What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-05-09 compared with 2024-02-08 · 319 added, 221 removed, 642 unchanged (46% of the section changed)

14 unchanged sentences

● decreased demand for our products and services and lower revenue and earnings because of a recession or other events;

● changes in consumer spending, borrowing and savings habits;

● changes in consumer spending, borrowing and savings habits, including repayment speeds on loans;

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

34 unchanged sentences

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 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.

Taking all of this into consideration, we remain confident that our business model and strategic approach remain appropriate.

Taking all of this into consideration, we remain committed to our mission, business model, and strategic approach.

Specifically, (1) our capital ratios remain a primary source of financial strength;

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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 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.

As of March 31, 2024, 96.1% of our $8.68 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 .

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

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.

At March 31, 2024, 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 $3.15 billion.

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

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Levels of Regulatory Capital

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.

At March 31, 2024, the Company’s Tier 1 (leverage) capital totaled $1.84 billion, or 10.72% of net average assets and 19.05% of risk-weighted assets, while the Association’s Tier 1 (leverage) capital totaled $1.68 billion, or 9.79% of net average assets and 17.40% of risk-weighted assets.

Each of these measures is in excess of the requirements in effect for the Association at March 31, 2024, 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.

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

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

For the Six Months Ended March 31, 2024 For the Six Months Ended March 31, 2023

Amount Percent Amount Percent

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Terms less than or equal to 10 years

3,729 0.9 19,695 2.4

Terms greater than 10 years

305,335 74.7 496,477 60.4

Total fixed-rate production

309,064 75.6 516,172 62.8

Total First Mortgage Loan Originations and Purchases

$ 408,842 100.0 % $ 821,854 100.0 %

December 31, 2023 September 30, 2023

March 31, 2024 September 30, 2023

Amount Percent Amount Percent

4 unchanged sentences

Terms less than or equal to 10 years

960,293 8.1 1,088,048 9.0

Terms greater than 10 years

6,232,998 52.8 6,275,775 51.8

Total fixed-rate loans

7,193,291 60.9 7,363,823 60.8

Total First Mortgage Loans Held For Investment $ 11,814,437 100.0 % $ 12,124,666 100.0 %

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.

The following table sets forth the balances as of March 31, 2024, for all ARM loans segregated by the next scheduled interest rate reset date:

Current Balance of ARM Loans Scheduled for Interest Rate Reset

4 unchanged sentences

Total $ 4,621,146

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.

At March 31, 2024 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 $9.7 million and $3.3 million, respectively.

Loan Portfolio Yield

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

The following tables set forth the principal balance and interest yield as of March 31, 2024, for the portfolio of loans held for investment, by type of loan, structure and geographic location:

March 31, 2024

Balance Percent Yield

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Terms greater than 10 years 6,232,998 41.1 3.93

Total Fixed-Rate loans 7,288,041 47.8 3.73

Total Fixed-Rate Residential Mortgage loans

7,193,291 47.4 3.76

ARMs 4,621,146 30.5 3.23

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Total Loans Receivable $ 15,171,781 100.0 % 4.41 %

December 31, 2023

Balance Fixed Rate Balance Percent Yield

March 31, 2024

Balance Fixed Rate Balance Fixed Rate Percent

(Dollars in thousands)

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

At March 31, 2024, the principal balance of home equity lines of credit (including those in repayment) that are structured to reset with each prime rate adjustment totaled $2.90 billion.

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

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

Funding sources

are discussed in more detail within this Item 2 in the sections entitled Maintaining Access to Adequate Liquidity and Diverse Funding Sources to Support our Growth and Liquidity and Capital Resources.

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

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.

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.

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

The Association is a party to interest rate swap agreements.

The Association uses swaps to extend the duration of its funding sources.

Each of the Association's swap agreements is registered on the Chicago Mercantile Exchange and involves the exchange of interest payment amounts based on a notional principal balance.

No exchange of principal amounts occur and the notional principal amount does not appear on our balance sheet.

The Association uses swaps to extend the duration of its funding sources.

In each of the Association's agreements, interest paid is based on a fixed rate of interest throughout the term of each agreement while interest received is based on an interest rate that resets and compounds daily over a specified interval (generally three months) throughout the term of each agreement.

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Concurrent with the execution of each swap, the Association enters into a short-term borrowing in an amount equal to the notional amount of the swap and with interest rate resets aligned with the reset interval of the swap.

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.

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.

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

For more details, refer to Notes 6.

BORROWED FUNDS and 13.

DERIVATIVE INSTRUMENTS to the unaudited consolidated financial statements.

DERIVATIVE INSTRUMENTS of the NOTES TO CONSOLIDATED FINANCIAL STATEMENTS .

Each funding alternative is monitored and evaluated based on its effective interest payment rate, options exercisable by the creditor (early withdrawal, right to call, etc.), and collateral requirements.

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We will continue to evaluate the structure of our funding sources based on current needs.

