8-K
PATHWARD FINANCIAL, INC. (CASH)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 27, 2022
PATHWARD FINANCIAL, INC.
(Exact name of registrant as specified in its charter)
| Delaware | 0-22140 | 42-1406262 |
|---|---|---|
| (State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
5501 South Broadband Lane, Sioux Falls, South Dakota 57108
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (877) 497-7497
| Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: | |
|---|---|
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d- 2(b)) |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4 (c)) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common Stock, $.01 par value | CASH | The NASDAQ Stock Market LLC |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02 Results of Operations and Financial Condition.
On October 27, 2022, the Registrant issued a press release announcing its results of operations and financial condition as of and for the three months and year ended September 30, 2022. A copy of the press release is attached as Exhibit 99.1 to this report and is incorporated into this Item 2.02 by reference.
The information in this Item 2.02, including Exhibit 99.1, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities thereof, nor shall it be deemed to be incorporated by reference in any filing under the Exchange Act or under the Securities Act of 1933, as amended (the "Securities Act"), except to the extent specifically provided in any such filing.
Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
On October 27, 2022, Pathward Financial, Inc. (the “Company”) announced that Sonja Theisen, Executive Vice President, Governance, Risk, and Compliance, will succeed Glen W. Herrick as Chief Financial Officer effective as of April 30, 2023.
Ms. Theisen, 41, has served as Executive Vice President, Governance, Risk, and Compliance of the Company and Pathward, N.A. (the “Bank”) since August 2022. She was previously Executive Vice President and Chief Governance, Risk and Compliance Officer from October 2021 to August 2022, Senior Vice President, Chief of Staff from February 2021 to October 2021, Senior Vice President, Chief Accounting Officer from September 2016 to February 2021, and Senior Vice President, Controller from December 2013 to September 2016. Prior to joining the Company, Ms. Theisen held various finance and accounting positions at Great Western Bank, including as Senior Vice President, Finance Operations. Prior to Great Western Bank, Ms. Theisen was an Audit Manager at Eide Bailly, LLC and KPMG LLC.
There are no family relationships between Ms. Theisen and any director or executive officer of the Company or relationships or related party transactions between Ms. Theisen and the Company that are required to be reported.
Item 7.01 Regulation FD Disclosure.
Information is being furnished herein in Exhibit 99.2 with respect to the Investor Update slide presentation prepared for use with the press release. While most of the selected financial information furnished herein is derived from the Company’s consolidated financial statements and related notes prepared in accordance with generally accepted accounting principles ("GAAP") and management’s discussion and analysis of financial condition and results of operations included, or to be included, in the Company’s reports on Forms 10-K and 10-Q, this information includes selected financial and operational information through the fourth quarter of fiscal year 2022 and does not represent a complete set of financial statement and related notes prepared in conformity with GAAP. The Company’s annual financial statements are subject to independent audit. The Investor Update slide presentation is dated October 27, 2022 and the Company does not undertake to update the materials after that date.
On October 27, 2022, the Company issued a press release related to the Chief Financial Officer succession. A copy of this press release is furnished as Exhibit 99.3.
The information in this Item 7.01, including Exhibits 99.2 and 99.3, shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities thereof, nor shall it be deemed to be incorporated by reference in any filing under the Exchange Act or under the Securities Act, except to the extent specifically provided in any such filing.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
| Exhibit Number | Description of Exhibit |
|---|---|
| 99.1 | Press Release of Pathward Financial, Inc., dated October 27, 2022 regarding the results of operations and financial condition. |
| 99.2 | Investor Update slide presentation for the Fourth Quarter of Fiscal Year 2022, dated October 27, 2022, prepared for use with the Press Release. |
| 99.3 | Press release dated October 27, 2022 regarding the Chief Financial Officer succession. |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| PATHWARD FINANCIAL, INC. | ||
|---|---|---|
| Date: October 27, 2022 | By: | /s/ Glen W. Herrick |
| Glen W. Herrick | ||
| Executive Vice President and Chief Financial Officer |
Document
Exhibit 99.1
PATHWARD FINANCIAL, INC. ANNOUNCES RESULTS FOR 2022 FISCAL FOURTH QUARTER AND FISCAL YEAR 2022
Fiscal 2022 Fourth Quarter Net Income of $23.4 million, or $0.81 Per Diluted Share -
Fiscal 2022 Net Income of $156.4 million, or $5.26 Per Diluted Share -
Sioux Falls, S.D., October 27, 2022 -- Pathward Financial, Inc.TM (“Pathward Financial” or the “Company”) (Nasdaq: CASH) reported net income of $23.4 million, or $0.81 per share, for the three months ended September 30, 2022, compared to net income of $15.9 million, or $0.50 per share, for the three months ended September 30, 2021. The Company reported net income of $156.4 million, or $5.26 per share, for the fiscal year ended September 30, 2022, compared to net income of $141.7 million, or $4.38 per share, for the fiscal year ended September 30, 2021. For the fiscal year ended September 30, 2022, the Company recognized return on average assets of 2.20% compared to 1.74% for the prior year period.
During the quarter, the Company recognized $6.9 million of pre-tax expenses related to rebranding efforts and $1.0 million of pre-tax separation related expenses. Excluding the impact of the rebranding and separation expenses, net of tax, the Company's adjusted net income for the quarter totaled $30.3 million, or $1.04 per share. For the fiscal year ended 2022, the Company recognized a gain on sale of Meta names and trademarks of $50.0 million, $13.1 million of pre-tax expenses related to rebranding efforts and $5.1 million of pre-tax separation related expenses. Excluding the impact of the gain on sale and rebranding and separation expenses, net of tax, the Company's adjusted net income for the 2022 fiscal year totaled $133.6 million, or $4.49 per share. See non-GAAP reconciliation table below.
“Fiscal 2022 was a landmark year for our organization as we renamed and unified our company under a single brand that reinforces our commitment to providing a path forward for individuals and businesses to reach the next stage of their financial journey," said CEO Brett Pharr.
"We are pleased with our results for the fiscal fourth quarter during which we delivered strong earnings per share growth. Our financial results continue to demonstrate that our optimization strategy will produce outsized returns of capital to shareholders."
