively, and a leverage ratio of at least 4% Tier 1 capital.

Common equity Tier 1 capital is generally defined as common stockholders’ equity and retained earnings.

Tier 1 capital is generally defined as

common equity Tier 1 and additional Tier 1 capital.

Tier 1 capital is generally defined as common equity Tier 1 and additional Tier 1 capital.

Additional Tier 1 capital includes certain noncumulative perpetual preferred stock and related surplus and minority interests in equity accounts of consolidated subsidiaries.

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In addition to establishing the minimum regulatory capital requirements, the regulations limit capital distributions and certain discretionary bonus payments to management if the institution does not hold a “capital conservation buffer” consisting of 2.5% in addition to the minimum capital requirements.

The capital conservation buffer requirement was phased in and was fully implemented at 2.5% on January 1, 2019.

At September 30, 2022, the Association exceeded the fully phased in regulatory requirement for the "capital conservation buffer".

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The Association also may satisfy the QTL test by qualifying as a “domestic building and loan association” as defined in the Internal Revenue Code.

A savings association that fails the qualified thrift lender test must operate under specified restrictions.

A savings association that fails the QTL test must operate under specified restrictions.

Under the DFA, non-compliance with the QTL test may subject the Association to agency enforcement action for a violation of law.

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In addition, the Federal Deposit Insurance Act provides that an insured depository institution may not make any capital distribution if the institution would be undercapitalized after the distribution.

The Association, in compliance with the preceding requirements, paid a $55 million cash dividend to the Company during the fiscal year ended September 30, 2021, a $57 million cash dividend to the Company during the fiscal year ended September 30, 2020 and an $85 million cash dividend to the Company during the fiscal year ended September 30, 2019.

There was a $16 million dividend paid to the Company by Third Capital during the fiscal year ended September 30, 2020, but there were no dividends paid to the Company by Third Capital during the fiscal years ended September 30, 2021 or 2019.

The Company's seventh stock repurchase program, for the repurchase of 10,000,000 shares of its common stock, was announced on July 30, 2015 and completed January 6, 2017.

The eighth stock repurchase program, also for 10,000,000 shares, was announced on October 27, 2016 and began on January 6, 2017.

The Association, in compliance with the preceding requirements, paid a $56 million cash dividend to the Company during the fiscal year ended September 30, 2022, a $55 million cash dividend to the Company during the fiscal year ended September 30, 2021 and a $57 million cash dividend to the Company during the fiscal year ended September 30, 2020.

There was a $16 million dividend paid to the Company by Third Capital, the Company's other wholly owned subsidiary, during the fiscal year ended September 30, 2020, but there were no dividends paid to the Company by Third Capital during the fiscal year ended September 30, 2021 or 2022.

The Company's eighth stock repurchase program, for the repurchase of 10,000,000 shares of its common stock, was announced on October 27, 2016 and began on January 6, 2017.

As of September 30, 2022, 5,553,820 shares remain to be purchased under the program.

Under current FRS regulations, Third Federal Savings, MHC is required to obtain the approval of its members (depositors and certain loan customers of the Association) every 12 months to enable Third Federal Savings, MHC to waive its right to receive dividends on the Company’s common stock that Third Federal Savings, MHC owns.

Third Federal Savings, MHC has received this approval of its members at meetings held July 13, 2021, July 14, 2020, July 16, 2019, July 11, 2018, July 19, 2017, July 26, 2016 and August 5, 2015.

Third Federal Savings, MHC has the approval to waive the receipt of up to a total of $1.13 per share of dividends from the Company over the four quarterly periods ending June 30, 2022.

Starting in 2014, Third Federal Savings, MHC has received this approval of its members at every meeting held.

Third Federal Savings, MHC has the approval to waive the receipt of dividends up to an aggregate of $1.13 per share on the common stock of the Company for the 12 months following the special meeting of members held on July 12, 2022.

Third Federal Savings, MHC waived its right to receive a $0.2825 per share dividend payment on September 20, 2022.

