What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2024-02-08 compared with 2023-08-09 · 252 added, 319 removed, 775 unchanged (42% of the section changed)

9 unchanged sentences

525,175 508,324

Mortgage loans held for sale (at fair value) 595 9,661

Mortgage loans held for sale ($ 0 and $ 3,260 measured at fair value, respectively)

Loans held for investment, net:

23 unchanged sentences

332,318,750 shares issued;

280,329,098 and 280,582,741 outstanding at June 30, 2023 and September 30, 2022, respectively

280,710,854 and 280,359,173 outstanding at December 31, 2023 and September 30, 2023, respectively

Paid-in capital 1,750,440 1,755,027

Treasury stock, at cost;

51,989,652 and 51,736,009 shares at June 30, 2023 and September 30, 2022, respectively

51,607,896 and 51,959,577 shares at December 31, 2023 and September 30, 2023, respectively

( 772,195 ) ( 776,101 )

8 unchanged sentences

(In thousands, except share and per share data)

For the Three Months Ended For the Nine Months Ended

June 30, June 30,

2023 2022 2023 2022

For the Three Months Ended

INTEREST AND DIVIDEND INCOME:

9 unchanged sentences

PROVISION (RELEASE) FOR CREDIT LOSSES ( 1,000 ) ( 1,000 )

NET INTEREST INCOME AFTER (RELEASE) FOR CREDIT LOSSES 68,779 67,302 215,204 190,887

NET INTEREST INCOME AFTER PROVISION (RELEASE) FOR CREDIT LOSSES

70,092 76,157

NON-INTEREST INCOME:

Fees and service charges, net of amortization 1,748 1,936

Net gain (loss) on the sale of loans 21 ( 51 ) 617 2,249

Net gain on the sale of loans

Increase in and death benefits from bank owned life insurance contracts 3,191 2,238

18 unchanged sentences

TFS FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (unaudited)

(In thousands)

For the Three Months Ended For the Nine Months Ended

June 30, June 30,

2023 2022 2023 2022

For the Three Months Ended

Net income $ 20,707 $ 22,193

Other comprehensive income (loss), net of tax:

Net change in unrealized (loss) on securities available for sale ( 6,127 ) ( 4,480 ) ( 3,915 ) ( 21,624 )

Net change in unrealized gain (loss) on securities available for sale

11,655 ( 1,961 )

Net change in cash flow hedges ( 87,205 ) 1,636

Net change in defined benefit plan obligation 524 197

Total other comprehensive income 46,284 15,785 27,836 72,755

Total comprehensive income $ 63,887 $ 32,932 $ 83,540 $ 121,887

Total other comprehensive income (loss)

( 75,026 ) ( 128 )

Total comprehensive income (loss)

$ ( 54,319 ) $ 22,065

See accompanying notes to unaudited interim consolidated financial statements.

2 unchanged sentences

(In thousands, except share and per share data)

For the Three Months Ended June 30, 2022

stock Paid-in

capital Treasury

stock Unallocated

held by ESOP Retained

earnings Accumulated other

comprehensive

income (loss) Total

shareholders’

Balance at March 31, 2022 $ 3,323 $ 1,748,589 $ ( 768,304 ) $ ( 33,584 ) $ 856,555 $ ( 10,831 ) $ 1,795,748

Net income — — — — 17,147 — 17,147

Other comprehensive income, net of tax — — — — — 15,785 15,785

ESOP shares allocated or committed to be released — 513 — 1,084 — — 1,597

Compensation costs for equity incentive plans — 947 — — — — 947

Purchase of treasury stock ( 243,200 shares)

— — ( 3,520 ) — — — ( 3,520 )

Treasury stock allocated to equity incentive plan — ( 230 ) 140 — — — ( 90 )

Dividends declared to common shareholders ($ 0.2825 per common share)

— — — — ( 14,560 ) — ( 14,560 )

Balance at June 30, 2022 $ 3,323 $ 1,749,819 $ ( 771,684 ) $ ( 32,500 ) $ 859,142 $ 4,954 $ 1,813,054

For the Three Months Ended June 30, 2023

stock Paid-in

capital Treasury

stock Unallocated

held by ESOP Retained

earnings Accumulated other

comprehensive

income (loss) Total

shareholders’

Balance at March 31, 2023 $ 3,323 $ 1,752,508 $ ( 775,852 ) $ ( 29,250 ) $ 879,046 $ 4,701 $ 1,834,476

Net income — — — — 17,603 — 17,603

Other comprehensive income, net of tax — — — — — 46,284 46,284

ESOP shares allocated or committed to be released — 232 — 1,083 — — 1,315

Compensation costs for equity incentive plans — 1,065 — — — — 1,065

Treasury stock allocated to equity incentive plan — ( 4 ) — — — — ( 4 )

Dividends declared to common shareholders ($ 0.2825 per common share)

— — — — ( 14,615 ) — ( 14,615 )

Balance at June 30, 2023 $ 3,323 $ 1,753,801 $ ( 775,852 ) $ ( 28,167 ) $ 882,034 $ 50,985 $ 1,886,124

For the Nine Months Ended June 30, 2022

For the Three Months Ended December 31, 2022

stock Paid-in

8 unchanged sentences

Net income — — — — 22,193 — 22,193

Other comprehensive income, net of tax — — — — — 72,755 72,755

Other comprehensive income (loss), net of tax

— — — — — ( 128 ) ( 128 )

ESOP shares allocated or committed to be released — 397 — 1,083 — — 1,480

5 unchanged sentences

— — — — ( 14,527 ) — ( 14,527 )

Balance at June 30, 2022 $ 3,323 $ 1,749,819 $ ( 771,684 ) $ ( 32,500 ) $ 859,142 $ 4,954 $ 1,813,054

For the Nine Months Ended June 30, 2023

Balance at December 31, 2022 $ 3,323 $ 1,751,020 $ ( 775,154 ) $ ( 30,334 ) $ 877,713 $ 23,021 $ 1,849,589

For the Three Months Ended December 31, 2023

stock Paid-in

7 unchanged sentences

Balance at September 30, 2023 $ 3,323 $ 1,755,027 $ ( 776,101 ) $ ( 27,084 ) $ 886,984 $ 85,212 $ 1,927,361

Cumulative effect from changes in accounting principle, net of tax 1

— — — — 7,898 — 7,898

Net income — — — — 20,707 — 20,707

Other comprehensive income, net of tax — — — — — 27,836 27,836

Other comprehensive income (loss), net of tax

— — — — — ( 75,026 ) ( 75,026 )

ESOP shares allocated or committed to be released — 322 — 1,084 — — 1,406

Compensation costs for equity incentive plans — 915 — — — — 915

Purchase of treasury stock ( 361,869 shares)

— — ( 5,000 ) — — — ( 5,000 )

Treasury stock allocated to equity incentive plan — ( 5,824 ) 3,906 — — — ( 1,918 )

1 unchanged sentence

— — — — ( 14,616 ) — ( 14,616 )

Balance at June 30, 2023 $ 3,323 $ 1,753,801 $ ( 775,852 ) $ ( 28,167 ) $ 882,034 $ 50,985 $ 1,886,124

Balance at December 31, 2023 $ 3,323 $ 1,750,440 $ ( 772,195 ) $ ( 26,000 ) $ 900,973 $ 10,186 $ 1,866,727

1 Related to ASU 2022-02 adopted October 1, 2023.

See accompanying notes to unaudited interim consolidated financial statements.

1 unchanged sentence

CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (In thousands)

For the Nine Months Ended June 30,

For the Three Months Ended December 31,

CASH FLOWS FROM OPERATING ACTIVITIES:

6 unchanged sentences

Net gain on the sale of loans ( 481 ) ( 17 )

Net gain on sale of commercial property — ( 181 )

Other net (gains) losses 239 ( 300 )

2 unchanged sentences

Increase in bank owned life insurance contracts ( 3,191 ) ( 2,238 )

Net increase in interest receivable and other assets ( 23,702 ) ( 20,085 )

Net increase (decrease) in accrued expenses and other liabilities 32,566 ( 6,401 )

Net decrease (increase) in interest receivable and other assets 1,960 ( 6,617 )

Net increase in accrued expenses and other liabilities 8,969 62,971

Net cash provided by operating activities 36,326 78,810

7 unchanged sentences

Real estate owned 133 45

Premises, equipment and other assets — 389

Purchases of:

16 unchanged sentences

Net cash provided by financing activities 90,533 244,040

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 66,651 ( 100,796 )

NET INCREASE IN CASH AND CASH EQUIVALENTS 85,022 74,017

CASH AND CASH EQUIVALENTS—Beginning of period 466,746 369,564

8 unchanged sentences

Transfer of loans from held for investment to held for sale 84,868 12,368

Transfer of loans from held for sale to held for investment 8,433 16,075

Treasury stock issued for stock benefit plans 5,824 1,751

6 unchanged sentences

The principal line of business of the Company is retail consumer banking, including mortgage lending, deposit gathering and, to a much lesser extent, other financial services.

