What changed in this filing

/stocks — the workspaceLOADING

Item 1. Business

2023-11-21 compared with 2022-11-22 · 171 added, 215 removed, 954 unchanged (29% of the section changed)

15 unchanged sentences

● adverse changes and volatility in the securities markets, credit markets or real estate markets;

● our ability to manage market risk, credit risk, liquidity risk, reputational risk, and regulatory and compliance risk;

● our ability to manage market risk, credit risk, liquidity risk, reputational risk, regulatory risk and compliance risk;

● our ability to access cost-effective funding;

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● the adoption of implementing regulations by a number of different regulatory bodies, and uncertainty in the exact nature, extent and timing of such regulations and the impact they will have on us;

● our ability to enter new markets successfully and take advantage of growth opportunities, and the possible short-term dilutive effect of potential acquisitions or de novo branches, if any;

● our ability to retain key employees;

● our ability to enter new markets successfully and take advantage of growth opportunities;

● future adverse developments concerning Fannie Mae or Freddie Mac;

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Government, including policies of the U.S.

Treasury and the FRS and changes in the level of government support of housing finance;

Treasury, the Federal Reserve System, Fannie Mae, the OCC, FDIC, and others;

● the continuing governmental efforts to restructure the U.S.

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● changes in accounting and tax estimates;

● changes in our organization, or compensation and benefit plans and changes in expense trends (including, but not limited to trends affecting non-performing assets, charge-offs and provisions for credit losses);

● changes in our organization and changes in expense trends, including but not limited to trends affecting non-performing assets, charge-offs and provisions for credit losses;

● changes in the value of our goodwill or other intangible assets;

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

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

● our ability to retain key employees;

● civil unrest;

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As of September 30, 2023, 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.

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, Florida and New Jersey, primarily to customers of the Association.

For the fiscal year ended September 30, 2023, Third Cap Associates, Inc.

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It also utilizes its internet website, direct mail solicitation and its customer service call center to generate loan applications and attract retail deposits.

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.

Longer-term brokered CDs and advances from the FHLB of Cincinnati as well as shorter-term brokered CDs and 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.

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The Association retains the servicing rights on all loans that it sells.

The Association’s revenues are derived primarily from interest on loans and, to a lesser extent, interest on interest-earning deposits in other financial institutions, deposits maintained at the FRS, federal funds sold, and investment securities, including mortgage-backed securities and dividends from FHLB of Cincinnati stock.

The Association’s revenues are derived primarily from interest on loans and, to a lesser extent,

interest on interest-earning deposits in other financial institutions, deposits maintained at the FRS, federal funds sold, investment securities, including mortgage-backed securities and dividends from FHLB of Cincinnati stock.

The Association also generates revenues from fees and service charges.

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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 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).

The Association conducts its operations from its main office in Cleveland, Ohio, and from 37 additional, full-service branches and four 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 three 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 June 30, 2023 (the latest date for which information is publicly available), the Association had $5.0 billion of deposits in Cuyahoga County, and ranked fifth among all financial institutions with offices in the county in terms of deposits, with a market share of 4.67%.

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 that date, the Association had $6.5 billion of deposits in the State of Ohio, and ranked eleventh among all financial institutions in the state in terms of deposits, with a market share of 1.19%.

As of June 30, 2023 (the latest date for which information is publicly available), the Association had $2.6 billion of deposits in the State of Florida, and ranked 34th among all financial institutions in terms of deposits, with a market share of 0.31%.

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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.

From October 2022 through August 2023 (the latest date for which information is publicly available), per data furnished by MarketTrac ® , the Association had the second 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.

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The Association’s primary strategy for increasing and retaining its customer base is to offer competitive deposit and loan rates and other product features, delivered with exceptional customer service, in each of the markets it serves.

We rely on the reputation that has been built during the Association’s over 80-year history of serving its customers and the communities in which it operates, the Association’s high capital levels, and the Association's extensive liquidity alternatives which, in combination, serve to maintain and nurture customer and marketplace confidence.

We rely on the reputation that has been built during the Association’s 85-year history of serving its customers and the communities in which it operates, the Association’s high capital levels, and the Association's extensive liquidity alternatives which, in combination, serve to maintain and nurture customer and marketplace confidence.

At September 30, 2023, our ratio of shareholders’ equity to total assets was 11.4%.

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).

For the fiscal year ended September 30, 2023, the Association's liquidity ratio averaged 5.53% (which we compute as the sum of cash and cash equivalents plus unpledged investment securities for which

ready markets exist, divided by total average assets).

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

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

The Company also purchases first mortgage loans originated in Ohio, Pennsylvania and North Carolina 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.

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Management’s Discussion and Analysis of Financial Condition and Results of Operation-Monitoring and Limiting Our Credit Risk for additional information regarding home equity loans and lines of credit.

At September 30, 2022, residential real estate, fixed-rate and adjustable-rate, first mortgage loans totaled $11.59 billion, or 80.8% of our loan portfolio, home equity loans and lines of credit totaled $2.63 billion, or 18.4% of our loan portfolio, and residential construction loans totaled $121.8 million, or 0.8% of our loan portfolio.

At September 30, 2023, fixed-rate and adjustable-rate, first mortgage residential real estate loans totaled $12.12 billion, or 79.7% of our loan portfolio, home equity loans and lines of credit totaled $3.03 billion, or 19.9% of our loan portfolio, and residential construction loans totaled $48.4 million, or 0.4% of our loan portfolio.

