TFS Financial CORPTFSL
TFS Financial CORP Fair Value Disclosure
FAIR VALUE
Under U.S. GAAP, fair value is defined as the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date under current market conditions. A fair value framework is established whereby assets and liabilities measured at fair value are grouped into three levels of a fair value hierarchy, based on the transparency of inputs and the reliability of assumptions used to estimate fair value.
Presented below is a discussion of the methods and significant assumptions used by the Company to estimate fair value.
Investment Securities Available for Sale—Investment securities available for sale are recorded at fair value on a recurring basis. At September 30, 2025 and 2024, this includes $520,659 and $526,251, respectively, of investments in U.S. government and agency obligations including U.S. Treasury notes and investments in highly liquid collateralized mortgage obligations, that can include items issued by Fannie Mae, Freddie Mac, and Ginnie Mae, measured using the market approach. The fair values of investment securities represent unadjusted price estimates obtained from independent third-party nationally recognized pricing services using pricing models or quoted prices of securities with similar characteristics and are included in Level 2 of the hierarchy. Third party pricing is reviewed on a monthly basis for reasonableness based on the market knowledge and experience of company personnel that interact daily with the markets for these types of securities.
Mortgage Loans Held for Sale—The fair value of mortgage loans held for sale is estimated on an aggregate basis using a market approach based on quoted secondary market pricing for loan portfolios with similar characteristics. Loans held for sale are carried at the lower of cost or fair value, with the exception of mortgage loans held for sale subject to pending agency contracts to securitize and sell loans. The Company elects the fair value measurement option for mortgage loans held for sale subject to pending agency contracts to securitize and sell loans, as permitted under the fair value guidance in U.S. GAAP. This election is expected to reduce volatility in earnings related to market fluctuations between the contract trade and settlement dates. At September 30, 2025 and September 30, 2024, there were $22,861 and $10,713 pending agency contracts held for sale measured at fair value, respectively, with unpaid principal balances of $22,306 and $10,336. For the years ended September 30, 2025 and 2024, net gain (loss) on the sale of loans includes $28 and $337, respectively, related to unrealized gains or losses during the period due to changes in the fair value of loans held for sale subject to pending agency contracts. At September 30, 2025 and 2024 there were $34,801 and $7,061 of loans held for sale carried at cost, respectively. Loans held for sale are included in Level 2 of the hierarchy. Interest income on mortgage loans held for sale is recorded in interest income on loans.
Collateral-Dependent Loans—Collateral-dependent loans represent certain loans held for investment that are subject to a fair value measurement under U.S. GAAP because they are individually evaluated using a fair value measurement, such as the fair value of the underlying collateral. Credit loss is measured using a market approach based on the fair value of the collateral, less estimated costs to dispose, for loans the Company considers to be collateral-dependent due to a delinquency status or other adverse condition severe enough to indicate that the borrower can no longer be relied upon as the continued source of repayment. These conditions are described more fully in Note 5. LOANS AND ALLOWANCES FOR CREDIT LOSSES. To calculate the credit loss of collateral-dependent loans, the fair market values of the collateral, estimated using third-party appraisals in the majority of instances, are reduced by calculated estimated costs to dispose, derived from historical experience and recent market conditions. Any indicated credit loss is recognized by a charge to the allowance for credit losses. Subsequent increases in collateral values or principal pay downs on loans with recognized credit loss could result in a collateral-dependent loan being carried below its fair value. When no credit loss is indicated, the carrying amount is considered to approximate the fair value of that loan to the Company because contractually that is the maximum repayment the Company can expect. The amortized cost of loans individually evaluated for credit loss based on the fair value of the collateral are included in Level 3 of the hierarchy with assets measured at fair value on a non-recurring basis. The range and weighted average impact of estimated costs to dispose on fair values is determined at the time of credit loss or when additional credit loss is recognized and is included in quantitative information about significant unobservable inputs later in this note.
Real Estate Owned—Real estate owned includes real estate acquired as a result of foreclosure or by deed in lieu of foreclosure and is carried at the lower of the cost basis or fair value, less estimated costs to dispose. The carrying amounts of real estate owned at September 30, 2025 and September 30, 2024 were $1,921 and $174, respectively. Fair value is estimated under the market approach using independent third party appraisals. As these properties are actively marketed, estimated fair values may be adjusted by management to reflect current economic and market conditions. At September 30, 2025 and 2024, these adjustments were not significant to reported fair values. At September 30, 2025 and 2024, $2,355 and $220, respectively, of real estate owned is included in Level 3 of the hierarchy with assets measured at fair value on a non-recurring basis where the cost basis equals or exceeds the estimated fair values, less estimated costs to dispose, of $434 and $46, respectively. There was no real estate owned carried at their original or adjusted cost basis at September 30, 2025 and 2024.