As of June 30, 2023, approximately 81.0 % of the Company’s outstanding shares were owned by the federally chartered mutual holding company, Third Federal Savings and Loan Association of Cleveland, MHC.

As of December 31, 2023, approximately 80.9 % of the Company’s outstanding shares were owned by the federally chartered mutual holding company, Third Federal Savings and Loan Association of Cleveland, MHC.

The thrift subsidiary of TFS Financial Corporation is Third Federal Savings and Loan Association of Cleveland.

5 unchanged sentences

The allowance for credit losses, the valuation of deferred tax assets, and the determination of pension obligations are particularly subject to change.

The unaudited interim consolidated financial statements reflect all adjustments of a normal recurring nature which, in the opinion of management, are necessary to present fairly the consolidated financial condition of the Company at June 30, 2023, and its consolidated results of operations and cash flows for the periods presented.

The unaudited interim consolidated financial statements reflect all adjustments of a normal recurring nature which, in the opinion of management, are necessary to present fairly the consolidated financial condition of the Company at December 31, 2023, and its consolidated results of operations and cash flows for the periods presented.

Such adjustments are the only adjustments reflected in the unaudited interim financial statements.

2 unchanged sentences

The results of operations for the interim periods disclosed herein are not necessarily indicative of the results that may be expected for the fiscal year ending September 30, 2024 or for any other period.

Per ASC 606, Revenue from Contracts with Customers, an entity is required to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to receive in exchange for those goods or services.

Effective October 1, 2023, the Company adopted ASU 2022-02, Financial Instruments - Credit Losses (Topic 326 ), eliminating the accounting guidance for TDR by creditors in Subtopic 310-40.

Refer to Note 4.

LOANS AND ALLOWANCE FOR CREDIT LOSSES and Note 14.

RECENT ACCOUNTING PRONOUNCEMENTS for additional details related to the adoption.

Three of the Company's revenue streams within scope of Topic 606 are the sales of REO, interchange income, and deposit account and other transaction-based service fee income.

8 unchanged sentences

Performance share units, determined to be contingently issuable and not participating securities, are excluded from the calculation of basic EPS.

At June 30, 2023 and 2022, respectively, the ESOP held 2,816,706 and 3,250,046 shares, respectively, that were neither allocated to participants nor committed to be released to participants.

At December 31, 2023 and 2022, the ESOP held 2,600,036 and 3,033,376 shares, respectively, that were neither allocated to participants nor committed to be released to participants.

The following is a summary of the Company's earnings per share calculations.

For the Three Months Ended June 30,

Income Shares Per share

amount Income Shares Per share

(Dollars in thousands, except per share data)

Net income $ 17,603 $ 17,147

income allocated to restricted stock units 388 370

Basic earnings per share:

Income available to common shareholders 17,215 277,472,312 $ 0.06 16,777 277,453,439 $ 0.06

Diluted earnings per share:

Effect of dilutive potential common shares 1,118,498 1,102,320

Income available to common shareholders $ 17,215 278,590,810 $ 0.06 $ 16,777 278,555,759 $ 0.06

For the Nine Months Ended June 30,

For the Three Months Ended December 31,

Income Shares Per share

9 unchanged sentences

The following is a summary of outstanding stock options and restricted and performance share units that are excluded from the computation of diluted earnings per share because their inclusion would be anti-dilutive.

For the Three Months Ended June 30, For the Nine Months Ended June 30,

2023 2022 2023 2022

For the Three Months Ended December 31,

Options to purchase shares 1,991,975 2,043,575

2 unchanged sentences

Investments available for sale are summarized in the tables below.

June 30, 2023

December 31, 2023

Unrealized Fair

8 unchanged sentences

Fannie Mae certificates 834 1 ( 21 ) 814

Freddie Mac certificates 1,141 — ( 97 ) 1,044

government and agency obligations 63,866 — ( 407 ) 63,459

Total $ 561,715 $ 1 $ ( 53,392 ) $ 508,324

At June 30, 2023 and September 30, 2022, respectively, investment securities included $ 59,454 and $ 0 of U.S.

government obligations pledged as collateral on our open swap positions to meet margin requirements established by the clearing organization.

Accrued interest on investment securities is $ 1,462 and $ 1,122 at June 30, 2023 and September 30, 2022, respectively, and is reported in accrued interest receivable on the CONSOLIDATED STATEMENTS OF CONDITION .

The following is a summary of our securities portfolio by the period remaining until contractual maturity and yield at June 30, 2023.

At December 31, 2023 and September 30, 2023, investment securities included $ 68,257 and $ 59,813 , respectively, of U.S.

government obligations pledged as collateral on our open swap positions to meet margin requirements established by the

clearing organization.

Accrued interest on investment securities is $ 1,730 and $ 1,907 at December 31, 2023 and September 30, 2023, respectively, and is reported in accrued interest receivable on the CONSOLIDATED STATEMENTS OF CONDITION .

The following is a summary of our securities portfolio by the period remaining until contractual maturity and yield at December 31, 2023.

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

1 unchanged sentence

We did not hold any tax-exempt securities.

June 30, 2023 September 30, 2022

December 31, 2023 September 30, 2023

Amortized Cost Fair Value Weighted Average Yield Amortized Cost Fair Value Weighted Average Yield

4 unchanged sentences

Total $ 563,451 $ 525,175 3.20 % $ 561,715 $ 508,324 3.03 %

Gross unrealized losses on available for sale securities and the estimated fair value of the related securities, aggregated by the length of time the securities have been in a continuous loss position, at June 30, 2023 and September 30, 2022, were as follows:

June 30, 2023

Gross unrealized losses on available for sale securities and the estimated fair value of the related securities, aggregated by the length of time the securities have been in a continuous loss position, at December 31, 2023 and September 30, 2023, were as follows:

December 31, 2023

Less Than 12 Months 12 Months or More Total

17 unchanged sentences

The investment portfolio is comprised entirely of securities issued by U.S.

government entities and agencies, which support an expectation of zero loss estimates since principal and interest payments due on these securities carry the full faith and credit guaranty of the U.S.

government entities and agencies, which supports an expectation of no credit loss estimates since principal and interest payments due on these securities carry the full faith and credit guaranty of the U.S.

In addition, the U.S.

Treasury Department established financing agreements in 2008 to ensure Fannie Mae and Freddie Mac meet their obligations to holders of mortgage-backed securities that they have issued or guaranteed.

Since the decline in value is attributable to an increase in market interest rates and not credit quality and because the Company has neither the intent to sell the securities nor is it more likely than not the Company will be required to sell the securities prior to recovery of the amortized cost, the Company did not record an allowance for credit losses at of June 30, 2023 .

Since the decline in value is primarily attributable to an increase in market interest rates and not credit quality deterioration and because the Company has neither the intent to sell the securities nor is it more likely than not the Company

will be required to sell the securities prior to recovery of the amortized cost, the Company did not record an allowance for credit losses as of December 31, 2023 .

LOANS AND ALLOWANCE FOR CREDIT LOSSES

14 unchanged sentences

Loans held for investment, net $ 15,207,242 $ 15,165,747

Loans are carried at amortized cost, which includes outstanding principal balance adjusted for any unamortized premiums or discounts, net of deferred fees and expenses.

Accrued interest is $ 48,372 and $ 39,124 as of June 30, 2023 and September 30, 2022, respectively, and is reported in accrued interest receivable on the CONSOLIDATED STATEMENTS OF CONDITION.

Loans held for investment are carried at amortized cost, which includes outstanding principal balance adjusted for any unamortized premiums or discounts, net of deferred fees and expenses and any applicable loans-in-process.

Accrued interest is $ 53,878 and $ 51,989 as of December 31, 2023 and September 30, 2023, respectively, and is reported in accrued interest receivable on the CONSOLIDATED STATEMENTS OF CONDITION.

A large concentration of the Company’s lending is in Ohio and Florida.

As of June 30, 2023 and September 30, 2022, the percentage of aggregate Residential Core, Home Today and Construction loans secured by properties in Ohio was 57 % and 56 %, respectively, and the percentage of loans secured by properties in Florida was 18 %, as of both dates.

As of June 30, 2023 and September 30, 2022, home equity loans and lines of credit were concentrated in the states of Ohio ( 26 % and 27 % respectively), Florida ( 22 % and 20 % respectively), and California ( 17 % and 16 % respectively).

As of December 31, 2023 and September 30, 2023, the percentage of aggregate Residential Core, Home Today and Construction loans secured by properties in Ohio was 58 % and 57 %, respectively, and the percentage of loans secured by properties in Florida was 18 % as of both dates.

As of December 31, 2023 and September 30, 2023, home equity loans and lines of credit were concentrated in Ohio ( 25 % and 26 %, respectively), Florida ( 23 % and 22 %, respectively), and California ( 17 % as of both dates).

Residential Core mortgage loans represent the largest portion of the residential real estate portfolio.

4 unchanged sentences

With limited historical loss experience compared to other types of loans in the portfolio, judgment is required by management in assessing the allowance required on adjustable-rate mortgage loans.