At September 30, 2023, adjustable-rate, residential real estate, first mortgage loans totaled $4.76 billion and comprised 31.3% of our loan portfolio.

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Florida 7,253 10,661

Other — 2,282

Total 48,406 0.4 121,759 0.8

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Deferred loan expenses, net

60,807 50,221

Loans in process (25,754) (72,273)

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741+ 6,688 10,224 — — — — — — 16,912

741+ 29,159 9,792 — — — — — — 38,951

Total Construction 11,646 10,755 — — — — — — 22,401

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Loan Portfolio Maturities.

The following table summarizes the scheduled repayments of the loan portfolio at September 30, 2022, according to each loan's final due date.

The following table summarizes the scheduled repayments of principal balances in the loan portfolio at September 30, 2023, according to each loan's final due date.

Demand loans, loans having no stated repayment schedule or maturity, are reported as being due in the fiscal year ending September 30, 2024.

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2024 $ 12,772 $ 38 $ 5,300 $ 1,162 $ 2,229 $ 21,501

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

2025 to 2028 311,246 83 62,414 338 — 374,081

2029 to 2038 2,017,470 36,368 176,777 3,529 2,182 2,236,326

2039 and beyond 9,736,670 10,019 2,786,035 43,377 — 12,576,101

Total $ 11,539,859 $ 53,255 $ 2,633,878 $ 121,759 $ 3,263 $ 14,352,014

Total loans receivable $ 12,078,158 $ 46,508 $ 3,030,526 $ 48,406 $ 4,411 $ 15,208,009

The following table sets forth the scheduled repayments of fixed- and adjustable-rate loans at September 30, 2023 that are contractually due after September 30, 2024.

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As part of a loan retention program, these adjustable-rate loans provide the borrower with an attractive rate reset option, which allow the borrower to re-lock the rate an unlimited number of times at the Company’s then current lending rates, for another three or five years (which must be the same as the original lock period).

Re-lock eligibility is subject to a satisfactory payment performance history by the borrower (current at the time of re-lock, and no foreclosures or bankruptcies since the Smart Rate application was taken).

In addition to a satisfactory payment history, re-lock eligibility requires that the property continues to be the borrower's primary residence.

The loan term cannot be extended in connection with a re-lock, nor can new funds be advanced.

All interest rate caps and floors remain as originated.

"Smart Rate" adjustable-rate mortgage loans represent over 99% of the adjustable-rate mortgage loan portfolio, with the difference representing the remaining balance of legacy adjustable-rate mortgage loan products with slightly different interest rate reset terms.

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As of September 30, 2023, the Company had $46.5 million of loans outstanding that were originated through its Home Today program, most of which were originated prior to March 2009.

At September 30, 2022, of the loans that were originated under the Home Today program, 5.6% were delinquent 30 days or more compared to 0.1% for the portfolio of Core loans as of that date.

At September 30, 2023, of the loans that were originated under the Home Today program, 4.0% were delinquent 30 days or more compared to

0.1% for the portfolio of Core loans as of that date.

At September 30, 2023, $0.9 million, or 1.9%, of loans originated under the Home Today program were delinquent 90 days and over and $4.6 million of Home Today loans were non-accruing loans, representing 14.5% of total non-accruing loans as of that date.

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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, 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.

The following table sets forth by calendar origination year, the 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.

Home equity lines of credit in the draw period are included in the year originated:

Exposure Principal

Balance Percent

90 Days or More Mean CLTV

Origination(1) Current Mean

(Dollars in thousands)

Home equity lines of credit in draw period

2014 and Prior $ 68,140 $ 14,216 — % 58 % 29 %

2015 98,495 24,558 — % 57 % 30 %

2016 257,607 76,933 — % 59 % 34 %

2017 531,853 181,534 0.16 % 58 % 35 %

2018 667,072 259,483 0.17 % 58 % 37 %

2019 884,797 388,800 0.07 % 61 % 42 %

2020 823,666 307,524 — % 58 % 42 %

2021 1,622,849 648,671 — % 62 % 52 %

2022 1,503,280 471,197 0.01 % 61 % 60 %

Total home equity lines of credit in

draw period 6,457,759 2,372,916 0.04 % 60 % 45 %

Home equity lines in repayment, home equity (3)

loans and bridge loans 260,962 260,962 0.49 % 59 % 37 %

Total $ 6,718,721 $ 2,633,878 0.09 % 60 % 45 %

______________________

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

(2) Current Mean CLTV is based on best available first mortgage and property values as of September 30, 2022.

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.

(3) The principal balance of all home equity products no longer in the draw period is $97.0 million, a portion of which represents home equity lines of credit originated in 2009 or earlier which had delinquency levels comparatively higher than the years following 2010.

Home equity lines of credit originated during those years also saw higher loan amounts, higher permitted LTV ratios, and lower credit scores.

The following table sets forth by fiscal year when the draw period expires, the principal balance of home equity lines of credit in the draw period as of September 30, 2022, segregated by the current combined LTV range.

Home equity lines of credit with an end of draw date in the current fiscal year include accounts with draw privileges that have been temporarily suspended.