Selling Fixed Rate Loans into the Secondary Market

Selling Fixed Rate Loans in the Secondary Market

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, 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.

First mortgage loans (primarily fixed-rate mortgages 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.

our Smart Rate adjustable-rate loans, home purchase fixed-rate loans and 10-year fixed-rate loans) are originated under our legacy procedures, which are not eligible for sale to Fannie Mae.

our Smart Rate adjustable-rate loans, 10-year fixed-rate loans, and first mortgage loans secured by certain property types) are originated under our legacy procedures, which are not eligible for sale to Fannie Mae.

We can also manage interest rate risk by selling non-Fannie Mae compliant mortgage loans to private investors, although those transactions may be limited to loans that have established payment histories, strong borrower credit profiles and are supported by adequate collateral.

Additionally, sales to private investors are dependent upon favorable market conditions, including motivated buyers, and involve more complicated negotiations and longer settlement timelines.

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

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.

During the six months ended March 31, 2024, $121.3 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, $5.1 million were originated through our traditional mortgage banking brand, known as "Mortgage Passport", and $116.2 million were originated or purchased as other agency-compliant first mortgage loans.

At March 31, 2024, loans classified as held for sale totaled $9.7 million.

At March 31, 2024, we serviced $1.95 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 adjustments.

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.

Additionally, we've expanded 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 adjustments in markets outside of Ohio and Florida.

This approach is 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 this Item 2.

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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 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.

At March 31, 2024, 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.

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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.

As of March 31, 2024, loans originated or purchased had a balance of $15.23 billion, of which $28.3 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 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.

At March 31, 2024, approximately 57.6% and 17.6% of the combined total of our residential Core and construction loans held for investment and approximately 24.8% and 22.9% 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 24 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 three months ended December 31, 2023, 24.2% are secured by properties in states other than Ohio or Florida.

Of the total mortgage loans originated in the six months ended March 31, 2024, 22.0% are secured by properties in states other than Ohio or Florida.

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

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

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%.

At March 31, 2024, 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 9.79%.

We expect to continue to remain a well capitalized institution.

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

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.

At March 31, 2024, deposits totaled $9.94 billion (including $1.26 billion of brokered CDs), while borrowings totaled $4.96 billion and borrowers’ advances and servicing escrows totaled $125.4 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.

2 unchanged sentences

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.

At March 31, 2024, the Association had the ability to borrow a maximum of $6.82 billion from the FHLB of Cincinnati and $693.2 million from the FRB-Cleveland Discount Window.

As of March 31, 2024, our capacity for additional borrowing from the FHLB of Cincinnati was $1.88 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.

At March 31, 2024, our investment securities portfolio totaled $520.2 million.

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

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

During the six months ended March 31, 2024 and 2023, cash flows from operations provided $50.5 million and $43.1 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.

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We continue to focus on managing operating expenses.

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've successfully been able to reduce our operating expenses to offset the pressure of margin compression resulting from the extended inverted yield curve.

Our ratio of annualized non-interest expense to average assets was 1.20% for the six months ended March 31, 2024, and 1.36% for the six months ended March 31, 2023.

As of March 31, 2024, our average assets per full-time employee and our average deposits per full-time employee were $18.1 million and $10.6 million, respectively.

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

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.

Our relatively high average deposits (exclusive of brokered CDs) held at our branch offices ($234.4 million per branch office as of March 31, 2024) 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.

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

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 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 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;

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A borrower with more equity in the property has a vested interest in keeping the loan current when compared to a borrower with little or no equity in the property.

In light of the past weakness in the housing market and uncertainty with respect to future employment levels and economic prospects, we conduct an expanded loan level evaluation of our home equity loans and lines of credit, including bridge loans used to aid borrowers in buying a new home before selling their old one, which are delinquent 90 days or more.

We conduct an expanded loan level evaluation of our home equity loans and lines of credit, including bridge loans used to aid borrowers in buying a new home before selling their old one, which are delinquent 90 days or more.

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

1 unchanged sentence

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.

At March 31, 2024, we had an amortized cost of $3.36 billion in home equity loans and home equity lines of credit outstanding, of which $4.5 million, or 0.13% were delinquent 90 days or more.

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

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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,

For the Three Months Ended March 31, For the Six Months Ended March 31,

2024 2023 2024 2023

(Dollars in thousands)

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Adoption of ASU 2022-02

— — (10,262) —

Charge-offs on real estate loans:

Total Residential Core

37 92 187 206

Total Residential Home Today — 71 30 243

Home equity loans and lines of credit

Ohio 124 171 242 234

Florida 35 16 55 48

California — 1 96 14

Other 45 243 141 263

Total Home equity loans and lines of credit 204 431 534 559

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Net recoveries 1,251 1,204 2,258 2,875

Provision (release) for allowance for credit losses on loans 1,024 (89)

Release of allowance for credit losses on loans

(2,166) (1,543) (1,142) (1,632)