"Looking ahead, we affirm our guidance for fiscal 2023: Our commercial finance loan portfolio is performing well and our credit quality metrics remain strong. We are starting to see the benefits of the rising rate environment in our loan yields, especially now that almost all of our variable rate loans are above their floors. Additionally, we believe our banking as a service business will continue to attract and maintain low-cost deposits while also generating steady fee income. Taken together, these factors position us well for fiscal 2023 and beyond," continued Pharr.
Business Highlights
•The Company announced today that Sonja Theisen, currently Executive Vice President of Governance, Risk and Compliance, has been appointed to succeed Glen Herrick as the Chief Financial Officer effective April 30, 2023. Ms. Theisen, who joined Pathward in 2013, has held leaderships roles across the organization including Chief Accounting Officer, Chief of Staff, and EVP of Governance, Risk and Compliance. Additional details can be found in the press release available at www.pathwardfinancial.com.
•On October 4, 2022, the Company announced the unveiling of its new corporate brand, marked by the transition to its new name, Pathward™, N.A. ("Pathward" or the "Bank"), and the launch of the Company's new website, Pathward.com. As part of the corporate rebrand, the Company recognized $6.9 million of pre-tax expenses related to rebranding efforts during the fourth quarter of fiscal 2022. The Company continues to estimate total rebranding expenses will range between $15 million to $20 million.
•As part of its strategy to continue to optimize interest-earning assets, the Company sold the entirety of its student loan portfolio during the fourth quarter of fiscal 2022. The sale generated an unfavorable pre-tax impact of approximately $0.5 million after netting the $4.3 million reversal of provision from the portfolio's allowance and the loss on sale of $4.8 million. The balance of the portfolio at time of sale was $81.5 million.
•On September 26, 2022, the Company announced the completion of a private placement of $20 million of its 6.625% Fixed-to-Floating Rate Subordinated Notes due 2032 to certain qualified institutional buyers and accredited investors. The Notes are intended to qualify as Tier 2 capital for regulatory capital purposes. The Company has used and intends to continue to use the net proceeds of the offering for general corporate purposes and repurchases of the Company's common stock.
•The Company announced on October 10, 2022 that the American Bankers Association ("ABA") Foundation awarded it the 2022 Community Commitment Award during the ABA's Annual Convention on October 4. Pathward's Community Impact Program partners with organizations that provide resources for the unbanked and underbanked and aid to historically marginalized populations. The Community Impact Program delivers on Pathward's purpose of powering financial inclusion for allTM by lifting up the communities it serves.
Financial Highlights for the 2022 Fiscal Fourth Quarter
•Total revenue for the fourth quarter was $123.2 million, an increase of $3.0 million, or 3%, compared to the same quarter in fiscal 2021, primarily driven by an increase in interest income, partially offset by a decrease in noninterest income.
•Net interest margin ("NIM") increased to 5.21% for the fourth quarter from 4.35% during the same period of last year. The prior year period was impacted by excess cash associated with the Company's participation in the U.S. Treasury Department's Economic Impact Program.
•Total gross loans and leases at September 30, 2022 decreased $79 million, to $3.53 billion, or 2%, compared to September 30, 2021 and decreased $154 million, or 4%, when compared to June 30, 2022. The decrease compared to the prior year quarter was primarily due the sale of all remaining community banking loans during the fiscal 2022 first quarter, the sale of the student loan portfolio during the fiscal 2022 fourth quarter, and a reduction in warehouse finance loans, partially offset by growth in the commercial finance portfolio. The primary driver for the decrease on a linked quarter basis was the sale of the student loan portfolio, a reduction in warehouse finance loans, and the seasonal decline in tax services loans.
•The Company resumed share repurchases on July 1, 2022, and during the fiscal 2022 fourth quarter repurchased 573,200 shares of common stock at an average share price of $37.05. An additional 396,100 shares of common stock at an average price of $35.16 were repurchased in October 2022 through October 13, 2022. As of October 13, 2022, there are 3,898,877 shares available for repurchase under the common stock share repurchase program announced during the fourth quarter of fiscal year 2021.
•The Company expects fiscal year 2023 GAAP earnings per share to be in the range of $5.25 to $5.75 and expects fiscal year 2023 adjusted earnings per share to be in the range of $5.10 to $5.60. See non-GAAP reconciliation table below.
Net Interest Income
Net interest income for the fourth quarter of fiscal 2022 was $79.8 million, an increase of 13% from the same quarter in fiscal 2021. The increase was mainly attributable to increased yields and an improved earning asset mix.
The fourth quarter average outstanding balance of loans and leases decreased $27.6 million compared to the same quarter of the prior year, primarily due to the sale of the remaining community bank and student loan portfolios, partially offset by increases in core loan and lease portfolios. The Company’s average interest-earning assets for the fourth quarter decreased by $364.8 million to $6.07 billion compared with the same quarter in fiscal 2021, primarily due to a reduction in cash balances as a result of high cash levels during the prior year period related to the Company's participation in government stimulus programs. The decrease in interest-earnings assets was partially offset by growth in total investments and core loans and leases.
Fiscal 2022 fourth quarter NIM increased to 5.21% from 4.35% in the fourth fiscal quarter of last year. The overall reported tax-equivalent yield (“TEY”) on average earning asset yields increased 81 basis points to 5.26% compared to the prior year quarter, primarily driven by an increase in loan and lease and investment securities yields, along with a decrease in lower-yielding cash balances. The yield on the loan and lease portfolio was 7.12% compared to 6.93% for the comparable period last year and the TEY on the securities portfolio was 2.56% compared to 1.50% over that same period.
The Company's cost of funds for all deposits and borrowings averaged 0.03% during the fiscal 2022 fourth quarter, as compared to 0.09% during the prior year quarter. The Company's overall cost of deposits was 0.01% in the fiscal fourth quarter of 2022, the same as the prior year quarter.
Noninterest Income
Fiscal 2022 fourth quarter noninterest income decreased to $43.5 million, compared to $49.5 million for the same period of the prior year. The decrease was driven by a reduction in other income, a reduction in gain on sale of other, and a loss on sale of investments. These decreases were partially offset by an increase in payments fee income.