Current CLTV Category

Home equity lines of credit in draw period (by end of draw fiscal year):

< 80% 80 - 89.9% 90 - 100% >100% Unknown (1) Total

(Dollars in thousands)

2022 $45,943 $— $— $— $— $45,943

2023 1,575 52 — — — 1,627

2024 9,017 — — — — 9,017

2025 24,616 — — — 13 24,629

2026 40,855 — — — — 40,855

2027 153,472 — — — 122 153,594

Post 2027 2,093,384 2,711 53 140 963 2,097,251

Total $2,368,862 $2,763 $53 $140 $1,098 $2,372,916

______________________

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

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.

The principal balance of home equity lines of credit in the draw period that have a current mean CLTV over 80% or unknown is $9.8 million, or 0.4% at September 30, 2023.

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.

At September 30, 2023, 30.7% of the home equity lending portfolio was either in a first lien position (16.0%), in a subordinate (second) lien position behind a first lien that we held (12.3%) or behind a first lien that was held by a loan that we originated, sold and now service for others (2.4%).

At September 30, 2023, 12.9% of the home equity line of credit portfolio in the draw period were making only the minimum payment on the outstanding line balance.

Minimum payments include both a principal and interest component.

Construction Loans.

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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.

Loans originated with the intent to sell and certain other long-term, fixed-rate loans, as described below, are originated using Fannie Mae processing and underwriting guidelines.

originated with the intent to sell and certain other long-term, fixed-rate loans, as described below, are originated using Fannie Mae processing and underwriting guidelines.

The majority of loans, however, are originated using guidelines that are similar, but not identical to Fannie Mae processing and underwriting guidelines.

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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.

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

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

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

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As described in Item 7.

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.

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 and purchases are eligible for securitization and sale in Fannie Mae mortgage backed security form.

The balance of loans held for sale was $3.3 million at September 30, 2023.

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.

In fiscal year 2022, the Company started a new 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 program is marketed under the name Mortgage Passport and is considered a division of the Association.

Both purchase and refinance products are offered through Mortgage Passport in 19 states and the District of Columbia, excluding Ohio and Florida.

The impact to the Company from the program to date is considered immaterial and therefore no breakout is provided.

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

These loans are underwritten by the correspondent lender with generally the same standards as our originated portfolio using Fannie Mae processing and underwriting guidelines.

During the fiscal year ended September 30, 2023, we purchased approximately $275.1 million of residential mortgage loans through our correspondent lending partnership.

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 .

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

There were also no delinquencies in the construction loan portfolio for the fiscal years presented.

There were no delinquencies in the construction loan portfolio for the fiscal years presented.

Loans Delinquent For

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Total loans seriously delinquent (i.e.

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 decreased from 0.02% to 0.01%.

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

delinquent 90 days or more) were 0.09% of total net loans at September 30, 2023 and at September 30, 2022.

The percentage of loans seriously delinquent to total net loans decreased in the residential Core portfolio from 0.06% to 0.05%.

Such loans in the residential Home Today portfolio remained at 0.01%.

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

Although delinquencies remain at or near historic lows, recent economic trends and rising interest rates have led to increased early stage delinquencies in the home equity loans and lines of credit portfolio.

Interest rates on home equity lines of credit are tied to the prime rate of interest which has increased significantly over the fiscal year, resulting in higher and less affordable monthly payments for some borrowers.

Non-performing Assets and Restructured Loans .

Within 15 days of a borrower’s delinquency, per the Company's collection procedures, it attempts personal, direct contact with the borrower to determine the reason for the delinquency, to ensure that the borrower correctly understands the terms of the loan and to emphasize the importance of making payments on or before the due date.

If necessary, subsequent late charges and delinquent notices are issued and the borrower’s account will be monitored on a regular basis thereafter.

If necessary, subsequent late charges and delinquent notices are issued and the borrower’s account will be

monitored on a regular basis thereafter.

The Company also mails system-generated reminder notices on a monthly basis.

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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.

Loans restructured in TDRs that were in non-accrual status prior to the restructurings remain in non-accrual status for a minimum of six months.

Home equity loans and lines of credit which are subordinate to a first mortgage lien where the customer is seriously delinquent, are placed in non-accrual status.

Loans in Chapter 7 bankruptcy status where all borrowers have been discharged from their mortgage obligation or where all borrowers had filed, and had not reaffirmed or been dismissed, are placed in non-accrual status.

Loans restructured in TDRs that were in non-accrual status prior to the restructurings remain in non-accrual status for a minimum of six months after restructuring.

Loans with a partial charge-off remain in non-accrual until, at a minimum, the loss is recovered.

Additionally, home equity loans and lines of credit which are subordinate to a first mortgage lien where the customer is severely delinquent and loans in Chapter 7 bankruptcy status where all borrowers have filed, and not reaffirmed or been dismissed, are placed in non-accrual status.

For discussion on interest recognition and further discussion on non-accrual, see Note 5.

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____________________

(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;

because they have been partially charged off;

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

(1) At September 30, 2023 and 2022, the totals include $17.8 million and $21.9 million, respectively, in TDRs that 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 or forbearance plan prior to restructuring, because of a prior partial charge-off or because all borrowers have filed Chapter 7 bankruptcy and have not reaffirmed or dismissed.

(2) At September 30, 2023 and 2022, the totals include $3.7 million and $3.6 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.

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.

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.

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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.

