What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-02-08 compared with 2023-08-09 · 252 added, 489 removed, 611 unchanged (55% of the section changed)

19 unchanged sentences

● legislative or regulatory changes that adversely affect our business, including changes in regulatory costs and capital requirements and changes related to our ability to pay dividends and the ability of Third Federal Savings, MHC to waive dividends;

● changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the Financial Accounting Standards Board or the Public Company Accounting Oversight Board;

● changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the FASB or the PCAOB;

● 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;

28 unchanged sentences

Our values are further reflected in a long-term revitalization program encompassing the three-mile corridor of the Broadway-Slavic Village neighborhood in Cleveland, Ohio where our main office was established and continues to be located and where the educational programs we have established and/or support are located.

We intend to continue to adhere to our primary values and to support our customers and the communities in which we operate as we pursue our mission to help people achieve the dream of home ownership and financial security while creating value for our shareholders, our customers, our communities and our associates.

The recent failure of three large domestic regional banks negatively impacted consumer confidence and increased stress across the banking sector.

The unprecedented implications of recent monetary and fiscal policy coupled with geopolitics impacting energy markets and supply-chain constraints from global shutdowns culminated into high levels of inflation.

We intend to continue to adhere to our primary values and to support our customers and the communities in which we operate as we pursue our mission to help people achieve the dream of home ownership and financial security while creating value for our customers, our communities, our associates and our shareholders.

The bank failures of three large domestic regional banks during the first half of 2023 negatively impacted consumer confidence and increased stress across the banking sector.

The unprecedented implications of 2022 and 2023 fiscal policy coupled with geopolitics impacting energy markets and supply-chain constraints from global shutdowns culminated with high levels of inflation.

The subsequent restrictive monetary policy approach has resulted in a heightened exposure of certain banking industry practices.

2 unchanged sentences

(2) our core deposits remain stable and the majority of our deposit accounts fall within FDIC insurance limits;

(3) we maintain ample access to contingent sources of liquidity;

(3) we maintain adequate access to contingent sources of liquidity;

and (4) our risk management practices around an array of financial disciplines are robust and commensurate to an institution of our size and complexity.

2 unchanged sentences

The Company maintains high-quality core deposits characterized by a high level of FDIC insured deposit accounts distributed primarily across our Ohio and Florida branch network in products tailored toward consumers seeking non-transactional savings.

As of June 30, 2023, 96.3% of our $8.40 billion retail deposit base consists of accounts structured under the FDIC insured limit of $250,000.

As of December 31, 2023, 96.2% of our $8.44 billion retail deposit base consists of accounts structured under the FDIC insured limit of $250,000.

The Company has the ability to fund 100% of all uninsured deposit balances through sources described later in this Item 2 under the heading Liquidity and Capital Resources .

Approximately 95% of core deposits are domiciled in the states of Ohio and Florida where we operate 37 full-service branches.

The Company retains ample and diverse sources of liquidity and funding, beyond deposits.

At June 30, 2023, our combined additional borrowing capacity under the Association's blanket pledge arrangements with the FHLB of Cincinnati and the FRB Cleveland along with our ability to purchase Fed Funds through arrangements with other institutions exceeded $4.05 billion.

At December 31, 2023, our combined additional borrowing capacity under the Association's blanket pledge arrangements with the FHLB of Cincinnati and the FRB Cleveland along with our ability to purchase Fed Funds through arrangements with other institutions exceeded $3.03 billion.

We also hold marketable securities that could be sold and converted to cash.

4 unchanged sentences

The program is also regularly exposed to outside scrutiny in the form of regulatory oversight and from our outside audit firm.

Management established the risk management framework with an appropriate level of sophistication such that it fully encapsulates all identified areas of risk, in conjunction with a necessary level of governance, to promote the program’s intention of properly identifying and managing our risk profile.

Management established the risk

management framework with an appropriate level of sophistication such that it fully encapsulates all identified areas of risk, in conjunction with a necessary level of governance, to promote the program’s intention of properly identifying and managing our risk profile.

Management believes that the following matters are those most critical to our success:

9 unchanged sentences

A challenge to our business model occurs when there is a rapid and substantial increase in short-term rates or there is an extended inverted yield curve, which have both occurred over recent periods.

This economic environment has resulted in a decrease in our net interest income and our net interest margin.

This economic environment has resulted in decreases in our net interest income and our net interest margin.

To mitigate our interest rate risk in general and to address the current rate environment specifically, we utilize a variety of strategies that include:

6 unchanged sentences

Levels of Regulatory Capital

At June 30, 2023, the Company’s Tier 1 (leverage) capital totaled $1.83 billion, or 11.18% of net average assets and 20.01% of risk-weighted assets, while the Association’s Tier 1 (leverage) capital totaled $1.62 billion, or 9.93% of net average assets and 17.79% of risk-weighted assets.

Each of these measures is in excess of the requirements currently in effect for the Association for designation as “well capitalized” under regulatory prompt corrective action provisions, which set minimum levels of 5.00% of net average assets and 8.00% of risk-weighted assets.

Beginning this fiscal year, the Company entered into the final three years of the five-year transitional period, as provided by a final rule, after CECL was adopted in fiscal year 2021.

At December 31, 2023, the Company’s Tier 1 (leverage) capital totaled $1.83 billion, or 10.78% of net average assets and 19.02% of risk-weighted assets, while the Association’s Tier 1 (leverage) capital totaled $1.66 billion, or 9.77% of net average assets and 17.22% of risk-weighted assets.

Each of these measures is in excess of the requirements in effect for the Association at December 31, 2023, for designation as “well capitalized” under regulatory prompt corrective action provisions.

Beginning this fiscal year, the Company entered into the final two years of the five-year transitional period, as provided by a final rule, after CECL was adopted in fiscal year 2021.

Refer to the Liquidity and Capital Resources section of this Item 2 for additional discussion regarding regulatory capital requirements.

Promotion of Adjustable-Rate Loans and Shorter-Term Fixed-Rate Loans

We market an adjustable-rate mortgage loan that provides us with improved interest rate risk characteristics when compared to a 30-year, fixed-rate mortgage loan.

We offer our "Smart Rate" adjustable-rate mortgage loan, which provides us with improved interest rate risk characteristics when compared to a 30-year, fixed-rate mortgage loan.

Our “Smart Rate” adjustable-rate mortgage offers borrowers an interest rate lower than that of a 30-year, fixed-rate loan.

5 unchanged sentences

All interest rate caps and floors remain as originated.

We also offer a ten-year, fully amortizing fixed-rate, first mortgage loan.

The ten-year, fixed-rate loan has a more desirable interest rate risk profile when compared to loans with fixed-rate terms of 15 to 30 years and can help to more effectively manage interest rate risk exposure, yet provides our borrowers with the certainty of a fixed interest rate throughout the life of the obligation.

We also offer a 10-year, fully amortizing fixed-rate, first mortgage loan.

The 10-year, fixed-rate loan has a more desirable interest rate risk profile when compared to loans with fixed-rate terms of 15 to 30 years and can help to more effectively manage interest rate risk exposure, yet provides our borrowers with the certainty of a fixed interest rate throughout the life of the obligation.

The following tables set forth our first mortgage loan production and balances segregated by loan structure at origination.

For the Nine Months Ended June 30, 2023 For the Nine Months Ended June 30, 2022

For the Three Months Ended December 31, 2023 For the Three Months Ended December 31, 2022

Amount Percent Amount Percent

(Dollars in thousands)

First Mortgage Loan Originations:

First Mortgage Loan Originations and Purchases:

ARM (all Smart Rate) production $ 65,858 24.1 % $ 162,715 33.5 %

3 unchanged sentences

Total fixed-rate production 207,095 75.9 322,754 66.5

Total First Mortgage Loan Originations $ 1,311,474 100.0 % $ 2,909,297 100.0 %

June 30, 2023 September 30, 2022

Total First Mortgage Loan Originations and Purchases

$ 272,953 100.0 % $ 485,469 100.0 %

December 31, 2023 September 30, 2023

Amount Percent Amount Percent

7 unchanged sentences

Total First Mortgage Loans Held For Investment $ 11,994,414 100.0 % $ 12,124,666 100.0 %

The following table sets forth the balances as of June 30, 2023 for all ARM loans segregated by the next scheduled interest rate reset date.

The following table sets forth the balances as of December 31, 2023, for all ARM loans segregated by the next scheduled interest rate reset date.

Current Balance of ARM Loans Scheduled for Interest Rate Reset

During the Fiscal Years Ending September 30, (In thousands)

During the Fiscal Years Ending September 30, (Dollars in thousands)

2024 $ 284,723

2026 1,428,047

2027 1,639,626

Total $ 4,706,373

At June 30, 2023 and September 30, 2022, mortgage loans held for sale, all of which were long-term, fixed-rate first mortgage loans and all of which were held for sale to Fannie Mae, totaled $0.6 million and $9.7 million, respectively.

At December 31, 2023 and September 30, 2023, mortgage loans held for sale, all of which were long-term, fixed-rate first mortgage loans and all of which were held for sale to Fannie Mae, totaled $1.1 million and $3.3 million, respectively.

Loan Portfolio Yield

The following tables set forth the balance and interest yield as of June 30, 2023 for the portfolio of loans held for investment, by type of loan, structure and geographic location.

June 30, 2023

The following tables set forth the principal balance and interest yield as of December 31, 2023 for the portfolio of loans held for investment, by type of loan, structure and geographic location.

December 31, 2023

Balance Percent Yield

7 unchanged sentences

Total Loans Receivable $ 15,237,689 100.0 % 4.34 %

June 30, 2023

Balance Percent Yield

December 31, 2023

Balance Fixed Rate Balance Percent Yield

(Dollars in thousands)

16 unchanged sentences

We strive to grow the home equity line of credit portfolio through offering competitive rates, marketing efforts and by utilizing partners to attract more home equity line of credit customers.

At June 30, 2023, the principal balance of home equity lines of credit totaled $2.53 billion.

At December 31, 2023, the principal balance of home equity lines of credit totaled $2.74 billion.

Our home equity lending is discussed in the Lending Activities section of this Item 2.

1 unchanged sentence

As a complement to our strategies to shorten the duration of our interest-earning assets, as described above, we also seek to lengthen the duration of our interest-bearing funding sources.

These efforts include monitoring the relative costs of alternative funding sources such as retail certificates of deposit, brokered certificates of deposit, longer-term (e.g.

four to six years) fixed-rate advances from the FHLB of Cincinnati, and shorter-term (e.g.

three months) funding, the durations of which

are extended by correlated interest rate exchange contracts ("swap").

These efforts include monitoring the relative costs of alternative funding sources such as retail certificates of deposit, brokered certificates of deposit, and shorter-term (e.g.

three months) funding, the durations of which are extended by correlated interest rate exchange contracts ("swap").

All of our swaps are subject to collateral pledges and require specific structural features to qualify for hedge accounting treatment.

Hedge accounting treatment directs that periodic mark-to-market adjustments be recorded in other comprehensive income (loss) in the equity section of the balance sheet, rather than being included in operating results of the income statement.

accounting treatment directs that periodic mark-to-market adjustments be recorded in other comprehensive income (loss) in the equity section of the balance sheet, rather than being included in operating results of the income statement.

The Association's intent is that any swap to which it may be a party will qualify for hedge accounting treatment.

8 unchanged sentences

Each individual swap agreement has been designated as a cash flow hedge of interest rate risk associated with either the Company's variable rate borrowings from the FHLB of Cincinnati or brokered CD's.

The notional amount of the Association's swap portfolio at June 30, 2023 was $5.22 billion.

The swap portfolio's weighted average fixed pay rate was 2.91% and the weighted average remaining term was 4.1 years.

As of September 30, 2022, the notional amount of swaps was $1.55 billion with a weighted average fixed pay rate of 1.88% and a weighted average remaining term of 2.7 years.