The reduction in gain on sale of other was primarily driven by the loss on the sale of the student loan portfolio during the quarter along with the Company recording fewer gains on loan sales as the SBA and USDA sale volumes have been impacted by supply chain constraints within the solar construction market. The decrease in other income was primarily related to a net unrealized gain of $4.1 million during the prior year period related to the MoneyLion investment. The $1.9 million loss on sale of investment was related to a sale of a venture capital investment. The increase in payment fee income was primarily from servicing fee income on off-balance sheet deposits, which increased $5.9 million during the 2022 fiscal fourth quarter compared to the same period of the prior year and increased $5.4 million compared to the fiscal 2022 third quarter.
Noninterest Expense
Noninterest expense increased 10% to $103.0 million for the fiscal 2022 fourth quarter, from $93.6 million for the same quarter last year. The increase in expense was primarily driven by an increase in card processing expense and compensation expense. During the fiscal 2022 fourth quarter, the Company recognized $6.9 million in rebranding expenses and $1.0 million in separation related expenses.
The card processing expense increase was due to structured agreements with banking as a service ("BaaS") partners. The amount of expense paid under those agreements is based on an agreed upon rate index that varies depending on the deposit levels, floor rates, market conditions, and other performance conditions. Generally this rate index averages between 50% to 85% of the Effective Federal Funds Rate ("EFFR") and reprices immediately upon a change in the EFFR. Approximately 37% of the deposit portfolio was subject to these higher card processing expenses. For the fiscal quarter ended September 30, 2022, card processing expenses related to these structured agreements were $7.4 million, as compared to $2.2 million for the fiscal quarter ended June 30, 2022 and $0.2 million for the fiscal quarter ended September 30, 2021.
Income Tax Expense
The Company recorded an income tax benefit of $1.3 million, representing an effective tax rate of (5.7%), for the fiscal 2022 fourth quarter, compared to income tax expense $1.1 million, representing an effective tax rate of 6.5%, for the fourth quarter last year. The current quarter decrease in income tax expense was primarily due to an increase in renewable energy investment tax credit lending volume compared to the prior year period.
The Company originated $35.9 million in solar leases during the fiscal 2022 fourth quarter, resulting in $9.6 million in total net investment tax credits. During the fourth quarter of fiscal 2021, the Company originated $29.1 million in solar leases resulting in $7.6 million in total net investment tax credits. Investment tax credits related to solar leases are recognized ratably based on income throughout each fiscal year. For the fiscal year ended September 30, 2022, the Company originated $62.8 million in solar leases, compared to $101.1 million for the comparable prior year period. The timing and impact of future solar tax credits are expected to vary from period to period, and the Company intends to undertake only those tax credit opportunities that meet the Company's underwriting and return criteria.
Outlook
The following forward-looking statements reflect the Company’s expectations as of the date of this release, and are subject to substantial uncertainty. The Company's results may be materially affected by many factors, such as changes in economic conditions and customer demand, changes in interest rates, inflation, uncertainty regarding the COVID-19 pandemic, and other factors detailed below under “Forward-looking Statements.” Because the Company’s reported GAAP results include certain income and expense items that are not expected to continue indefinitely and may include additional elements that the Company cannot currently predict, the Company is also providing guidance on a non-GAAP or “adjusted” basis.
The Company expects fiscal year 2023 GAAP earnings per share to be in the range of $5.25 to $5.75. When adjusting for gain on sale of trademarks, rebrand related expenses, and separation related expenses, the Company expects fiscal year 2023 adjusted earnings per share to be in the range of $5.10 to $5.60. See non-GAAP reconciliation table below.
Investments, Loans and Leases
| (Dollars in thousands) | September 30, 2022 | June 30, 2022 | March 31, 2022 | December 31, 2021 | September 30, 2021 | |||||
|---|---|---|---|---|---|---|---|---|---|---|
| Total investments | $ | 1,924,551 | $ | 2,000,400 | $ | 2,090,765 | $ | 1,833,733 | $ | 1,921,568 |
| Loans held for sale | ||||||||||
| Consumer credit products | 21,071 | 23,710 | 23,670 | 20,728 | 23,111 | |||||
| SBA/USDA | — | 43,861 | 7,740 | 15,454 | 33,083 | |||||
| Total loans held for sale | 21,072 | 67,571 | 31,410 | 36,182 | 56,194 | |||||
| Term lending | 1,090,289 | 1,047,764 | 1,111,076 | 1,038,378 | 961,019 | |||||
| Asset based lending | 351,696 | 402,506 | 382,355 | 337,236 | 300,225 | |||||
| Factoring | 372,595 | 408,777 | 394,865 | 402,972 | 363,670 | |||||
| Lease financing | 210,692 | 218,789 | 235,397 | 245,315 | 266,050 | |||||
| Insurance premium finance | 479,754 | 481,219 | 403,681 | 385,473 | 428,867 | |||||
| SBA/USDA | 359,238 | 215,510 | 214,195 | 209,521 | 247,756 | |||||
| Other commercial finance | 159,409 | 173,338 | 173,260 | 178,853 | 157,908 | |||||
| Commercial finance | 3,023,673 | 2,947,903 | 2,914,829 | 2,797,748 | 2,725,495 | |||||
| Consumer credit products | 144,353 | 152,106 | 171,847 | 173,343 | 129,251 | |||||
| Other consumer finance | 25,306 | 107,135 | 111,922 | 144,412 | 123,606 | |||||
| Consumer finance | 169,659 | 259,241 | 283,769 | 317,755 | 252,857 | |||||
| Tax services | 9,098 | 41,627 | 85,999 | 100,272 | 10,405 | |||||
| Warehouse finance | 326,850 | 434,748 | 441,496 | 466,831 | 419,926 | |||||
| Community banking | — | — | — | — | 199,132 | |||||
| Total loans and leases | 3,529,280 | 3,683,519 | 3,726,093 | 3,682,606 | 3,607,815 | |||||
| Net deferred loan origination costs | 7,025 | 5,047 | 4,097 | 1,655 | 1,748 | |||||
| Total gross loans and leases | 3,536,305 | 3,688,566 | 3,730,190 | 3,684,261 | 3,609,563 | |||||
| Allowance for credit losses | (45,947) | (75,206) | (88,552) | (67,623) | (68,281) | |||||
| Total loans and leases, net | $ | 3,490,358 | $ | 3,613,360 | $ | 3,641,638 | $ | 3,616,638 | $ | 3,541,282 |
The Company's investment security balances at September 30, 2022 totaled $1.92 billion, as compared to $2.00 billion at June 30, 2022 and $1.92 billion at September 30, 2021.
