TFS Financial Corporation, through its subsidiaries, operates as a federally chartered stock holding company. The company is a subsidiary of Third Federal Savings and Loan Association of Cleveland, MHC.
The principal line of business of the company is retail consumer banking, including mortgage lending, deposit gathering, and other financial services.
The company’s primary operating subsidiaries include the Association (Third Federal Savings and Loan Association of Cleveland) and Third Capital...
TFS Financial Corporation, through its subsidiaries, operates as a federally chartered stock holding company. The company is a subsidiary of Third Federal Savings and Loan Association of Cleveland, MHC.
The principal line of business of the company is retail consumer banking, including mortgage lending, deposit gathering, and other financial services.
The company’s primary operating subsidiaries include the Association (Third Federal Savings and Loan Association of Cleveland) and Third Capital, Inc. The Association is a federal savings association which provides retail loan and savings products to its customers in Ohio and Florida through its full-service branches, two loan production offices, customer service call center and internet site. The Association also provides savings products, purchase mortgages, first mortgage refinance loans, home equity lines of credit, and home equity loans in states outside of its branch footprint. The Association also acquires first mortgage loans through a correspondent lending partnership. Third Capital, Inc. was formed to hold non-thrift investments and subsidiaries.
The Association’s primary business strategy is to originate mortgage loans with interest rates that are competitive with those of similar products offered by other financial institutions in its markets. Similarly, the Association offers checking accounts, savings accounts, money market accounts and certificate of deposit accounts, each bearing interest rates that are competitive with similar products offered by other financial institutions in its markets. The Association expects to continue to pursue this business philosophy. While this strategy does not enable the Association to earn the highest rates of interest on loans that it offers or to pay the lowest rates on its deposit accounts, the Association believes that this strategy is the primary reason for its successful growth in the past and will continue to be a successful strategy in the future.
The Association attracts retail deposits from the general public in the areas surrounding its main office and its branch offices. It also utilizes its internet website, direct mail solicitation and its customer service call center to generate loan applications and attract retail deposits. Longer-term brokered CDs and advances from the FHLB of Cincinnati, as well as shorter-term brokered CDs and advances from the FHLB of Cincinnati, hedged to longer effective durations by interest rate exchange contracts, are also used as cost-effective funding alternatives. In addition to residential real estate mortgage loans, the Association originates residential construction loans to individuals for the construction of their personal residences by a qualified builder. The Association also offers home equity loans and lines of credit subject to certain property and credit performance conditions. The Association retains in its portfolio a large portion of the loans that it originates. The Association also purchases residential real estate mortgage loans through a correspondent lending partnership. Loans that the Association sells consist primarily of long-term, fixed-rate residential real estate mortgage loans. The Association retains the servicing rights on all loans that it sells. The Association’s revenues are derived primarily from interest on loans and, to a lesser extent, interest on interest-earning deposits in other financial institutions, deposits maintained at the FRS, federal funds sold, investment securities, including mortgage-backed securities and dividends from FHLB of Cincinnati stock. The Association also generates revenues from fees, gains on loan sales and service charges. The Association’s primary sources of funds are deposits, borrowings, principal and interest payments on loans and securities and proceeds from loan sales.
Market Area
The Association conducts its operations from its main office in Cleveland, Ohio, and from various additional, full-service branches and various loan production offices located throughout the states of Ohio and Florida. In Ohio, the Association maintains various full-service offices located in the northeast Ohio counties of Cuyahoga, Lake, Lorain, Medina and Summit; a regional loan production office located in the central Ohio (Columbus, Ohio), and a regional loan production office located in the southern Ohio county of Butler (Cincinnati, Ohio). In Florida, the Association maintains various full-service branches located in the counties of Pasco, Pinellas, Hillsborough, Sarasota, Lee, Collier, Palm Beach and Broward.
The Association also provides savings and loan products in states outside of its core markets of Ohio, Florida, Kentucky and Indiana using its customer service call center and its internet site. The Association also purchases first mortgage loans from its correspondent lending partner, in Ohio, Indiana, North Carolina, South Carolina, Pennsylvania and Michigan. Savings products are available in all 50 states, while first mortgage loans, home equity lines of credit, home equity loans and bridge loans are offered in up to 27 states and the District of Columbia.
The Association’s primary strategy for increasing and retaining its customer base is to offer competitive deposit and loan rates and other product features, delivered with exceptional customer service, in each of the markets it serves.