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,

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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;

term extensions including those beyond that provided in the original agreement;

principal forgiveness;

term extensions including those beyond the original agreement;

capitalization of delinquent payments in special situations;

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Non-accrual, performing status indicates that a loan was not accruing interest or in a forbearance plan at the time of restructuring, continues to not accrue interest, and is performing according to the terms of the restructuring;

but has not been current for at least six consecutive months since its restructuring, has a partial charge-off, or is being classified as non-accrual per the OCC guidance on loans in Chapter 7 bankruptcy status, where all borrowers have filed and have not reaffirmed or been dismissed.

but it has not been current for at least six consecutive months since its restructuring, has a partial charge-off, or is being classified as non-accrual per the OCC guidance on loans in Chapter 7 bankruptcy status, where all borrowers have filed and have not reaffirmed or been dismissed.

Non-accrual, non-performing status includes loans that are not accruing interest because they are greater than 90 days past due and therefore not performing according to the terms of the restructuring.

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We regularly review our asset portfolio to determine whether any assets require classification in accordance with applicable regulations.

On the basis of our review of assets at September 30, 2022, the amortized cost of classified assets consists of substandard assets of $50.9 million, including $1.2 million of real estate owned, and we also had $3.4 million of assets designated special mention.

On the basis of our review of assets at September 30, 2023, the amortized cost of classified assets consists of substandard assets of $44.3 million, including $1.4 million of real estate owned, and $5.3 million of assets designated special mention.

As of September 30, 2023, there were no individual assets with balances exceeding $1.0 million that were classified as substandard.

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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.

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

The estimated exposure for additional loss related to multiple loan restructurings as well as additional losses on individually reviewed TDRs are included as a $1.4 million component of our qualitative GVA at September 30, 2023.

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

22 unchanged sentences

Florida — — 377

Other 13 1 21

Total Residential Core 257 247 1,965

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Net recoveries 6,414 9,657 5,175

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

Release of allowance for credit losses on loans

(1,994) (1,051) (11,918)

Allowance balance for loans (end of the year) $ 77,315 $ 72,895 $ 64,289

10 unchanged sentences

(Dollars in thousands)

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

Net recoveries to average loans outstanding during the year

Real estate loans:

2 unchanged sentences

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

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

Total net recoveries to average loans outstanding

0.04 % 0.07 % 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.

We reported net recoveries in each quarter for the past five 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.

During the fiscal year ended September 30, 2023, recoveries exceeded loan charge-offs by $6.4 million.

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.

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During the fiscal year ended September 30, 2023, the total allowance for credit losses increased to $104.8 million, from $99.9 million at September 30, 2022.

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.

The total allowance for credit losses is comprised of the asset portion, which is applied to the loan portfolio and the liability portion, which is applied to off-balance sheet exposures, primarily related to undrawn equity exposures.

During the fiscal year ended September 30, 2023 the asset and liability portions of the total allowance increased to $77.3 million from $72.9 million and to $27.5 million from $27.0 million, respectively.

We recorded a $1.5 million net release for credit losses for the year, consisting of a $2.0 million release from credit losses on loans and a $0.5 million reclassification to credit losses on off-balance sheet exposures.

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.

Changes in the allowance for credit losses on loan balances during the fiscal year ended

September 30, 2023 were generally related to new growth in the residential Core and home equity loans and lines of credit portfolios, partially offset by some deterioration in the economic forecasts.

The amortized cost of the residential Core portfolio increased 4.5%, or $543.7 million, and its total allowance increased 3.5% or $1.9 million as of September 30, 2023 compared to September 30, 2022.

The amortized cost of the home equity loans and lines of credit portfolio increased 15.0%, or $401.1 million, and its total allowance increased 15.1% to $23.0 million from $20.0 million at September 30, 2022.

As we are no longer originating loans under our Home Today program, there is an expected net recovery position for this portfolio which was $1.2 million at September 30, 2023 and $1.0 million at September 30, 2022.

Under the CECL methodology, the life of loan concept allows for qualitative adjustments for the expected future recoveries of previously charged-off loans, which is driving the allowance balance for the Home Today loans negative.

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

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

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 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.

Delinquencies greater than 90 days decreased 0.9% to $9.3 million at September 30, 2022 from $9.4 million at September 30, 2021.

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.

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.

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 $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.

Total delinquencies for this portfolio segment decreased 13.8% to $4.7 million at September 30, 2022 as compared to $5.5 million at September 30, 2021.

Delinquencies greater than 90 days decreased 45.1% to $2.3 million at September 30, 2022 from $4.2 million at September 30, 2021.

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 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.

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

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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

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, 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.

The fair value of our investment portfolio at September 30, 2023 consisted of $0.8 million in fixed-rate securities guaranteed by Fannie Mae, $443.0 million of REMICs collateralized only by securities guaranteed by Fannie Mae, $1.0 million of securities guaranteed by Freddie Mac, and $63.5 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.

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 interest rate exchange contracts (swaps) and as an interest rate risk hedge in the event of significant mortgage loan prepayments.

Mortgage-Backed Securities.

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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, 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 also borrows, primarily from the FHLB of Cincinnati, 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 borrowings from the FRB-Cleveland Discount Window, 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 2023, which required 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.

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At September 30, 2023, deposits totaled $9.45 billion.

Checking accounts totaled $1.21 billion (including $1.10 billion of interest-bearing checking accounts) and savings accounts totaled $1.85 billion (including $1.75 billion of higher yield savings accounts and MMK).

At September 30, 2022, the Association had a total of $5.86 billion in CDs (including $575.2 million of brokered CDs), of which $3.02 billion had remaining maturities of one year or less.