In these challenging economic times with an extended inverted yield curve, the Association has found it financially beneficial to increase the use of swaps to lower our borrowing costs and extend the duration of our liabilities.

14 unchanged sentences

We also manage interest rate risk by selectively selling a portion of our long-term, fixed-rate mortgage loans in the secondary market.

First mortgage loans (primarily fixed-rate, mortgage refinances with terms of 15 years or more, and Home Ready) are originated under Fannie Mae procedures and are eligible for sale to Fannie Mae either as whole loans or within mortgage-backed securities.

First mortgage loans (primarily fixed-rate, mortgage refinances with terms of 15 years or more, Home Ready and some loans purchased through our correspondent lending partner) are originated under Fannie Mae procedures and are eligible for sale to Fannie Mae either as whole loans or within mortgage-backed securities.

Currently, certain types of loans (i.e.

3 unchanged sentences

Refer to the Liquidity and Capital Resources section of the Overview for information on loan sales.

During the nine months ended June 30, 2023, $58.1 million of agency-compliant, long-term (15 to 30 years), fixed-rate mortgage loans were sold, or committed to be sold, to Fannie Mae on a servicing retained basis.

At June 30, 2023, $0.6 million of agency-compliant, long term, fixed-rate residential first mortgage loans were classified as "held for sale".

Of the agency-compliant loan sales during the nine months ended June 30, 2023, $8.9 million were sold under Fannie Mae's Home Ready program, and $49.2 million were sold to Fannie Mae.

At June 30, 2023, we serviced $1.96 billion of loans we originated and later sold to investors.

During the three months ended December 31, 2023, $87.8 million of agency-compliant, long-term (15 to 30 years), fixed-rate mortgage loans were sold, or committed to be sold, to Fannie Mae on a servicing retained basis.

Of these sold loans, $4.4 million were originated through our more traditional mortgage banking activities also know as "Mortgage Passport", and $83.4 million were originated or purchased as other agency-compliant first mortgage loans .

At December 31, 2023, loans classified as held for sale totaled $1.1 million.

At December 31, 2023, we serviced $1.97 billion of loans we originated and later sold to investors.

We continue to consider liquidity and balance sheet management, as well as secondary market pricing, in evaluating the opportunity to sell loans.

Additionally, we are expanding our ability to sell certain fixed rate loans to Fannie through the use of more traditional mortgage banking activities, including a proprietary approach to risk-based pricing and loan-level pricing

This approach is concentrated in markets outside of Ohio and Florida.

Some additional startup and marketing costs have been incurred, but are not expected to significantly impact our financial results in fiscal year 2024.

Loan sales are discussed in more detail within the Liquidity and Capital Resources section of Item 2.

Loan sales are discussed in more detail within the Liquidity and Capital Resources section of this Item 2.

Monitoring and Limiting Our Credit Risk.

While, historically, we had been successful in limiting our credit risk exposure by generally imposing high credit standards with respect to lending, the memory of the 2008 housing market collapse and financial crisis is a constant reminder to focus on credit risk.

While, historically, we had been successful in limiting our credit risk exposure by generally imposing high credit standards with respect to lending, the memory of the 2008 housing market collapse

and financial crisis is a constant reminder to focus on credit risk.

In response to the evolving economic landscape, we continuously revise and update our quarterly analysis and evaluation procedures, as needed, for each category of our lending with the objective of identifying and recognizing all appropriate credit losses.

At June 30, 2023, 90% of our assets consisted of residential real estate loans (both “held for sale” and “held for investment”) and home equity loans and lines of credit.

At December 31, 2023, 89% of our assets consisted of residential real estate loans (both “held for sale” and “held for investment”) and home equity loans and lines of credit.

Our analytic procedures and evaluations include specific reviews of all home equity loans and lines of credit that become 90 or more days past due, as well as specific reviews of all first mortgage loans that become 180 or more days past due.

1 unchanged sentence

We also charge-off performing loans to collateral value and classify those loans as non-accrual within 60 days of notification of all borrowers filing Chapter 7 bankruptcy, that have not reaffirmed or been dismissed, regardless of how long the loans have been performing.

In an effort to limit our credit risk exposure with the low risk appetite approved by the Board of Directors, the credit eligibility criteria is evaluated to ensure a successful homeowner has the primary source of repayment, followed by a collateral position that allows for a secondary source of repayment, if needed.

In an effort to limit our credit risk exposure consistent with the low risk appetite approved by the Board of Directors, the credit eligibility criteria is evaluated to ensure a successful homeowner has the primary source of repayment, followed by a collateral position that allows for a secondary source of repayment, if needed.

Products that do not result in an effective mix of repayment ability are not offered.

1 unchanged sentence

For first mortgage loans originated during the current quarter, the average credit score was 776 and the average LTV was 71% at origination.

The delinquency level related to loan originations prior to 2009, compared to originations in 2009 and after, reflect the higher credit standards to which we have subjected all new originations.

As of June 30, 2023, loans originated prior to 2009 had a balance of $291.2 million, of which $7.5 million, or 2.6%, were delinquent, while loans originated in 2009 and after had a balance of $14.67 billion, of which $15.3 million, or 0.1%, were delinquent.

Our current delinquency levels reflect the higher credit standards to which we subject all new originations.

As of December 31, 2023, loans originated or purchased had a balance of $15.28 billion, of which $25.8 million, or 0.2%, were delinquent.

One aspect of our credit risk concern relates to high concentrations of our loans that are secured by residential real estate in specific states, particularly Ohio and Florida, where a large portion of our historical lending has occurred.

At June 30, 2023, approximately 56.7% and 17.9% of the combined total of our residential Core and construction loans held for investment and approximately 25.8% and 21.7% of our home equity loans and lines of credit were secured by properties in Ohio and Florida, respectively.

At December 31, 2023, approximately 57.5% and 17.6% of the combined total of our residential Core and construction loans held for investment and approximately 25.3% and 22.6% of our home equity loans and lines of credit were secured by properties in Ohio and Florida, respectively.

In an effort to moderate the concentration of our credit risk exposure in individual states, we have utilized direct mail marketing, our internet site and our customer service call center to extend our lending activities to other attractive geographic locations.

Currently, in addition to Ohio and Florida, we are actively lending in 23 other states and the District of Columbia, and as a result of that activity, the concentration ratios of the combined total of our residential Core and construction loans held for investment in Ohio and Florida have trended downward from their September 30, 2010, levels when the concentrations were 79.1% in Ohio and 19.0% in Florida.

Of the total mortgage loans originated in the nine months ended June 30, 2023, 24.8% are secured by properties in states other than Ohio or Florida.

Of the total mortgage loans originated in the three months ended December 31, 2023, 24.2% are secured by properties in states other than Ohio or Florida.

Maintaining Access to Adequate Liquidity and Diverse Funding Sources to Support our Growth.

1 unchanged sentence

We believe that a well capitalized institution is one of the most important factors in nurturing customer and community confidence.

Accordingly, we have managed the pace of our growth in a manner that reflects our emphasis on high capital levels.

At June 30, 2023, the Association’s ratio of Tier 1 (leverage) capital to net average assets (a basic industry measure that deems 5.00% or above to represent a “well capitalized” status) was 9.93%.

The Association's Tier 1 (leverage) capital ratio at June 30, 2023 included the negative impact of a $40 million cash dividend payment that the Association made to the Company, its sole shareholder, in December 2022.

Because of its intercompany nature, this dividend payment did not impact the Company's consolidated capital ratios which are reported in the Liquidity and Capital Resources section of this Item 2.

At December 31, 2023, the Association’s ratio of Tier 1 (leverage) capital to net average assets (a basic industry measure that deems 5.00% or above to represent a “well capitalized” status) was 9.77%.

We expect to continue to remain a well capitalized institution.

In managing its level of liquidity, the Company monitors available funding sources, which include attracting new deposits (including brokered CDs and brokered checking accounts), borrowings from others, the conversion of assets to cash and the generation of funds through profitable operations.

In managing its level of liquidity, the Company monitors available funding sources, which include attracting new deposits (including brokered deposits), borrowing from others, the conversion of assets to cash and the generation of funds through profitable operations.

The Company has traditionally relied on retail deposits as its primary means in meeting its funding needs.

To attract deposits, we typically offer rates that are competitive with the rates on similar products offered by other financial institutions.

At June 30, 2023, deposits totaled $9.07 billion (including $667.8 million of brokered CDs), while borrowings totaled $5.45 billion and borrowers’ advances and servicing escrows totaled $90.9 million, combined.

At December 31, 2023, deposits totaled $9.92 billion (including $1.49 billion of brokered CDs), while borrowings totaled $5.03 billion and borrowers’ advances and servicing escrows totaled $138.3 million, combined.

In evaluating funding sources, we consider many factors, including cost, collateral, duration and optionality, current availability, expected sustainability, impact on operations and capital levels.

We preserve the availability of alternative funding sources through various mechanisms.

First, by maintaining high capital levels, we retain the flexibility to increase our balance sheet size without jeopardizing our capital adequacy.

Effectively, this permits us to increase the rates that we offer on our deposit products thereby attracting more potential customers.

Second, we pledge available real estate mortgage loans with the FHLB of Cincinnati and the FRB-Cleveland.

At June 30, 2023, these collateral pledge support arrangements provided the Association with the ability to borrow a maximum of $8.67 billion from the FHLB of Cincinnati and $136.5 million from the FRB-Cleveland Discount Window.

From the perspective of collateral value securing FHLB of Cincinnati advances, our capacity for additional borrowings at June 30, 2023 was $3.25 billion.

Third, we have the ability to purchase overnight Fed Funds up to $670.0 million through various arrangements with other institutions.

Fourth, we invest in high quality marketable securities that exhibit limited market price variability, and to the extent that they are not needed as collateral for borrowings, can be sold in the institutional market and converted to cash.

At June 30, 2023, our investment securities portfolio totaled $513.3 million.

First, we pledge available real estate mortgage loans with the FHLB of Cincinnati and the FRB-Cleveland.

At December 31, 2023, the Association had the ability to borrow a maximum of $6.76 billion from the FHLB of Cincinnati and $704.5 million from the FRB-Cleveland Discount Window.

As of December 31, 2023, our capacity for additional borrowing from the FHLB of Cincinnati was $1.75 billion.

Second, we have the ability to purchase overnight Fed Funds up to $575.0 million through various arrangements with other institutions.

Third, we invest in high quality marketable securities that exhibit limited market price variability and, to the extent that they are not needed as collateral for borrowings, can be sold in the institutional market and converted to cash.

At December 31, 2023, our investment securities portfolio totaled $525.2 million.

Finally, cash flows from operating activities have been a regular source of funds.

During the nine months ended June 30, 2023 and 2022, cash flows from operations provided $76.9 million and $51.1 million, respectively.

During the three months ended December 31, 2023 and 2022, cash flows from operations provided $36.3 million and $78.8 million, respectively.

Overall, while customer and community confidence can never be assured, the Company believes that its liquidity is adequate and that it has access to adequate alternative funding sources.

1 unchanged sentence

We continue to focus on managing operating expenses.

Our ratio of annualized non-interest expense to average assets was 1.34% for the nine months ended June 30, 2023 and 1.38% for the nine months ended June 30, 2022.

As of June 30, 2023, our average assets per full-time employee and our average deposits per full-time employee were $16.5 million and $9.0 million, respectively.

Our ratio of annualized non-interest expense to average assets was 1.19% for the three months ended December 31, 2023, and 1.34% for the three months ended December 31, 2022.

As of December 31, 2023, our average assets per full-time employee and our average deposits per full-time employee were $17.6 million and $10.2 million, respectively.

We believe that each of these measures compares favorably with industry averages.