Total gross loans and leases totaled $3.54 billion at September 30, 2022, as compared to $3.69 billion at June 30, 2022 and $3.61 billion at September 30, 2021. The primary driver for the decrease on a linked quarter basis was a decrease in consumer finance loans, a reduction in warehouse finance loans, and the seasonal decline in the tax services portfolio, partially offset by an increase in the commercial finance portfolio. The year-over-year decrease was primarily due the sale of all remaining community banking loans during the fiscal 2022 first quarter, the sale of the student loan portfolio during the fiscal 2022 fourth quarter, and a reduction in warehouse finance loans, partially offset by growth in our commercial finance portfolio.
Commercial finance loans, which comprised 86% of the Company's gross loan and lease portfolio, totaled $3.02 billion at September 30, 2022, reflecting growth of $75.8 million, or 3%, from June 30, 2022 and $298.2 million, or 11%, from September 30, 2021.
When excluding PPP loans, the community bank portfolio and the student loan portfolio, total loans and leases grew 9% at September 30, 2022 when compared to the same period of the prior year.
Asset Quality
The Company’s allowance for credit losses ("ACL") totaled $45.9 million at September 30, 2022, a decrease compared to $75.2 million at June 30, 2022 and a decrease from $68.3 million at September 30, 2021. The decrease in the ACL at September 30, 2022, when compared to June 30, 2022, was primarily due to a $22.6 million decrease in the seasonal tax services loan portfolio, and to a lesser extent, a $4.8 million decrease in the consumer finance portfolio and a $1.7 million decrease in the commercial finance portfolio. The decrease in the consumer finance portfolio was primarily attributable to the sale of the student loan portfolio.
The $22.3 million year-over-year decrease in the ACL was primarily driven by a $12.3 million decrease attributable to the disposition of the community banking portfolio, along with a $5.9 million decrease in the consumer finance portfolio and a $4.1 million decrease in the commercial finance portfolio.
The following table presents the Company's ACL as a percentage of its total loans and leases.
| As of the Period Ended | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| (Unaudited) | September 30, 2022 | June 30, 2022 | March 31, 2022 | December 31, 2021 | September 30, 2021 | |||||
| Commercial finance | 1.46 | % | 1.56 | % | 1.66 | % | 2.04 | % | 1.77 | % |
| Consumer finance | 0.86 | % | 2.44 | % | 3.18 | % | 2.70 | % | 2.91 | % |
| Tax services | 0.05 | % | 54.29 | % | 35.76 | % | 1.60 | % | 0.02 | % |
| Warehouse finance | 0.10 | % | 0.10 | % | 0.10 | % | 0.10 | % | 0.10 | % |
| Community banking | — | % | — | % | — | % | — | % | 6.16 | % |
| Total loans and leases | 1.30 | % | 2.04 | % | 2.38 | % | 1.84 | % | 1.89 | % |
| Total loans and leases excluding tax services | 1.30 | % | 1.44 | % | 1.59 | % | 1.84 | % | 1.89 | % |
The Company's ACL as a percentage of total loans and leases decreased to 1.30% at September 30, 2022 from 2.04% at June 30, 2022. The decrease in the total loans and leases coverage ratio was primarily driven by the seasonal tax services loan portfolio, along with a decrease in the coverage ratio for both the commercial and consumer finance portfolios. The drop in the consumer finance portfolio coverage ratio was attributable to the sale of the student loan portfolio. The Company expects to continue to diligently monitor the ACL and adjust as necessary in future periods to maintain an appropriate and supportable level.
Activity in the allowance for credit losses for the periods presented was as follows.
| (Unaudited) | Three Months Ended | Twelve Months Ended | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| (Dollars in thousands) | September 30, 2022 | June 30, 2022 | September 30, 2021 | September 30, 2022 | September 30, 2021 | |||||
| Beginning balance | $ | 75,206 | $ | 88,552 | $ | 91,208 | $ | 68,281 | $ | 56,188 |
| Adoption of CECL accounting standard | — | — | — | — | 12,773 | |||||
| Provision (reversal of) - tax services loans | — | (166) | 457 | 28,093 | 33,276 | |||||
| Provision (reversal of) - all other loans and leases | (2,617) | (982) | 8,368 | 769 | 16,663 | |||||
| Charge-offs - tax services loans | (22,599) | (7,998) | (24,849) | (30,852) | (34,354) | |||||
| Charge-offs - all other loans and leases | (6,844) | (6,346) | (7,635) | (30,210) | (22,920) | |||||
| Recoveries - tax services loans | 5 | 6 | 51 | 2,762 | 1,078 | |||||
| Recoveries - all other loans and leases | 2,796 | 2,140 | 681 | 7,104 | 5,577 | |||||
| Ending balance | $ | 45,947 | $ | 75,206 | $ | 68,281 | $ | 45,947 | $ | 68,281 |
The Company recognized a reversal of provision for credit losses of $2.6 million for the quarter ended September 30, 2022, compared to $8.8 million of provision for credit losses expense for the comparable period in the prior fiscal year. The reversal of provision for credit losses during the current quarter was primarily driven by the student loan sale and commercial finance recoveries. Net charge-offs were $26.6 million for the quarter ended September 30, 2022, compared to $31.8 million for the quarter ended September 30, 2021. Net charge-offs attributable to the tax services, commercial finance, and consumer finance portfolios for the quarter were $22.6 million, $3.4 million, and $0.6 million, respectively.
