TFS Financial CORP (TFSL)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

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Overview

The business strategy of TFS Financial Corporation ("we," "us," or "our") is to operate as a well capitalized and profitable financial institution dedicated to providing exceptional personal service to our customers.

Since being organized in 1938, we grew to become, at the time of our initial public offering of stock in 2007, and continue to be, the nation’s largest mutually-owned savings and loan association based on total assets. We credit our success to our continued emphasis on our primary values: “Love, Trust, Respect, and a Commitment to Excellence, along with Having Fun.” Our values are reflected in the design and pricing of our loan and deposit products, as described below. Our values are further reflected in a long-term revitalization program encompassing the three-mile corridor of the Broadway-Slavic Village neighborhood in Cleveland, Ohio where our main office was established and continues to be located and where we've been the developer of a community of 51 homes, intended to serve the low- to moderate income home owner. 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.

Consumers, businesses, and governments alike are navigating an elevated level of economic uncertainty, as inflation remains elevated and markets continue to deliberate the implications of global trade policies and the conflict in the Middle East. The FRS implemented three consecutive 25 basis point rate cuts between September and the end of December 2025. Current market sentiments have shifted from anticipated policy easing to the possibility of rate hikes. Uncertainty and volatility in interest rates and spreads, can create a challenging operating environment. 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; (2) our core deposits remain stable and the majority of our deposit accounts are within FDIC insurance limits; (3) we maintain adequate access to contingent sources of liquidity; and (4) our risk management practices around an array of financial disciplines are robust and commensurate to an institution of our size and complexity.

Capital ratios remain a source of financial strength for the Company and the Association as all capital ratios, including the Company's Common Equity Tier 1 Capital ratio of 16.88%, exceed the regulatory requirement to be considered "Well Capitalized". Additional details on our capital ratios are reported in the Liquidity and Capital Resources section of this Item 2.

The Company maintains high-quality core deposits distributed primarily across our Ohio and Florida branch network in products tailored toward consumers seeking non-transactional savings. As of June 30, 2026, 95.6% of our $9.07 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 June 30, 2026, 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 totaled $1.85 billion. We also hold marketable securities that could be sold and converted to cash. Further details about liquidity and funding are described in the section labelled Maintaining Access to Adequate Liquidity and Diverse Funding Sources to Support our Growth of this Item 2.

We operate a multi-disciplined risk management program that emphasizes stress testing and scenario analysis in the realms of interest rate risk, credit risk, market risk and liquidity risk. Key risk indicators are proactively monitored and reported throughout the organization, up to and including the Board of Directors. The program is supported by a multi-line of defense approach in which internal oversight functions of risk management and internal audit grant their fully autonomous opinion of

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the process with an ability to issue findings for remediation if deemed necessary. The program is also regularly exposed to additional scrutiny in the form of regulatory oversight. Management established the risk management framework with an appropriate level of sophistication such that it fully encapsulates all identified areas of risk, in conjunction with a necessary level of governance, to promote the program’s intention of properly identifying and managing our risk profile.

Management believes that the following matters are those most critical to our success: (1) controlling our interest rate risk exposure; (2) monitoring and limiting our credit risk; (3) maintaining access to adequate liquidity and diverse funding sources to support our growth; and (4) monitoring and controlling our operating expenses.

Controlling Our Interest Rate Risk Exposure. Historically, our greatest risk has been our exposure to changes in market interest rates. When we hold longer-term, fixed-rate assets, funded by liabilities with shorter-term re-pricing characteristics, we are exposed to potentially adverse impacts from changing interest rates. Generally, and particularly over extended periods of time that encompass full economic cycles, interest rates associated with longer-term assets, like fixed-rate mortgages, have been higher than interest rates associated with shorter-term funding sources, like deposits. This difference has been an important component of our net interest income and is fundamental to our operations.

A challenge to our business model occurs when there are rapid and substantial changes in short-term rates or there is a prolonged inverted yield curve where short-term rates exceed long-term rates. When short-term rates change, our home equity line of credit portfolio, indexed to the prime rate, reprice

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

Our business strategy is to operate as a well capitalized and profitable financial institution dedicated to providing exceptional personal service to our customers.