Allowance balance for loans (end of the period) $ 68,169 $ 74,138 $ 68,169 $ 74,138

Allowance balance for credit losses on unfunded commitments (beginning of the period) $ 25,491 $ 26,110 $ 27,515 $ 27,021

Provision for credit losses on unfunded loan commitments (2,024) (911)

Provision (release) for credit losses on unfunded loan commitments

1,166 543 (858) (368)

Allowance balance for unfunded loan commitments (end of the period) 26,657 26,653 26,657 26,653

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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,

For the Three Months Ended March 31, For the Six Months Ended March 31,

2024 2023 2024 2023

Net recoveries to average loans outstanding (annualized)

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Recoveries are recognized on previously charged-off loans as borrowers perform their repayment obligations or as loans with improved collateral positions reach final resolution.

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.

During the six months ended March 31, 2024 and March 31, 2023, recoveries exceeded loan charge-offs by $2.3 million and $2.9 million, respectively.

During the six months ended March 31, 2024, total gross charge-offs decreased slightly compared to the six months ended March 31, 2023.

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

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

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.

During the three months ended March 31, 2024, the total allowance for credit losses increased to $94.8 million, from $94.6 million at December 31, 2023.

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.

During the three months ended March 31, 2024, the asset portion of the total allowance decreased to $68.2 million from $69.1 million, and the liability portion of the total allowance increased to $26.7 million from $25.5 million.

We recorded a $1.0 million net release of allowance for credit losses for the period, consisting of a $2.2 million release of provision on loans and a $1.2 million provision 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.

Changes in the allowance for credit losses on loan balances during the three months ended March 31, 2024, were primarily related to new growth in the home equity loans and lines of credit portfolio, partially offset by a decrease in the residential Core portfolio balance primarily due to aging.

The amortized cost of the residential Core portfolio decreased 1.5%, or $179.4 million, and its total allowance decreased 3.4% or $1.7 million as of March 31, 2024, compared to December 31, 2023.

The amortized cost of the home equity loans and lines of credit portfolio increased 3.8%, or $122.6 million, and its total allowance increased 2.5% to $23.0 million from $22.4 million at December 31, 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 $2.6 million at March 31, 2024, and $2.8 million at December 31, 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.

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The allowance for credit losses allocated to each category is not necessarily indicative of future losses in any particular category and does not restrict the use of the allowance to absorb losses in other categories.

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

December 31, 2023

Amount Percent of

Allowance Percent of

Category to Total

(Dollars in thousands)

Real estate loans:

Residential Core $ 49,389 71.5% 78.4%

Residential Home Today (2,814) (4.1) 0.3

Home equity loans and lines of credit 22,436 32.5 21.0

Construction 73 0.1 0.3

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

September 30, 2023 December 31, 2022

The tables do not include allowances for credit losses on unfunded loan commitments, which are primarily related to undrawn home equity lines of credit.

March 31, 2024 September 30, 2023

Amount Percent of

15 unchanged sentences

Therefore, neither was segregated by geographic location.

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

Amount Percent Amount Percent Amount Percent

March 31, 2024 September 30, 2023

Amount Percent Amount Percent

(Dollars in thousands)

15 unchanged sentences

Florida 4,132 7,253

Other 859 — —

Total Construction 33,009 0.2 48,406 0.4

5 unchanged sentences

Total loans receivable, net $ 15,149,619 $ 15,165,747

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 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 March 31, 2024.

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.

3 unchanged sentences

(Dollars in thousands)

December 31, 2023

March 31, 2024

Real estate loans:

19 unchanged sentences

1,155 2,953 406 — — — — — 4,514

3,397 8,653 612 — — — — — 12,662

Total Construction 4,552 12,194 1,018 — — — — — 17,764

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

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.

The following table provides amortized cost and an analysis of our residential mortgage loans by origination LTV, origination year and portfolio at March 31, 2024.

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

3 unchanged sentences

(Dollars in thousands)

December 31, 2023

March 31, 2024

Real estate loans:

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

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.

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 loan portfolio as of December 31, 2023.

At March 31, 2024, the unpaid principal balance of the home equity loans and lines of credit portfolio consisted of $478.6 million in home equity loans (including $60.8 million of home equity lines of credit, which are in repayment and no longer eligible to be drawn upon, and $12.4 million in bridge loans) and $2.84 billion in home equity lines of credit.

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

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(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 December 31, 2023.

(3) Current Mean CLTV is based on best available first mortgage and property values as of March 31, 2024.

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

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

The principal balance of home equity lines of credit in the draw period that have a current mean CLTV over 80% or unknown is $25.4 million, or 0.9% at March 31, 2024 .

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.

At March 31, 2024, 28.5% of the home equity lending portfolio was either in a first lien position (14.7%), in a subordinate (second) lien position behind a first lien that we held (11.5%) or behind a first lien that was held by a loan that we originated, sold and now serviced for others (2.3%).

At March 31, 2024, 12.6% 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.