The Company's past due loans and leases were as follows for the periods presented.
| As of September 30, 2022 | Accruing and Nonaccruing Loans and Leases | Nonperforming Loans and Leases | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (Dollars in thousands) | 30-59 Days Past Due | 60-89 Days Past Due | > 89 Days Past Due | Total Past Due | Current | Total Loans and Leases Receivable | > 89 Days Past Due and Accruing | Nonaccrual Balance | Total | |||||||||
| Loans held for sale | $ | — | $ | — | $ | — | $ | — | $ | 21,071 | $ | 21,071 | $ | — | $ | — | $ | — |
| Commercial finance | 24,881 | 6,208 | 7,868 | 38,957 | 2,984,716 | 3,023,673 | 4,142 | 13,375 | 17,517 | |||||||||
| Consumer finance | 3,322 | 2,609 | 2,793 | 8,724 | 160,935 | 169,659 | 2,793 | — | 2,793 | |||||||||
| Tax services | — | — | 8,873 | 8,873 | 225 | 9,098 | 8,873 | — | 8,873 | |||||||||
| Warehouse finance | — | — | — | — | 326,850 | 326,850 | — | — | — | |||||||||
| Total loans and leases held for investment | 28,203 | 8,817 | 19,534 | 56,554 | 3,472,726 | 3,529,280 | 15,808 | 13,375 | 29,183 | |||||||||
| Total loans and leases | $ | 28,203 | $ | 8,817 | $ | 19,534 | $ | 56,554 | $ | 3,493,797 | $ | 3,550,351 | $ | 15,808 | $ | 13,375 | $ | 29,183 |
| As of June 30, 2022 | Accruing and Nonaccruing Loans and Leases | Nonperforming Loans and Leases | ||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| (Dollars in thousands) | 30-59 Days Past Due | 60-89 Days Past Due | > 89 Days Past Due | Total Past Due | Current | Total Loans and Leases Receivable | > 89 Days Past Due and Accruing | Nonaccrual Balance | Total | |||||||||
| Loans held for sale | $ | — | $ | — | $ | — | $ | — | $ | 67,571 | $ | 67,571 | $ | — | $ | — | $ | — |
| Commercial finance | 15,426 | 4,155 | 9,195 | 28,776 | 2,919,127 | 2,947,903 | 3,519 | 19,603 | 23,122 | |||||||||
| Consumer finance | 3,808 | 3,476 | 3,501 | 10,785 | 248,456 | 259,241 | 3,501 | — | 3,501 | |||||||||
| Tax services | — | 41,627 | — | 41,627 | — | 41,627 | — | — | — | |||||||||
| Warehouse finance | — | — | — | — | 434,748 | 434,748 | — | — | — | |||||||||
| Total loans and leases held for investment | 19,234 | 49,258 | 12,696 | 81,188 | 3,602,331 | 3,683,519 | 7,020 | 19,603 | 26,623 | |||||||||
| Total loans and leases | $ | 19,234 | $ | 49,258 | $ | 12,696 | $ | 81,188 | $ | 3,669,902 | $ | 3,751,090 | $ | 7,020 | $ | 19,603 | $ | 26,623 |
The Company's nonperforming assets at September 30, 2022 were $30.9 million, representing 0.46% of total assets, compared to $26.8 million, or 0.40% of total assets at June 30, 2022 and $61.8 million, or 0.92% of total assets at September 30, 2021.
The Company's nonperforming loans and leases at September 30, 2022, were $29.2 million, representing 0.82% of total gross loans and leases, compared to $26.6 million, or 0.71% of total gross loans and leases at June 30, 2022 and $55.9 million, or 1.52% of total gross loans and leases at September 30, 2021.
The increase in the nonperforming assets as a percentage of total assets at September 30, 2022 compared to June 30, 2022, was driven by an increase in nonperforming loans in the tax services portfolio, which is due to seasonal timing. This increase was partially offset by decreases within the commercial and consumer finance portfolios. When comparing the current period to the same period of the prior year, the decrease in nonperforming assets was due to a decrease in nonperforming assets in the community bank and commercial finance portfolios, partially offset by slight increases in nonperforming loans in the consumer and tax finance portfolios.
The Company has various portfolios of consumer lending and tax services loans that present unique risks that are statistically managed. Due to the unique risks associated with these portfolios, the Company monitors other credit quality indicators in their evaluation of the appropriateness of the allowance for credit losses on these portfolios, and as such, these loans are not included in the asset classification table below. The Company's loans and leases held for investment by asset classification were as follows for the periods presented.
| Asset Classification | ||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (Dollars in thousands) | Pass | Watch | Special Mention | Substandard | Doubtful | Total | ||||||||||||||||||||
| As of September 30, 2022 | ||||||||||||||||||||||||||
| Commercial finance | $ | 2,254,579 | $ | 469,638 | $ | 91,754 | $ | 203,680 | $ | 4,022 | $ | 3,023,673 | ||||||||||||||
| Warehouse finance | 294,350 | — | 32,500 | — | — | 326,850 | ||||||||||||||||||||
| Total loans and leases | $ | 2,548,929 | $ | 469,638 | $ | 124,254 | $ | 203,680 | $ | 4,022 | $ | 3,350,523 | Asset Classification | |||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | ||||||||||||||
| (Dollars in thousands) | Pass | Watch | Special Mention | Substandard | Doubtful | Total | ||||||||||||||||||||
| As of June 30, 2022 | ||||||||||||||||||||||||||
| Commercial finance | $ | 2,182,712 | $ | 462,392 | $ | 125,249 | $ | 172,696 | $ | 4,854 | $ | 2,947,903 | ||||||||||||||
| Warehouse finance | 434,748 | — | — | — | — | 434,748 | ||||||||||||||||||||
| Total loans and leases | $ | 2,617,460 | $ | 462,392 | $ | 125,249 | $ | 172,696 | $ | 4,854 | $ | 3,382,651 |
Deposits, Borrowings and Other Liabilities
Total average deposits for the fiscal 2022 fourth quarter decreased by $311.8 million to $5.77 billion compared to the same period in fiscal 2021. The decrease in average deposits was primarily due to decreases in interest-bearing deposits, wholesale deposits, savings deposits, and noninterest-bearing deposits, partially offset by an increase in money market deposits. The Company's deposit balances are seasonally lower during the fiscal fourth quarter. Additionally, prior period deposit balances were elevated due to the Company's participation in government stimulus programs.
The average balance of total deposits and interest-bearing liabilities was $5.80 billion for the three-month period ended September 30, 2022, compared to $6.17 billion for the same period in the prior fiscal year, representing a decrease of 6%.
Total end-of-period deposits increased 6% to $5.87 billion at September 30, 2022, compared to $5.51 billion at September 30, 2021. The increase in end-of-period deposits was primarily driven by an increase in noninterest-bearing deposits of $628.9 million, partially offset by a decrease in interest-bearing checking of $254.3 million and a decrease in wholesale deposits of $73.6 million.
As of September 30, 2022, the Company managed $1.31 billion of customer deposits at other banks in its capacity as custodian. These deposits provide the Company with excess deposits that can earn record keeping service fee income, typically reflective of the EFFR.