Our relatively high average of deposits (exclusive of brokered CDs) held at our branch offices ($227.1 million per branch office as of June 30, 2023) contributes to our expense management efforts by limiting the overhead costs of serving our customers.

We will continue our efforts to control operating expenses as we grow our business.

Our relatively high average deposits (exclusive of brokered CDs) held at our branch offices ($228.0 million per branch office as of December 31, 2023) contributes to our expense management efforts by limiting the overhead costs of serving our customers.

We will continue our efforts to control operating expenses to help safeguard against margin compression.

Critical Accounting Policies and Estimates

8 unchanged sentences

We regularly review the loan portfolio and off-balance sheet exposures and make provisions (or releases) for losses in order to maintain the allowance for credit losses in accordance with U.S.

Our allowance for credit losses consists of three components:

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

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

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

Our allowance for credit losses is a general valuation allowance (GVA) on our portfolio made up of:

(1) quantitative GVAs for loans, which are general allowances for credit losses for each loan type based on historical loan loss experience;

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

(3) qualitative GVAs, which are adjustments to the quantitative GVAs, maintained to cover uncertainties that affect the estimate of expected credit losses for each loan type.

On October 1, 2023, the Individual Valuation Allowance (IVA) established for any loans dependent on cash flows, such as performing TDRs, was eliminated with the adoption of ASU 2022-02.

Subsequently, all non-collaterally dependent modifications have an allowance estimated through the lifetime loss model.

The qualitative GVAs expand our ability to identify and estimate probable losses and are based on our evaluation of the following factors, some of which are consistent with factors that impact the determination of quantitative GVAs.

5 unchanged sentences

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

• changes in the volume or severity of past due loans, volume of non-accrual loans, or the volume and severity of adversely classified loans including the trending of delinquency statistics (both current and historical), historical loan loss experience and trends, the frequency and magnitude of multiple restructurings of loans previously the subject of TDRs, and uncertainty surrounding borrowers’ ability to recover from temporary hardships for which short-term loan restructurings are granted;

loss experience and trends, the frequency and magnitude of loan modifications, and uncertainty surrounding borrowers’ ability to recover from temporary hardships for which short-term loan modifications are granted;

• changes in the quality of the loan review system;

3 unchanged sentences

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

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

Potential defaults are distinguished from multiple restructurings as borrowers who default are generally not eligible for subsequent restructurings.

At June 30, 2023, the balance of such individual valuation allowances were $9.7 million.

In instances when loans require multiple restructurings, additional valuation allowances may be required.

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.

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

5 unchanged sentences

We have established an allowance for our unfunded commitments on this portfolio, which is recorded in other liabilities.

Our home equity loans and lines of credit portfolio continues to comprise a significant portion of our gross charge-offs.

At June 30, 2023, we had an amortized cost of $2.90 billion in home equity loans and home equity lines of credit outstanding, of which $3.1 million, or 0.11% were delinquent 90 days or more.

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

In general, a considerable portion of our gross charge-offs originate from our home equity loans and lines of credit portfolios.

At December 31, 2023, we had an amortized cost of $3.24 billion in home equity loans and home equity lines of credit outstanding, of which $4.0 million, or 0.12% were delinquent 90 days or more.

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

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

1 unchanged sentence

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

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

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

2023 2022 2023 2022

The majority of our Residential Core and Home Today loan portfolios are secured by properties located in Ohio, and therefore were not segregated by state.

For the Three Months Ended December 31,

(Dollars in thousands)

Allowance balance for credit losses on loans (beginning of the period) $ 77,315 $ 72,895

Adoption of ASU 2022-02

Charge-offs on real estate loans:

Residential Core

Ohio 35 11 241 168

Other — 12 — 13

Total Residential Core

1 unchanged sentence

Home equity loans and lines of credit

Ohio 4 129 237 546

Florida 20 32

California 96 13

Other 18 6 281 116

Total Home equity loans and lines of credit 330 127

4 unchanged sentences

Home equity loans and lines of credit 670 1,080

Construction — 175 — 175

Total recoveries 1,517 2,085

8 unchanged sentences

Allowance for credit losses on loans to the total amortized cost in loans at end of the period 0.45 % 0.51 %

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

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

2023 2022 2023 2022

Net recoveries (charge-off) as a percentage of average loans outstanding (annualized)

The following table sets forth additional information with respect to net recoveries by category for the periods indicated.

For the Three Months Ended December 31,

Net recoveries to average loans outstanding (annualized)

Real estate loans:

Residential Core

0.01 % 0.01 %

Residential Home Today 0.01 0.01

Home Equity loans and lines of credit 0.01 0.03

Construction — 0.01 — —

Total net recoveries (charge-off) as a percentage of average loans outstanding (annualized) 0.05 % 0.08 % 0.04 % 0.08 %

Net recoveries totaled $4.6 million during the nine months ended June 30, 2023 compared to $7.3 million during the nine months ended June 30, 2022.

We have reported net recoveries in each quarter for the last four years, primarily due to improvements in the values of collateral properties used to secure loans that were fully or partially charged off after the 2008 collapse of the housing market.

Total net recoveries to average loans outstanding (annualized)

0.03 % 0.05 %

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 past five years, primarily due to improvements in the values of collateral 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 obligations or as loans with improved collateral positions reach final resolution.

Gross charge-offs remained at relatively low levels, during the nine months ended June 30, 2023 and the nine months ended June 30, 2022.

During the three months ended December 31, 2023 and December 31, 2022, recoveries exceeded loan charge-offs by $1.0 million and $1.7 million, respectively.

Gross charge-offs increased slightly.

Delinquent loans continue to be evaluated for potential losses and provisions are recorded for the estimate of potential losses of those loans.

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

During the three months ended June 30, 2023, the total allowance for credit losses increased $1.8 million, to $102.6 million from $100.8 million at March 31, 2023, as we recorded no provision expense for the allowance for credit losses and $1.8 million of net recoveries.

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

During the three months ended December 31, 2023, the total allowance for credit losses decreased to $94.6 million, from $104.8 million at September 30, 2023, primarily due to the adoption of ASU 2022-02 on October 1, 2023, which eliminated the IVA that was established for TDRs dependent on cash flows.

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 three months ended December 31, 2023, the asset and liability portions of the total allowance decreased to $69.1 million from $77.3 million and to $25.5 million from $27.5 million, respectively.

We recorded a $1.0 million net release of allowance for credit losses for the quarter, consisting of a $1.0 million provision on loans and a $2.0 million release of the allowance for unfunded commitments.

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 three months ended December 31, 2023, were primarily related to the adoption of ASU 2022-02 and partially offset by a slight positive upward trend in the economic forecast.

The amortized cost of the residential Core portfolio decreased 1.1%, or $129.1 million, and its total allowance decreased 10.8% or $6.0 million as of December 31, 2023, compared to September 30, 2023.

The amortized cost of the home equity loans and lines of credit portfolio increased 5.5%, or $167.8 million, and its total allowance decreased 2.7% to $22.4 million from $23.0 million at September 30, 2023.

As we are no longer originating loans under our Home Today program, there is an expected net recovery position for this portfolio which was $2.8 million at December 31, 2023, and $1.2 million at September 30, 2023.

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 to be negative.

Refer to the "Activity in the Allowance for Credit Losses" and "Analysis of the Allowance for Credit Losses" tables in Note 4.

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

Changes during the three months ended June 30, 2023 in the allowance for credit loss balances of loans are described below.

The allowance for credit losses on off-balance sheet exposures increased by $1.1 million primarily related to a slight increase in commitments to originate.

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 1.6%, or $195.0 million, and its total allowance increased 1.4% or $0.8 million as of June 30, 2023 as compared to March 31, 2023.

There were net recoveries of $0.2 million recorded for the current quarter and there were net recoveries of $0.6 million for the quarter ended June 30, 2022.

Total delinquencies decreased 5.6% to $13.5 million at June 30, 2023 from $14.3 million at March 31, 2023.

Delinquencies greater than 90 days decreased by 25.3% to $6.1 million at June 30, 2023 from $8.1 million at March 31, 2023.

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

• Residential Home Today – The amortized cost of this segment decreased 3.2%, or $1.6 million, as we are no longer originating loans under the Home Today program.

The expected net recovery position for this segment was $1.1 million at June 30, 2023 and $1.2 million at March 31, 2023.

Total delinquencies increased 0.8% to $2.5 million at June 30, 2023 from $2.5 million at March 31, 2023.

Delinquencies greater than 90 days remained at $1.0 million for June 30, 2023 and March 31, 2023.

There were net recoveries of $0.4 million recorded during the current quarter and net recoveries of $0.5 million during the quarter ended June 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 current allowance balance for Home Today loans negative.

• Home Equity Loans and Lines of Credit – The amortized cost of this segment increased 5.2%, or $144.2 million, to $2.90 billion at June 30, 2023 from $2.76 billion at March 31, 2023.

The total allowance for this segment decreased by 0.5% to $21.1 million from $21.2 million at March 31, 2023.

Total delinquencies for this portfolio segment decreased

4.8% to $6.8 million at June 30, 2023 as compared to $7.1 million at March 31, 2023.

Delinquencies greater than 90 days increased 6.7% to $3.1 million at June 30, 2023 from $2.9 million at March 31, 2023.

There were net recoveries of $1.2 million for this loan segment during the current quarter and net recoveries of $1.3 million during the quarter ended June 30, 2022.

Balance increases caused a slight increase in forecasted losses, offset by a reduction due to model adjustments for product mix.

The following tables set forth the allowance for credit losses allocated by loan category, the percent of allowance in each category to the total allowance on loans, and the percent of loans in each category to total loans at the dates indicated.

1 unchanged sentence

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

June 30, 2023 March 31, 2023

December 31, 2023

Amount Percent of

1 unchanged sentence

Category to Total

Loans Amount Percent of

Allowance Percent of

Category to Total

(Dollars in thousands)

5 unchanged sentences

Allowance for credit losses on loans $ 69,084 100.0% 100.0%

September 30, 2022 June 30, 2022

September 30, 2023 December 31, 2022

Amount Percent of

15 unchanged sentences

Therefore, neither was segregated by geographic location.

June 30, 2023 March 31, 2023 September 30, 2022 June 30, 2022

Amount Percent Amount Percent Amount Percent Amount Percent

December 31, 2023 September 30, 2023 December 31, 2022

Amount Percent Amount Percent Amount Percent

(Dollars in thousands)

23 unchanged sentences

Total loans receivable, net $ 15,207,242 $ 15,165,747 $ 14,473,495

The following table provides an analysis of our residential mortgage loans disaggregated by refreshed FICO score, year of origination and portfolio at June 30, 2023.

The following table provides the amortized cost and an analysis of our residential mortgage loans disaggregated by refreshed FICO score, year of origination and portfolio at December 31, 2023.

The Company treats the FICO score information as demonstrating that underwriting guidelines reduce risk rather than as a credit quality indicator utilized in the evaluation of credit risk.

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

Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term

2 unchanged sentences

(Dollars in thousands)

June 30, 2023

December 31, 2023

Real estate loans:

19 unchanged sentences

741+ 1,867 7,283 3,873 — — — — — 13,023

741+ 12,627 16,739 294 — — — — — 29,660

Total Construction 3,021 10,962 4,237 — — — — — 18,220

2 unchanged sentences

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

The following table provides an analysis of our residential mortgage loans by origination LTV, origination year and portfolio at June 30, 2023.

The following table provides amortized cost and an analysis of our residential mortgage loans by origination LTV, origination year and portfolio at December 31, 2023.

LTVs are not updated subsequent to origination except as part of the charge-off process.

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

Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term

2 unchanged sentences

(Dollars in thousands)

June 30, 2023

December 31, 2023

Real estate loans:

24 unchanged sentences

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

At June 30, 2023, the unpaid principal balance of the home equity loans and lines of credit portfolio consisted of $338.1 million in home equity loans (including $75.0 million of home equity lines of credit, which are in repayment and no longer eligible to be drawn upon, and $10.0 million in bridge loans) and $2.53 billion in home equity lines of credit.