Derivatives—Derivative instruments include interest rate lock commitments on loans being originated or acquired for the held for sale portfolio, forward commitments on contracts to deliver mortgage loans, and interest rate swaps designated as cash
flow hedges. Derivatives not designated as cash flow hedges are reported at fair value in Other assets or Other liabilities on the CONSOLIDATED STATEMENT OF CONDITION with changes in value recorded in current earnings. Derivatives qualifying as cash flow hedges are settled daily, bringing their fair value to $0. Refer to Note 17. DERIVATIVE INSTRUMENTS for additional information on cash flow hedges and other derivative instruments. Interest rate lock commitments are commitments to lend at interest rates and amounts defined prior to funding. The fair value of interest rate lock commitments is adjusted by a closure rate based on the estimated percentage of commitments that will result in closed loans. The range and weighted average impact of the closure rate is included in quantitative information about significant unobservable inputs later in this note. A significant change in the closure rate may result in a significant change in the ending fair value measurement of these derivatives relative to their total fair value. Because the closure rate is a significantly unobservable assumption, interest rate lock commitments are included in Level 3 of the hierarchy. Forward commitments on contracts to deliver mortgage loans are included in Level 2 of the hierarchy.
Assets and liabilities carried at fair value on a recurring basis in the CONSOLIDATED STATEMENTS OF CONDITION at September 30, 2025 and 2024 are summarized below.
| Recurring Fair Value Measurements at Reporting Date Using | |||||||||||||||||||||||
| September 30, 2025 | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||||||||||
| Assets | |||||||||||||||||||||||
| Investment securities available for sale: | |||||||||||||||||||||||
| REMIC’s | $ | 455,368 | $ | — | $ | 455,368 | $ | — | |||||||||||||||
| Fannie Mae certificates | 2,719 | — | 2,719 | — | |||||||||||||||||||
| Freddie Mac certificates | 8,617 | — | 8,617 | — | |||||||||||||||||||
| U.S. government and agency obligations | 53,955 | — | 53,955 | — | |||||||||||||||||||
| Mortgage loans held for sale | 22,861 | — | 22,861 | — | |||||||||||||||||||
| Derivatives: | |||||||||||||||||||||||
| Interest rate lock commitments | 272 | — | — | 272 | |||||||||||||||||||
| Total | $ | 543,792 | $ | — | $ | 543,520 | $ | 272 | |||||||||||||||
| Liabilities | |||||||||||||||||||||||
| Derivatives: | |||||||||||||||||||||||
| Forward commitments for the sale of mortgage loans | 351 | — | 351 | — | |||||||||||||||||||
| Total | $ | 351 | $ | — | $ | 351 | $ | — | |||||||||||||||
| Recurring Fair Value Measurements at Reporting Date Using | |||||||||||||||||||||||
| September 30, 2024 | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||||||||||
| Assets | |||||||||||||||||||||||
| Investment securities available for sale: | |||||||||||||||||||||||
| REMIC’s | $ | 449,401 | $ | — | $ | 449,401 | $ | — | |||||||||||||||
| Fannie Mae certificates | 2,945 | — | 2,945 | — | |||||||||||||||||||
| Freddie Mac certificates | 1,129 | — | 1,129 | — | |||||||||||||||||||
| U.S. government and agency obligations | 72,776 | — | 72,776 | — | |||||||||||||||||||
Mortgage loans held for sale | 10,713 | $ | — | 10,713 | $ | — | |||||||||||||||||
| Derivatives: | |||||||||||||||||||||||
Interest rate lock commitments | $ | 395 | — | — | $ | 395 | |||||||||||||||||
| Total | $ | 537,359 | $ | — | $ | 536,964 | $ | 395 | |||||||||||||||
| Liabilities | |||||||||||||||||||||||
| Derivatives: | |||||||||||||||||||||||
Forward commitments for the sale of mortgage loans | 72 | — | 72 | — | |||||||||||||||||||
| Total | $ | 72 | $ | — | $ | 72 | $ | — | |||||||||||||||
The table below presents a reconciliation of the beginning and ending balances and the location within the CONSOLIDATED STATEMENTS OF INCOME where gains (losses) due to changes in fair value are recognized on interest rate lock commitments which are measured at fair value on a recurring basis using significant unobservable inputs (Level 3).