Approximately 37% of the deposit balances at September 30, 2022 are subject to variable card processing expenses that are derived from the terms of contractual agreements with certain BaaS partners. These agreements are tied to a portion of a rate index, typically the EFFR.
Regulatory Capital
The Company and the Bank remained above the federal regulatory minimum capital requirements at September 30, 2022, and continued to be classified as well-capitalized, and in good standing with the regulatory agencies. Regulatory capital ratios of the Company and the Bank are stated in the table below. Regulatory Capital is not affected by the unrealized loss on accumulated other comprehensive income (“AOCI”). The securities portfolio is made up of nearly all amortizing securities that should provide consistent cash flow and is not expected to require sales to realize the losses to fund future loan growth.
The tables below include certain non-GAAP financial measures that are used by investors, analysts and bank regulatory agencies to assess the capital position of financial services companies. Management reviews these measures along with other measures of capital as part of its financial analysis.
| As of the Periods Indicated | September 30, 2022(1) | June 30, 2022 | March 31,<br>2022 | December 31,<br>2021 | September 30,<br>2021 | |||||
|---|---|---|---|---|---|---|---|---|---|---|
| Company | ||||||||||
| Tier 1 leverage capital ratio | 8.10 | % | 8.23 | % | 6.80 | % | 7.39 | % | 7.67 | % |
| Common equity Tier 1 capital ratio | 12.07 | % | 11.87 | % | 11.26 | % | 10.88 | % | 12.12 | % |
| Tier 1 capital ratio | 12.39 | % | 12.19 | % | 11.58 | % | 11.20 | % | 12.46 | % |
| Total capital ratio | 13.88 | % | 13.44 | % | 14.16 | % | 13.80 | % | 15.45 | % |
| Bank | ||||||||||
| Tier 1 leverage ratio | 8.19 | % | 8.22 | % | 7.79 | % | 8.52 | % | 8.69 | % |
| Common equity Tier 1 capital ratio | 12.55 | % | 12.17 | % | 13.26 | % | 12.90 | % | 14.11 | % |
| Tier 1 capital ratio | 12.55 | % | 12.18 | % | 13.26 | % | 12.91 | % | 14.13 | % |
| Total capital ratio | 13.57 | % | 13.43 | % | 14.52 | % | 14.16 | % | 15.38 | % |
(1) September 30, 2022 percentages are preliminary pending completion and filing of the Company's regulatory reports. Regulatory capital ratios for periods presented reflect the Company's election of the five-year CECL transition for regulatory capital purposes.
The following table provides the non-GAAP financial measures used to compute certain of the ratios included in the table above, as well as a reconciliation of such non-GAAP financial measures to the most directly comparable financial measure in accordance with GAAP:
| Standardized Approach(1) | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| (Dollars in thousands) | September 30,<br>2022 | June 30,<br>2022 | March 31,<br>2022 | December 31,<br>2021 | September 30,<br>2021 | |||||
| Total stockholders' equity | $ | 645,140 | $ | 724,774 | $ | 763,406 | $ | 826,157 | $ | 871,884 |
| Adjustments: | ||||||||||
| LESS: Goodwill, net of associated deferred tax liabilities | 299,186 | 299,616 | 299,983 | 300,382 | 300,780 | |||||
| LESS: Certain other intangible assets | 26,406 | 27,809 | 30,007 | 32,294 | 33,572 | |||||
| LESS: Net deferred tax assets from operating loss and tax credit carry-forwards | 17,968 | 11,978 | 13,404 | 19,855 | 22,801 | |||||
| LESS: Net unrealized gains (losses) on available for sale securities | (211,600) | (131,352) | (69,838) | 403 | 7,344 | |||||
| LESS: Noncontrolling interest | (30) | 665 | 322 | 642 | 1,155 | |||||
| ADD: Adoption of Accounting Standards Update 2016-13 | 2,689 | 10,011 | 13,387 | 6,527 | 8,202 | |||||
| Common Equity Tier 1(1) | 515,899 | 526,069 | 502,915 | 479,108 | 514,434 | |||||
| Long-term borrowings and other instruments qualifying as Tier 1 | 13,661 | 13,661 | 13,661 | 13,661 | 13,661 | |||||
| Tier 1 minority interest not included in common equity Tier 1 capital | (20) | 377 | 208 | 444 | 747 | |||||
| Total Tier 1 capital | 529,540 | 540,107 | 516,784 | 493,213 | 528,842 | |||||
| Allowance for credit losses | 43,623 | 55,506 | 56,051 | 55,125 | 53,159 | |||||
| Subordinated debentures, net of issuance costs | 20,000 | — | 59,256 | 59,220 | 73,980 | |||||
| Total capital | $ | 593,163 | $ | 595,613 | $ | 632,091 | $ | 607,558 | $ | 655,981 |
(1) Capital ratios were determined using the Basel III capital rules that became effective on January 1, 2015. Basel III revised the definition of capital, increased minimum capital ratios, and introduced a minimum CET1 ratio; those changes were fully phased in through the end of calendar year 2021.
The following table provides a reconciliation of tangible common equity and tangible common equity excluding AOCI, each of which is used in calculating tangible book value data, to Total Stockholders' Equity. Each of tangible common equity and tangible common equity excluding AOCI is a non-GAAP financial measure that is commonly used within the banking industry.
| September 30,<br>2022 | June 30,<br>2022 | March 31,<br>2022 | December 31,<br>2021 | September 30,<br>2021 | ||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Total stockholders' equity | $ | 645,140 | $ | 724,774 | $ | 763,406 | $ | 826,157 | $ | 871,884 |
| Less: Goodwill | 309,505 | 309,505 | 309,505 | 309,505 | 309,505 | |||||
| Less: Intangible assets | 25,691 | 27,088 | 29,290 | 31,661 | 33,148 | |||||
| Tangible common equity | 309,944 | 388,181 | 424,611 | 484,991 | 529,231 | |||||
| Less: AOCI | (213,080) | (131,407) | (69,374) | 724 | 7,599 | |||||
| Tangible common equity excluding AOCI | $ | 523,024 | $ | 519,588 | $ | 493,985 | $ | 484,267 | $ | 521,632 |
Conference Call
The Company will host a conference call and earnings webcast at 4:00 p.m. Central Time (5:00 p.m. Eastern Time) on Thursday, October 27, 2022. The live webcast of the call can be accessed from Pathward’s Investor Relations website at www.pathwardfinancial.com. Telephone participants may access the conference call by dialing 1-844-200-6205 (International: +1-929-526-1599) approximately 10 minutes prior to start time and reference access code 372192. A webcast replay will also be archived at www.pathwardfinancial.com for one year.