Checking accounts totaled $983.4 million (including $891.0 million of interest-bearing checking accounts) and savings accounts totaled $1.81 billion (including $1.72 billion of higher yield savings accounts and MMKs).

At September 30, 2023, the Association had a total of $6.65 billion in CDs (including $1.16

billion of brokered CDs), of which $3.42 billion had remaining maturities of one year or less.

Based on historical experience and its current pricing strategy, management believes the Association will retain a large portion of these accounts upon maturity.

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.

Additional details on deposit accounts can be found in Note 9.

DEPOSITS of the NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

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Total Deposits $ 9,449,820 100.0 % 2.77 %

As of September 30, 2023 and September 30, 2022, the total amount of the Association's uninsured deposits were $322.5 million and $366.7 million, respectively.

As of September 30, 2023, the aggregate amount of the Association’s outstanding certificate of deposits in amounts greater than $250 thousand was approximately $230.9 million.

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Total $ 230,869

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.

At September 30, 2023, the Association had $5.27 billion of borrowings outstanding, consisting of $5.25 billion from the FHLB of Cincinnati and $22.8 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.

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

At September 30, 2023, the Association had the

capacity to borrow up to $126.4 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.

The following tables set 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 are no borrowings with original terms between 30 and 90 days.

At or For the Fiscal Years Ended

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(Dollars in thousands)

Borrowings (90 days or more):

Borrowings (90 days to 12 months):

Balance at end of year $ 3,150,000 $ 1,550,000 $ 2,450,000

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Any change in these laws or regulations, whether by the FDIC, OCC, FRS, CFPB or Congress, could have a material impact on the Company, the Association, and their operations.

Certain statutes and regulations of the regulatory requirements that are applicable to the Association and the Company are described below.

Certain statutes and regulations that are applicable to the Association and the Company are described below.

This description of statutes and regulations is not intended to be a complete explanation of such statutes and regulations and their effects on the Association and the Company, and is qualified in its entirety by reference to the actual statutes and regulations.

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Business Activities.

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

A federal savings association derives its lending and investment powers from the 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.

The Association may also invest in commercial business loans up to 20% of assets in the aggregate and consumer loans up to 35% of assets in the aggregate, and in certain types of debt securities and certain other assets.

An association may also establish subsidiaries that may engage in certain activities not otherwise permissible for an association, including real estate investment and securities and insurance brokerage.

Effective July 1, 2019, the OCC issued a final rule, pursuant to a provision of the Economic Growth Regulatory Relief and Consumer Protection Act, that permits a federal savings association to elect to exercise national bank powers without converting to a national bank charter.

The Association may also establish subsidiaries that may engage in certain activities not otherwise permissible for an association, including real estate investment and securities and insurance brokerage.

A federal savings association may elect to exercise national bank powers without converting to a national bank charter.

Among other things, the election allows a federal savings association to engage in commercial and commercial real estate lending without the aggregate limits applicable to federal savings associations.

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Tier 2 capital is comprised of capital instruments and related surplus, meeting specified requirements, and may include cumulative preferred stock and long-term perpetual preferred stock, mandatory convertible securities, intermediate preferred stock and subordinated debt.

Also included in Tier 2 capital is the allowance for loan and lease losses limited to a maximum of 1.25% of risk-weighted assets and, for institutions that have exercised an opt-out election regarding the treatment of Accumulated Other Comprehensive Income (“AOCI”), up to 45% of net unrealized gains on available for sale equity securities with readily determinable fair market values.

Also included in Tier 2 capital is the allowance for credit losses limited to a maximum of 1.25% of risk-weighted assets and, for institutions that have exercised an opt-out election regarding the treatment of AOCI, up to 45% of net unrealized gains on available for sale equity securities with readily determinable fair market values.

Institutions that have not exercised the AOCI opt-out have AOCI incorporated into common equity Tier 1 capital (including unrealized gains and losses on available for sale-securities).

The Association exercised its opt-out election during the first quarter of calendar 2015.

The Association exercised its opt-out election during 2015.

Calculation of all types of regulatory capital is subject to deductions and adjustments specified in the regulations.

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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.

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

In assessing an institution’s capital adequacy, the OCC takes into consideration, not only these numeric factors, but qualitative factors as well, and has the authority to establish higher capital requirements for individual institutions where deemed necessary.

At September 30, 2023, the Association exceeded the fully phased in regulatory requirement for the "capital conservation buffer." In assessing an institution’s capital adequacy, the OCC takes into consideration, not only these numeric factors, but qualitative factors as well, and has the authority to establish higher capital requirements for individual institutions where deemed necessary.

As presented in Note 3.

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Under the QTL test, the Association must maintain at least 65% of its “portfolio assets” in “qualified thrift investments” (primarily residential mortgages and related investments, including mortgage-backed securities) in at least nine months of the most recent 12-month period.

“Portfolio assets” generally means total assets of a savings institution, less the sum of specified liquid assets up to 20% of total assets, goodwill and other intangible assets, and the value of property used in the conduct of the savings association’s business.

“Portfolio assets” generally means total assets of a federal savings association, less the sum of specified liquid assets up to 20% of total assets, goodwill and other intangible assets, and the value of property used in the conduct of the federal savings association’s business.

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 QTL test must operate under specified restrictions.

A federal 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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• the savings association is not eligible for expedited treatment of its filings.