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Loans Delinquent for

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

March 31, 2024 30-89 Days 90 Days or More Total

Real estate loans:

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Total $ 10,393 $ 12,999 $ 23,392

Loans Delinquent for

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

Real estate loans:

(Dollars in thousands)

Residential Core

Ohio $ 3,353 $ 3,798 $ 7,151

Florida 4,297 727 5,024

Other 950 3,000 3,950

Total Residential Core 8,600 7,525 16,125

Residential Home Today 1,790 1,179 2,969

Home equity loans and lines of credit

Ohio 943 698 1,641

Florida 796 844 1,640

California 1,052 589 1,641

Other 984 820 1,804

Total Home equity loans and lines of credit 3,775 2,951 6,726

Total $ 14,165 $ 11,655 $ 25,820

Total loans seriously delinquent (i.e.

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.

delinquent 90 days or more) were 0.09% of total net loans at March 31, 2024 and at September 30, 2023.

The percentage of loans seriously delinquent to total net loans increased in the residential Core portfolio to 0.06% at March 31, 2024, from 0.05% at September 30, 2023.

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

Serious delinquencies in the home equity loans and lines of credit portfolio remained at 0.03% at March 31, 2024 from September 30, 2023.

Although delinquencies remain at or near historic lows, recent economic trends and rising interest rates have led to increased delinquencies in all portfolios.

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.

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2024 September 30,

2023 December 31,

(Dollars in thousands)

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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 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.

2024 September 30,

2023 December 31,

(Dollars in thousands)

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Accruing Collateral-Dependent Loans

8,385 10,962 13,612

Loans Collectively Evaluated (4,845) (4,647)

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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.

Loan modifications may include interest rate reductions, term extensions (generally including capitalization of delinquent amounts), 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.

Comparison of Financial Condition at March 31, 2024 and September 30, 2023

Total assets increased $99.2 million, or 0.6%, to $17.02 billion at March 31, 2024, from $16.92 billion at September 30, 2023.

This increase was mainly the result of an increase in cash and cash equivalents, partially offset by a decreases in loans held for investment, and prepaid expenses and other assets.

Cash and cash equivalents increased $127.6 million, or 27.3%, to $594.3 million at March 31, 2024, 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 $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.

Investment securities, all of which are classified as available for sale, increased $11.9 million to $520.2 million at March 31, 2024, from $508.3 million at September 30, 2023.

The increase was the result of a $3.2 million increase in the mortgage-backed securities portfolio, and an $8.6 million increase in the balance of U.S.

government and agency obligations during the six months ended March 31, 2024.

There were no sales of investment securities during the six months ended March 31, 2024.

Loans held for investment, net of deferred loan fees and allowance for credit losses, decreased $16.1 million, or less than 1%, to $15.15 billion at March 31, 2024, from $15.17 billion at September 30, 2023, as repayments and sales of mortgage loans held for investment outpaced originations and additional draws on existing accounts.

This decrease included a $310.2 million, or 2.6%, decrease in residential mortgage loans to $11.81 billion at March 31, 2024, from $12.12 billion at September 30, 2023.

In addition, there was a $289.1 million increase in the balance of home equity loans and lines of credit during the six months ended March 31, 2024.

During the six months ended March 31, 2024, $99.8 million of three- and five-year “Smart Rate” loans were originated while $309.1 million of fixed-rate first mortgage loans were originated.

Between September 30, 2023 and March 31, 2024, the total fixed-rate portion of the first mortgage loan portfolio decreased $170.5 million.

During the six months ended March 31, 2024, $121.3 million of first mortgage loans were sold or committed to sell to Fannie Mae.

Commitments originated for home equity loans, lines of credit, and bridge loans were $915.4 million for the six months ended March 31, 2024, compared to $720.0 million for the six months months ended March 31, 2023.

At March 31, 2024, pending commitments to originate new equity loans and lines of credit were $202.9 million.

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

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 $94.8 million, or 0.63% of total loans receivable, at March 31, 2024, including a $26.7 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.

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.

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

The amount of FHLB stock owned decreased $6.7 million or 2.7% to $240.4 million at March 31, 2024, from $247.1 million at September 30, 2023.

The decrease is a result of stock redemptions by the FHLB.

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.

Total bank owned life insurance contracts increased $1.4 million, to $313.5 million at March 31, 2024, from $312.1 million at September 30, 2023, due to changes in cash surrender value, offset by death benefits received.

Other assets, including prepaid expenses, decreased $26.3 million to $91.0 million at March 31, 2024, from $117.3 million at September 30, 2023.

The decrease was primarily due to a $22.3 million decline in swap margin receivable.

Deposits increased $485.8 million, or 5.1%, to $9.94 billion at March 31, 2024, from $9.45 billion at September 30, 2023.

The increase in deposits resulted primarily from a $868.4 million increase in CDs, inclusive of brokered CDs, as current market interest rates, product development and marketing have attracted additional balances and new customers to our CDs.