The following table sets forth credit exposure, principal balance, percent delinquent 90 days or more, the mean CLTV percent at the time of origination and the current mean CLTV percent of home equity loans, home equity lines of credit and bridge loans as of June 30, 2023.

At December 31, 2023, the unpaid principal balance of the home equity loans and lines of credit portfolio consisted of $454.0 million in home equity loans (including $64.5 million of home equity lines of credit, which are in repayment and no longer eligible to be drawn upon, and $12.0 million in bridge loans) and $2.74 billion in home equity lines of credit.

Home equity lines of credit in the draw period are reported according to geographic distribution.

16 unchanged sentences

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

(3) Current Mean CLTV is based on best available first mortgage and property values as of June 30, 2023.

(3) Current Mean CLTV is based on best available first mortgage and property values as of December 31, 2023.

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

1 unchanged sentence

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

At June 30, 2023, 31.9% of the home equity lending portfolio was either in a first lien position (16.6%), in a subordinate (second) lien position behind a first lien that we held (12.8%) or behind a first lien that was held by a loan that we originated, sold and now serviced for others (2.5%).

At June 30, 2023, 12.8% of the home equity line of credit portfolio in the draw period were making only the minimum payment on the outstanding line balance.

The principal balance of home equity lines of credit in the draw period that have a current mean CLTV over 80% or unknown is $12.1 million, or 0.4% at December 31, 2023 .

In recognition of the 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 December 31, 2023, 29.6% of the home equity lending portfolio was either in a first lien position (15.2%), in a subordinate (second) lien position behind a first lien that we held (12.0%) or behind a first lien that was held by a loan that we originated, sold and now serviced for others (2.4%).

At December 31, 2023, 13.5% 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.

The following table sets forth by calendar year of origination the credit exposure, principal balance, percent delinquent 90 days or more, the mean CLTV percent at the time of origination and the estimated current mean CLTV percent of our home equity loans, home equity lines of credit and bridge loan portfolio as of June 30, 2023.

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

2015 and Prior $ 156,561 $ 31,817 — % 57 % 26 %

2016 241,675 63,057 0.01 59 28

2017 497,927 149,244 0.12 58 30

2018 623,560 217,856 0.06 58 32

2019 830,868 329,759 0.11 61 35

2020 772,300 251,844 0.15 58 34

2021 1,522,066 559,975 0.11 62 42

2022 1,730,864 652,676 0.05 61 49

2023 753,664 271,905 — 60 55

Total home equity lines of credit in draw period 7,129,485 2,528,133 0.08 60 40

Home equity lines in repayment, home equity loans and bridge loans 338,071 338,071 0.68 57 36

Total $ 7,467,556 $ 2,866,204 0.11 % 60 % 40 %

________________

(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 June 30, 2023.

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.

The following table sets forth, by fiscal year of the draw period expiration, the principal balance of home equity lines of credit in the draw period as of June 30, 2023, segregated by the estimated 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.

Estimated 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)

2023 $ 53,584 $ 356 $ — $ — $ 48 $ 53,988

2024 10,674 70 — — 35 10,779

2025 19,741 — — — 11 19,752

2026 33,639 — — — — 33,639

2027 125,171 — — — 120 125,291

2028 205,909 — — — — 205,909

Post 2028 2,029,521 44,325 — 113 4,816 2,078,775

Total $ 2,478,239 $ 44,751 $ — $ 113 $ 5,030 $ 2,528,133

_________________

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

Delinquent Loans

1 unchanged sentence

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 no delinquencies in the construction loan portfolio for the dates presented.

There were no delinquencies in the construction loan portfolio as of the dates presented.

Loans Delinquent for

30-89 Days 90 Days or More Total

(Dollars in thousands)

June 30, 2023

December 31, 2023 30-89 Days 90 Days or More Total

Real estate loans:

Residential Core

Ohio $ 4,579 $ 2,980 $ 7,559

Florida 2,112 1,202 3,314

Other 741 1,871 2,612

Total Residential Core 7,432 6,053 13,485

Residential Home Today 1,489 1,026 2,515

Home equity loans and lines of credit

Ohio 802 840 1,642

Florida 670 197 867

California 868 902 1,770

Other 1,362 1,153 2,515

Total Home equity loans and lines of credit 3,702 3,092 6,794

Total $ 12,623 $ 10,171 $ 22,794

Loans Delinquent for

30-89 Days 90 Days or More Total

(Dollars in thousands)

March 31, 2023

Real estate loans:

Residential Core

12 unchanged sentences

Loans Delinquent for

30-89 Days 90 Days or More Total

(Dollars in thousands)

September 30, 2022

September 30, 2023 30-89 Days 90 Days or More Total

Real estate loans:

(Dollars in thousands)

Residential Core

12 unchanged sentences

Loans Delinquent for

30-89 Days 90 Days or More Total

(Dollars in thousands)

June 30, 2022

December 31, 2022 30-89 Days 90 Days or More Total

Real estate loans:

(Dollars in thousands)

Residential Core

12 unchanged sentences

Total loans seriously delinquent (i.e.

delinquent 90 days or more) were 0.07% of total net loans at June 30, 2023, 0.08% at March 31, 2023, and 0.09% at September 30, 2022 and June 30, 2022.

Total loans delinquent (i.e.

delinquent 30 days or more) were 0.15% of total net loans at June 30, 2023, 0.16% at March 31, 2023, 0.15% at September 30, 2022 and 0.16% at June 30, 2022.

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 in recent months, resulting in higher and less affordable monthly payments for some borrowers.

Non-Performing Assets and Troubled Debt Restructurings

The following table sets forth the amortized costs and categories of our non-performing assets and TDRs as of the dates indicated.

delinquent 90 days or more) were 0.10% of total net loans at December 31, 2023, 0.09% at September 30, 2023, and 0.08% at December 31, 2022.

The percentage of loans seriously delinquent to total net loans increased in the residential Core portfolio to 0.07% at December 31, 2023, from 0.05% at September 30, 2023 and December 31, 2022.

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

Serious delinquencies in the home equity loans and lines of credit portfolio remained at 0.03% from September 30, 2023, but increased from 0.02% at December 31, 2022.

Although delinquencies remain at or near historic lows, recent economic trends and rising interest rates have led to increased late stage delinquencies (delinquent 90 days or more) in the core portfolio and delinquencies overall 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 trended upward over the last two years, resulting in higher and less affordable monthly payments for some borrowers.

Non-Performing Assets

The following table sets forth the amortized costs and categories of our non-performing assets at the dates indicated.

There were no construction loans reported as non-accrual for the dates presented.

2023 March 31,

2023 September 30,

2022 June 30,

2023 December 31,

(Dollars in thousands)

5 unchanged sentences

Total non-accrual loans

33,495 31,914 34,130

Real estate owned 1,070 1,444 1,378

3 unchanged sentences

Total non-performing assets to total assets 0.20 % 0.20 % 0.22 %

(not included in non-accrual loans above)

Real estate loans:

Residential Core $ 41,720 $ 43,192 $ 43,101 $ 44,016

Residential Home Today 17,307 17,672 18,380 18,683

Home equity loans and lines of credit 20,667 20,914 22,060 22,605

Total $ 79,694 $ 81,778 $ 83,541 $ 85,304

_________________

(1) At June 30, 2023, March 31, 2023, September 30, 2022, and June 30, 2022, the totals include $19.4 million, $19.7 million, $21.9 million and $23.6 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 been reaffirmed or dismissed.

(2) At June 30, 2023, March 31, 2023, September 30, 2022, and June 30, 2022, the totals include $3.2 million, $3.4 million, $3.6 million and $4.3 million in TDRs that are 90 days or more past due, respectively.

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

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

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

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

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

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

Also, the amortized cost of non-accrual loans includes loans that

are not included in the amortized cost of collateral-dependent loans because they are included in loans collectively evaluated for credit losses.

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 June 30, 2023 from June 30, 2022 was primarily related to forbearance plans that had been extended past 12 months that are now performing with no charge-off and are no longer collateral-dependent.

2023 March 31,

The decrease in accruing collateral-dependent loans at December 31, 2023 from December 31, 2022 was primarily related to loans that are now performing according to the terms of their agreement with no charge-off and are no longer collateral-dependent.

2023 September 30,

2022 June 30,

2023 December 31,

(Dollars in thousands)

Non-Accrual Loans $ 33,495 $ 31,914 $ 34,130

Accruing Collateral-Dependent TDRs 5,534 6,317 7,279 7,246

Other Accruing Collateral-Dependent Loans 6,100 5,529 6,426 10,783

Accruing Collateral-Dependent Loans

8,385 10,962 13,612

Loans Collectively Evaluated (3,167) (4,647) (2,286)

Total Collateral-Dependent loans $ 38,713 $ 38,229 $ 45,456

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

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

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

term extensions including those beyond the original agreement;

capitalization of delinquent payments in special situations;

or some combination of the aforementioned.

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

For discussion on TDR measurement, see Note 4.

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

We had $102.3 million of TDRs (accrual and non-accrual) recorded at June 30, 2023.

This was a decrease in the amortized cost of TDRs of $2.5 million, $6.7 million, and $10.9 million from March 31, 2023, September 30, 2022 and June 30, 2022, respectively.

The following table sets forth the amortized cost in accrual and non-accrual TDRs, by the types of concessions granted, as of June 30, 2023.

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

Some TDRs have experienced a combination of concessions.

TDRs also can 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.

Initial Restructurings Multiple

Restructurings Bankruptcy Total

(In thousands)

Residential Core $ 27,024 $ 10,484 $ 4,212 $ 41,720

Residential Home Today 9,014 7,479 814 17,307

Home equity loans and lines of credit 19,447 932 288 20,667

Total $ 55,485 $ 18,895 $ 5,314 $ 79,694

Non-Accrual, Performing

Residential Core $ 1,391 $ 5,206 $ 5,239 $ 11,836

Residential Home Today 507 2,645 888 4,040

Home equity loans and lines of credit 1,512 1,310 686 3,508

Total $ 3,410 $ 9,161 $ 6,813 $ 19,384

Non-Accrual, Non-Performing

Residential Core $ 868 $ 491 $ 233 $ 1,592

Residential Home Today 226 317 60 603

Home equity loans and lines of credit 750 231 — 981

Total $ 1,844 $ 1,039 $ 293 $ 3,176

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

TDRs in accrual status are loans accruing interest and performing according to the terms of the restructuring.

To be performing, a loan must be less than 90 days past due as of the report date.

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 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.

Comparison of Financial Condition at June 30, 2023 and September 30, 2022

Total assets increased $805.1 million, or 5.1%, to $16.59 billion at June 30, 2023 from $15.79 billion at September 30, 2022.

This increase was mainly the result of new loan origination levels exceeding the total of loan sales and principal repayments.

Cash and cash equivalents increased $66.6 million, or 18.0%, to $436.2 million at June 30, 2023 from $369.6 million at September 30, 2022.

We continue to modify loans to work with borrowers who are experiencing financial difficulty to keep their homes and to preserve neighborhoods.

Loan modifications may include interest rate reductions, term extensions, significant payment delays, other or a combination thereof.

For additional information, refer to Note 4.

LOANS AND ALLOWANCES FOR CREDIT LOSSES .

Comparison of Financial Condition at December 31, 2023 and September 30, 2023

Total assets increased $135.8 million, or 0.8%, to $17.05 billion at December 31, 2023, from $16.92 billion at September 30, 2023.

This increase was mainly the result of an increase in cash and cash equivalents and new loan origination levels exceeding the total of loan sales and principal repayments.

Cash and cash equivalents increased $85.1 million, or 18.2%, to $551.8 million at December 31, 2023, from $466.7 million at September 30, 2023.