Regardless of whether an application is required, every savings association that is a subsidiary of a holding company must still file a notice with the FRS at least 30 days before the board of directors declares a dividend or approves a capital distribution.

Regardless of whether an application is required, every federal savings association that is a subsidiary of a holding company must still file a notice with the FRS at least 30 days before the board of directors declares a dividend or approves a capital distribution.

The OCC and the FRS have established similar criteria for approving an application or notice, and may disapprove an application or notice if:

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The Association, in compliance with the preceding requirements, paid a $40 million cash dividend to the Company during the fiscal year ended September 30, 2023, a $56 million cash dividend to the Company during the fiscal year ended September 30, 2022 and a $55 million cash dividend to the Company during the fiscal year ended September 30, 2021.

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.

There were no dividends paid to the Company by Third Capital, the Company's other wholly owned subsidiary, during the fiscal years ended September 30, 2023, 2022 or 2021.

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.

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Third Federal Savings, MHC waived its right to receive a $0.2825 per share dividend payment on September 26, 2023.

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.

As a result of the 2022, 2021, and 2020 approvals, Third Federal Savings, MHC previously waived its right to receive an aggregate of $1.13 per share on common stock for the period ended June 30, 2023, $1.13 per share for the period ended June 30, 2022, and $1.12 per share for the period ended June 30, 2021.

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 ("CRA") and federal regulations to help meet the credit needs of their communities, including low- and moderate-income neighborhoods.

All savings associations have a responsibility under the 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 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.

A federal 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.

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.

On October 24, 2023, the FDIC, the Federal Reserve and the OCC released a final rule revising the framework used to evaluate banks' records of community reinvestment under the CRA.

Under the revised framework, banks with assets of at least $2 billion, such as the Association, are considered large banks and will have their retail lending, retail services and products, community development financing, and community development services subject to periodic evaluation.

Depending on a large bank's geographic concentrations of lending, the evaluation of retail lending may include assessment areas in which the bank extends loans but does not operate any deposit-taking facilities, in addition to assessment areas in which the bank has deposit-taking facilities.

The rule becomes effective April 1, 2024.

Most provisions of the final rule will apply beginning January 1, 2026, and the remaining provisions will apply beginning January 1, 2027.

The Association is evaluating the impact of the final rule.

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 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.

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

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

Third Federal Savings, MHC and the Company are affiliates of the Association.

In general, loan transactions between an insured depository institution and its affiliates are subject to certain quantitative and collateral requirements.

In this regard, transactions between an insured depository institution and its affiliates are limited to 10% of the institution’s unimpaired capital and unimpaired surplus for transactions with any one affiliate and 20% of unimpaired capital and unimpaired surplus for transactions in the aggregate with all affiliates.

Collateral in specified amounts ranging from 100% to 130% of the amount of the transaction must be provided by affiliates in order to receive loans from the savings association.

In general, specified covered transactions between an insured depository institution and its affiliates are subject to certain quantitative and collateral requirements.

In this regard, covered transactions between an insured depository institution and its affiliates are limited to 10% of the institution’s unimpaired capital and unimpaired surplus for transactions with any one affiliate and 20% of unimpaired capital and unimpaired surplus for transactions in the aggregate with all affiliates.

Collateral in specified amounts ranging from 100% to 130% of the amount of the transaction must be provided by affiliates in order to receive loans from the insured depository institution.

In addition, federal regulations prohibit a savings association from lending to any of its affiliates that are engaged in activities that are not permissible for bank holding companies and from purchasing the securities of any affiliate, other than a subsidiary.

Finally, transactions with affiliates must be consistent with safe and sound banking practices, not involve low-quality assets and be on terms that are as favorable to the institution as comparable transactions with non-affiliates.

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 Federal Reserve Act and Regulation O of the FRS.

Finally, transactions with affiliates must be consistent with safe and sound banking practices, not involve low-quality assets and be on terms that are substantially the same or at least as favorable to the institution as comparable transactions with non-affiliates.

Federal 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 governed by the requirements of Sections 22(g) and 22(h) of the Federal Reserve Act and Regulation O of the FRS.

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

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

(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;

(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.

In addition, extensions of credit in excess of certain limits must be approved by the Association’s Board of Directors.

The OCC has primary enforcement responsibility over federal savings associations and has the authority to bring enforcement action against all “institution-affiliated parties,” including shareholders, attorneys, appraisers and accountants who knowingly or recklessly participate in wrongful action likely to have an adverse effect on an insured institution.

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.

The OCC has primary enforcement responsibility over federal savings associations and has the authority to bring enforcement action against all “institution-affiliated parties,” a term that includes shareholders who participate in the affairs of the association, as well as attorneys, appraisers and accountants who knowingly or recklessly participate in violations of law or regulation, breaches of fiduciary duty, or unsafe or unsound practices.

Formal enforcement actions by the OCC may include issuance of a capital directive, formal agreement, or cease and desist order against institutions, and can also include the removal of officers and/or directors of the institution.

Civil money penalties can be assessed for various types of conduct against the institution and/or its officers and directors.

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.

The OCC can appoint receivers and conservators for the institutions it supervises if certain circumstances are met.

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 federal savings institution.

If action is not taken by the OCC, the FDIC has authority to take action under specified circumstances.

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The guidelines set forth the safety and soundness standards that the federal banking agencies use to identify and address problems at insured depository institutions before capital becomes impaired.