The change also included a $10.5 million increase in accrued interest payable.

The increase was partially offset by a $194.2 million decrease in savings accounts, a $106.6 million decrease in money market accounts, and a $92.3 million decrease in checking accounts.

The balance of brokered CDs included in total deposits at March 31, 2024, increased by $99.1 million to $1.26 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 $335.9 million and $322.5 million at March 31, 2024 and September 30, 2023, respectively.

Borrowed funds decreased $318.2 million, or 6.0%, to $4.96 billion at March 31, 2024, from $5.27 billion at September 30, 2023.

The decrease was primarily due to borrowings being replaced at maturity, when needed, by retail deposits.

The total balance of borrowed funds at March 31, 2024, all from the FHLB, included $1.83 billion of term advances with a weighted average maturity of 2.2 years and $3.10 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 $15.3 million to $109.1 million at December 31, 2023, from $124.4 million at September 30, 2023.

Borrowers' advances for insurance and taxes decreased by $24.9 million to $99.5 million at March 31, 2024, 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 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.

Accrued expenses and other liabilities decreased by $19.8 million to $93.1 million at March 31, 2024, from $112.9 million at September 30, 2023.

The decrease is primarily due to a $10.8 million decrease in deferred income taxes, a $1.7 million decrease in bonus accruals, and a $4.1 million decrease in real estate tax payments remitted on behalf of borrowers.

Total shareholders’ equity decreased $19.9 million, or 1.0%, to $1.91 billion at March 31, 2024, from $1.93 billion at September 30, 2023.

Activity reflects $41.4 million of net income in the current year reduced by dividends of $29.4 million.

Other changes include $42.8 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.

During the six months ended March 31, 2024, 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 March 31, 2024.

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.

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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 December 31, 2023 and 2022

Comparison of Operating Results for the Three Months Ended March 31, 2024 and 2023

Average Balances and Yields .

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Three Months Ended Three Months Ended

December 31, 2023 December 31, 2022

March 31, 2024 March 31, 2023

Balance Interest

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Interest-earning assets:

Interest-earning cash

equivalents $ 398,506 $ 5,124 5.14 % $ 354,214 $ 3,249 3.67 %

Interest-earning cash equivalents

$ 720,657 $ 9,919 5.51 % $ 350,437 $ 3,947 4.51 %

Investment securities

72,091 907 5.03 3,649 11 1.21

Mortgage-backed securities

Loans (2) 15,232,349 162,035 4.26 14,396,685 129,665 3.60

448,653 3,569 3.18 475,902 3,444 2.89

15,163,185 162,970 4.30 14,517,771 136,835 3.77

Federal Home Loan Bank stock

244,560 6,128 10.02 230,496 3,315 5.75

Total interest-earning assets 16,649,146 183,493 4.41 % 15,578,255 147,552 3.79 %

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Checking accounts

$ 887,584 98 0.04 % $ 1,128,560 2,229 0.79 %

Savings accounts

1,561,331 5,598 1.43 1,668,115 5,028 1.21

Certificates of deposit

7,548,314 66,989 3.55 6,110,460 32,619 2.14

Borrowed funds

5,033,253 39,430 3.13 5,112,767 38,408 3.00

Total interest-bearing liabilities 15,030,482 112,115 2.98 % 14,019,902 78,284 2.23 %

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

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.

Net income increased $4.8 million, or 30%, to $20.7 million for the quarter ended March 31, 2024, from $15.9 million for the quarter ended March 31, 2023.

The increase in net income was attributable primarily to an increase in net interest income and decreases related to compensation and marketing expenses.

Interest and Dividend Income.

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Interest income on loans increased $26.2 million, or 19%, to $163.0 million during the current quarter compared to $136.8 million during the same quarter in the prior year.

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.

This change was primarily attributed to a 53 basis point increase in the average yield on loans for the quarter ended March 31, 2024, to 4.30%, compared to 3.77% the same quarter last year.

It was also attributed to a 4%, or $645.4 million, increase in the average balance of loans to $15.16 billion for the quarter ended March 31, 2024, compared to $14.52 billion during the same quarter last year as new loan production exceeded principal repayments and loan sales over the past year.

Interest Expense .

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.

Interest expense increased $33.8 million, or 43%, to $112.1 million during the current quarter compared to $78.3 million during the quarter ended March 31, 2023.

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.

Interest expense on CDs, net of related interest rate swap contracts, increased $34.4 million, or 105%, to $67.0 million during the current quarter compared to $32.6 million during the quarter ended March 31, 2023.

The increase was attributed to a 141 basis point increase in the average rate paid on CDs to 3.55% for the current quarter from 2.14% 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 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.

Additionally, there was a $1.44 billion, or 23.5%, increase in the average balance of CDs to $7.55 billion during the current quarter from $6.11 billion during the same quarter of the prior year.

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

Interest expense on borrowed funds, net of related interest rate swap contracts, increased $1.0 million, or 3%, to $39.4 million during the current quarter compared to $38.4 million during the quarter ended March 31, 2023.