The principal amount of adjustable-rate mortgage loans included in the Residential Core portfolio was $ 4,755,783 and $ 4,668,089 at June 30, 2023 and September 30, 2022, respectively.

Home Today was an affordable housing program targeted to benefit low- and moderate-income home buyers and most loans under the program were originated prior to 2009.

The principal amount of adjustable-rate mortgage loans included in the Residential Core portfolio was $ 4,706,373 and $ 4,760,843 at December 31, 2023 and September 30, 2023, respectively.

Home Today was an affordable housing program targeted to benefit low- and moderate-income home buyers.

Most loans under the program were originated prior to 2009.

No new loans were originated under the Home Today program after 2016.

11 unchanged sentences

Loans held for sale include loans originated with the intent to sell which are generally priced in alignment with secondary market pricing and may be subject to loan level pricing adjustments.

Additionally, loans originated for the held for investment portfolio may later be identified for sale and transferred to the held for sale portfolio, which may include loans originated within the parameters of programs established by Fannie Mae.

During the three and nine months ended June 30, 2023 and June 30, 2022, reclassifications to the held for sale portfolio included loans that were sold during the period, including those in contracts pending settlement at the end of the period, and loans originated for the held for investment portfolio that were later identified for sale.

At June 30, 2023 and September 30, 2022, respectively, mortgage loans held for sale totaled $ 595 and $ 9,661 .

During the three and nine months ended June 30, 2023, the principal balance of loans sold was $ 23,583 and $ 58,146 (including no loans in contracts pending settlement) compared to $ 2,633 and $ 104,299 (including $ 831 of contracts pending settlement) during the three and nine months ended June 30, 2022.

During the three and nine months ended June 30, 2023, the amortized cost of loans originated as held for sale that were subsequently transferred to the held for investment portfolio was $ 0 and $ 8,433 , as compared to $ 0 and $ 16,075 during the three and nine months ended June 30, 2022.

Additionally, loans originated or purchased for the held for investment portfolio may later be identified for sale and transferred to the held for sale portfolio, which may include loans originated or purchased within the parameters of programs established by Fannie Mae.

During the three months ended December 31, 2023 and December 31, 2022, reclassifications to the held for sale portfolio included loans that were sold during the period, including those in contracts pending settlement at the end of the period, and loans originated for the held for investment portfolio that were later identified for sale.

At December 31, 2023 and September 30, 2023, mortgage loans held for sale totaled $ 1,095 and $ 3,260 , respectively.

During the three months ended December 31, 2023, the principal balance of loans sold was $ 87,843 compared to $ 19,182 during the three months ended December 31, 2022.

During the three months ended December 31, 2023 and December 31, 2022, there were no transfers to the held for investment portfolio.

DELINQUENCY and NON-ACCRUAL

An aging analysis of the amortized cost in loan receivables that are past due at June 30, 2023 and September 30, 2022 is summarized in the following tables.

An aging analysis of the amortized cost in loan receivables that are past due at December 31, 2023 and September 30, 2023 is summarized in the following tables.

When a loan is more than one month past due on its scheduled payments, the loan is considered 30 days or more past due, regardless of the number of days in each month.

Balances are adjusted for deferred loan fees and expenses and any applicable loans-in-process.

Past Due 60-89

2 unchanged sentences

Due Current Total

June 30, 2023

December 31, 2023

Real estate loans:

22 unchanged sentences

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

Loans restructured in TDRs that were in non-accrual status prior to the restructurings and loans with forbearance plans that were subsequently modified in TDRs are reported in non-accrual status for a minimum of six months after restructuring.

Loans restructured in TDRs with a high debt-to-income ratio at the time of modification are placed in non-accrual status for a minimum of 12 months.

Loans modified that were in non-accrual status prior to modification and loans with forbearance plans that were subsequently modified, are reported in non-accrual status for a minimum of six months after modification.

Loans modified with a high debt-to-income ratio at the time of modification are placed in non-accrual status for a minimum of 12 months.

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

The amortized cost of loan receivables in non-accrual status is summarized in the following table.

Non-accrual with no ACL describes non-accrual loans which have no quantitative or individual valuation allowance, primarily because they have already been collaterally reviewed and any required charge-offs have been taken, but may be included in consideration of qualitative allowance factors.

Non-accrual with no ACL describes non-accrual loans which have no quantitative allowance, primarily because they have already been collaterally reviewed and any required charge-offs have been taken, but may be included in consideration of qualitative allowance factors.

Balances are adjusted for deferred loan fees and expenses.

There are no loans 90 or more days past due and still accruing at June 30, 2023 or September 30, 2022.

June 30, 2023 September 30, 2022

Non-accrual with No ACL Total

Non-accrual Non-accrual with No ACL Total

There are no loans 90 or more days past due and still accruing at December 31, 2023 or September 30, 2023.

December 31, 2023 September 30, 2023

Non-accrual with No ACL

Non-accrual Non-accrual with No ACL

Real estate loans:

3 unchanged sentences

Total non-accrual loans $ 30,176 $ 33,495 $ 27,237 $ 31,914

At June 30, 2023 and September 30, 2022, respectively, the amortized cost in non-accrual loans includes $ 20,451 and $ 23,159 which are performing according to the terms of their agreement, of which $ 11,774 and $ 13,526 are loans in Chapter 7

bankruptcy status, primarily where all borrowers have filed, and have not reaffirmed or been dismissed.

At June 30, 2023 and September 30, 2022, real estate loans include $ 9,230 and $ 9,833 , respectively, of loans that were in the process of foreclosure.

At December 31, 2023 and September 30, 2023, respectively, the amortized cost in non-accrual loans includes $ 18,633 and $ 18,915 which are performing according to the terms of their agreement, of which $ 11,611 and $ 11,508 are loans in Chapter 7 bankruptcy status, primarily where all borrowers have filed, and have not reaffirmed or been dismissed.

At December 31, 2023 and September 30, 2023, real estate loans include $ 10,041 and $ 9,144 , respectively, of loans that were in the process of foreclosure.

Interest on loans in accrual status is recognized in interest income as it accrues, on a daily basis.

2 unchanged sentences

Cash payments on loans in non-accrual status are applied to the oldest scheduled, unpaid payment first.

The amount of interest income recognized on non-accrual loans was $ 145 and $ 503 for the three and nine months ended June 30, 2023 and $ 112 and $ 549 for three and nine months ended June 30, 2022, respectively.

Cash payments on loans with a partial charge-off are applied fully to principal, then to recovery of the charged off amount prior to interest income being recognized, except cash payments may be applied to interest capitalized in a restructuring when collection of remaining amounts due is considered probable.

The amount of interest income recognized on non-accrual loans was $ 162 for both the three months ended December 31, 2023 and December 31, 2022.

Cash payments on loans with a partial charge-off are applied fully to principal, then to recovery of the charged off amount prior to interest income being recognized, except cash payments may be applied to interest capitalized in a modification when collection of remaining amounts due is considered probable.

A non-accrual loan is generally returned to accrual status when contractual payments are less than 90 days past due.

However, a loan may remain in non-accrual status when collectability is uncertain, such as a TDR that has not met minimum payment requirements, a loan with a partial charge-off, a home equity loan or line of credit with a delinquent first mortgage greater than 90 days past due, or a loan in Chapter 7 bankruptcy status where all borrowers have filed, and have not reaffirmed or been dismissed.

However, a loan may remain in non-accrual status when collectability is uncertain, such as a modification that has not met minimum payment requirements, a loan with a partial charge-off, a home equity loan or line of credit with a delinquent first mortgage greater than 90 days past due, or a loan in Chapter 7 bankruptcy status where all borrowers have filed, and have not reaffirmed or been dismissed.

ALLOWANCE FOR CREDIT LOSSES

1 unchanged sentence

Factors considered in determining that a loan is collateral-dependent may include the deteriorating financial condition of the borrower indicated by missed or delinquent payments, a pending legal action, such as bankruptcy or foreclosure, or the absence of adequate security for the loan.

Charge-offs on residential mortgage loans, home equity loans and lines of credit, and construction loans are recognized when triggering events, such as foreclosure actions, short sales, or deeds accepted in lieu of repayment, result in less than full repayment of the amortized cost in the loans.

Partial or full charge-offs are also recognized for the amount of credit losses on loans considered collateral-dependent when the borrower is experiencing financial difficulty as described by meeting the conditions below.

Partial or full charge-offs are recognized for the amount of credit losses on loans when the borrower is experiencing financial difficulty as described by meeting the conditions below.

• For residential mortgage loans, payments are greater than 180 days delinquent;

• For home equity loans and lines of credit, and residential loans restructured in TDR, payments are greater than 90 days delinquent;

• For all classes of loans restructured in a TDR with a high debt-to-income ratio at time of modification;

• For home equity loans and lines of credit, and modified residential loans, payments are greater than 90 days delinquent;

• For all classes of loan modifications with a high debt-to-income ratio at time of modification;

• For all classes of loans, a sheriff sale is scheduled within 60 days to sell the collateral securing the loan;

3 unchanged sentences

• For all classes of loans, it becomes evident that a loss is probable.