Upcoming Investor Events
•KBW Winter Financial Services Conference, Feb 16, 2023 | Boca Raton, FL
About Pathward Financial, Inc.™
Pathward Financial, Inc.™ (Nasdaq: CASH) is a U.S.-based financial holding company driven by its purpose to power financial inclusion for all™. Through our subsidiary, Pathward™, N.A., we strive to increase financial availability, choice, and opportunity across our Banking as a Service and Commercial Finance business lines. These strategic business lines provide end-to-end support to individuals and businesses. Learn more at www.pathwardfinancial.com.
| Investor Relations Contact |
|---|
| Justin Schempp |
| 877-497-7497 |
| jschempp@pathward.com |
| Media Relations Contact |
| mediarelations@pathward.com |
Forward-Looking Statements
The Company and Pathward may from time to time make written or oral “forward-looking statements,” including statements contained in this press release, the Company’s filings with the SEC, the Company’s reports to stockholders, and in other communications by the Company and Pathward, which are made in good faith by the Company pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995.
You can identify forward-looking statements by words such as “may,” “hope,” “will,” “should,” “expect,” “plan,” “anticipate,” “intend,” “believe,” “estimate,” “predict,” “potential,” “continue,” “could,” “future,” or the negative of those terms, or other words of similar meaning or similar expressions. You should carefully read statements that contain these words because they discuss our future expectations or state other “forward-looking” information. These forward-looking statements are based on information currently available to us and assumptions about future events, and include statements with respect to the Company’s beliefs, expectations, estimates, and intentions, which are subject to significant risks and uncertainties, and are subject to change based on various factors, some of which are beyond the Company’s control. Such risks, uncertainties and other factors may cause our actual growth, results of operations, financial condition, cash flows, performance and business prospects and opportunities to differ materially from those expressed in, or implied by, these forward-looking statements. Such statements address, among others, the following subjects: future operating results; the impact of measures expected to increase efficiencies or reduce expenses; the timing of and expenses related to our new brand rollout; customer retention; loan and other product demand; expectations concerning acquisitions and divestitures; new products and services; credit quality; the level of net charge-offs and the adequacy of the allowance for credit losses; technology; and the Company's employees. The following factors, among others, could cause the Company's financial performance and results of operations to differ materially from the expectations, estimates, and intentions expressed in such forward-looking statements: maintaining our executive management team; expected growth opportunities may not be realized or may take longer to realize than expected; the potential adverse effects of the ongoing COVID-19 pandemic and any governmental or societal responses thereto, or other unusual and infrequently occurring events, including the impact on financial markets from geopolitical conflicts such as the military conflict between Russia and Ukraine; our ability to achieve brand recognition for Pathward equal to or greater than we have enjoyed for MetaBank; our ability to successfully implement measures designed to reduce expenses and increase efficiencies; changes in trade, monetary, and fiscal policies and laws, including actual changes in interest rates and the Fed Funds rate; changes in tax laws; the strength of the United States' economy, and the local economies in which the Company operates; inflation, market, and monetary fluctuations; the timely and efficient development of new products and services offered by the Company or its strategic partners, as well as risks (including reputational and litigation) attendant thereto, and the perceived overall value of these products and services by users; Pathward's ability to maintain its Durbin Amendment exemption; the risks of dealing with or utilizing third parties, including, in connection with the Company’s prepaid card and tax refund advance businesses, the risk of reduced volume of refund advance loans as a result of reduced customer demand for or usage of Pathward’s strategic partners’ refund advance products; our relationship with, and any actions which may be initiated by, our regulators; changes in financial services laws and regulations, including laws and regulations relating to the tax refund industry and the insurance premium finance industry; technological changes, including, but not limited to, the protection of our electronic systems and information; the impact of acquisitions and divestitures; litigation risk; the growth of the Company’s business, as well as expenses related thereto; continued maintenance by Pathward of its status as a well-capitalized institution; changes in consumer spending and saving habits; losses from fraudulent or illegal activity; technological risks and developments and cyber threats, attacks, or events; and the success of the Company at maintaining its high quality asset level and managing and collecting assets of borrowers in default should problem assets increase.
The foregoing list of factors is not exclusive. We caution you not to place undue reliance on these forward-looking statements. The forward-looking statements included in this press release speak only as of the date hereof. Additional discussions of factors affecting the Company’s business and prospects are reflected under the caption “Risk Factors” and in other sections of the Company’s Annual Report on Form 10-K for the Company’s fiscal year ended September 30, 2021, and in other filings made with the SEC. The Company expressly disclaims any intent or obligation to update any forward-looking statements, whether written or oral, that may be made from time to time by or on behalf of the Company or its subsidiaries, whether as a result of new information, changed circumstances, or future events or for any other reason.