This increase was mainly attributed to a 13 basis point increase in the average rate paid on these funds, to 3.13% for the current quarter from 3.00% for the same quarter last 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.

In addition, the average balance of borrowed funds decreased $79.5 million, or 2%, to $5.03 billion during the current quarter from an average balance of $5.11 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 $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.

Net interest income increased $2.1 million to $71.4 million during the current quarter when compared to $69.3 million for the three months ended March 31, 2023.

Both the average balance and the yield of interest earning assets increased when compared to the same period last year.

And to a lesser extent, there was also an increase in the cost of interest-bearing liabilities when compared to the same period last year.

Average interest-earning assets during the current quarter increased $1.07 billion, or 7%, when compared to the quarter ended March 31, 2023.

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

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The interest rate spread decreased 13 basis points to 1.43% compared to 1.56% during the same quarter last year.

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.

The net interest margin decreased seven basis points to 1.71% in the current quarter compared to 1.78% 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 substantial 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 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.

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 March 31, 2024 and March 31, 2023.

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 $1.0 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.

In the current quarter, we recorded net recoveries of $1.3 million compared to net recoveries of $1.2 million in the quarter ended March 31, 2023.

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.

Refer to the Lending Activities section of Item 2.

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Non-Interest Income.

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 income increased $0.4 million, or 8%, to $5.7 million during the current quarter compared to $5.3 million during the quarter ended March 31, 2023.

Non-Interest Expense.

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.

Non-interest expense decreased $3.4 million, or 6%, to $52.2 million during the current quarter compared to $55.6 million during the quarter ended March 31, 2023.

The decrease primarily consisted of a $1.6 million decrease in marketing expenses, and a $2.9 million decrease in salaries and employee benefits, partially offset by a $0.5 million increase in FDIC premiums.

Income Tax Expense.

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 income taxes increased $1.1 million to $5.2 million during the current quarter compared to $4.1 million during the quarter ended March 31, 2023.

The provision for the current quarter included $4.7 million of federal income tax provision and $0.5 million of state income tax expense.

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.

The provision for the quarter ended March 31, 2023, included $3.7 million of federal income tax provision and $0.4 million of state income tax expense.

Our effective federal tax rate was 18.4% and 19.3% during the quarters ended March 31, 2024 and March 31, 2023, respectively.

Comparison of Operating Results for the Six Months Ended March 31, 2024 and 2023

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.

Six Months Ended Six Months Ended

March 31, 2024 March 31, 2023

Balance Interest

Expense Yield/

Cost (1) Average

Balance Interest

Expense Yield/

(Dollars in thousands)

Interest-earning assets:

Interest-earning cash equivalents

$ 559,581 $ 15,043 5.38 % $ 352,325 $ 7,196 4.08 %

Investment securities

68,435 1,757 5.13 3,634 22 1.21

Mortgage-backed securities 446,532 7,114 3.19 469,933 6,495 2.76

15,197,767 325,005 4.28 14,457,228 266,500 3.69

Federal Home Loan Bank stock

257,550 11,733 9.11 224,889 6,309 5.61

Total interest-earning assets 16,529,865 360,652 4.36 % 15,508,009 286,522 3.70 %

Noninterest-earning assets 529,303 506,658

Total assets $ 17,059,168 $ 16,014,667

Interest-bearing liabilities:

Checking accounts

$ 912,701 216 0.05 % $ 1,156,728 4,639 0.80 %

Savings accounts

1,641,398 12,510 1.52 1,717,235 8,735 1.02

Certificates of deposit

7,197,898 124,285 3.45 6,041,692 56,357 1.87

Borrowed funds

5,130,746 83,171 3.24 4,992,956 72,366 2.90

Total interest-bearing liabilities 14,882,743 220,182 2.96 % 13,908,611 142,097 2.04 %

Noninterest-bearing liabilities 245,503 233,257

Total liabilities 15,128,246 14,141,868

Shareholders’ equity 1,930,922 1,872,799

Total liabilities and shareholders’ equity $ 17,059,168 $ 16,014,667

Net interest income $ 140,470 $ 144,425

Interest rate spread (1)(3) 1.40 % 1.66 %

Net interest-earning assets (4) $ 1,647,122 $ 1,599,398

Net interest margin (1)(5) 1.70 % 1.86 %

Average interest-earning assets to average interest-bearing liabilities 111.07 % 111.50 %

Selected performance ratios:

Return on average assets (1) 0.49 % 0.48 %

Return on average equity (1) 4.29 % 4.07 %

Average equity to average assets 11.32 % 11.69 %

_________________

(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 $3.3 million to $41.4 million for the six months ended March 31, 2024, compared to $38.1 million for the six months ended March 31, 2023.

The increase in net income was primarily driven by an increase in non-interest income and decreases in compensation and marketing expenses, partially offset by a decrease in net interest income income.

Interest and Dividend Income.