Since being organized in 1938, we grew to become, at the time of our initial public offering of stock in 2007, the nation’s largest mutually-owned savings and loan association based on total assets. We credit our success to our continued emphasis on our primary values: “Love, Trust, Respect, and a Commitment to Excellence, along with Having Fun". Our values are reflected in the design and pricing of our loan and deposit products, as described below. Our values are further reflected in a long-term revitalization program encompassing the three-mile corridor of the Broadway-Slavic Village neighborhood in Cleveland, Ohio where our main office was established and continues to be located and where we've been the developer of a community of 42 homes, intended to serve the low- to moderate income home owner. 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. Also, in the spirit of our values and specifically our Commitment to Excellence, the Association is in the process of implementing a new core processing system. The implementation is intended to go live in July 2026 and will modernize our operations, boost efficiency and allow us to leverage technology to enhance our customers' experience.

Consumers, businesses, and governments alike are navigating an elevated level of economic uncertainty as a new perspective on global trade policy is being deliberated by the markets. After maintaining interest rates near 20-year highs, the Federal Reserve has shifted its focus and initiated an easing cycle, conducting rate cuts in September and October 2025. The U.S. Treasury yield curve is currently positive, after a prolonged period of inversion, normalizing just prior to the FRS's 100 basis point rate cuts between September and December 2024. It is possible that the easing cycle will continue into late 2025 and 2026, however, uncertainty can lead to volatility in interest rates and spreads, creating a challenging operating environment. 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; (2) our core deposits remain stable and the majority of our deposit accounts fall within FDIC insurance limits; (3) we maintain adequate access to contingent sources of liquidity; and (4) our risk management practices around an array of financial disciplines are robust and commensurate to an institution of our size and complexity.

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The following tables present select financial data of the Company for the five most recent fiscal years.

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______________________

(1)Represents the difference between the weighted-average yield on interest-earning assets and the weighted-average cost of interest-bearing liabilities for the year.

(2)The net interest margin represents net interest income as a percent of average interest-earning assets for the year.

(3)The efficiency ratio represents non-interest expense divided by the sum of net interest income and non-interest income.

Management believes that the following matters are those most critical to our success: (1) controlling our interest rate risk exposure; (2) monitoring and limiting our credit risk; (3) maintaining access to adequate liquidity and diverse funding sources to support our growth; and (4) monitoring and controlling our operating expenses.

Controlling Our Interest Rate Risk Exposure. Historically, our greatest risk has been our exposure to changes in market interest rates. When we hold longer-term, fixed-rate assets, funded by liabilities with shorter-term re-pricing characteristics, we are exposed to potentially adverse impacts from changing interest rates, and most notably rising interest rates. Generally, and particularly over extended periods of time that encompass full economic cycles, interest rates associated with longer-term assets, like fixed-rate mortgages, have been higher than interest rates associated with shorter-term funding sources, like deposits. This difference has been an important component of our net interest income and is fundamental to our operations.

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A challenge to our business model occurs when there is a rapid and substantial increase in short-term rates or there is an extended inverted yield curve where short-term rates exceed long-term rates, both of which occurred in the past three years. Although the yield curve became positive in September 2024, rapid and substantial decreases in short-term rates can also pose a challenge when interest rates on our home equity line of credit portfolio, indexed to the prime rate, reprice more quickly than interest rates on borrowings and certificate of deposit accounts which generally reprice at maturity. These economic environments may result in decreases in our net interest income and our net interest margin.

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

•Maintaining regulatory capital in excess of levels required to be considered well capitalized;

•Maintaining adjustable-rate mortgage loan balances and shorter-term fixed-rate loans;

•Marketing home equity lines of credit, which carry an adjustable rate of interest, indexed to the prime rate;

•Opportunistically extending the duration of our funding sources;

•Utilizing interest rate swaps to convert short-term FHLB advances and brokered certificates of deposit into long-term, fixed-rate borrowings; and

•Selectively selling a portion of our long-term, fixed-rate mortgage loans in the secondary market.

Levels of Regulatory Capital

At September 30, 2025, the Comp

[Excerpt truncated for page length; the complete text is on the linked full-MD&A page.]