The company continues to utilize a multi-faceted approach to support its efforts to instill customer and marketplace confidence. First, the company provides thorough and timely information to all of its associates so as to prepare them for their day-to-day interactions with customers and other individuals who are not part of the company.
Lending Activities
The company’s principal lending activity is the origination of up to 30-year fixed-rate and adjustable-rate, first mortgage loans to purchase or refinance residential real estate. Also, the company offers home equity loans and lines of credit and originates residential construction loans to individuals (for the construction of their personal residences by a qualified builder). The company lends in 27 states and the District of Columbia, and through a correspondent lending partnership, the company purchases first mortgages in six of those states.
Residential Real Estate Mortgage Loans. The company’s primary lending activity is the origination of residential real estate mortgage loans. The company offers fixed-rate conventional mortgage loans with terms of 30 years or less that are fully amortizing with monthly loan payments, and adjustable-rate mortgage loans that amortize over a period of up to 30 years, provide an initial fixed interest rate for three or five years and then adjust annually, subject to rate reset options as discussed later in this section. At September 30, 2024, there were no ‘interest only’ residential real estate mortgage loans held in the company's portfolio.
The company generally originates or purchases both fixed- and adjustable-rate mortgage loans in amounts up to 2 million dollars, for owner occupied, one- to four-family homes in most of its lending markets. The loans originated or purchased for dollar amounts on the higher end of the range are commonly referred to as ‘jumbo loans.’ The company generally underwrites jumbo loans in a manner similar to conforming loans. Jumbo loans are not uncommon in the company’s market areas.
The company offers ‘Smart Rate’ adjustable-rate mortgage loan products secured by residential properties with interest rates that are fixed for an initial period of three or five years, after which the interest rate generally resets every year based upon a contractual spread or margin linked to the Prime Rate as published in the Wall Street Journal.
The company retains the servicing rights on all loans sold in order to generate fee income and reinforce its commitment to customer service. One- to four-family residential mortgage real estate loans that have been sold were underwritten generally to Fannie Mae guidelines. At the time of the closing of these loans, the company owns the loans and subsequently sells them to Fannie Mae and others providing normal and customary representations and warranties, including representations and warranties related to compliance, generally with Fannie Mae underwriting standards.
The company requires title insurance on all of its residential real estate mortgage loans. The company also requires that borrowers maintain fire and extended coverage casualty insurance (and, if appropriate, flood insurance up to $250 thousand) in an amount at least equal to the lesser of the loan balance or the replacement cost of the improvements. A majority of its residential real estate mortgage loans have a mortgage escrow account from which disbursements are made for real estate taxes and to a lesser extent for hazard insurance and flood insurance. The company does not conduct environmental testing on residential real estate mortgage loans unless specific concerns for hazards are identified by the appraiser used in connection with the origination of the loan.
Home Equity Loans and Home Equity Lines of Credit. The company offers home equity loans and home equity lines of credit, which are primarily secured by a second mortgage on residences. The home equity product is offered in 27 states and the District of Columbia.
The company originates its home equity loans and home equity lines of credit without application fees (except for bridge loans) or borrower-paid closing costs. Home equity loans are offered with variable and fixed interest rates, are fully amortizing and have terms of up to 30 years. The company’s home equity lines of credit are offered with adjustable rates of interest indexed to the Prime Rate, as reported in The Wall Street Journal.
Construction Loans. The company originates construction loans to individuals for the construction of their personal single-family residence by a qualified builder (construction/permanent loans). The company’s construction/permanent loans generally provide for disbursements to the builder or sub-contractors during the construction phase as work progresses.
Investment Portfolio
As of September 30, 2024, the company’s investment portfolio included REMICs; Fannie Mae certificates; Freddie Mac certificates; and the U.S. Government and agency obligations.
Deposits
The Association obtains deposits primarily from the areas in which its branch offices are located, as well as from its customer service call center, its internet website, and from brokered deposits. It relies on its competitive pricing, convenient locations, and customer service to attract and retain its non-brokered deposits. It offers a variety of retail deposit accounts with a range of interest rates and terms. Its retail deposit accounts consist of savings accounts, money market accounts, checking accounts, CDs, individual retirement accounts, and other qualified plan accounts.
Supervision and Regulation
The company is a savings and loan holding company, and is required to file certain reports with, is subject to examination by, and otherwise must comply with the rules and regulations of, the FRS. The company is also subject to the rules and regulations of the SEC under the federal securities laws.