| Interest Rate Lock Commitments | |||||||||||||||||
| Year Ended September 30, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Beginning balance | $ | 395 | $ | (1) | $ | (333) | |||||||||||
| Gain during the period due to changes in fair value: | |||||||||||||||||
| Included in other non-interest income | |||||||||||||||||
| Ending balance | $ | 272 | $ | 395 | $ | (1) | |||||||||||
| Change in unrealized gains for the period included in earnings for assets held at end of the reporting date | $ | 272 | $ | 395 | $ | (1) | |||||||||||
Summarized in the tables below are those assets measured at fair value on a nonrecurring basis.
| Nonrecurring Fair Value Measurements at Reporting Date Using | |||||||||||||||||||||||
| September 30, 2025 | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||||||||||
| Collateral-dependent loans, net of allowance | $ | 45,275 | $ | — | $ | — | $ | 45,275 | |||||||||||||||
Real estate owned(1) | 2,355 | — | — | 2,355 | |||||||||||||||||||
| Total | $ | 47,630 | $ | — | $ | — | $ | 47,630 | |||||||||||||||
______________________
(1) Amounts represent fair value measurements of properties before deducting estimated costs to dispose.
| Nonrecurring Fair Value Measurements at Reporting Date Using | |||||||||||||||||||||||
| September 30, 2024 | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||||||||||
| Collateral-dependent loans, net of allowance | $ | 39,577 | $ | — | $ | — | $ | 39,577 | |||||||||||||||
Real estate owned(1) | 220 | — | — | 220 | |||||||||||||||||||
| Total | $ | 39,797 | $ | — | $ | — | $ | 39,797 | |||||||||||||||
______________________
(1) Amounts represent fair value measurements of properties before deducting estimated costs to dispose.
The following provides quantitative information about significant unobservable inputs categorized within Level 3 of the Fair Value Hierarchy.
| Fair Value | ||||||||||||||||||||||||||||||||||||||
| September 30, 2025 | Valuation Technique(s) | Unobservable Input | Range | Weighted Average | ||||||||||||||||||||||||||||||||||
| Collateral-dependent loans, net of allowance | $45,275 | Market comparables of collateral discounted to estimated net proceeds | Discount rate applied to appraised value to estimated net proceeds: | |||||||||||||||||||||||||||||||||||
| • Residential Properties | 0 | - | 28% | 3.2% | ||||||||||||||||||||||||||||||||||
| Interest rate lock commitments | $272 | Quoted Secondary Market pricing | Closure rate | 0 | - | 100% | 98.7% | |||||||||||||||||||||||||||||||
| Fair Value | ||||||||||||||||||||||||||||||||||||||
| September 30, 2024 | Valuation Technique(s) | Unobservable Input | Range | Weighted Average | ||||||||||||||||||||||||||||||||||
| Collateral-dependent loans, net of allowance | $39,577 | Market comparables of collateral discounted to estimated net proceeds | Discount rate applied to appraised value to estimated net proceeds: | |||||||||||||||||||||||||||||||||||
| • Residential Properties | 0 | - | 28% | 4.0% | ||||||||||||||||||||||||||||||||||
| Interest rate lock commitments | $395 | Quoted Secondary Market pricing | Closure rate | 0 | - | 100% | 90.1% | |||||||||||||||||||||||||||||||
The following tables present the estimated fair value of the Company's financial instruments and their carrying amounts as reported in the CONSOLIDATED STATEMENTS OF CONDITION.