Cash is managed to maintain the level of liquidity described later in the Liquidity and Capital Resources section.

Investment securities, all of which are classified as available for sale, increased $55.4 million to $513.3 million at June 30, 2023 from $457.9 million at September 30, 2022.

Investment securities increased as $124.2 million in purchases, which included a $59.5 million treasury note that was pledged as collateral on centrally cleared interest rate swap contracts, exceeded the combined effect of $62.6 million in principal repayments, a $5.2 million increase in unrealized losses and $1.0 million of premium amortization that occurred in the mortgage-backed securities portfolio during the nine months ended June 30, 2023.

There were no sales of investment securities during the nine months ended June 30, 2023.

Mortgage loans held for sale decreased $9.1 million, or 93.8%, to $0.6 million at June 30, 2023 from $9.7 million at September 30, 2022.

The decrease is related to a reduction in loans originated for sale due to a higher interest rate environment.

Loans held for investment, net of deferred loan fees and allowance for credit losses, increased $626.6 million, or 4.4%, to $14.88 billion at June 30, 2023 from $14.26 billion at September 30, 2022, as new originations and additional draws on existing accounts exceeded loan sales and repayments.

This increase included a $400.9 million, or 3.5%, increase in residential mortgage loans to $11.99 billion at June 30, 2023 from $11.59 billion at September 30, 2022.

In addition, there was a $232.3 million increase in the balance of home equity loans and lines of credit during the nine months ended June 30, 2023.

During the nine months ended June 30, 2023, $467.0 million of three- and five-year “Smart Rate” loans were originated while $844.5 million of fixed-rate first mortgage loans were originated.

Between September 30, 2022 and June 30, 2023, the total fixed-rate portion of the first mortgage loan portfolio increased $311.3 million.

During the nine months ended June 30, 2023, $58.1 million of first mortgage loans were sold or committed to sell to Fannie Mae.

Commitments originated for home equity loans and lines of credit, and bridge loans were $1.24 billion for the nine months ended June 30, 2023 compared to $1.60 billion for the nine months months ended June 30, 2022.

At June 30, 2023, pending commitments to originate new home equity lines of credit were $64.2 million and equity loans and bridge loans were $78.0 million.

Investment securities, all of which are classified as available for sale, increased $16.9 million to $525.2 million at December 31, 2023, from $508.3 million at September 30, 2023.

The increase was the result of an $8.3 million increase in the mortgage-backed securities portfolio and an $8.5 million increase in the balance of U.S.

government and agency obligations during the three months ended December 31, 2023.

There were no sales of investment securities during the three months ended December 31, 2023.

Mortgage loans held for sale decreased $2.2 million, or 66.7%, to $1.1 million at December 31, 2023, from $3.3 million at September 30, 2023.

The decrease is related to loan sales during the period as well as a decrease in new originations.

Loans held for investment, net of deferred loan fees and allowance for credit losses, increased $41.5 million, or less than 1%, to $15.21 billion at December 31, 2023, from $15.17 billion at September 30, 2023, as new originations and additional draws on existing accounts exceeded loan sales and repayments.

This increase included a $130.3 million, or 1.1%, decrease in residential mortgage loans to $11.99 billion at December 31, 2023, from $12.12 billion at September 30, 2023.

In addition, there was a $167.2 million increase in the balance of home equity loans and lines of credit during the three months ended December 31, 2023.

During the three months ended December 31, 2023, $65.9 million of three- and five-year “Smart Rate” loans were originated while $207.1 million of fixed-rate first mortgage loans were originated.

Between September 30, 2023 and December 31, 2023, the total fixed-rate portion of the first mortgage loan portfolio decreased $75.8 million.

During the three months ended December 31, 2023, $87.8 million of first mortgage loans were sold or committed to sell to Fannie Mae.

Commitments originated for home equity loans and lines of credit, and bridge loans were $436.1 million for the three months ended December 31, 2023, compared to $362.6 million for the three months months December 31, 2022.

At December 31, 2023, pending commitments to originate new home equity lines of credit were $73.7 million and equity loans and bridge loans were $64.0 million.

Refer to the Controlling Our Interest Rate Risk Exposure section of the Overview for additional information.

The allowance for credit losses was $102.6 million, or 0.69% of total loans receivable, at June 30, 2023, including a $27.8 million liability for unfunded commitments.

The allowance for credit losses was $94.6 million, or 0.62% of total loans receivable, at December 31, 2023, including a $25.5 million liability for unfunded commitments.

The allowance for credit losses was $104.8 million, or 0.69% of total loans receivable, at September 30, 2023, including a $27.5 million liability for unfunded commitments.

Refer to Note 4.

LOANS AND ALLOWANCES FOR CREDIT LOSSES of the NOTES TO CONSOLIDATED FINANCIAL STATEMENTS for additional discussion.

The amount of FHLB stock owned increased $34.8 million or 16.4% to $247.1 million at June 30, 2023 from $212.3 million at September 30, 2022.

Collateral requirements on funds borrowed from the FHLB dictate the amount of stock owned at any given time.

Total bank owned life insurance contracts increased $6.5 million, to $310.5 million at June 30, 2023, from $304.0 million at September 30, 2022, primarily due to changes in cash surrender value.

Other assets, including prepaid expenses, increased $14.5 million to $109.9 million at June 30, 2023 from $95.4 million at September 30, 2022.

The increase was primarily due to a $22.1 million increase in receivables on swap contracts, which included a $14.5 million increase in interest receivable and a $7.6 million increase in margin receivable, partially offset by an $8.0 million decrease in net deferred taxes.

Deposits increased $148.1 million, or 1.7%, to $9.07 billion at June 30, 2023 from $8.92 billion at September 30, 2022.

The increase in deposits resulted primarily from a $224.0 million increase in CDs, inclusive of brokered CDs, as the current market rates have increased customers' desires to maintain longer-term CDs, a $150.9 million increase in savings accounts, excluding money market accounts, a $2.4 million increase in accrued interest, offset by a $70.3 million decrease in money market accounts, and a $158.9 million decrease in checking accounts.

The balance of brokered CDs included in total deposits at June 30, 2023 increased by $92.5 million to $667.8 million compared to a balance of $575.2 million at September 30, 2022.

Based on FDIC insurance limits by ownership structure, the total uninsured deposits were $311.3 million and $366.7 million at June 30, 2023 and September 30, 2022, respectively.

Borrowed funds increased $659.0 million, or 13.7%, to $5.45 billion at June 30, 2023 from $4.79 billion at September 30, 2022.

The increase was primarily used to fund loan growth.

The total balance of borrowed funds at June 30, 2023, all from the FHLB, included $243.0 million of overnight advances, $1.59 billion of term advances with a weighted average maturity of approximately 2.3 years and $3.60 billion of short-term advances, aligned with interest rate swap contracts, with a remaining weighted average effective maturity of approximately 4.1 years.

ALLOWANCES FOR CREDIT LOSSES of the NOTES TO CONSOLIDATED FINANCIAL STATEMENTS for additional discussion.

The amount of FHLB stock owned increased $7.6 million or 3.1% to $254.7 million at December 31, 2023, from $247.1 million at September 30, 2023.

The increase resulted from $34.5 million of FHLB stock purchases, offset by $26.9 million of FHLB stock redemptions.

FHLB collateral requirements on funds borrowed dictate the minimum amount of stock owned at any given time.

Total bank owned life insurance contracts decreased $0.2 million, to $311.8 million at December 31, 2023, from $312.1 million at September 30, 2023, due to changes in cash surrender value, offset by death benefits paid.

Other assets, including prepaid expenses, decreased $13.9 million to $103.4 million at December 31, 2023, from $117.3 million at September 30, 2023.

The decrease was primarily due to decreases of $17.6 million in swap margin receivables and a decrease in the federal tax asset of $3.1 million, which is a liability at December 31, 2023, partially offset by a $6.8 million increase in deferred taxes and a $0.9 million increase in interest receivable on swaps.

Deposits increased $471.2 million, or 5.0%, to $9.92 billion at December 31, 2023, from $9.45 billion at September 30, 2023.

The increase in deposits resulted primarily from a $680.6 million increase in CDs, inclusive of brokered CDs, as the current market rates have increased customers' desires to maintain longer-term CDs, and a $7.7 million increase in accrued interest payable.

The increase was partially offset by a $99.0 million decrease in savings accounts, excluding money market accounts, a $65.3 million decrease in money market accounts, and a $52.8 million decrease in checking accounts.

The balance of brokered CDs included in total deposits at December 31, 2023, increased by $322.6 million to $1.49 billion compared to a balance of $1.16 billion at September 30, 2023.

Based on FDIC insurance limits by ownership structure, the total uninsured deposits were $324.4 million and $322.5 million at December 31, 2023 and September 30, 2023, respectively.

Borrowed funds decreased $243.1 million, or 4.6%, to $5.03 billion at December 31, 2023, from $5.27 billion at September 30, 2023.

The decrease was primarily due to deposit growth.

The total balance of borrowed funds at December 31, 2023, all from the FHLB, included $1.98 billion of term advances with a weighted average maturity of 2.3 years and $3.03 billion of short-term advances aligned with interest rate swap contracts.

Interest rate swaps have been used to extend the duration of short-term borrowings, at inception, by paying a fixed rate of interest and receiving the variable rate.

Refer to the Extending the Duration of Funding Sources section of the Overview for additional discussion regarding short-term borrowings and interest-rate swaps.

Borrowers' advances for insurance and taxes decreased by $42.9 million to $74.4 million at June 30, 2023 from $117.3 million at September 30, 2022.

Borrowers' advances for insurance and taxes decreased by $15.3 million to $109.1 million at December 31, 2023, from $124.4 million at September 30, 2023.

This change primarily reflects the cyclical nature of real estate tax payments that have been collected from borrowers and are in the process of being remitted to various taxing agencies.

Accrued expenses and other liabilities increased by $12.6 million to $96.7 million at June 30, 2023 from $84.1 million at September 30, 2022.

The increase is primarily due to a $7.1 million increases in accrued interest on interest rate swap contracts

and a $4.9 million increase in real estate tax payments remitted on behalf of borrowers, that remained outstanding at June 30, 2023.

Total shareholders’ equity increased $41.8 million, or 2.3%, to $1.89 billion at June 30, 2023 from $1.84 billion at September 30, 2022.

Activity reflects $55.7 million of net income in the current year reduced by dividends of $43.7 million, and $5.0 million of repurchases of outstanding common stock.

Other changes include $27.8 million of positive change in accumulated other comprehensive income, primarily related to changes in market values due to fluctuations in market interest rates and maturities of swap contracts, and a $7.0 million net positive impact related to activity in the Company's stock compensation and employee stock ownership plans.

During the three months ended June 30, 2023, we did not repurchase shares of our common stock.

The Company's eighth stock repurchase program allows for a total of 10,000,000 shares to be repurchased, with 5,191,951 shares remaining to be repurchased at June 30, 2023.

Accrued expenses and other liabilities decreased by $15.8 million to $97.2 million at December 31, 2023, from $112.9 million at September 30, 2023.

The decrease is primarily due to a $13.2 million decrease in deferred income taxes, which are an asset at December 31, 2023, a $2.5 million decrease in the provision for unfunded commitments, a $1.6 million decrease in bonus accrual, a $2.9 million decrease in real estate tax payments remitted on behalf of borrowers, offset by a $2.0 million increase in federal tax liability.

Total shareholders’ equity decreased $60.6 million, or 3.1%, to $1.87 billion at December 31, 2023, from $1.93 billion at September 30, 2023.

Activity reflects $20.7 million of net income in the current year reduced by dividends of $14.6 million.

Other changes include $75.0 million of net negative change in accumulated other comprehensive income, primarily related to changes in market values due to fluctuations in market interest rates and maturities of swap contracts, and a $7.9 increase related to a change in accounting principle, ASU 2022-02, net of tax.