If the appropriate federal banking agency determines that an institution fails to meet any standard prescribed by the guidelines, the agency may require the institution to submit to the agency an acceptable plan to achieve compliance with the standard.

If the appropriate federal banking agency determines that an institution fails to meet any standard prescribed by the guidelines, the agency may require the institution to

submit to the agency an acceptable plan to achieve compliance with the standard.

If an institution fails to meet these standards, the appropriate federal banking agency may require the institution to submit a compliance plan.

Prompt Corrective Action Regulations .

Under the prompt corrective action regulations, the OCC is required and authorized to take supervisory actions against undercapitalized savings associations.

For this purpose, a savings association is placed in one of the following five categories based on the savings association’s capital:

Under the prompt corrective action regulations, the OCC is required and authorized to take supervisory actions against undercapitalized federal savings associations.

For this purpose, a federal savings association is placed in one of the following five categories based on its capital:

• well capitalized (at least 5% leverage capital, 8% Tier 1 risk-based capital, 10% total risk-based capital, and 6.5% common equity Tier 1 ratios, and is not subject to any written agreement, order, capital directive or prompt corrective action directive issued under certain statutes and regulations, to maintain a specific capital level for any capital measure);

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

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

The regulations also provide that a capital restoration plan must be filed with the OCC within 45 days of the date a savings association receives notice that it is “undercapitalized,” “significantly undercapitalized” or “critically undercapitalized.” The criteria for an acceptable capital restoration plan include, among other things, the establishment of the methodology and assumptions for attaining adequately capitalized status on an annual basis, procedures for ensuring compliance with restrictions imposed by applicable federal regulations, the identification of the types and levels of activities the savings association will engage in while the capital restoration plan is in effect, and assurances that the capital restoration plan will not appreciably increase the current risk profile of the savings association.

Any holding company for a savings association required to submit a capital restoration plan must guarantee the lesser of an amount equal to 5% of the savings association’s assets at the time it was notified or deemed to be undercapitalized by the OCC, or the amount necessary to restore the savings association to adequately capitalized status.

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.

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.

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

The regulations also provide that a capital restoration plan must be filed with the OCC within 45 days of the date a federal savings association receives notice that it is “undercapitalized,” “significantly undercapitalized” or “critically undercapitalized.” The criteria for an acceptable capital restoration plan include, among other things, the establishment of the methodology and assumptions for attaining adequately capitalized status on an annual basis, procedures for ensuring compliance with restrictions imposed by applicable federal regulations, the identification of the types and levels of activities the federal savings association will engage in while the capital restoration plan is in effect, and assurances that the capital restoration plan will not appreciably increase the current risk profile of the federal savings association.

Any holding company for a federal savings association required to submit a capital restoration plan must guarantee the lesser of an amount equal to 5% of the federal savings association’s assets at the time it was notified or deemed to be undercapitalized by the OCC, or the amount necessary to restore the federal savings association to adequately capitalized status.

This guarantee remains in place until the OCC notifies the federal 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 federal 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 federal savings associations, including the issuance of a capital directive and the replacement of senior executive officers and directors.

As of September 30, 2023, the Association exceeded all regulatory requirements to be considered “Well Capitalized” as presented in the table below (dollar amounts in thousands).

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Insurance of Deposit Accounts.

The Deposit Insurance Fund of the FDIC insures deposits at FDIC-insured depository institutions such as the Association.

The DIF of the FDIC insures deposits at FDIC-insured depository institutions such as the Association.

Deposit accounts in the Association are insured by the FDIC, generally up to a maximum of $250,000 per separately insured depositor.

The FDIC charges insured depository institutions assessments to maintain the Deposit Insurance Fund.

The FDIC bases its assessments on each institution’s total assets less Tier 1 capital, with an assessment schedule based on perceived risk to the Deposit Insurance Fund.

As of September 30, 2023, 96.1% of our $8.29 billion retail deposit base consists of accounts structured under the FDIC insured limit of $250,000.

The FDIC charges insured depository institutions assessments to maintain the DIF.

The FDIC bases its assessments on each institution’s total assets less Tier 1 capital, with an assessment schedule based on perceived risk to the DIF.

Institutions with over $10 billion of total assets, such as the Association, are classified for assessment purposes as "Large Institutions".

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

Such Large Institutions are generally subject to a pricing system that includes a separate “scorecard” methodology designed to

measure risk to the DIF.

The assessment range for Large Institutions (inclusive of adjustments specified by the FDIC) is 2.5 to 42 basis points.

On November 16, 2023, the FDIC approved a final rule to implement a special assessment on certain banking organizations with financial institution subsidiaries with more than $5 billion in assets, in order to recover the costs associated with protecting uninsured depositors following the closures of Silicon Valley Bank and Signature Bank in March 2023.

The special assessment will be collected beginning with the first quarterly assessment period of 2024 at an annual rate of approximately 13.4 basis points for an anticipated total of eight quarterly periods and is subject to periodic adjustments.

The assessment base is equal to uninsured deposits reported as of December 31, 2022, adjusted to exclude the first $5 billion.

Because the Association's uninsured deposits at the measurement date were below $5 billion, the Association will not be subject to this special assessment.

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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Interest and other charges collected or contracted for by the Association are subject to state usury laws and federal laws concerning interest rates.