| September 30, 2025 | |||||||||||||||||||||||||||||
| Carrying | Estimated Fair Value | ||||||||||||||||||||||||||||
| Amount | Total | Level 1 | Level 2 | Level 3 | |||||||||||||||||||||||||
| Assets: | |||||||||||||||||||||||||||||
| Cash and due from banks | $ | 24,176 | $ | 24,176 | $ | 24,176 | $ | — | $ | — | |||||||||||||||||||
| Interest earning cash equivalents | 405,263 | 405,263 | 405,263 | — | — | ||||||||||||||||||||||||
| Investment securities available for sale | 520,659 | 520,659 | — | 520,659 | — | ||||||||||||||||||||||||
| Mortgage loans held for sale | 57,662 | 58,325 | — | 58,325 | — | ||||||||||||||||||||||||
| Loans, net: | |||||||||||||||||||||||||||||
| Mortgage loans held for investment | 15,655,159 | 14,564,394 | — | — | 14,564,394 | ||||||||||||||||||||||||
| Other loans | 8,153 | 8,153 | — | — | 8,153 | ||||||||||||||||||||||||
| Federal Home Loan Bank stock | 235,363 | 235,363 | N/A | — | — | ||||||||||||||||||||||||
| Accrued interest receivable | 62,553 | 62,553 | — | 62,553 | — | ||||||||||||||||||||||||
| Cash collateral received from or held by counterparty | 6,910 | 6,910 | 6,910 | — | — | ||||||||||||||||||||||||
| Derivatives | 272 | 272 | — | — | 272 | ||||||||||||||||||||||||
| Liabilities: | |||||||||||||||||||||||||||||
| Checking and savings accounts | $ | 1,957,745 | $ | 1,957,745 | $ | — | $ | 1,957,745 | $ | — | |||||||||||||||||||
| Certificates of deposit | 8,489,223 | 8,511,443 | — | 8,511,443 | — | ||||||||||||||||||||||||
| Borrowed funds | 4,870,219 | 4,892,273 | — | 4,892,273 | — | ||||||||||||||||||||||||
| Borrowers’ advances for taxes and insurance | 113,168 | 113,168 | — | 113,168 | — | ||||||||||||||||||||||||
| Principal, interest and escrow owed on loans serviced | 30,328 | 30,328 | — | 30,328 | — | ||||||||||||||||||||||||
| Derivatives | 351 | 351 | — | 351 | — | ||||||||||||||||||||||||
| September 30, 2024 | |||||||||||||||||||||||||||||
| Carrying | Estimated Fair Value | ||||||||||||||||||||||||||||
| Amount | Total | Level 1 | Level 2 | Level 3 | |||||||||||||||||||||||||
| Assets: | |||||||||||||||||||||||||||||
| Cash and due from banks | $ | 26,287 | $ | 26,287 | $ | 26,287 | $ | — | $ | — | |||||||||||||||||||
| Interest earning cash equivalents | 437,431 | 437,431 | 437,431 | — | — | ||||||||||||||||||||||||
| Investment securities available for sale | 526,251 | 526,251 | — | 526,251 | — | ||||||||||||||||||||||||
| Mortgage loans held for sale | 17,775 | 17,986 | — | 17,986 | — | ||||||||||||||||||||||||
| Loans, net: | |||||||||||||||||||||||||||||
| Mortgage loans held for investment | 15,316,354 | 13,922,944 | — | — | 13,922,944 | ||||||||||||||||||||||||
| Other loans | 5,705 | 5,705 | — | — | 5,705 | ||||||||||||||||||||||||
| Federal Home Loan Bank stock | 228,494 | 228,494 | N/A | — | — | ||||||||||||||||||||||||
| Accrued interest receivable | 59,398 | 59,398 | — | 59,398 | — | ||||||||||||||||||||||||
| Cash collateral received from or held by counterparty | 7,844 | 7,844 | 7,844 | — | — | ||||||||||||||||||||||||
| Derivatives | 395 | 395 | — | — | 395 | ||||||||||||||||||||||||
| Liabilities: | |||||||||||||||||||||||||||||
| Checking and savings accounts | $ | 2,150,770 | $ | 2,150,770 | $ | — | $ | 2,150,770 | $ | — | |||||||||||||||||||
| Certificates of deposit | 8,044,309 | 7,989,992 | — | 7,989,992 | — | ||||||||||||||||||||||||
| Borrowed funds | 4,792,847 | 4,819,873 | — | 4,819,873 | — | ||||||||||||||||||||||||
| Borrowers’ advances for taxes and insurance | 113,637 | 113,637 | — | 113,637 | — | ||||||||||||||||||||||||
| Principal, interest and escrow owed on loans serviced | 28,753 | 28,753 | — | 28,753 | — | ||||||||||||||||||||||||
| Derivatives | 72 | 72 | — | 72 | — | ||||||||||||||||||||||||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Nov 25, 2025 | Showing above |
| 2024 | Nov 22, 2024 | |
| 2023 | Nov 21, 2023 | |
| 2022 | Nov 22, 2022 | |
| 2021 | Nov 24, 2021 | |
| 2020 | Nov 24, 2020 | |
| 2019 | Nov 26, 2019 | |
| 2018 | Nov 27, 2018 | |
| 2017 | Nov 22, 2017 | |
| 2016 | Nov 23, 2016 | |
| 2015 | Nov 25, 2015 | |
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.