During the three months ended December 31, 2023, we did not repurchase shares of our common stock.

The Company's eighth stock repurchase program allows for a total of 10,000,000 shares to be repurchased, with 5,191,951 shares remaining to be repurchased at December 31, 2023.

As a result of a mutual member vote, Third Federal Savings and Loan Association of Cleveland, MHC (the "MHC"), the mutual holding company that owns approximately 80.9% of the outstanding stock of the Company, was able to waive its receipt of its share of the dividend paid.

1 unchanged sentence

Unregistered Sales of Equity Securities and Use of Proceeds for additional details regarding the repurchase of shares of common stock and the dividend waiver.

Comparison of Operating Results for the Three Months Ended June 30, 2023 and 2022

Comparison of Operating Results for the Three Months Ended December 31, 2023 and 2022

Average Balances and Yields .

5 unchanged sentences

Three Months Ended Three Months Ended

June 30, 2023 June 30, 2022

December 31, 2023 December 31, 2022

Balance Interest

39 unchanged sentences

(5) Net interest margin represents net interest income divided by total interest-earning assets.

Net income increased $0.5 million, or 3%, to $17.6 million for the quarter ended June 30, 2023 from $17.1 million for the quarter ended June 30, 2022.

The increase in net income was attributable primarily to a decrease in the provision for credit losses, partially offset by a decrease in net interest income and an increase in non-interest expense.

Net income decreased $1.5 million, or 7%, to $20.7 million for the quarter ended December 31, 2023 from $22.2 million for the quarter ended December 31, 2022.

The decrease in net income was attributable primarily to a decrease in net interest income, partially offset by an increase in non-interest income and a decrease in non-interest expense.

Interest and Dividend Income.

2 unchanged sentences

Interest income on loans increased $32.3 million, or 25%, to $162.0 million during the current quarter compared to $129.7 million during the same quarter in the prior year.

This change was primarily attributed to a 98 basis point increase in the average yield on loans for the quarter ended June 30, 2023 to 3.93%, compared to 2.95% the same quarter last year.

It was also attributed to a 9%, or $1.18 billion, increase in the average balance of loans to $14.68 billion for the quarter ended June 30, 2023 compared to $13.50 billion during the same quarter last year as new loan production exceeded principal repayments and loan sales during the current quarter.

This change was primarily attributed to a 66 basis point increase in the average yield on loans for the quarter ended December 31, 2023, to 4.26%, compared to 3.60% the same quarter last year.

It was also attributed to a 6%, or $835.7 million, increase in the average balance of loans to $15.23 billion for the quarter ended December 31, 2023, compared to $14.40 billion during the same quarter last year as new loan production exceeded principal repayments and loan sales during the current quarter.

Interest Expense .

Interest expense increased $56.4 million, or 179%, to $87.9 million during the current quarter compared to $31.5 million during the quarter ended June 30, 2022.

The increase resulted from higher costs of certificates of deposit and borrowed funds.

Interest expense on CDs increased $24.2 million, or 158%, to $39.5 million during the current quarter compared to $15.3 million during the quarter ended June 30, 2022.

Interest expense increased $44.3 million, or 69%, to $108.1 million during the current quarter compared to $63.8 million during the quarter ended December 31, 2022.

The increase primarily resulted from higher costs of certificates of deposit and borrowed funds.

Interest expense on CDs increased $33.6 million, or 142%, to $57.3 million during the current quarter compared to $23.7 million during the quarter ended December 31, 2022.

The increase was attributed to a 176 basis point increase in the average rate paid on CDs to 3.35% for the current quarter from 1.59% for the same quarter last year.

Additionally, there was a $874.6 million, or 14.6%, increase in the average balance of CDs to $6.85 billion during the current quarter from $5.97 billion during the same quarter of the prior year.

Interest rates were increased on deposits in response to increases in market interest rates, as well as the higher rates paid by our competition.

Interest expense on borrowed funds increased $24.7 million, or 173%, to $39.0 million during the current quarter compared to $14.3 million during the quarter ended June 30, 2022.

Interest rates were generally increased on deposits in response to increases in market interest rates, as well as the higher rates paid by our competition.

Interest expense on borrowed funds increased $9.7 million, or 29%, to $43.7 million during the current quarter compared to $34.0 million during the quarter ended December 31, 2022.

This increase was mainly attributed to a 56 basis point increase in the average rate paid on these funds, to 3.35% for the current quarter from 2.79% for the same quarter last year.

In addition, the average balance of borrowed funds increased $1.40 billion, or 37%, to $5.18 billion during the current quarter from an average balance of $3.77 billion during the same quarter of the prior year.

In addition, the average balance of borrowed funds increased $355.1 million, or 7%, to $5.23 billion during the current quarter from an average balance of $4.87 billion during the same quarter of the prior year.

Refer to the Extending the Duration of Funding Sources section of the Overview and Comparison of Financial Condition for further discussion.

Net Interest Income.

Net interest income decreased $2.5 million to $68.8 million during the current quarter when compared to $71.3 million for the three months ended June 30, 2022.

Average interest-earning assets during the current quarter increased $1.30 billion, or 9%, when compared to the quarter ended June 30, 2022.

Net interest income decreased $6.1 million to $69.1 million during the current quarter when compared to $75.2 million for the three months ended December 31, 2022.

Average interest-earning assets during the current quarter increased $972.8 million, or 6%, when compared to the quarter ended December 31, 2022.

The increase in average interest-earning assets was attributed primarily to an increase in the average balances of loans.

In addition to the increase in average interest-earning assets, the yield on those assets increased 114 basis point to 3.98% from 2.84%, as a result of market interest rate increases.

In addition to the increase in average interest-earning assets, the yield on those assets increased 72 basis points to 4.32% from 3.60%, as a result of market interest rate increases.

The interest rate spread decreased 36 basis points to 1.39% compared to 1.75% during the same quarter last year.

The net interest margin decreased twenty-two basis points to 1.75% in the current quarter compared to 1.97% for the same quarter last year.

The decrease in our interest rate spread and net interest margin is primarily due to the impact of a prolonged period of historically low interest rate environment followed by a rapid and meaningful rise in interest rates, that started in March 2022, along with an extended period of yield curve inversion.

The net interest margin decreased 27 basis points to 1.68% in the current quarter compared to 1.95% for the same quarter last year.

The decrease in our interest rate spread and net interest margin is primarily due to the impact of a prolonged period of historically low interest rates followed by a rapid and meaningful rise in interest rates, that started in March 2022, along with an extended period of yield curve inversion.

Refer to Controlling Our Interest Rate Risk Exposure of the Overview section for further discussion.

Provision (Release) for Credit Losses.

We recorded no provision of the allowance for credit losses on loans and off-balance sheet exposures during the quarter ended June 30, 2023, compared to a $4.0 million provision of allowance for credit losses during the quarter ended June 30, 2022.

We recorded a release of the allowance for credit losses of $1.0 million on loans and off-balance sheet exposures during each of the quarters ended December 31, 2023 and December 31, 2022.

As delinquencies in the portfolio have been resolved through pay-offs, short sale or foreclosure, or management determines the collateral is not sufficient to satisfy the loan balance, uncollected balances have been charged against the allowance for credit losses previously provided.

Recoveries of amounts charged against the allowance for credit losses occur when collateral values increase and homes are sold or when borrowers repay the amounts previously charged-off.

In the current quarter, we recorded net recoveries of $1.8 million compared to net recoveries of $2.7 million in the quarter ended June 30, 2022.

In the current quarter, we recorded net recoveries of $1.0 million compared to net recoveries of $1.7 million in the quarter ended December 31, 2022.

Credit loss provisions (releases) are recorded with the objective of aligning our allowance for credit loss balances with our current estimates of loss in the portfolio.

2 unchanged sentences

Non-Interest Income.

Non-interest income increased $0.1 million, or 2%, to $5.8 million during the current quarter compared to $5.7 million during the quarter ended June 30, 2022, mainly as a result of a $0.7 million increase in the cash surrender value and death benefits from bank owned life insurance, to $2.8 million during the quarter ended June 30, 2023 from

$2.1 million during the quarter ended June 30, 2022.

Additionally, there was a decrease of $0.8 million in loan fees and service charges.

Non-interest income increased $1.1 million, or 21%, to $6.3 million during the current quarter compared to $5.2 million during the quarter ended December 31, 2022, mainly as a result of a $1.0 million increase in the cash surrender value and death benefits from bank owned life insurance, to $3.2 million during the quarter ended December 31, 2023, from $2.2 million during the quarter ended December 31, 2022.

Non-Interest Expense.

Non-interest expense increased $1.1 million, or 2%, to $52.9 million during the current quarter compared to $51.8 million during the quarter ended June 30, 2022.

The increase primarily consisted of a $2.2 million increase in marketing, a $1.2 million increase in FDIC premiums, and a $0.6 million increase in other operating expenses, partially offset by a $3.5 million decrease in salaries and employee benefits, related to higher wage and health insurance costs.

FDIC premiums increased due to deposit growth and a two basis point increase in the assessment rate that went into effect on January 1, 2023.

Non-interest expense decreased $2.9 million, or 5%, to $50.3 million during the current quarter compared to $53.2 million during the quarter ended December 31, 2022.

The decrease primarily consisted of a $3.3 million decrease in marketing expenses, a $1.0 million increase in FDIC premiums, and a $0.6 million increase in other operating

expenses, partially offset by a $1.3 million decrease in salaries and employee benefits, related to a decrease in discretionary incentive payments.

Income Tax Expense.

The provision for income taxes was $4.1 million for both the current quarter and the quarter ended June 30, 2022.

The provision for income taxes decreased $0.5 million to $5.4 million during the current quarter compared to $5.9 million during the quarter ended December 31, 2022.

The provision for the current quarter included $5.1 million of federal income tax provision and $0.3 million of state income tax expense.

The provision for the quarter ended June 30, 2022 included $3.9 million of federal income tax provision and $0.1 million of state income tax expense.

Our effective federal tax rate was 18.8% during the current quarter and 18.6% during the quarter ended June 30, 2022.

Comparison of Operating Results for the Nine Months Ended June 30, 2023 and 2022

Average balances and yields .

The following table sets forth average balances, average yields and costs, and certain other information for the periods indicated.

No tax-equivalent yield adjustments were made, as the effects thereof were not material.

Average balances are derived from daily average balances.

Non-accrual loans are included in the computation of loan average balances, but only cash payments received on those loans during the period presented are reflected in the yield.

The yields set forth below include the effect of deferred fees, deferred expenses, discounts and premiums that are amortized or accreted to interest income or interest expense.

Nine Months Ended Nine Months Ended

June 30, 2023 June 30, 2022

Balance Interest

Expense Yield/

Cost (1) Average

Balance Interest

Expense Yield/

(Dollars in thousands)

Interest-earning assets:

Interest-earning cash equivalents $ 351,742 $ 11,677 4.43 % $ 389,884 $ 1,060 0.36 %

Investment securities 10,438 342 4.37 3,604 32 1.18

Mortgage-backed securities 470,108 9,887 2.80 432,781 3,565 1.10

Loans (2) 14,530,428 410,847 3.77 12,975,292 280,820 2.89

Federal Home Loan Bank stock 228,318 10,426 6.09 165,240 2,845 2.30

Total interest-earning assets 15,591,034 443,179 3.79 % 13,966,801 288,322 2.75 %

Noninterest-earning assets 518,875 485,123

Total assets $ 16,109,909 $ 14,451,924

Interest-bearing liabilities:

Checking accounts $ 1,126,064 5,956 0.71 % $ 1,306,720 1,516 0.15 %

Savings accounts 1,774,965 16,822 1.26 1,862,449 1,973 0.14

Certificates of deposit 6,042,061 95,858 2.12 5,814,710 49,872 1.14

Borrowed funds 5,053,965 111,339 2.94 3,410,751 43,074 1.68

Total interest-bearing liabilities 13,997,055 229,975 2.19 % 12,394,630 96,435 1.04 %

Noninterest-bearing liabilities 243,823 267,142

Total liabilities 14,240,878 12,661,772

Shareholders’ equity 1,869,031 1,790,152

Total liabilities and shareholders’ equity $ 16,109,909 $ 14,451,924

Net interest income $ 213,204 $ 191,887

Interest rate spread (1)(3) 1.60 % 1.71 %

Net interest-earning assets (4) $ 1,593,979 $ 1,572,171

Net interest margin (1)(5) 1.82 % 1.83 %

Average interest-earning assets to average interest-bearing liabilities 111.39 % 112.68 %

Selected performance ratios:

Return on average assets (1) 0.46 % 0.45 %

Return on average equity (1) 3.97 % 3.66 %

Average equity to average assets 11.60 % 12.39 %

_________________

(1) Annualized.