The Association’s operations are also subject to federal laws applicable to credit transactions, such as the:

The Association’s operations are also subject to federal laws and regulations applicable to credit transactions, such as the:

• Truth-In-Lending Act, governing disclosures of credit terms to consumer borrowers;

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• Fair Debt Collection Act, governing the manner in which consumer debts may be collected by collection agencies;

• rules and regulations of the various federal agencies charged with the responsibility of implementing such federal laws.

• Implementing regulations of the relevant federal agencies charged with the responsibility of implementing such federal laws that have supervisory authority over the Association.

The operations of the Association also are subject to:

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• The Check Clearing for the 21 st Century Act (also known as “Check 21”), which gives “substitute checks,” such as digital check images and copies made from those images, the same legal standing as the original paper check;

• Title III of The Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (referred to as the “USA PATRIOT Act”), which significantly expanded the responsibilities of financial institutions, including savings associations, in preventing the use of the U.S.

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;

• The Bank Secrecy Act and Title III of The Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (referred to as the “USA PATRIOT Act”), which require the Association to implement a compliance program to detect and prevent money laundering, terrorist financing, and illicit crime.

Together, the BSA and USA PATRIOT Act require the Association to implement internal controls, conduct customer due diligence, maintain records, and file reports.

• Regulations of the Office of Foreign Assets Control that enforce economic and trade sanctions against targeted foreign countries, regimes, and other designated individuals and organizations;

• The Gramm-Leach-Bliley Act, which placed limitations on the sharing of consumer financial information by financial institutions with unaffiliated third parties.

Specifically, the Gramm-Leach-Bliley Act requires all financial institutions offering financial products or services to retail customers to provide such customers with the financial institution’s privacy policy and provide such customers the opportunity to “opt out” of the sharing of certain personal financial information with unaffiliated third parties.

• The Dodd-Frank Act, which holds lenders accountable for ensuring a borrower's ability to repay a mortgage.

Loans defined as a "qualified mortgage" must be made to a borrower whose total monthly debt-to-income ratio does not exceed 43%, as well as the verification and documentation of the income and financial resources relied upon to qualify the borrower on the loan.

Upon the loan being underwritten based on a fully amortizing payment schedule and maximum interest rate during the first five years, as well as meeting the other qualifications above, the loan is determined to be a "qualified mortgage" and therefore presumed to have complied with the ability-to-repay standard under the Dodd-Frank Act.

Holding Company Regulation

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Permitted 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:

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 holding 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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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.

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 DIF, 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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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.

We are in compliance with the holding company consolidated capital requirements and the capital conservation buffer as of September 30, 2023.

Dividends and Repurchases.

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Federal regulations require Third Federal Savings, MHC to notify the FRS of any proposed waiver of its receipt of dividends from the Company.

The OTS, the previous regulator for Third Federal Savings, MHC, allowed dividend waivers provided the mutual holding company’s Board of Directors determined that the waiver was consistent with its fiduciary duties and the waiver would not be detrimental to the safety and soundness of its subsidiary institution.

The OTS, the previous regulator for Third Federal Savings, MHC, allowed dividend waivers provided that its Board of Directors determined that the waiver was consistent with the Board's fiduciary duties and the waiver would not be detrimental to the safety and soundness of its subsidiary institution.

In February 2008, the Company declared its first quarterly dividend and Third Federal Savings, MHC waived its right to receive each dividend paid by the Company.

Section 625(a) of DFA preserved, for mutual holding companies, including Third Federal Savings, MHC, that had reorganized into mutual holding company form, issued minority stock and waived dividends prior to December 1, 2009, the right to waive dividends if the waiver was not detrimental to the safe and sound operation of the savings association and the board of directors expressly determines that the waiver is consistent with the fiduciary duties of the board to the mutual members of the mutual holding company.

Section 625(a) of DFA preserved, for mutual holding companies that had reorganized into mutual holding company form, issued minority stock and waived dividends prior to December 1, 2009, including Third Federal Savings, MHC, the right to waive dividends if the waiver was not detrimental to the safe and sound operation of the savings association and the board of directors expressly determined that the waiver was consistent with the fiduciary duties of the board to the mutual members of the mutual holding company.

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.

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 .

months following the special meeting of members held on July 11, 2023.

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

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The Sarbanes-Oxley Act of 2002 and related regulations address, among other issues, corporate governance, auditing and accounting, executive compensation, and enhanced and timely disclosure of corporate information.

We have prepared policies, procedures and systems designed to ensure compliance with these regulations.

The Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”)

The CARES Act, which became law on March 27, 2020, provided over $2 trillion to combat the coronavirus (COVID-19) and stimulate the economy.

The law had several provisions relevant to depository institutions, including:

Allowing institutions not to characterize loan modifications relating to the COVID-19 pandemic as a troubled debt restructuring and also allowing them to suspend the corresponding impairment determination for accounting purposes;

The ability of a borrower of a federally-backed mortgage loan (VA, FHA, USDA, Freddie Mac and Fannie Mae) experiencing financial hardship due, directly or indirectly, to the COVID-19 pandemic to request forbearance from paying their mortgage by submitting a request to the borrower’s servicer affirming their financial hardship during the COVID-19 emergency.

Such a forbearance could be granted for up to 180 days, subject to extension for an additional 180-day period upon the request of the borrower.

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.

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

We have prepared policies, procedures and systems designed to ensure compliance with this law and related regulations.

Human Capital Resources

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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.

Our voluntary turnover rate, at 4.4% for the twelve months ending September 30, 2023, 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