Charge-offs on residential mortgage loans, home equity loans and lines of credit, and construction loans are also recognized when triggering events, such as foreclosure actions, short sales, or deeds accepted in lieu of repayment, result in less than full repayment of the amortized cost in the loans.

Collateral-dependent residential mortgage loans and construction loans are charged-off to the extent the amortized cost in the loan, net of anticipated mortgage insurance claims, exceeds the fair value, less estimated costs to dispose of the underlying property.

3 unchanged sentences

A loan in any portfolio that has a partial charge-off will continue to be individually evaluated for credit loss until, at a minimum, the loss has been recovered.

Residential mortgage loans, home equity loans and lines of credit and construction loans restructured in TDRs that are not evaluated based on collateral are separately evaluated for credit losses on a loan by loan basis at each reporting date for as long as they are reported as TDRs.

The credit loss evaluation is based on the present value of expected future cash flows discounted at the effective interest rate of the original loan.

Expected future cash flows include a discount factor representing a potential for default.

Valuation allowances are recorded for the excess of the amortized costs over the result of the cash flow analysis.

Loans discharged in Chapter 7 bankruptcy are reported as TDRs and also evaluated based on the present value of expected future cash flows unless evaluated based on collateral.

These loans are evaluated using expected future cash flows because the borrower,

not liquidation of the collateral, is expected to be the source of repayment for the loan.

Other loans are not considered for restructuring.

At June 30, 2023 and September 30, 2022, respectively, allowances on individually reviewed TDRs (IVAs), evaluated for credit losses based on the present value of cash flows, were $ 9,742 and $ 10,284 .

All other individually evaluated loans received a charge-off, if applicable.

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

The allowance is estimated at each reporting date using relevant available information relating to past events, current conditions and supportable forecasts.

The allowance is estimated at each reporting date using relevant available information relating to past events, current conditions and reasonable and supportable forecasts.

The Company utilizes loan level regression models with forecasted economic data to derive the probability of default and loss given default factors.

These factors are used to calculate the loan level credit loss over a 24-month period with an immediate reversion to historical mean loss rates for the remaining life of the loans.

The Company adopted ASU 2022-02 on October 1, 2023, which eliminated the accounting for TDRs.

As such, at December 31, 2023, there was no allowance for individually reviewed TDRs (IVAs), based on the present value of cash flows, as compared to September 30, 2023, when there was $ 9,546 .

Effective with this adoption, losses on loans with modifications to borrowers experiencing financial difficulties, previously identified as TDRs, will be estimated as described above, in the same manner as loans that have not been subject to such modifications.

Historical credit loss experience provides the basis for the estimation of expected credit losses.

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The qualitative adjustments resulted in a negative ending balance on the allowance for credit losses for the Home Today portfolio, where recoveries are expected to exceed charge-offs over the remaining life of that portfolio.

The net qualitative adjustment at June 30, 2023 was a reduction of $ 10,620 .

The net qualitative adjustment at December 31, 2023, was a reduction to the allowance for credit losses of $ 7,419 compared to a reduction of $13,425 at September 30, 2023.

During the quarter, a portion of the loss estimate that had previously been measured qualitatively was reclassed to the model-driven quantitative estimate due to enhancements in the accessibility of certain data.

Adjustments are evaluated quarterly based on current facts and circumstances.

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LOAN COMMITMENTS AND CONTINGENT LIABILITIES for further details on the allowance for unfunded commitments.

For the Three Months Ended June 30, 2023

Balance Provisions (Releases) Charge-offs Recoveries Ending

Real estate loans:

Residential Core $ 53,772 $ 587 $ ( 35 ) $ 227 $ 54,551

Residential Home Today ( 1,212 ) ( 283 ) ( 34 ) 434 ( 1,095 )

Home equity loans and lines of credit 21,232 ( 1,272 ) ( 22 ) 1,194 21,132

Construction 346 ( 131 ) — — 215

Total real estate loans $ 74,138 $ ( 1,099 ) $ ( 91 ) $ 1,855 $ 74,803

Total Unfunded Loan Commitments (1)

26,653 1,099 — — 27,752

Total Allowance for Credit Losses $ 100,791 $ — $ ( 91 ) $ 1,855 $ 102,555

For the Three Months Ended June 30, 2022

Balance Provisions (Releases) Charge-offs Recoveries Ending

Real estate loans:

Residential Core $ 46,469 $ 4,337 $ ( 23 ) $ 669 $ 51,452

Residential Home Today ( 850 ) ( 543 ) ( 91 ) 592 ( 892 )

Home equity loans and lines of credit 18,425 ( 1,162 ) ( 191 ) 1,522 18,594

Construction 280 ( 159 ) — 175 296

Total real estate loans $ 64,324 $ 2,473 $ ( 305 ) $ 2,958 $ 69,450

Total Unfunded Loan Commitments (1)

26,601 1,527 — — 28,128

Total Allowance for Credit Losses $ 90,925 $ 4,000 $ ( 305 ) $ 2,958 $ 97,578

For the Nine Months Ended June 30, 2023

Balance Provisions (Releases) Charge-offs Recoveries Ending

For the Three Months Ended December 31, 2023

Balance Adoption of ASU 2022-02

Provisions (Releases) Charge-offs Recoveries Ending

Real estate loans:

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Total Allowance for Credit Losses $ 104,830 $ ( 10,262 ) $ ( 1,000 ) $ ( 510 ) $ 1,517 $ 94,575

For the Nine Months Ended June 30, 2022

For the Three Months Ended December 31, 2022

Balance Provisions (Releases) Charge-offs Recoveries Ending

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CLASSIFIED LOANS

The following tables provide information about the credit quality of residential loan receivables by an internally assigned grade as of the dates presented.

The following tables provides the amortized cost and information about the credit quality of residential loan receivables by an internally assigned grade as of the dates presented.

Revolving loans reported at amortized cost include home equity lines of credit currently in their draw period.

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No Home Today loans are classified Special Mention and all construction loans are classified Pass for both periods presented.

Balances are adjusted for deferred loan fees and expenses and any applicable loans-in-process.

Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term

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2024 2023 2022 2021 2020 Prior Total

June 30, 2023

December 31, 2023

Real estate loans:

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(1) No new originations of Home Today loans since fiscal 2016.

The home equity lines of credit converted from revolving to term loans during the three and nine months ended June 30, 2023 totaled $ 802 and $ 1,697 and during the three and nine months ended June 30, 2022 totaled $ 211 and $ 462 , respectively.

The following table provides information on the gross charge-offs of residential loan receivables for the period presented.

There were no gross charge-offs in the construction loan portfolio for the period presented and t here were no gross charge-offs in the non-revolving portfolios with origination years between 2020 and 2024 for the period presented .

For the Three Months Ended December 31, 2023

Origination year prior to fiscal 2020

Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Loans

Real estate loans:

Residential Core

$ 150 $ — $ — $ 150

Residential Home Today (1)

Home equity loans and lines of credit

— 163 167 330

Total real estate loans $ 180 $ 163 $ 167 $ 510

(1) No new originations of Home Today loans since fiscal 2016.

The home equity lines of credit converted from revolving to term loans during the three months ended December 31, 2023 and December 31, 2022 totaled $ 1,135 and $ 396 , respectively.

The amount of conversions to term loans is expected to remain low for several years since the length of the draw period on new originations changed from five to ten years in 2016.

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Substandard loans are inadequately protected by the current payment capacity of the borrower or the collateral pledged with a defined weakness that jeopardizes the liquidation of the debt.

Also included in Substandard are performing home equity loans and lines of credit where the customer has a severely delinquent first mortgage to which the performing home equity loan or line of credit is subordinate and all loans in Chapter 7 bankruptcy status where all borrowers have filed, and have not reaffirmed or been dismissed.

and have not reaffirmed or been dismissed.

Loss loans are considered uncollectible and are charged off when identified.

Loss loans are of such little value that their continuance as bankable assets is not warranted even though partial recovery may be effected in the future.

At June 30, 2023 and September 30, 2022, respectively, $ 73,805 and $ 75,904 of TDRs individually evaluated for credit loss have adequately performed under the terms of the restructuring and are classified as Pass loans.

Other loans are internally assigned a grade of non-performing when they become 90 days or more past due.

At June 30, 2023 and September 30, 2022, no other loans were graded as non-performing.

TROUBLED DEBT RESTRUCTURINGS

Initial concessions granted for loans restructured as TDRs may include reduction of interest rate, extension of amortization period, forbearance or other actions.

Some TDRs have experienced a combination of concessions.

TDRs also may occur as a result of bankruptcy proceedings.

Loans discharged in Chapter 7 bankruptcy are classified as multiple restructurings if the loan's original terms had also been restructured by the Company.

The amortized cost in TDRs by category as of June 30, 2023 and September 30, 2022 is shown in the tables below.