The Association is a federal savings association that is examined and supervised by the OCC and the CFPB, and is subject to examination by the FDIC under certain circumstances. The Association also is a member of and owns stock in the FHLB of Cincinnati, which is one of the eleven regional banks in the FHLB System. The CFPB has examination and enforcement authority over the Association with respect to consumer protection laws and regulations. The Association’s relationship with its depositors and borrowers also is regulated to a great extent by federal law and, to a much lesser extent, state law, especially in matters concerning the ownership of deposit accounts and the form and content of the Association’s mortgage documents.
In July 2024, the Association received a rating of ‘Satisfactory’ from the OCC for the exam during for the period of January 1, 2020 through December 31, 2022.
The Association’s authority to extend credit to its directors, executive officers and 10% shareholders, as well as to entities controlled by such persons, is governed by the requirements of Sections 22(g) and 22(h) of the Federal Reserve Act and Regulation O of the FRS.
The DIF of the FDIC insures deposits at FDIC-insured depository institutions such as the Association. The Association is a member of the FHLB System.
The Association’s operations are also subject to federal laws and regulations applicable to credit transactions, such as the:
Truth-In-Lending Act, governing disclosures of credit terms to consumer borrowers;
Home Mortgage Disclosure Act, requiring financial institutions to provide information to enable the public and public officials to determine whether a financial institution is fulfilling its obligation to help meet the housing needs of the community it serves;
Real Estate Settlement Procedures Act, requiring that borrowers for mortgage loans for one- to four-family residential real estate receive various disclosures, including good faith estimates of settlement costs, lender servicing and escrow account practices, and prohibiting certain practices that increase the cost of settlement services;
Equal Credit Opportunity Act, prohibiting discrimination on the basis of race, creed or other prohibited factors in extending credit;
Fair Credit Reporting Act, governing the use and provision of information to credit reporting agencies;
Fair Debt Collection Act, governing the manner in which consumer debts may be collected by collection agencies; and
Implementing regulations of the relevant federal agencies charged with the responsibility of implementing such federal laws that have supervisory authority over the Association.
The operations of the Association also are subject to:
The Right to Financial Privacy Act, which imposes a duty to maintain confidentiality of consumer financial records and prescribes procedures for complying with administrative subpoenas of financial records;
The Electronic Funds Transfer Act and Regulation E promulgated thereunder, which govern automatic deposits to and withdrawals from deposit accounts and customers’ rights and liabilities arising from the use of automated teller machines and other electronic banking services;
The Check Clearing for the 21st Century Act (also known as ‘Check 21’), which gives ‘substitute checks,’ such as digital check images and copies made from those images, the same legal standing as the original paper check;
The Bank Secrecy Act and Title III of The Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (referred to as the ‘USA PATRIOT Act’), which require the Association to implement a compliance program to detect and prevent money laundering, terrorist financing, and illicit crime. Together, the BSA and USA PATRIOT Act require the Association to implement internal controls, conduct customer due diligence, maintain records, and file reports;
Regulations of the Office of Foreign Assets Control that enforce economic and trade sanctions against targeted foreign countries, regimes, and other designated individuals and organizations;
The Gramm-Leach-Bliley Act, which placed limitations on the sharing of consumer financial information by financial institutions with unaffiliated third parties. Specifically, the Gramm-Leach-Bliley Act requires all financial institutions offering financial products or services to retail customers to provide such customers with the financial institution’s privacy policy and provide such customers the opportunity to ‘opt out’ of the sharing of certain personal financial information with unaffiliated third parties; and
The DFA, which holds lenders accountable for ensuring a borrower's ability to repay a mortgage. Loans defined as a ‘qualified mortgage’ must be made to a borrower whose total monthly debt-to-income ratio does not exceed 43%, as well as the verification and documentation of the income and financial resources relied upon to qualify the borrower on the loan. Upon the loan being underwritten based on a fully amortizing payment schedule and maximum interest rate during the first five years, as well as meeting the other qualifications above, the loan is determined to be a ‘qualified mortgage’ and therefore presumed to have complied with the ability-to-repay standard under the DFA.
The company is a non-diversified savings and loan holding company within the meaning of the HOLA.
The Sarbanes-Oxley Act of 2002 and related regulations address, among other issues, corporate governance, auditing and accounting, executive compensation, and enhanced and timely disclosure of corporate information. The company has prepared policies, procedures and systems designed to ensure compliance with this law and related regulations.
History
TFS Financial Corporation was founded in 1938. The company was incorporated in 1996.