As a result of the 2020, 2019, 2018, 2017, 2016 and 2015 approvals, Third Federal Savings, MHC previously waived its right to receive four separate $0.28 per share dividend payments during the four quarterly periods ended June 30, 2021, two separate $0.27 per share dividend payments, two separate $0.28 per share dividend payments during the four quarterly periods ended June 30, 2020, four separate $0.25 per share dividend payments during the four quarterly periods ended June 30, 2019, four separate $0.17 per share dividend payments during the four quarterly periods ended June 30, 2018, four separate $0.125 per share dividend payments during the four quarterly periods ended June 30, 2017 and four separate $0.10 per share dividend payments during the four quarterly periods ending June 30, 2016.

As a result of the 2021, 2020, and 2019 approvals, Third Federal Savings, MHC previously waived its right to receive four separate $0.28 per share dividend payments during the four quarterly periods ended June 30, 2021, two separate $0.27 per share dividend payments, two separate $0.28 per share dividend payments during the four quarterly periods ended June 30, 2020, and four separate $0.25 per share dividend payments during the four quarterly periods ended June 30, 2019.

A federal savings association is required to identify, measure, monitor and control its funding and liquidity risk and maintain a sufficient amount of liquid assets to ensure its safe and sound operation.

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Community Reinvestment Act and Fair Lending Laws.

All savings associations have a responsibility under the Community Reinvestment Act and federal regulations to help meet the credit needs of their communities, including low- and moderate-income neighborhoods.

In connection with its examination of a federal savings association, the OCC is required to assess the savings association’s record of compliance with the Community Reinvestment Act.

All savings associations have a responsibility under the Community Reinvestment Act ("CRA") and federal regulations to help meet the credit needs of their communities, including low- and moderate-income neighborhoods.

In connection with its examination of a federal savings association, the OCC is required to assess the savings association’s record of compliance with the CRA.

In addition, the Equal Credit Opportunity Act and the Fair Housing Act prohibit lenders from discriminating in their lending practices on the basis of characteristics specified in those statutes.

A savings association’s failure to comply with the provisions of the Community Reinvestment Act could, at a minimum, result in denial of certain corporate applications such as branches, mergers, minority stock offerings or second-step conversion, or in restrictions on its activities.

A savings association’s failure to comply with the provisions of the CRA could, at a minimum, result in denial of certain corporate applications such as branches, mergers, minority stock offerings or second-step conversion, or in restrictions on its activities.

The failure to comply with the Equal Credit Opportunity Act and the Fair Housing Act could result in enforcement actions by the OCC, as well as other federal regulatory agencies and the Department of Justice.

The Association received a "Needs to Improve" Community Reinvestment Act rating in its most recent federal evaluation dated February 24, 2020 and received in January 2021.

In June 2020, the OCC issued amendments to its Community Reinvestment Act regulations.

The final rule clarifies and expands the activities that qualify for Community Reinvestment Act credit, updates where activities count for such credit and, according to the agency, seeks to create a more consistent and objective method for evaluating Community Reinvestment Act performance.

The final rule was effective October 1, 2020 but the Association is not required to be compliant with applicable revised requirements until January 1, 2023.

In May 2021, the OCC indicated that it was reconsidering the June 2020 amendments and would not object to the suspension of development of compliance systems for the January 1, 2023 date.

Most recently, in July 2021, the OCC, along with the FRB and FDIC, announced plans to jointly work to “strengthen and modernize” the CRA regulations and the related regulatory framework.

No timetable for a rule making process was indicated.

In March 2021, the Association received a "Needs to Improve" CRA rating in its most recent federal evaluation dated February 24, 2020.

In December 2021, the OCC issued amendments to its CRA regulations, effective January 1, 2022, with a separate compliance date of April 1, 2022 for the rules' public file and public notice requirements.

In May 2022, the OCC, along with the FRB and FDIC, released a notice of proposed rule making to “strengthen and modernize” the CRA regulations and the related regulatory framework.

Transactions with Related Parties.

A federal savings association’s authority to engage in transactions with its affiliates is limited by FRS regulations and by Sections 23A and 23B of the FRS Act and its implementing Regulation W.

A federal savings association’s authority to engage in transactions with its affiliates is limited by FRS regulations and by Sections 23A and 23B of the Federal Reserve Act and its implementing Regulation W.

An affiliate is a company that controls, is controlled by, or is under common control with an insured depository institution such as the Association.

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Savings associations are required to maintain detailed records of all transactions with affiliates.

The Association’s authority to extend credit to its directors, executive officers and 10% shareholders, as well as to entities controlled by such persons, is currently governed by the requirements of Sections 22(g) and 22(h) of the FRS Act and Regulation O of the FRS.