June 30, 2023 Initial Restructuring Multiple

Restructurings Bankruptcy Total

Residential Core $ 29,283 $ 16,181 $ 9,684 $ 55,148

Residential Home Today 9,747 10,441 1,762 21,950

Home equity loans and lines of credit 21,709 2,473 974 25,156

Total $ 60,739 $ 29,095 $ 12,420 $ 102,254

September 30, 2022 Initial Restructuring Multiple

Restructurings Bankruptcy Total

At December 31, 2023 and September 30, 2023, no other loans were graded as non-performing.

MODIFICATIONS TO BORROWERS EXPERIENCING FINANCIAL DIFFICULTY

On October 1, 2023, the Company adopted ASU 2022-02, which eliminates the accounting guidance for TDRs by creditors and enhances the disclosure requirements for certain loan modifications when a borrower is experiencing financial difficulty.

For additional information on the adoption, refer to Note 14.

RECENT ACCOUNTING PRONOUNCEMENTS .

To mitigate losses, the Company works with borrowers who are experiencing financial difficulty to identify solutions the borrowers can afford by entering into agreements to modify their loans.

These efforts often result in modifications to the payment terms of the loan, which vary by situation and may include interest rate reductions, term extensions, significant payment delays, other, or a combination thereof.

The Company does not generally offer principal forgiveness as a type of modification.

If a borrower is experiencing an income curtailment that temporarily has reduced their capacity to repay, such as loss of employment, reduction of work hours, non-paid leave or short-term disability, a temporary modification is considered.

If a borrower lacks the capacity to repay the loan at the current terms due to a permanent condition, a permanent modification is considered.

Loans may be modified more than once.

Among other requirements, a subsequent modification may be available for a borrower upon the expiration of temporary modified terms if the borrower is unable to resume contractually scheduled loan payments.

In evaluating the need for a subsequent modification, the borrower’s ability to repay is generally assessed utilizing a debt-to-income and cash flow analysis.

The following table represents the amortized cost of modifications by type during the period presented.

For the three months ended December 31, 2023, there were no modifications made on construction loans.

For the Three Months Ended December 31, 2023

Interest Rate Reduction

Term Extension

Significant Payment Delay

Combination-Rate Reduction & Term Extension

% of Total Class

Residential Core $ — $ 2 $ 851 $ — $ 124 $ 977 0.01 %

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Total $ — $ 2 $ 1,373 $ 48 $ 339 $ 1,762 0.01 %

TDRs may be restructured more than once.

Among other requirements, a subsequent restructuring may be available for a borrower upon the expiration of temporary restructuring terms if the borrower is unable to resume contractually scheduled loan payments.

If the borrower is experiencing an income curtailment that temporarily has reduced their capacity to repay, such as loss of employment, reduction of work hours, non-paid leave or short-term disability, a temporary restructuring is considered.

If the borrower lacks the capacity to repay the loan at the current terms due to a permanent condition, a permanent restructuring is considered.

In evaluating the need for a subsequent restructuring, the borrower’s ability to repay is generally assessed utilizing a debt to income and cash flow analysis.

For all TDRs restructured during the three and nine months ended June 30, 2023 and June 30, 2022 (set forth in the tables below), the pre-restructured outstanding amortized cost was not materially different from the post-restructured outstanding amortized cost.

The following tables set forth the amortized cost in TDRs restructured during the periods presented.

For the Three Months Ended June 30, 2023

Initial Restructuring Multiple

Restructurings Bankruptcy Total

The following table presents the financial effect of the loan modifications presented above to borrowers experiencing financial difficulty for the three months ended December 31, 2023.

For the Three Months Ended December 31, 2023

Interest Rate Reduction

Term Extension

Weighted-Average Contractual Interest Rate

Weighted-Average Years Added to Life

Residential Core 5.99 % 2.00 % 7.3

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Home equity loans and lines of credit 4.24 % 3.45 % 17.4

Total $ 1,585 $ 693 $ 104 $ 2,382

For the Three Months Ended June 30, 2022

Initial Restructuring Multiple

Restructurings Bankruptcy Total

The performance of loans made to borrowers experiencing financial difficulty in which modifications were made is closely monitored by the Company to understand the effectiveness of modification efforts.

Modifications made to borrowers experiencing financial difficulty that become 90 days or more past due under the modified terms are considered subsequently defaulted.

There were no modifications that had subsequently defaulted for the three months ending December 31, 2023.

The following table presents the performance by loan type for loans modified to borrowers experiencing financial difficulty, on or after October 1, 2023, the date of which the Company adopted ASU 2022-02, through December 31, 2023.

The loans in delinquency status consisted of only significant payment delays, which are still reported delinquent even after modification.

December 31, 2023 30-59

Past Due 60-89

Past Due 90 Days or

Due Total Past

Residential Core $ — $ — $ 613 $ 613 $ 363 $ 976

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Total $ — $ — $ 1,123 $ 1,123 $ 639 $ 1,762

For the Nine Months Ended June 30, 2023

Initial Restructuring Multiple

TROUBLED DEBT RESTRUCTURINGS PRIOR TO THE ADOPTION OF ASU 2022-02

Prior to the adoption of ASU 2022-02, initial concessions granted for loans restructured as TDRs include reduction of interest rate, extension of amortization period, capitalization of delinquent amounts, forbearance or other actions.

Some TDRs have experienced a combination of concessions.

TDRs also could occur as a result of bankruptcy proceedings.

Loans discharged in Chapter 7 bankruptcy are classified as multiple restructurings if the loan's original terms had also been restructured by the Company.

At September 30, 2023, $ 73,172 of TDRs individually evaluated for credit loss have adequately performed under the terms of the restructuring and are classified as Pass loans.

The amortized cost in TDRs by category as of September 30, 2023 is shown in the table below.

September 30, 2023 Initial Restructuring Multiple

Restructurings Bankruptcy Total

3 unchanged sentences

Total $ 58,999 $ 28,304 $ 12,147 $ 99,450

For the Nine Months Ended June 30, 2022

The following table sets forth the amortized cost in TDRs restructured during the period presented.

For all loans modified during the three months ended December 31, 2022, the pre-modified outstanding amortized cost was not materially different from the post-modified outstanding amortized cost.

For the Three Months Ended December 31, 2022

Initial Restructuring Multiple

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Total $ 1,782 $ 695 $ 364 $ 2,841

The tables below summarize information about TDRs restructured within 12 months of the period presented for which there was a subsequent payment default, at least 30 days past due on one scheduled payment, during the periods presented.

For the Three Months Ended June 30,

TDRs That Subsequently Defaulted Number of

Contracts Amortized Cost Number of

Contracts Amortized Cost

Residential Core 3 $ 456 6 $ 701

Residential Home Today 5 108 5 89

Home equity loans and lines of credit 1 57 3 254

Total 9 $ 621 14 $ 1,044

For the Nine Months Ended June 30,

TDRs That Subsequently Defaulted Number of

Contracts Amortized Cost Number of

Contracts Amortized Cost

The table below summarizes information about TDRs restructured within 12 months of the period presented for which there was a subsequent payment default, at least 30 days past due on one scheduled payment, during the period presented.

For the Three Months Ended December 31, 2022

TDRs That Subsequently Defaulted Number of Contracts

Amortized Cost

Residential Core 5 $ 676

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Total deposits $ 9,921,056 $ 9,449,820

The aggregate amount of CDs in denominations of more than $250 was $ 804,695 and $ 733,301 at June 30, 2023, and September 30, 2022, respectively.

The aggregate amount of CDs in denominations of more than $250 was $ 975,375 and $ 845,375 at December 31, 2023, and September 30, 2023, respectively.

In accordance with the DFA, the maximum amount of federal deposit insurance is $250 per depositor for each account ownership category.

Brokered certificates of deposits (exclusive of acquisition costs and subsequent amortization), which are used as a cost effective funding alternative, totaled $ 667,757 at June 30, 2023, and $ 575,236 at September 30, 2022.

Brokered CDs (exclusive of acquisition costs and subsequent amortization), which are used as a cost effective funding alternative, totaled $ 1,485,226 and $ 1,162,601 at December 31, 2023 and September 30, 2023, respectively, of which $875,000 and $665,000 were aligned with interest rate swaps discussed in Note 13.

DERIVATIVE INSTRUMENTS .

The FDIC places restrictions on banks with regard to issuing brokered deposits based on the bank's capital classification.

As a well-capitalized institution at June 30, 2023 and September 30, 2022, the Association may accept brokered deposits without FDIC restrictions.

As a well-capitalized institution at December 31, 2023 and September 30, 2023, the Association may accept brokered deposits without FDIC restrictions.

BORROWED FUNDS

At June 30, 2023, the Association had a maximum borrowing capacity of $9,479,848, of which $5,452,228 was outstanding.

At December 31, 2023, the Association had a maximum borrowing capacity of $8,041,072, of which $5,030,561 was outstanding.

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.

The Association also has the ability to purchase Fed Funds through arrangements with other institutions.