(2) Loans include both mortgage loans held for sale and loans held for investment.

(3) Interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities.

(4) Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.

(5) Net interest margin represents net interest income divided by total interest-earning assets.

Net income increased $6.6 million to $55.7 million for the nine months ended June 30, 2023 compared to $49.1 million for the nine months ended June 30, 2022.

The increase in net income was primarily driven by an increase in net interest income, partially offset by an increase in non-interest expense and decrease in non-interest income.

Interest and Dividend Income.

Interest and dividend income increased $154.9 million, or 54%, to $443.2 million during the nine months ended June 30, 2023 compared to $288.3 million during the same nine months in the prior year.

The increase in interest and dividend income resulted mainly from an increase in interest income on loans and mortgage-backed securities, as well as increases in income earned on FHLB stock and other interest-bearing cash equivalents.

Interest income on loans increased $130.0 million, or 46%, to $410.8 million for the nine months ended June 30, 2023 compared to $280.8 million for the nine months ended June 30, 2022.

This increase was attributed mainly to an 88 basis point increase in the average yield on loans to 3.77% for the nine months ended June 30, 2023 from 2.89% for the same nine months in the prior fiscal year.

Adding to the increase was a $1.56 billion increase in the average balance of loans to $14.53 billion for the current nine months compared to $12.98 billion for the prior fiscal year period as new loan production exceeded repayments and loan sales during the current fiscal year.

Interest Expense.

Interest expense increased $133.6 million, or 139%, to $230.0 million during the current nine months compared to $96.4 million during the nine months ended June 30, 2022.

This increase mainly resulted from an increase in yields and average volume of borrowed funds.

Interest expense on CDs increased $46.0 million, or 92%, to $95.9 million during the nine months ended June 30, 2023 compared to $49.9 million during the nine months ended June 30, 2022.

The increase was attributed primarily to a 98 basis point increase in the average rate paid on CDs to 2.12% during the current nine months from 1.14% during the same nine months last fiscal year.

In addition, there was a $227.4 million, or 4%, increase in the average balance of CDs to $6.04 billion from $5.81 billion during the same nine months of the prior fiscal year.

Interest expense on savings accounts increased $14.8 million to $16.8 million during the nine months ended June 30, 2023, compared to interest expense of $2.0 million for the nine-month period ended June 30, 2023.

Interest expense on checking accounts increased $4.5 million to $6.0 million during the nine months ended June 30, 2023, compared to interest expense of $1.5 million for the nine-month period ended June 30, 2022.

Rates were increased for deposits in response to increases in market interest rates, as well as increases in the rates paid by our competitors.

Interest expense on borrowed funds, as impacted by related interest rate swap contracts, increased $68.2 million, or 158%, to $111.3 million during the nine months ended June 30, 2023 from $43.1 million during the nine months ended June 30, 2022.

The increase was primarily the result of higher average interest rates for the nine months ended June 30, 2023.

There was a 126 basis point increase in the average rate paid for these funds to 2.94% from 1.68% for the nine months ended June 30, 2023 and June 30, 2022, respectively.

The average balance of borrowed funds increased $1.64 billion, or 48%, to $5.05 billion during the current nine months from $3.41 billion during the same nine months of the prior fiscal year.

Refer to the Extending the Duration of Funding Sources section of the Overview and Comparison of Financial Condition for further discussion.

Net Interest Income.

Net interest income increased $21.3 million, or 11%, to $213.2 million during the nine months ended June 30, 2023 from $191.9 million during the nine months ended June 30, 2022.

The net increase consisted of a $154.9 million increase in interest income and a $133.6 million increase in interest expense.

Average interest-earning assets increased during the current nine months by $1.62 billion, or 12%, to $15.59 billion when compared to the nine months ended June 30, 2022.

The increase in average assets was attributed primarily to a $1.56 billion increase in the average balance of our loans and a $63.1 million increase in FHLB stock, partially offset by a $38.2 million decrease in cash and cash equivalents.

The yield on average interest-earning assets increased 104 basis points to 3.79% for the nine months ended June 30, 2023 from 2.75% for the nine months ended June 30, 2022.

Average interest-bearing liabilities increased $1.60 billion to $14.00 billion for the nine months ended June 30, 2023 compared to $12.39 billion for the nine months ended June 30, 2022.

Average interest-bearing liabilities experienced a 115 basis point increase in cost and the interest rate spread decreased 11 basis points to 1.60% compared to 1.71% during the same nine months last fiscal year.

The net interest margin was 1.82% for the current nine months and 1.83% for the same nine months in the prior fiscal year period.

Provision (Release) for Credit Losses .

We recorded a release of the allowance for credit losses on loans and off-balance sheet exposures of $2.0 million during the nine months ended June 30, 2023 compared to a $1.0 million provision of allowance for credit losses for the nine months ended June 30, 2022.

In the current nine months, we recorded net recoveries of $4.6 million, as compared to net recoveries of $7.3 million for the nine months ended June 30, 2022.

Credit loss provisions (releases) are recorded with the objective of aligning our allowance for credit loss balances with our current estimates of loss in the portfolio.

As delinquencies in the portfolio have been resolved through pay-off, short sale or foreclosure, or management determines the collateral is not sufficient to satisfy the loan balance, uncollected balances have been charged against the allowance for credit losses previously provided.

Refer to the Lending Activities section of the Overview and Note 4.

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

Non-Interest Income.

Non-interest income decreased $3.1 million, or 16%, to $16.3 million during the nine months ended June 30, 2023 compared to $19.4 million during the nine months ended June 30, 2022.

The decrease in non-interest income was primarily due to a $1.6 million decrease in the net gain on sale of loans and a $1.9 million decrease in loan fees and service charges.

The decrease in net gain on the sale of loans was generally attributable to both lower volumes of sales as well as less favorable market pricing on loan delivery contracts settled during the current period.

There were loan sales of $58.1 million during the nine months ended June 30, 2023, compared to loan sales of $104.3 million during the nine months ended June 30, 2022.

Non-Interest Expense.

Non-interest expense increased $12.2 million, or 8%, to $161.6 million during the nine months ended June 30, 2023 compared to $149.4 million during the nine months ended June 30, 2022.

This increase was driven by a $2.0 million increase in salaries and employee benefits, a $4.4 million increase in marketing expenses, a $3.2 million increase in federal insurance premiums and a $2.0 million increase in other operating expenses.

Income Tax Expense.

The provision for income taxes increased $2.4 million to $14.2 million during the nine months ended June 30, 2023 from $11.8 million for the nine months ended June 30, 2022 reflecting the higher level of pre-tax income during the more recent period.

The provision for the current nine months included $12.8 million of federal income tax provision and $1.4 million of state income tax provision.

The provision for the nine months ended June 30, 2022 included $11.1 million of federal income tax provision and $0.7 million of state income tax provision.

Our effective federal tax rate was 18.7% during the nine months ended June 30, 2023 and 18.4% during the nine months ended June 30, 2022.

The provision for the quarter ended December 31, 2022, included $5.3 million of federal income tax provision and $0.6 million of state income tax expense.

Our effective federal tax rate was 19.8% and 19.3% during the quarters ended December 31, 2023 and December 31, 2022, respectively.

Liquidity and Capital Resources

6 unchanged sentences

We generally seek to maintain a minimum liquidity ratio of 5% (which we compute as the sum of cash and cash equivalents plus unencumbered investment securities for which ready markets exist, divided by total assets).

For the three months ended June 30, 2023, our liquidity ratio averaged 5.51%.

We believe that we had sufficient sources of liquidity to satisfy our short- and long-term liquidity needs as of June 30, 2023.

For the three months ended December 31, 2023, our liquidity ratio averaged 6.07%.

We believe that we had sufficient sources of liquidity to satisfy our short- and long-term liquidity needs as of December 31, 2023.

We regularly adjust our investments in liquid assets based upon our assessment of expected loan demand, expected deposit flows, yields available on interest-earning deposits and securities, scheduled liability maturities and the objectives of our asset/liability management program.

2 unchanged sentences

The levels of these assets are dependent on our operating, financing, lending and investing activities during any given period.

At June 30, 2023, cash and cash equivalents totaled $436.2 million, which represented an increase of 18% from $369.6 million at September 30, 2022.

Investment securities classified as available-for-sale, which provide additional sources of liquidity, totaled $513.3 million at June 30, 2023.

During the nine-month period ended June 30, 2023, loan sales, including commitments to sell, totaled $58.1 million, which included sales to Fannie Mae, consisting of $49.2 million of long-term, fixed-rate, agency-compliant, non-Home Ready first mortgage loans and $8.9 million of loans that qualified under Fannie Mae's Home Ready initiative.

At June 30, 2023, $0.6 million of long-term, fixed-rate residential first mortgage loans are classified as “held for sale".

At December 31, 2023, cash and cash equivalents totaled $551.8 million, which represented an increase of 18% from $466.7 million at September 30, 2023.

Investment securities classified as available-for-sale, which provide additional sources of liquidity, totaled $525.2 million at December 31, 2023.

During the three-month period ended December 31, 2023, loan sales, including commitments to sell, totaled $87.8 million, which included sales to Fannie Mae, consisting of $79.2 million of long-term, fixed-rate, agency-compliant, non-Home Ready first mortgage loans and $8.6 million of loans that qualified under Fannie Mae's Home Ready initiative.

At December 31, 2023, $1.1 million of long-term, fixed-rate residential first mortgage loans were classified as “held for sale".

Our cash flows are derived from operating activities, investing activities and financing activities as reported in our CONSOLIDATED STATEMENTS OF CASH FLOWS .

At June 30, 2023, we had $441.9 million in outstanding commitments to originate loans.

At December 31, 2023, we had $207.0 million in outstanding commitments to originate loans.

In addition to commitments to originate loans, we had $4.75 billion in unfunded home equity lines of credit to borrowers.

CDs due within one year of June 30, 2023 totaled $2.83 billion, or 31.3% of total deposits.

CDs due within one year of December 31, 2023, totaled $4.12 billion, or 41.5% of total deposits.

If these deposits do not remain with us, we will be required to seek other sources of funds, including loan sales, sales of investment securities, other deposit products, including new CDs, brokered CDs, FHLB advances, borrowings from the FRB-Cleveland Discount Window or other collateralized borrowings.

Depending on market conditions, we may be required to pay higher rates on such deposits or other borrowings than we currently pay on the CDs due on or before June 30, 2024.

Depending on market conditions, we may be required to pay higher rates on such deposits or other borrowings than we currently pay on the CDs due on or before December 31, 2024.

We believe, however, based on past experience, that a significant portion of such deposits will remain with us.

Generally, we have the ability to attract and retain deposits by adjusting the interest rates offered.