Among other things, these provisions require that extensions of credit to insiders:

(i) subject to certain exceptions for loan programs made available to all employees, be made on terms that are substantially the same as, and follow credit underwriting procedures that are not less stringent than those prevailing for comparable transactions with unaffiliated persons and that do not involve more than the normal risk of repayment or present other unfavorable features;

comparable transactions with unaffiliated persons and that do not involve more than the normal risk of repayment or present other unfavorable features;

(ii) do not exceed certain limitations on the amount of credit extended to such persons, individually and in the aggregate, which limits are based, in part, on the amount of the Association’s capital.

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Formal enforcement action by the OCC may range from the issuance of a capital directive or cease and desist order, to removal of officers and/or directors of the institution and the appointment of a receiver or conservator.

Civil penalties cover a wide range of violations and actions, and range up to $25,000 per day, unless a finding of reckless disregard is made, in which case penalties may be as high as $1 million per day.

Civil penalties cover a wide range of violations and actions.

The maximum civil money penalties that can be assessed are generally based on the type and severity of the violation, unsafe and unsound practice or other action, and are adjusted annually for inflation.

The FDIC also has the authority to terminate deposit insurance or to recommend to the OCC that enforcement action be taken with respect to a particular savings institution.

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• critically undercapitalized (less than or equal to 2% tangible capital to total assets).

The previously referenced final rule that strengthened regulatory capital requirements and was effective January 1, 2015, also adjusted the prompt corrective actions categories to incorporate the new standards, as reflected above.

Generally, the banking regulator is required to appoint a receiver or conservator for a savings association that is “critically undercapitalized” within specific time frames.

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This guarantee remains in place until the OCC notifies the savings association that it has maintained adequately capitalized status for each of four consecutive calendar quarters, and the OCC has the authority to require payment and collect payment under the guarantee.

Failure by a holding company to provide the required guarantee will result in certain operating restrictions on the savings association, such as restrictions on the ability to declare and pay dividends, pay executive compensation and management fees, and increase assets or expand operations.

Failure by a holding

company to provide the required guarantee will result in certain operating restrictions on the savings association, such as restrictions on the ability to declare and pay dividends, pay executive compensation and management fees, and increase assets or expand operations.

The OCC may also take any one of a number of discretionary supervisory actions against undercapitalized associations, including the issuance of a capital directive and the replacement of senior executive officers and directors.

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Such Large Institutions are generally subject to a pricing system that includes a separate “scorecard” methodology designed to measure risk to the fund.

In conjunction with the FDIC Deposit Insurance Fund’s reserve ratio reaching 1.15%, the assessment range for Large Institutions (inclusive of adjustments specified by the FDIC) was lowered

to 1.5 to 40 basis points, effective July 1, 2016.

In addition, “Large Institutions” were assessed a surcharge required by the DFA until the earlier of the Deposit Insurance Fund reaching 1.35% or December 31, 2018.

The surcharge was 4.5 basis points of the Large Institution’s “surcharge base,” which is generally its regular assessment base reduced by $10 billion.

The FDIC announced that the 1.35% ratio was reached as of September 30, 2018 and the surcharge ended with payment of the December 31, 2018 invoice.

As of June 30, 2020, the FDIC announced that the ratio had declined to 1.30% largely due to economic consequences of the COVID-19 pandemic.

The FDIC adopted a plan to restore the Insurance Fund ratio to 1.35% within eight years but has not changed its assessment schedule.

The assessment range for Large Institutions (inclusive of adjustments specified by the FDIC) is 1.5 to 40 basis points.

Insurance of deposits may be terminated by the FDIC upon a finding that an institution has engaged in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC.

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financial system to fund terrorist activities.

Among other provisions, the USA PATRIOT Act and the related regulations of the OCC require savings associations operating in the United States to develop new anti-money laundering compliance programs, due diligence

policies and controls to ensure the detection and reporting of money laundering.

Such compliance programs are intended to supplement existing compliance requirements, also applicable to financial institutions, under the Bank Secrecy Act and the Office of Foreign Assets Control Regulations;

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Holding Company Regulation

Third Federal Savings, MHC, and the Company are non-diversified savings and loan holding companies within the meaning of the Home Owners’ Loan Act.

Third Federal Savings, MHC, and the Company are non-diversified savings and loan holding companies within the meaning of the HOLA.