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

Total borrowings at June 30, 2023 are summarized in the table below:

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

Total borrowings at December 31, 2023 are summarized in the table below:

Borrowing Capacity Borrowings Available Borrowings Outstanding

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Total Borrowings $ 5,030,561

Maturities of borrowings at June 30, 2023 are summarized in the table below.

Maturities of borrowings at December 31, 2023 are summarized in the table below.

Amount Weighted

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All borrowings have fixed rates during their term ranging up to 240 months.

Interest is payable monthly for long-term advances and at maturity for FHLB swap based three-month and overnight advances.

The table above reflects the effective maturities and fixed interest rates of the $3,025,000 of short-term FHLB advances that are tied to interest rate swaps discussed in Note 13.

DERIVATIVE INSTRUMENTS.

For the three and nine month periods ended June 30, 2023 and June 30, 2022, net interest expense related to short-term borrowings was $ 29,406 and $ 82,681 , and $ 10,425 and $ 33,465 , respectively.

Interest is payable monthly for long-term advances and at maturity for FHLB swap based three-month and overnight advances.

For the three month periods ended December 31, 2023 and December 31, 2022, net interest expense related to short-term borrowings was $ 32,973 and $ 38,636 , respectively.

OTHER COMPREHENSIVE INCOME (LOSS)

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For the Three Months Ended For the Three Months Ended

June 30, 2023 June 30, 2022

Unrealized Gains (Losses) on Securities Available for Sale Cash Flow Hedges Defined Benefit Plan Total Unrealized Gains (Losses) on Securities Available for Sale Cash Flow Hedges Defined Benefit Plan Total

Balance at beginning of period $ ( 31,687 ) $ 47,831 $ ( 11,443 ) $ 4,701 $ ( 16,183 ) $ 15,726 $ ( 10,374 ) $ ( 10,831 )

Other comprehensive income (loss) before reclassifications, net of tax expense (benefit) of $ 17,617 and $ 3,338

( 6,127 ) 65,980 — 59,853 ( 4,480 ) 16,073 630 12,223

Amounts reclassified, net of tax expense (benefit) of $( 3,993 ) and $ 1,031

— ( 13,765 ) 196 ( 13,569 ) — 3,467 95 3,562

Other comprehensive income (loss) ( 6,127 ) 52,215 196 46,284 ( 4,480 ) 19,540 725 15,785

Balance at end of period $ ( 37,814 ) $ 100,046 $ ( 11,247 ) $ 50,985 $ ( 20,663 ) $ 35,266 $ ( 9,649 ) $ 4,954

For the Nine Months Ended For the Nine Months Ended

June 30, 2023 June 30, 2022

December 31, 2023 December 31, 2022

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Amounts Reclassified from Accumulated

Other Comprehensive Income Amounts Reclassified from Accumulated

Other Comprehensive Income

Details about Accumulated Other Comprehensive Income Components For the Three Months Ended June 30, For the Nine Months Ended June 30, Line Item in the Consolidated Statements of Income

2023 2022 2023 2022

Details about Accumulated Other Comprehensive Income Components For the Three Months Ended December 31, Line Item in the Consolidated Statements of Income

Cash flow hedges:

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federal jurisdiction and in various state and city jurisdictions.

The Company’s combined federal and state effective income tax rate was 20.3 % and 19.3 % for the nine months ended June 30, 2023 and June 30, 2022, respectively.

The increase in the effective tax rate is primarily due to excess tax deficiencies associated with equity compensation during the nine months ended June 30, 2023 compared to excess tax benefits in the nine months ended June 30, 2022, as well as an increase in state tax rates for the current year.

The Company’s combined federal and state effective income tax rate was 20.8 % and 21.1 % for the three months ended December 31, 2023 and December 31, 2022, respectively.

The Company is no longer subject to income tax examinations in its major jurisdictions for tax years prior to 2020.

The Company recognizes interest and penalties on income tax assessments or income tax refunds, where applicable, in the financial statements as a component of its provision for income taxes.

The Company recognizes interest and penalties on income tax assessments or income tax refunds, where applicable, in the consolidated financial statements as a component of its provision for income taxes.

The Company makes certain investments in limited partnerships, which invest in affordable housing projects that qualify for the Low Income Housing Tax Credit.

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The Company accounts for its interests in LIHTCs using the proportional amortization method.

The impact of the Company's investments in tax credit entities on the provision for income taxes was not material during the nine months ended June 30, 2023 and June 30, 2022.

The impact of the Company's investments in tax credit entities on the provision for income taxes was not material during the three months ended December 31, 2023 and December 31, 2022.

DEFINED BENEFIT PLAN

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The components of net periodic cost recognized in other non-interest expense in the CONSOLIDATED STATEMENTS OF INCOME are as follows:

Three Months Ended Nine Months Ended

June 30, June 30,

2023 2022 2023 2022

For the Three Months Ended

Interest cost $ 827 $ 831

1 unchanged sentence

Amortization of net loss 137 255

Recognized net loss due to settlement — 815 — 815

Net periodic (benefit) cost $ ( 32 ) $ 118

There were no required minimum employer contributions during the nine months ended June 30, 2023.

There were no required minimum employer contributions during the three months ended December 31, 2023.

There are no required minimum employer contributions expected during the remainder of the fiscal year ending September 30, 2024.

EQUITY INCENTIVE PLAN

In December 2022, 174,550 restricted stock units were granted to certain directors, officers and managers of the Company and 102,000 performance share units were granted to certain officers of the Company.

During the nine months ended June 30, 2023, there were 4,394 performance shares earned and added to those granted in December 2020, according to the targeted performance formula.

During the three months ended December 31, 2023, performance share units granted in December 2021 were reduced by 2,655 units, according to the targeted performance formula.

The awards were made pursuant to the Amended and Restated 2008 Equity Incentive Plan, which was approved at the annual meeting of shareholders held on February 22, 2018.

1 unchanged sentence

There was no stock option expense for either period presented.

Three Months Ended June 30, Nine Months Ended June 30,

2023 2022 2023 2022

For the Three Months Ended

Restricted stock units expense $ 669 $ 941

1 unchanged sentence

Total stock-based compensation expense $ 915 $ 1,151

At June 30, 2023, 2,281,775 shares were subject to vested options, with a weighted average exercise price of $ 15.18 per share and a weighted average grant date fair value of $ 2.54 per share.

At June 30, 2023, 574,085 restricted stock units and 218,071 performance share units with a weighted average grant date fair value of $ 16.49 and $ 15.87 per unit, respectively, are unvested.

Expected future compensation expense relating to the 1,339,833 restricted stock units and 218,071 performance share units outstanding as of June 30, 2023 is $ 3,422 over a weighted average period of 2.3 years and $ 1,722 over a weighted average period of 2.0 years, respectively.

At December 31, 2023, 1,991,975 shares were subject to vested options, with a weighted average exercise price of $ 15.69 per share and a weighted average grant date fair value of $ 2.42 per share.

At December 31, 2023, 142,770 restricted stock units and 152,445 performance share units with a weighted average grant date fair value of $ 15.09 and $ 15.05 per unit, respectively, are unvested.

Expected future compensation expense, relating to the 908,518 restricted stock units and 152,445 performance share units outstanding as of December 31, 2023, is $ 1,937 over a weighted average period of 2.7 years and $ 1,009 over a weighted average period of 1.7 years, respectively.

Each unit is equivalent to one share of common stock.

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Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract.

Commitments to originate loans generally have fixed expiration dates of 60 to 360 days or other termination clauses and may require payment of a fee.

Commitments to originate or purchase loans generally have fixed expiration dates of 60 to 360 days or other termination clauses and may require payment of a fee.

Unfunded commitments related to home equity lines of credit generally expire from five to 10 years following the date that the line of credit was established, subject to various conditions, including compliance with payment obligations, adequacy of collateral securing the line and maintenance of a satisfactory credit profile by the borrower.

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Refer to Note 4.

LOANS AND ALLOWANCES FOR CREDIT LOSSES for discussion on

credit loss methodology .

LOANS AND ALLOWANCES FOR CREDIT LOSSES for discussion on credit loss methodology .

Interest rate risk on commitments to extend credit results from the possibility that interest rates may move unfavorably from the position of the Company since the time the commitment was made.

At June 30, 2023, the Company had commitments to originate and purchase loans and related allowances as follows:

At December 31, 2023, the Company had commitments to originate or purchase loans and related allowances as follows:

Commitment Allowance

3 unchanged sentences

Total $ 207,015 $ 2,348

At June 30, 2023, the Company had unfunded commitments outstanding and related allowances as follows:

At December 31, 2023, the Company had unfunded commitments outstanding and related allowances as follows:

Commitment Allowance

2 unchanged sentences

Total $ 4,776,233 $ 23,143

At June 30, 2023, the unfunded commitment on home equity lines of credit, including commitments for accounts suspended as a result of material default or a decline in equity, was $ 4,631,746 .

At June 30, 2023 and September 30, 2022, the Company had $ 7,092 and $ 0 , respectively, in commitments to sell mortgage loans.