Interest and dividend income increased $74.2 million, or 26%, to $360.7 million during the six months ended March 31, 2024, compared to $286.5 million during the same six months in the prior year.

The increase in interest and dividend income resulted mainly from an increase in interest income on loans, other interest earning assets, as well as increases in income earned on FHLB stock.

Interest income on loans increased $58.5 million, or 22%, to $325.0 million for the six months ended March 31, 2024, compared to $266.5 million for the six months ended March 31, 2023.

This increase was attributed mainly to an 59 basis point increase in the average yield on loans to 4.28% for the six months ended March 31, 2024, from 3.69% for the same six months in the prior fiscal year.

Adding to the increase was a $740.5 million increase in the average balance of loans to $15.20 billion for the current six months compared to $14.46 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 $78.1 million, or 55%, to $220.2 million during the current six months compared to $142.1 million during the six months ended March 31, 2023.

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

Interest expense on CDs, net of related interest rate swap contracts, increased $67.9 million, or 120%, to $124.3 million during the six months ended March 31, 2024, compared to $56.4 million during the six months ended March 31, 2023.

The increase was attributed primarily to a 158 basis point increase in the average rate paid on CDs to 3.45% during the current six months from 1.87% during the same six months last fiscal year.

In addition, there was a $1.16 billion, or 19%, increase in the average balance of CDs to $7.20 billion from $6.04 billion during the same six months of the prior fiscal year.

Interest expense on savings accounts increased $3.8 million to $12.5 million during the six months ended March 31, 2024, compared to interest expense of $8.7 million for the six-month period ended March 31, 2023.

Interest expense on checking accounts decreased $4.4 million to $0.2 million during the six months ended March 31, 2024, compared to interest expense of $4.6 million for the six-month period ended March 31, 2023.

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, net of related interest rate swap contracts, increased $10.8 million, or 15%, to $83.2 million during the six months ended March 31, 2024, from $72.4 million during the six months ended March 31, 2023.

The increase was primarily the result of higher average interest rates for the six months ended March 31, 2024.

There was a 34 basis point increase in the average rate paid for these funds to 3.24% from 2.90% for the six months ended March 31, 2024 and March 31, 2023, respectively.

The average balance of borrowed funds increased $137.8 million, or 3%, to $5.13 billion during the current six months from $4.99 billion during the same six 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 decreased $3.9 million, or 3%, to $140.5 million during the six months ended March 31, 2024, from $144.4 million during the six months ended March 31, 2023.

The net decrease consisted of a $74.2 million increase in interest income offset by a $78.1 million increase in interest expense.

Average interest-earning assets increased during the current six months by $1.02 billion, or 7%, to $16.53 billion when compared to the six months ended March 31, 2023.

The increase in average assets was attributed primarily to a $740.5 million increase in the average balance of our loans, a $32.7 million increase in FHLB stock and a $207.3 million increase in interest-bearing cash equivalents.

The yield on average interest-earning assets increased 66 basis points to 4.36% for the six months ended March 31, 2024, from 3.70% for the six months ended March 31, 2023.

Average interest-bearing liabilities increased $974.1 million to $14.88 billion for the six months ended March 31, 2024, compared to $13.91 billion for the six months ended March 31, 2023.

Average interest-bearing liabilities experienced a 92 basis point increase in cost and the interest rate spread decreased 26 basis points to 1.40% compared to 1.66% during the same six months last fiscal year.

The net interest margin was 1.70% for the current six months and 1.86% for the same six 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 six months ended March 31, 2024, and March 31, 2023.

In the current six months, we recorded net recoveries of $2.3 million, as compared to net recoveries of $2.9 million for the six months ended March 31, 2023.

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.

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

Non-Interest Income.

Non-interest income increased $1.5 million, or 14%, to $12.0 million during the six months ended March 31, 2024, compared to $10.5 million during the six months ended March 31, 2023.

The increase in non-interest income was primarily due to a $1.0 million increase in cash surrender value and death benefits from bank owned life insurance, a $0.3 million increase in the net gain on sale of loans, offset by a $0.3 million decrease in loan fees and service charges.

There were loan sales of $121.3 million during the six months ended March 31, 2024, compared to loan sales of $34.6 million during the six months ended March 31, 2023.

Non-Interest Expense.

Non-interest expense decreased $6.3 million, or 6%, to $102.5 million during the six months ended March 31, 2024 compared to $108.8 million during the six months ended March 31, 2023.

This decrease was driven by a $4.2 million decrease in salaries and employee benefits, a $4.9 million decrease in marketing expenses, partially offset by a $1.6 million increase in federal insurance premiums and a $0.7 million increase in other operating expenses.

Income Tax Expense.

The provision for income taxes increased $0.6 million to $10.6 million during the six months ended March 31, 2024 from $10.0 million for the six months ended March 31, 2023 reflecting the higher level of pre-tax income during the more recent period.