As such, Third Federal Savings, MHC and the Company are registered with the FRS and subject to FRS regulations, examinations, supervision and reporting requirements.

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Permitted Activities .

Pursuant to Section 10(o) of the Home Owners’ Loan Act and FRS regulations, a mutual holding company, such as Third Federal Savings, MHC and its mid-tier company, the Company, may, with appropriate regulatory approval, engage in the following activities:

Pursuant to Section 10(o) of the HOLA and FRS regulations, a mutual holding company, such as Third Federal Savings, MHC and its mid-tier company, the Company, may, with appropriate regulatory approval, engage in the following activities:

(i) investing in the stock of a savings association;

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If a mutual holding company acquires or merges with another holding company, the holding company acquired or the holding company resulting from such merger or acquisition may only invest in assets and engage in activities listed in (i) through (x) above, and has a period of two years to cease any nonconforming activities and divest any nonconforming investments.

The Home Owners’ Loan Act prohibits a savings and loan holding company, such as the Company, from directly or indirectly acquiring more than 5% of a class of voting securities of, or acquiring "control" as defined in FRS regulations of, another savings institution or savings and loan holding company, without prior written approval of the FRS.

It also prohibits the acquisition or retention of, with certain exceptions, more than 5% of a non-subsidiary company engaged in activities other than those permitted by the Home Owners’ Loan Act or acquiring or retaining control of an institution that is not federally insured.

In evaluating applications by holding companies to acquire savings institutions, the FRS must consider the financial

and managerial resources, future prospects of the company and institution involved, the effect of the acquisition on the risk to the federal deposit insurance fund, the convenience and needs of the community and competitive factors.

The HOLA prohibits a savings and loan holding company, such as the Company, from directly or indirectly acquiring more than 5% of a class of voting securities of, or acquiring "control" as defined in FRS regulations of, another savings institution or savings and loan holding company, without prior written approval of the FRS.

It also prohibits the acquisition or retention of, with certain exceptions, more than 5% of a non-subsidiary company engaged in activities other than those permitted by the HOLA or acquiring or retaining control of an institution that is not federally insured.

In evaluating applications by holding companies to acquire savings institutions, the FRS must consider the financial and managerial resources, future prospects of the company and institution involved, the effect of the acquisition on the risk to the federal deposit insurance fund, the convenience and needs of the community and competitive factors.

The FRS is prohibited from approving any acquisition that would result in a multiple savings and loan holding company controlling savings institutions in more than one state, subject to two exceptions:

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Instruments such as cumulative preferred stock and trust preferred securities could no longer be included as Tier 1 capital, as was previously permitted for bank holding companies.

The previously discussed final rule regarding regulatory capital requirements, effective in 2015, implemented the directive as to savings and loan holding companies.

Consolidated regulatory capital requirements identical to those applicable to the subsidiary depository institutions generally applied to savings and loan holding companies as of January 1, 2015.

As is the case with institutions themselves, the capital conservation buffer was phased in between 2016 and 2019.

Consolidated regulatory capital requirements identical to those applicable to the subsidiary depository institutions, including the capital conservation buffer, apply to savings and loan holding companies.

We were in compliance with the holding company consolidated capital requirements and the capital conservation buffer as of September 30, 2022.

Dividends and Repurchases.

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Regulatory guidance provides for prior regulatory review of capital distributions in certain circumstances such as where the company's net income for the past four quarters, net of dividends previously paid over that period, is insufficient to fully fund the dividend, the proposed dividend is not covered by earnings for the period for which it is being paid or the company's overall rate of earnings retention is inconsistent with the company's capital needs and overall financial condition.

The guidance also provides for prior consultation with supervisory staff for material increases in the amount of a company's common stock dividend.

The ability of a holding company to pay dividends may be restricted if a subsidiary depository institution becomes undercapitalized.

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Source of Strength.

The DFA extended the “source of strength” doctrine, which has traditionally been applicable to bank holding companies, was extended to savings and loan holding companies as well.

The FRS has issued regulations requiring that all savings and loan holding companies serve as a source of strength to their subsidiary depository institutions by providing capital, liquidity and other support in times of financial stress.

The DFA extended the “source of strength” doctrine, which had traditionally been applicable to bank holding companies, to savings and loan holding companies.