At June 30, 2023 and September 30, 2022, the Company had $ 84,764 and $ 0 , respectively, in commitments to purchase mortgage loans, which are included in mortgage loan commitments above.

At December 31, 2023, the unfunded commitment on home equity lines of credit, including commitments for accounts suspended as a result of material default or a decline in equity, was $ 4,785,036 .

At December 31, 2023 and September 30, 2023, the Company had $ 5,991 and $ 2,094 , respectively, in commitments to sell mortgage loans.

At December 31, 2023 and September 30, 2023, the Company had $ 6,357 and $ 51,275 , respectively, in commitments to purchase mortgage loans, which are included in mortgage loan commitments above.

The above commitments are expected to be funded through normal operations.

The Company is undergoing an escheat audit covering Ohio, Kentucky and Florida.

Any potential loss that may result from this matter is not reasonably estimable at June 30, 2023.

The Company is undergoing an escheat audit covering the states of Ohio, Kentucky and Florida.

Any potential loss, or range of loss, that may result from this matter is not reasonably estimable at December 31, 2023.

The Company and its subsidiaries are subject to various legal actions arising in the normal course of business.

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This election is expected to reduce volatility in earnings related to market fluctuations between the contract trade and settlement dates.

At June 30, 2023 and September 30, 2022, there were no pending agency contracts held for sale.

There was a net loss of $ 0 on the sale of loans for all periods during the three and nine months ending June 30, 2023 and a net loss of $ 6 for both three and nine months ending June 30, 2022, related to the changes in fair value of loans held for sale during the period in which loans were subject to pending agency contracts.

At December 31, 2023 and September 30, 2023, there were no pending agency contracts held for sale.

During the three months ended December 31, 2023 and December 31, 2022, there was no change in fair value related to loans held for sale that were subject to pending agency contracts.

Presented below is a discussion of the methods and significant assumptions used by the Company to estimate fair value.

Investment Securities Available for Sale— Investment securities available for sale are recorded at fair value on a recurring basis.

At June 30, 2023 and September 30, 2022, respectively, this includes $ 513,303 and $ 457,908 of investments in U.S.

At December 31, 2023 and September 30, 2023, this includes $ 525,175 and $ 508,324 , respectively, of investments in U.S.

government and agency obligations including U.S.

Treasury notes and investments in highly liquid collateralized mortgage obligations, that can include items issued by Fannie Mae, Freddie Mac and Ginnie Mae, measured using the market approach.

The fair values of investment securities represent unadjusted price estimates obtained from third party independent nationally recognized pricing services using pricing models or quoted prices of securities with similar characteristics and are included in Level 2 of the hierarchy.

The fair values of investment securities represent unadjusted price estimates obtained from independent third-party nationally recognized pricing services using pricing models or quoted prices of securities with similar characteristics and are included in Level 2 of the hierarchy.

Third-party pricing is reviewed on a monthly basis for reasonableness based on the market knowledge and experience of company personnel that interact daily with the markets for these types of securities.

Mortgage Loans Held for Sale— The fair value of mortgage loans held for sale is estimated on an aggregate basis using a market approach based on quoted secondary market pricing for loan portfolios with similar characteristics.

Loans held for sale are carried at the lower of cost or fair value except, as described above, the Company elects the fair value measurement option for mortgage loans held for sale subject to pending agency contracts to securitize and sell loans.

Loans held for sale

are carried at the lower of cost or fair value except, as described above, the Company elects the fair value measurement option for mortgage loans held for sale subject to pending agency contracts to securitize and sell loans.

Loans held for sale are included in Level 2 of the hierarchy.

At June 30, 2023 and September 30, 2022, there were $ 595 and $ 9,661 , respectively of loans held for sale measured at fair value.

At June 30, 2023 and September 30, 2022 there were no loans carried at cost.

At December 31, 2023 and September 30, 2023, there were $ 0 and $ 3,260 , respectively, of loans held for sale measured at fair value.

At December 31, 2023 and September 30, 2023, there were $ 1,095 and $ 0 , respectively, of loans held for sale carried at cost.

Interest income on mortgage loans held for sale is recorded in interest income on loans.

10 unchanged sentences

The range and weighted average impact of estimated costs to dispose on fair values is determined at the time of credit loss or when additional credit loss is recognized and is included in quantitative information about significant unobservable inputs later in this note.

Loans held for investment that have been restructured in TDRs, are performing according to the restructured terms of the loan agreement and not evaluated based on collateral are individually evaluated for credit loss using the present value of future cash flows based on the loan’s effective interest rate, which is not a fair value measurement.

At June 30, 2023 and September 30, 2022, respectively, this included $ 102,254 and $ 76,692 in amortized cost of TDRs with related allowances for loss of $ 9,742 and $ 10,284 .

Real Estate Owned— Real estate owned includes real estate acquired as a result of foreclosure or by deed in lieu of foreclosure and is carried at the lower of the cost basis or fair value, less estimated costs to dispose.

The carrying amounts of real estate owned at June 30, 2023 and September 30, 2022 were $ 1,400 and $ 1,191 , respectively.

The carrying amounts of real estate owned at December 31, 2023 and September 30, 2023, were $ 1,070 and $ 1,444 , respectively.

Fair value is estimated under the market approach using independent third party appraisals.

As these properties are actively marketed, estimated fair values may be adjusted by management to reflect current economic and market conditions.

At June 30, 2023 and September 30, 2022, these adjustments were not significant to reported fair values.

At June 30, 2023 and September 30, 2022, respectively, $ 1,591 and $ 1,192 of real estate owned is included in Level 3 of the hierarchy with assets measured at fair value on a non-recurring basis, where the cost basis equals or exceeds the estimated fair values, less estimated costs to dispose, of $ 191 and $ 156 , respectively.

Real estate owned includes $ 0 and $ 155 of properties carried at their original or adjusted cost basis at June 30, 2023 and September 30, 2022, respectively.

At December 31, 2023 and September 30, 2023, these adjustments were not significant to reported fair values.

At December 31, 2023 and September 30, 2023, $ 795 and $ 1,413 , respectively, of real estate owned is included in Level 3 of the hierarchy with assets measured at fair value on a non-recurring basis, where the cost basis equals or exceeds the estimated fair values, less estimated costs to dispose, of $ 64 and $ 163 , respectively.

Real estate owned includes $ 339 and $ 194 of properties carried at their original or adjusted cost basis at December 31, 2023 and September 30, 2023, respectively.

Derivatives— Derivative instruments include interest rate locks on commitments to originate loans for the held for sale portfolio, forward commitments on contracts to deliver mortgage loans and interest rate swaps designated as cash flow hedges.

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Forward commitments on contracts to deliver mortgage loans are included in Level 2 of the hierarchy.

Assets and liabilities carried at fair value on a recurring basis in the CONSOLIDATED STATEMENTS OF CONDITION at June 30, 2023 and September 30, 2022 are summarized below.

Assets and liabilities carried at fair value on a recurring basis in the CONSOLIDATED STATEMENTS OF CONDITION at December 31, 2023 and September 30, 2023, are summarized below.

Recurring Fair Value Measurements at Reporting Date Using

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government and agency obligations 72,001 — 72,001 —

Forward commitments for the sale of mortgage loans 8 — 8 —

Total $ 513,311 $ — $ 513,311 $ —

Interest rate lock commitments 55 — — 55

Total $ 525,230 $ — $ 525,175 $ 55

Forward commitments for the sale of mortgage loans 115 — 115 —

Total $ 115 $ — $ 115 $ —

Recurring Fair Value Measurements at Reporting Date Using

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Fannie Mae certificates 814 — 814 —

Freddie Mac certificates

1,044 — 1,044 —

government and agency obligations 63,459 — 63,459 —

Forward commitments for the sale of mortgage loans

Total $ 508,335 $ — $ 508,335 $ —

2 unchanged sentences

The table below presents a reconciliation of the beginning and ending balances and the location within the CONSOLIDATED STATEMENTS OF INCOME where gains (losses) due to changes in fair value are recognized on interest rate lock commitments which are measured at fair value on a recurring basis using significant unobservable inputs (Level 3).

Three Months Ended June 30, Nine Months Ended June 30,

2023 2022 2023 2022

Three Months Ended December 31,

Beginning balance $ ( 1 ) $ ( 333 )

(Loss)/Gain during the period due to changes in fair value:

Gain during the period due to changes in fair value:

Included in other non-interest income 56 304

9 unchanged sentences

Collateral-dependent loans, net of allowance $ 38,562 $ — $ — $ 38,562

Mortgage loans held for sale 595 — 595 —

Real estate owned (1)

1,591 — — 1,591

Total $ 39,357 $ — $ — $ 39,357

14 unchanged sentences

The interest rate lock commitments include mortgage origination applications.