The provision for the current six months included $9.8 million of federal income tax provision and $0.8 million of state income tax provision.

The provision for the six months ended March 31, 2023 included $9.0 million of federal income tax provision and $1.1 million of state income tax provision.

Our effective federal tax rate was 19.1% during the six months ended March 31, 2024 and 19.0% during the six months ended March 31, 2023.

Liquidity and Capital Resources

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The Association’s Asset/Liability Management Committee is responsible for establishing and monitoring our liquidity targets and strategies in order to ensure that sufficient liquidity exists for meeting the borrowing needs and deposit withdrawals of our customers as well as unanticipated contingencies.

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

For the three months ended March 31, 2024, our liquidity ratio averaged 6.44%.

We believe that we had sufficient sources of liquidity to satisfy our short- and long-term liquidity needs as of March 31, 2024.

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.

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

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".

At March 31, 2024, cash and cash equivalents totaled $594.3 million, which represented an increase of 27% from $466.7 million at September 30, 2023.

Investment securities classified as available-for-sale, which provide additional sources of liquidity, totaled $520.2 million at March 31, 2024.

During the six-month period ended March 31, 2024, loan sales, including commitments to sell, totaled $121.3 million, which included sales to Fannie Mae, consisting of $105.3 million of long-term, fixed-rate, agency-compliant, non-Home Ready first mortgage loans and $16.0 million of loans that qualified under Fannie Mae's Home Ready initiative.

At March 31, 2024, $9.7 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 December 31, 2023, we had $207.0 million in outstanding commitments to originate loans.

At March 31, 2024, we had $277.7 million in outstanding commitments to originate loans.

In addition to commitments to originate loans, we had $4.91 billion in unfunded home equity lines of credit to borrowers.

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

CDs due within one year of March 31, 2024, totaled $4.41 billion, or 44.4% 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 December 31, 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 March 31, 2025.

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

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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.

During the six months ended March 31, 2024, we originated $408.8 million of residential mortgage loans, and $915.4 million of commitments for home equity loans and lines of credit, while during the six months ended March 31, 2023, we originated $821.9 million of residential mortgage loans and $720.0 million of commitments for home equity loans and lines of credit.

We purchased $96.7 million of securities during the six months ended March 31, 2024, and $63.7 million during the six months ended March 31, 2023.

Also, during the six months ended March 31, 2024, we purchased $85.8 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 $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.

We experienced a net increase in total deposits of $485.8 million during the six months ended March 31, 2024, which reflected the active management of the offered rates on maturing CDs, compared to a net increase of $78.2 million during the six months ended March 31, 2023.

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 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:

During the six months ended March 31, 2024, there was a $99.1 million increase in the balance of brokered CDs (exclusive of acquisition costs and subsequent amortization), which had a balance of $1.26 billion at March 31, 2024.

At March 31, 2023, the balance of brokered CDs was $556.8 million.

Principal and interest owed on loans serviced for others experienced a net decrease of $3.9 million to $25.9 million during the six months ended March 31, 2024, compared to a net decrease of $2.7 million to $27.2 million during the six months ended March 31, 2023.

During the six months ended March 31, 2024, we decreased our total borrowings by $318.2 million as we funded:

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

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

During the six months ended March 31, 2023, our total borrowings increased by $411.7 million.

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

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Treasuries, agency debt and mortgage-backed securities, owned as of March 21, 2023.

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

The BTFP ceased extending new loans on March 11, 2024.

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.

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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.

In addition to interest rate swap agreements, we have the ability to obtain funding with terms greater than one year through retail and brokered CDs, generally at market rates of interest similar to other long-term funding alternatives.

Therefore, we expect our ability to access long-term funding to continue, and our funding alternatives will not have a material impact to our funding costs, interest margin and spreads.

At March 31, 2024, we had $4.93 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 six months ended March 31, 2024, we had average outstanding advances from the FHLB of Cincinnati of $5.13 billion, as compared to average outstanding advances of $4.99 billion during the six months ended March 31, 2023.

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

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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.

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 ending in 2025.

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 standard minimum capital requirements.

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).

At March 31, 2024, the Association exceeded the regulatory requirement for the "capital conservation buffer".

As of March 31, 2024, 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.

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Common Equity Tier 1 Capital to Risk-Weighted Assets 1,681,816 17.40 % 628,287 6.50 %

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

The capital ratios of the Company as of March 31, 2024, are presented in the table below (dollar amounts in thousands).

Total Capital to Risk-Weighted Assets $ 1,913,177 19.78 %

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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.

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.

At March 31, 2024, the Company had, in the

form of cash and a demand loan from the Association, $152.6 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 December 31, 2023.

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

There were 4,808,049 shares repurchased under that program between its start date and March 31, 2024.

During the six months ended March 31, 2024, 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, 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 26, 2023 and December 13, 2023.

Third Federal Savings, MHC waived its right to receive $0.2825 per share dividend payments on September 26, 2023, December 13, 2023, and March 21, 2024.

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