Our cost of insuring deposits is likely to increase due to special assessments related to losses incurred by the FDIC's Deposit Insurance Fund under the systemic risk exception recently exercised by the FDIC to protect the uninsured depositors of three recently failed large domestic regional banks.

By law, the FDIC is required to recover such losses by special assessment on member banks, but has not yet announced the amount or timeline of any special assessments.

Our primary investing activities are originating residential mortgage loans, home equity loans and lines of credit and purchasing investments.

During the nine months ended June 30, 2023, we originated $1.31 billion of residential mortgage loans, and $1.24 billion of commitments for home equity loans and lines of credit, while during the nine months ended June 30, 2022, we originated $2.91 billion of residential mortgage loans and $1.60 billion of commitments for home equity loans and lines of credit.

We purchased $124.2 million of securities during the nine months ended June 30, 2023, and $197.3 million during the nine months ended June 30, 2022.

Also, during the nine months ended June 30, 2023, we purchased $133.9 million of long-term, fixed-rate first mortgage loans.

Our primary investing activities are originating residential mortgage loans, home equity loans and lines of credit and purchasing investment securities.

During the three months ended December 31, 2023, we originated $273.0 million of residential mortgage loans, and $436.1 million of commitments for home equity loans and lines of credit, while during the three months ended December 31, 2022, we originated $485.5 million of residential mortgage loans and $362.6 million of commitments for home equity loans and lines of credit.

We purchased $80.8 million of securities during the three months ended December 31, 2023, and $40.3 million during the three months ended December 31, 2022.

Also, during the three months ended December 31, 2023, we purchased $31.7 million of long-term, fixed-rate first mortgage loans.

Financing activities consist primarily of changes in deposit accounts, changes in the balances of principal and interest owed on loans serviced for others, FHLB advances, including any collateral requirements related to interest rate swap agreements and borrowings from the FRB-Cleveland Discount Window.

We experienced a net increase in total deposits of $145.1 million during the nine months ended June 30, 2023, which reflected the active management of the offered rates on maturing CDs, compared to a net increase of $164.9 million during the nine months ended June 30, 2022.

We experienced a net increase in total deposits of $471.2 million during the three months ended December 31, 2023, which reflected the active management of the offered rates on maturing CDs, compared to a net increase of $92.0 million during the three months ended December 31, 2022.

Deposit flows are affected by the overall level of interest rates, the interest rates and products offered by us and our local competitors, and by other factors.

During the nine months ended June 30, 2023, there was a $92.5 million increase in the balance of brokered CDs (exclusive of acquisition costs and subsequent amortization), which had a balance of $667.8 million at June 30, 2023.

At June 30, 2022 the balance of brokered CDs was $489.8 million.

Principal and interest owed on loans serviced for others experienced a net decrease of $13.4 million to $16.5 million during the nine months ended June 30, 2023 compared to a net decrease of $22.8 million to $18.7 million during the nine months ended June 30, 2022.

During the nine months ended June 30, 2023 we increased our total borrowings by $659.0 million as we funded:

During the three months ended December 31, 2023, there was a $322.6 million increase in the balance of brokered CDs (exclusive of acquisition costs and subsequent amortization), which had a balance of $1.49 billion at December 31, 2023.

At December 31, 2022, the balance of brokered CDs was $650.1 million.

Principal and interest owed on loans serviced for others experienced a net decrease of $0.6 million to $29.2 million during the three months ended December 31, 2023, compared to a net decrease of $1.4 million to $28.5 million during the three months ended December 31, 2022.

During the three months ended December 31, 2023, we decreased our total borrowings by $243.1 million as we funded:

new loan originations, our capital initiatives, and actively managed our liquidity ratio.

During the nine months ended June 30, 2022, our total borrowings increased by $1.15 billion.

During the three months ended December 31, 2022, our total borrowings increased by $194.1 million.

Liquidity management is both a daily and long-term function of business management.

If we require funds beyond our ability to generate them internally, borrowing agreements exist with the FHLB of Cincinnati and the FRB-Cleveland Discount Window, and arrangements with other institutions to purchase overnight Fed Funds, each of which provides an additional source of funds.

Also, in evaluating funding alternatives, we may participate in the brokered deposit market.

In March 2023, as a result of two recent bank failures, the Federal Reserve created the Bank Term Funding Program (BTFP) as an additional source of liquidity.

On December 19, 2023, the FHLB of Cincinnati, subsequent to revising their Credit Policy Manual in September 2023 to decrease the allowable borrowing limit from 50% to 40% of total assets, approved an exception to increase the Association's allowable borrowing limit to 45% of total assets.

The exception requires the Association to maintain compliance with certain credit and regulatory criteria.

In order to ensure adequate borrowing capacity with the FHLB, the Company has started replacing a portion of its 90-day FHLB advances with like-term brokered deposits.

In March 2023, as a result of two recent bank failures, the Federal Reserve created the BTFP as an additional source of liquidity.

The program offers loans up to one year in length against pledges of high-quality securities, such as U.S.

1 unchanged sentence

The BTFP is currently scheduled to end on March 11, 2024.

At June 30, 2023 we had $5.43 billion of FHLB of Cincinnati advances, no outstanding borrowings from the FRB-Cleveland Discount Window and no outstanding borrowings in the form of Fed Funds.

During the nine months ended June 30, 2023, we had average outstanding advances from the FHLB of Cincinnati of $5.05 billion, as compared to average outstanding advances of $3.41 billion during the nine months ended June 30, 2022.

In December 2023, the Association received notice from the FHLB of Cincinnati that, effective January 19, 2024, the Association will be placed on restriction by the FHFA due to a second consecutive "Needs Improvement" rating, received on our CRA exam covering the period ended December 31, 2019.

During the period of restriction, the Association will not have access to long-term advances (advances with a term greater than one year) from the FHLB of Cincinnati and will not be eligible for participation in the Bank's Affordable Housing Program or other Community Investment Cash Advance programs.

With certain exceptions, the restriction will remain in place until the Association receives a "Satisfactory" or better rating on a CRA exam and otherwise complies with standards established by the FHFA's Community Support Regulation.

Existing advances and future advances with a term of one year or less, including 90 day advances used to facilitate longer term interest rate swap agreements, will not be affected.

We expect no impact to our ability to access funding.

At December 31, 2023, we had $5.01 billion of FHLB of Cincinnati advances, no outstanding borrowings from the FRB-Cleveland Discount Window and no outstanding borrowings in the form of Fed Funds.

During the three months ended December 31, 2023, we had average outstanding advances from the FHLB of Cincinnati of $5.23 billion, as compared to average outstanding advances of $4.87 billion during the three months ended December 31, 2022.

Refer to the Extending the Duration of Funding Sources section of the Overview for further discussion.

4 unchanged sentences

federal banking regulatory agencies issued a final rule which provides banking organizations that implement CECL during the 2020 calendar year the option to delay for two years an estimate of CECL’s effect on regulatory capital, relative to the incurred loss methodology’s effect on regulatory capital, followed by a three-year transition period, which the Association and Company have adopted.

During the two-year delay, the Association and Company added back to common equity tier 1 capital (“CET1”) 100% of the initial adoption impact of CECL plus 25% of the cumulative quarterly changes in the allowance for credit losses.

Beginning this quarter the cumulative transitional amounts became fixed and will be phased out of CET1 capital over the subsequent three-year period.

During the two-year delay, the Association and Company added back to CET1 100% of the initial adoption impact of CECL, plus 25% of the cumulative quarterly changes in the allowance for credit losses.

After two years, the quarterly transitional amounts, along with the initial adoption impact of CECL, are deemed to be fixed and will be phased out of CET1 capital over the three-year period.

The Association is subject to the "capital conservation buffer" requirement level of 2.5%.

The requirement limits capital distributions and certain discretionary bonus payments to management if the institution does not hold a "capital conservation buffer" in addition to the minimum capital requirements.

At June 30, 2023, the Association exceeded the regulatory requirement for the "capital conservation buffer".

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

At December 31, 2023, the Association exceeded the regulatory requirement for the "capital conservation buffer".

As of December 31, 2023, the Association exceeded all regulatory requirements to be considered “Well Capitalized” as presented in the table below (dollar amounts in thousands).

Capital remains a source of financial strength for the Association and the Company.

Preserving capital to levels in excess of regulatory minimums is a priority for the Association, especially given the pressures in the economic environment.

The Association intends to maintain minimum capital ratios to exceed total capital to risk-weighted assets of 13.0%, tier 1 (leverage) capital to net average assets of 9.0%, and tier 1 capital to risk-weighted assets of 11.0%.

Actual Well Capitalized Levels

4 unchanged sentences

Common Equity Tier 1 Capital to Risk-Weighted Assets 1,660,369 17.22 % 626,629 6.50 %

The capital ratios of the Company as of June 30, 2023 are presented in the table below (dollar amounts in thousands).

The capital ratios of the Company as of December 31, 2023, are presented in the table below (dollar amounts in thousands).

Total Capital to Risk-Weighted Assets $ 1,904,184 19.75 %

5 unchanged sentences

The amount of dividends that the Association may declare and pay to the Company in any calendar year, without the receipt of prior approval from the OCC but with prior notice to the FRB-Cleveland, cannot exceed net income for the current calendar year-to-date period plus retained net income (as defined) for the preceding two calendar years, reduced by prior dividend payments made during those periods.

In December 2022, the Company received a $40 million cash dividend from the Association.

Because of its intercompany nature, this dividend payment had no impact on the Company's capital ratios or its CONSOLIDATED STATEMENTS OF CONDITION but reduced the Association's reported capital ratios.

At June 30, 2023, the Company had, in the form of cash and a demand loan from the Association, $200.9 million of funds readily available to support its stand-alone operations.

At December 31, 2023, the Company had, in the form of cash and a demand loan from the Association, $167.0 million of funds readily available to support its stand-alone operations.

The Company’s eighth stock repurchase program, which authorized the repurchase of up to 10,000,000 shares of the Company’s outstanding common stock was approved by the Board of Directors on October 27, 2016, and repurchases began on January 6, 2017.

There were 4,808,049 shares repurchased under that program between its start date and June 30, 2023.

During the nine months ended June 30, 2023, the Company repurchased $5.0 million of its common stock.

There were 4,808,049 shares repurchased under that program between its start date and December 31, 2023.

During the three months ended December 31, 2023, the Company did not repurchase any shares of its common stock.

On July 11, 2023, Third Federal Savings, MHC received the approval of its members with respect to the waiver of dividends on the Company’s common stock the MHC owns, up to a total of $1.13 per share, to be declared on the Company’s common stock during the 12 months subsequent to the members’ approval (i.e., through July 11, 2024).

The members approved the waiver by casting 60% of the eligible votes, with 97% of the votes cast, voting in favor of the waiver.

The members approved

the waiver by casting 60% of the eligible votes, with 97% of the votes cast, voting in favor of the waiver.

Third Federal Savings, MHC is the 81% majority shareholder of the Company.

Following the receipt of the members’ approval at the July 11, 2023 special meeting, the MHC filed a notice with, and a request for non-objection from, the Federal Reserve Bank of

Cleveland for the proposed dividend waiver.

Both the non-objection from the FRB-Cleveland and the timing of the non-objection are unknown as of the filing date of this quarterly report.

Following the receipt of the members' approval at the July 11, 2023, meeting, Third Federal Savings, MHC filed a notice with, and received the non-objection from the FRB-Cleveland for the proposed dividend waivers.

Third Federal Savings, MHC waived its right to receive $0.2825 per share dividend payments on September 20, 2022, December 13, 2022, March 21, 2023, and June 13, 2023.

Third Federal Savings, MHC waived its right to receive $0.2825 per share dividend payments on September 26, 2023 and December 13, 2023.

The payment of dividends, support of asset growth and strategic stock repurchases are planned to continue in the future as the focus for future capital deployment activities.

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 2. Management’s Discussion and Analysis