June 30, 2023 Valuation Technique(s) Unobservable Input Range Weighted Average

December 31, 2023 Valuation Technique(s) Unobservable Input Range Weighted Average

Collateral-dependent loans, net of allowance $ 38,562 Market comparables of collateral discounted to estimated net proceeds Discount appraised value to estimated net proceeds based on historical experience:

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The following tables present the estimated fair value of the Company’s financial instruments and their carrying amounts as reported in the CONSOLIDATED STATEMENTS OF CONDITION .

June 30, 2023

December 31, 2023

Carrying Fair Level 1 Level 2 Level 3

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Cash collateral received from or held by counterparty 24,887 24,887 24,887 — —

Derivatives 11 11 — 11 —

Checking and passbook accounts $ 2,790,476 $ 2,790,476 $ — $ 2,790,476 $ —

10 unchanged sentences

Changes in the fair value of derivatives designated and that qualify as cash flow hedges are recorded in OCI and are subsequently reclassified into earnings during the period in which the hedged forecasted transaction affects earnings.

Quarterly, a qualitative analysis is performed to monitor the ongoing effectiveness of the hedging instrument.

All derivative positions were initially and continue to be highly effective at June 30, 2023.

The Company enters into forward commitments for the sale of mortgage loans principally to protect against the risk of lost revenue from adverse interest rate movements on net income.

Quarterly, a quantitative analysis is performed to monitor the ongoing effectiveness of the hedging instrument.

All derivative positions were initially, and continue to be, highly effective at December 31, 2023.

The Company enters into forward commitments for the sale of mortgage loans primarily to protect against the risk of lost revenue from adverse interest rate movements on net income.

The Company recognizes the fair value of such contracts when the characteristics of those contracts meet the definition of a derivative.

4 unchanged sentences

therefore, gains and losses are recognized immediately in the CONSOLIDATED STATEMENTS OF INCOME.

In accordance with the reference rate reform, for every LIBOR referenced interest rate swap with a reset date after the LIBOR cessation date, counterparties received a LIBOR referenced instrument maturing on the first reset date after the LIBOR cessation date, and a forward starting SOFR instrument.

Both the LIBOR-based and SOFR-based instruments are included in the notional value disclosed, which creates a one-time increase in notional amounts outstanding for this quarter as all LIBOR-based instruments will mature by September 30, 2023.

Additionally, under previously adopted ASU 2020-04, Reference Rate Reform (Topic 848), the Company has elected and applied certain optional expedients for eligible hedging relationships impacted by the LIBOR cessation.

The following tables provide the notional values and fair values, and the locations of the fair values within the CONSOLIDATED STATEMENTS OF CONDITION , at the reporting dates, for all derivative instruments.

June 30, 2023

The following tables provide the locations within the CONSOLIDATED STATEMENTS OF CONDITION, notional values and fair values, at the reporting dates, for all derivative instruments.

December 31, 2023

Weighted Average

3 unchanged sentences

Interest rate swaps

LIBOR swaps (1)

$ 1,400,000 $ — 0.2 1.84 %

SOFR swaps (2) (3)

3,640,000 — 3.9 3.49

Other Assets $ 2,965,000 $ — 3.1 2.68 %

Other Liabilities 935,000 — 4.7 3.80

SOFR swaps (2)

175,000 — 5.4 3.97

Total cash flow hedges:

6 unchanged sentences

Interest rate swaps

LIBOR swaps (1)

$ 1,550,000 $ — 2.7 1.88 %

Other Assets $ 3,815,000 $ — 3.7 2.91 %

Total cash flow hedges:

Interest rate swaps $ 3,815,000 $ — 3.7 2.91 %

(1) LIBOR swap contracts that reset on or after July 1st, 2023 will transition to a SOFR-based rate.

(2) All swap contracts entered into after October 1, 2022 are based on a SOFR-based rate.

(3) Total notional value includes $ 1,400,000 of forward-starting SOFR-based swaps for the LIBOR transition.

June 30, 2023 September 30, 2022

December 31, 2023 September 30, 2023

Notional Value Fair Value Notional Value Fair Value

1 unchanged sentence

Interest rate lock commitments

Other Assets $ 1,982 $ 55 $ — $ —

Other Liabilities — — 1,830 ( 1 )

1 unchanged sentence

Other Assets — — 2,094 11

Other Liabilities 5,991 ( 115 ) — —

Total derivatives not designated as hedging instruments $ 7,973 $ ( 60 ) $ 3,924 $ 10

The following tables present the net gains and losses recorded within the CONSOLIDATED STATEMENTS OF INCOME and the CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME relating to derivative instruments.

Three Months Ended Nine Months Ended

Location of Gain or (Loss) June 30, June 30,

Three Months Ended

Location of Gain or (Loss) December 31,

Recognized in Income 2023 2022

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Amount of gain/(loss) reclassified from AOCI Interest expense:

Borrowed funds 17,817 ( 4,469 ) 36,992 ( 24,225 )

Borrowed funds and Deposits

Derivatives not designated as hedging instruments

1 unchanged sentence

Forward commitments for the sale of mortgage loans Net gain/(loss) on the sale of loans ( 126 ) —

The Company estimates that $ 93,512 of the amounts reported in AOCI will be reclassified as a reduction to interest expense during the twelve months ending June 30, 2024.

The Company estimates that $ 66,228 of the amounts reported in AOCI will be reclassified as a reduction to interest expense during the twelve months ending December 31, 2024.

Derivatives contain an element of credit risk which arises from the possibility that the Company will incur a loss because a counterparty fails to meet its contractual obligations.

The Company's exposure is limited to the replacement value of the contracts rather than the notional or principal amounts.

The Company's exposure is limited to the replacement value of the

contracts rather than the notional or principal amounts.

Credit risk is minimized through counterparty margin payments, transaction limits and monitoring procedures.

1 unchanged sentence

The clearing organization establishes daily cash and upfront cash or securities margin requirements to cover potential exposure in the event of default.

This process shifts the risk away from the counterparty, since the clearing organization acts as the middleman on each cleared transaction.

At June 30, 2023 and September 30, 2022, there was $ 33,181 and $ 26,045 , respectively, of cash collateral included in other assets, and $ 59,454 and $ 0 , respectively, included in investment securities related to initial margin requirements that are held by the central clearing organization .

This process shifts the risk away from the counterparty, since the clearing organization acts as an intermediary on each cleared transaction.

At December 31, 2023 and September 30, 2023, there was $ 9,595 and $ 24,887 , respectively, of cash collateral included in other assets, and $ 68,257 and $ 59,813 , respectively, included in investment securities related to initial margin requirements that are held by the central clearing organization.

For derivative transactions cleared through certain clearing parties, variation margin payments are recognized as settlements on a daily basis.

1 unchanged sentence

RECENT ACCOUNTING PRONOUNCEMENTS

Issued but not yet adopted as of June 30, 2023

Adopted as of December 31, 2023

In March 2022, the FASB issued ASU 2022-02, Financial Instruments - Credit Losses (Topic 326 ).

The amendments in this update eliminate the accounting guidance for TDRs by creditors in Subtopic 310-40, while enhancing disclosure requirements for certain loan refinancings and restructurings by creditors when the borrower is experiencing financial difficulty.

This will be done by applying the loan refinancing and restructuring guidance to determine whether a modification results in a new loan or a continuation of an existing loan.

The amendments in this update eliminate the accounting guidance for TDR by creditors in Subtopic 310-40, while enhancing disclosure requirements for certain loan refinancings and modifications by creditors when the borrower is experiencing financial difficulty.

Additionally, this amendment requires that an entity disclose current-period gross write-offs by year of origination for financing receivables and net investments in leases within the scope of Subtopic 326.

This update is effective for fiscal years beginning after December 15, 2022, with early adoption permitted.

The Company is currently evaluating the impact that this accounting guidance may have on its consolidated financial condition and/or results of operations.

The Company plans to adopt this guidance as of October 1, 2023.

The Company adopted this guidance as of October 1, 2023, and applied the modified retrospective transition method that evaluates loans previously identified as TDRs for credit loss under the Company’s current ACL policy.

Upon adoption, we recognized an increase in retained earnings of $7,898, net of income taxes, resulting from a pretax decrease to the allowance for credit losses on loans and unfunded commitments of $10,262.

The enhanced disclosure requirements provided for by the ASU have been adopted on a prospective basis.

The required disclosures are included in Note 4.

LOANS AND ALLOWANCES FOR CREDIT LOSSES .

Issued but not yet adopted as of December 31, 2023

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280) .

The amendments in this update improve disclosures about a public entity's reportable segments and addresses request from investors and other allocators of capital for additional information about a reportable segment's expenses.

While the Company only has one reportable segment, the update requires public entities with a single segment to provide all segment disclosures under ASC 280.

This update is effective for fiscal years beginning after December 15, 2023, with early adoption permitted.

Retrospective application is required for all prior periods presented in the financial statements.

We are currently evaluating this ASU to determine its impact on the Company’s disclosures.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740) .

The ASU requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income tax paid.

The update is effective for fiscal years beginning after December 15, 2024.

We are currently evaluating the impact of the ASU on our income tax disclosures within the consolidated financial statements.

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-Q

Item 1. Financial Statements