FRS regulations require that all savings and loan holding companies serve as a source of strength to their subsidiary depository institutions by providing capital, liquidity and other support in times of financial stress.

Waivers of Dividends by Third Federal Savings, MHC .

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However, on August 12, 2011, the FRS issued an interim final rule that added a requirement that a majority of the mutual holding company’s members eligible to vote must approve a dividend waiver by a mutual holding company within 12 months prior to the declaration of the dividend being waived.

On July 13, 2021, Third Federal Savings, MHC received the approval of its members (depositors and certain loan customers of the Association) with respect to the waiver of dividends, and subsequently received the non-objection of the FRB-Cleveland, to waive receipt of dividends on the Company’s common stock the MHC owns up to a total of $1.13 per share during the four quarterly periods ending June 30, 2022.

Third Federal Savings, MHC previously received the approval of its members at:

(1) a July 14, 2020 meeting to waive dividends of up to a total of $1.12 per share during the four quarterly periods ended June 30, 2021, (2) a July 16, 2019 meeting to waive receipt of dividends up to a total of

$1.10 per share during the four quarterly periods ended June 30, 2020;

(3) a July 11, 2018 meeting to waive receipt of dividends up to a total of $1.00 per share during the four quarterly periods ended June 30, 2019;

(4) a July 19, 2017 meeting to waive receipt of dividends up to a total of $0.68 per share during the four quarterly periods ended June 30, 2018;

and (5) a July 26, 2016 meeting to waive receipt of dividends up to $0.50 per share during the four quarterly periods ended June 30, 2017.

Third Federal Savings, MHC received the approval of its members (depositors and certain loan customers of the Association) with respect to the waiver of dividends, and subsequently received the non-objection of the FRB-Cleveland, to waive dividends aggregating up to $1.13 per share on the common stock of the Company for the 12 months following the special meeting of members held on July 12, 2022 .

Third Federal Savings, MHC previously received the approval of its members every calendar year beginning in 2014.

Conversion of Third Federal Savings, MHC to Stock Form .

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During that time, no fees, penalties or interest beyond the amounts scheduled or calculated as if the borrower made all contractual payments on time and in full under the mortgage contract will accrue on the borrower’s account.

Except for vacant or abandoned property, the servicer of a federally backed mortgage was prohibited from taking any foreclosure action, including any eviction or sale action, for not less than the 60-day period beginning March 18, 2020, subsequently extended several times by federal mortgage-backing agencies, most recently to at least September 30, 2021.

As of January 2, 2022 all COVID-19 restrictions have been lifted.

Human Capital Resources

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Reimbursement is available to associates enrolled in pre-approved degree or certification programs at accredited institutions that teach skills or knowledge relevant to our business, in compliance with Section 127 of the Internal Revenue Code, and for seminars, conferences, and other training events associates attend in connection with their job duties.

The safety, health and wellness of our associates is a top priority.

The COVID-19 pandemic presented a unique challenge with regard to maintaining associate safety while continuing successful operations.

At the onset of the pandemic, we were able to transition, over a short period of time, 75% of our associates to effectively working from remote locations and ensure a safely-distanced working environment for associates performing customer facing activities or working on-site at branches and operations centers.

During fiscal year 2021, our associates who weren't already working onsite full-time, have returned to working hybrid schedules split between on-site and remote locations.

In 2020, all of our branch and most of our customer care associates were working onsite full-time.

All associates are asked not to come to work when they experience signs or symptoms of a possible COVID-19 illness and have been provided additional paid time off to cover compensation during such absences.

On an ongoing basis, we further promote the health and wellness of our associates by strongly encouraging work-life balance, offering flexible work schedules, keeping the associate portion of health care premiums to a minimum and sponsoring various wellness programs, whereby associates are compensated for incorporating healthy habits into their daily routines.

Associate retention helps us operate efficiently and achieve one of our business objectives, which is being a low-cost provider.

During fiscal year 2022, we experienced an increase in voluntary associate turnover as was the case among the general workforce.

However, our voluntary turnover rate, at 7.6% for the twelve months ending September 30, 2022, excluding retirements, remains one of the lowest in the industry.

We believe our commitment to living out our core values, actively prioritizing concern for our associates’ well-being, supporting our associates’ career goals, offering competitive wages and providing valuable fringe benefits aids in retention of our top-performing associates.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business