TFS Financial CORPTFSL
TFS Financial CORP Income Taxes Disclosure
INCOME TAXES
The components of the income tax provision are as follows:
| Year Ended September 30, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Current tax expense (benefit): | |||||||||||||||||
| Federal | $ | 20,497 | $ | 16,353 | $ | 13,602 | |||||||||||
| State | 1,907 | 1,670 | 781 | ||||||||||||||
| Deferred tax expense (benefit): | |||||||||||||||||
| Federal | 1,278 | 2,466 | 3,681 | ||||||||||||||
| State | 74 | 236 | 53 | ||||||||||||||
| Income tax provision | $ | 23,756 | $ | 20,725 | $ | 18,117 | |||||||||||
Reconciliation from tax at the federal statutory rate to the income tax provision is as follows:
| Year Ended September 30, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Tax at statutory rate | 21.0 | % | 21.0 | % | 21.0 | % | |||||||||||
| State tax, net | 1.4 | 1.5 | 0.7 | ||||||||||||||
| Non-taxable income from bank owned life insurance contracts | (2.0) | (2.1) | (2.1) | ||||||||||||||
| Non-deductible compensation | 1.1 | 1.2 | 1.0 | ||||||||||||||
| Equity based compensation | 0.5 | 0.4 | 0.2 | ||||||||||||||
Employee (Associate) Stock Ownership Plan | (1.4) | (1.5) | (1.5) | ||||||||||||||
| Other, net | 0.1 | 0.2 | 0.1 | ||||||||||||||
Income tax provision | 20.7 | % | 20.7 | % | 19.4 | % | |||||||||||
Temporary differences between the financial statement carrying amounts and tax basis of assets and liabilities that gave rise to significant portions of net deferred taxes relate to the following:
| September 30, | |||||||||||
| 2025 | 2024 | ||||||||||
| Deferred tax assets: | |||||||||||
Impairment and credit loss reserves | $ | 30,214 | $ | 27,966 | |||||||
| Deferred compensation | 3,132 | 3,217 | |||||||||
| Lease liability | 4,255 | 4,282 | |||||||||
| Property, equipment and software basis difference | 947 | 1,029 | |||||||||
Fair value adjustment | 2,641 | 3,666 | |||||||||
| Other | 2,043 | 2,149 | |||||||||
| Total deferred tax assets | 43,232 | 42,309 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Mortgage servicing rights | 1,883 | 1,613 | |||||||||
| Pension | 5,023 | 4,550 | |||||||||
| Goodwill | 2,172 | 2,160 | |||||||||
| Lease ROU asset | 4,135 | 4,173 | |||||||||
| Deferred loan costs, net of fees | 15,568 | 15,576 | |||||||||
| Other | 2,411 | 2,512 | |||||||||
| Total deferred tax liabilities | 31,192 | 30,584 | |||||||||
Net deferred tax asset (liability) | $ | 12,040 | $ | 11,725 | |||||||
In the accompanying CONSOLIDATED STATEMENTS OF CONDITION the net deferred tax asset or liability is included in other assets, and accrued expenses and other liabilities for September 30, 2025 and 2024, respectively.
A valuation allowance is established to reduce deferred tax assets if it is more likely than not that the related tax benefits will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. There was no valuation allowance required at September 30, 2025 or 2024.
Retained earnings at September 30, 2025 and 2024 included approximately $104,861, for which no provision for federal or state income tax has been made. This amount represents allocations of income during years prior to 1988 to bad debt deductions for tax purposes only. These qualifying and non-qualifying base year reserves and supplemental reserves will be recaptured into income in the event of certain distributions and redemptions. Such recapture would create income for tax purposes only, which would be subject to the then current corporate income tax rate. However, recapture would not occur upon the reorganization, merger, or acquisition of the Association, nor if the Association is merged or liquidated tax-free into a bank or undergoes a charter change. If the Association fails to qualify as a bank or merges into a non-bank entity, these reserves will be recaptured into income.
The provisions of Accounting for Uncertainty in Income Taxes, codified within FASB ASC 740 “Income Taxes,” prescribe a recognition threshold and measurement attribute for the financial statement recognition and measurement for a tax position taken or expected to be taken in a tax return. FASB ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. Tax positions must meet a more-likely-than-not recognition threshold in order for the related tax benefit to be recognized or continue to be recognized. As of September 30, 2025 and 2024, the Company had no unrecognized tax benefits. The Company does not anticipate the total amount of unrecognized tax benefits to significantly change within the next twelve months.
The Company recognizes interest and penalties on income tax assessments or income tax refunds, where applicable, in the financial statements as a component of its provision for income taxes. The Company recognized $0, $7, and $0 of interest expense or penalties on income tax assessments during the years ended September 30, 2025, 2024 and 2023, respectively. There was no interest related to income tax assessments accrued at September 30, 2025 or 2024.
The Company’s effective income tax rate was 20.7%, 20.7% and 19.4% for the years ended September 30, 2025, 2024 and 2023, respectively.
The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction and various state and city jurisdictions. With few exceptions, the Company is no longer subject to income tax examinations in its major jurisdictions for tax years prior to 2022.
On July 4, 2025, H.R. 1, commonly referred to as the One Big Beautiful Bill Act, (the "Act"), was signed into law. The Act makes various provisions of the 2017 Tax Cuts and Jobs Act permanent. The Company continues to evaluate the future impacts of these provisions, and does not expect the Act to have a material impact on the Company's financial statements.
The Company makes certain investments in limited partnerships which invest in affordable housing projects that qualify for the LIHTC. The Company acts as a limited partner in these investments and does not exert control over the operating or financial policies of the partnership. The Company accounts for its interests in LIHTCs using the proportional amortization method. The impact of the Company's investments in tax credit entities on the provision for income taxes was not material for the years ended September 30, 2025, 2024 and 2023.
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 Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.