Condensed Consolidated Statements of Financial Condition (Unaudited)
| (Dollars in Thousands, Except Share Data) | September 30, 2022 | June 30, 2022 | March 31, 2022 | December 31, 2021 | September 30, 2021 | |||||
|---|---|---|---|---|---|---|---|---|---|---|
| ASSETS | ||||||||||
| Cash and cash equivalents | $ | 388,038 | $ | 157,260 | $ | 237,680 | $ | 1,230,100 | $ | 314,019 |
| Securities available for sale, at fair value | 1,882,869 | 1,956,523 | 2,043,478 | 1,782,739 | 1,864,899 | |||||
| Securities held to maturity, at amortized cost | 41,682 | 43,877 | 47,287 | 50,994 | 56,669 | |||||
| Federal Reserve Bank and Federal Home Loan Bank Stock, at cost | 28,812 | 28,812 | 28,812 | 28,400 | 28,400 | |||||
| Loans held for sale | 21,071 | 67,571 | 31,410 | 36,182 | 56,194 | |||||
| Loans and leases | 3,536,305 | 3,688,566 | 3,730,190 | 3,684,261 | 3,609,563 | |||||
| Allowance for credit losses | (45,947) | (75,206) | (88,552) | (67,623) | (68,281) | |||||
| Accrued interest receivable | 17,979 | 16,818 | 19,115 | 17,240 | 16,254 | |||||
| Premises, furniture, and equipment, net | 41,710 | 42,076 | 43,167 | 44,130 | 44,888 | |||||
| Rental equipment, net | 204,371 | 222,023 | 213,033 | 234,693 | 213,116 | |||||
| Goodwill and intangible assets | 335,196 | 336,593 | 338,795 | 341,166 | 342,653 | |||||
| Other assets | 295,324 | 243,266 | 242,823 | 227,376 | 212,276 | |||||
| Total assets | $ | 6,747,410 | $ | 6,728,178 | $ | 6,887,239 | $ | 7,609,658 | $ | 6,690,650 |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||
| LIABILITIES | ||||||||||
| Deposits | 5,866,037 | 5,710,799 | 5,829,886 | 6,525,569 | 5,514,971 | |||||
| Long-term borrowings | 36,028 | 16,616 | 91,386 | 92,274 | 92,834 | |||||
| Accrued expenses and other liabilities | 200,205 | 275,989 | 202,561 | 165,658 | 210,961 | |||||
| Total liabilities | 6,102,270 | 6,003,404 | 6,123,833 | 6,783,501 | 5,818,766 | |||||
| STOCKHOLDERS’ EQUITY | ||||||||||
| Preferred stock | — | — | — | — | — | |||||
| Common stock, $.01 par value | 288 | 294 | 294 | 301 | 317 | |||||
| Common stock, Nonvoting, $.01 par value | — | — | — | — | — | |||||
| Additional paid-in capital | 617,403 | 615,159 | 612,917 | 610,816 | 604,484 | |||||
| Retained earnings | 245,394 | 244,686 | 223,760 | 217,992 | 259,189 | |||||
| Accumulated other comprehensive income (loss) | (213,080) | (131,407) | (69,374) | 724 | 7,599 | |||||
| Treasury stock, at cost | (4,835) | (4,623) | (4,513) | (4,318) | (860) | |||||
| Total equity attributable to parent | 645,170 | 724,109 | 763,084 | 825,515 | 870,729 | |||||
| Noncontrolling interest | (30) | 665 | 322 | 642 | 1,155 | |||||
| Total stockholders’ equity | 645,140 | 724,774 | 763,406 | 826,157 | 871,884 | |||||
| Total liabilities and stockholders’ equity | $ | 6,747,410 | $ | 6,728,178 | $ | 6,887,239 | $ | 7,609,658 | $ | 6,690,650 |
Condensed Consolidated Statements of Operations (Unaudited)
| Three Months Ended | Twelve Months Ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| (Dollars in Thousands, Except Share and Per Share Data) | September 30, 2022 | June 30, 2022 | September 30, 2021 | September 30, 2022 | September 30, 2021 | |||||
| Interest and dividend income: | ||||||||||
| Loans and leases, including fees | $ | 64,963 | $ | 62,541 | $ | 63,665 | $ | 268,078 | $ | 256,080 |
| Mortgage-backed securities | 10,155 | 7,381 | 3,979 | 26,846 | 12,155 | |||||
| Other investments | 5,104 | 3,984 | 4,412 | 17,272 | 17,619 | |||||
| 80,222 | 73,906 | 72,056 | 312,196 | 285,854 | ||||||
| Interest expense: | ||||||||||
| Deposits | 99 | 94 | 164 | 500 | 1,593 | |||||
| FHLB advances and other borrowings | 363 | 1,661 | 1,225 | 4,372 | 5,270 | |||||
| 462 | 1,755 | 1,389 | 4,872 | 6,863 | ||||||
| Net interest income | 79,760 | 72,151 | 70,667 | 307,324 | 278,991 | |||||
| Provision for credit losses | (2,648) | (1,302) | 8,775 | 28,538 | 49,766 | |||||
| Net interest income after provision for credit losses | 82,408 | 73,453 | 61,892 | 278,786 | 229,225 | |||||
| Noninterest income: | ||||||||||
| Refund transfer product fees | 1,135 | 10,289 | 2,567 | 39,809 | 37,967 | |||||
| Refund advance fee income | 44 | (20) | 226 | 40,557 | 47,639 | |||||
| Payments card and deposit fees | 28,609 | 24,673 | 25,541 | 104,684 | 107,182 | |||||
| Other bank and deposit fees | 299 | 262 | 230 | 1,049 | 939 | |||||
| Rental income | 12,024 | 12,082 | 9,709 | 46,558 | 39,416 | |||||
| Gain (loss) on sale of securities | (1,882) | 198 | — | (1,287) | 6 | |||||
| Gain on sale of trademarks | — | — | — | 50,000 | — | |||||
| Gain (loss) on sale of other | (3,319) | 1,239 | 580 | (4,920) | 11,515 | |||||
| Other income | 6,546 | 5,271 | 10,689 | 17,357 | 26,240 | |||||
| Total noninterest income | 43,456 | 53,994 | 49,542 | 293,807 | 270,904 | |||||
| Noninterest expense: | ||||||||||
| Compensation and benefits | 42,762 | 45,091 | 36,222 | 171,126 | 151,090 | |||||
| Refund transfer product expense | 52 | 2,457 | 3,219 | 8,908 | 11,861 | |||||
| Refund advance expense | 1 | (29) | 30 | 2,157 | 2,564 | |||||
| Card processing | 15,718 | 8,438 | 7,063 | 38,785 | 27,201 | |||||
| Occupancy and equipment expense | 9,064 | 8,996 | 8,252 | 34,909 | 29,269 | |||||
| Operating lease equipment depreciation | 9,306 | 9,145 | 7,865 | 35,636 | 30,987 | |||||
| Legal and consulting | 13,355 | 11,724 | 14,369 | 40,634 | 31,341 | |||||
| Intangible amortization | 1,397 | 1,532 | 1,761 | 6,585 | 8,545 | |||||
| Impairment expense | — | 670 | 601 | 670 | 2,818 | |||||
| Other expense | 11,375 | 8,626 | 14,232 | 45,865 | 48,007 | |||||
| Total noninterest expense | 103,030 | 96,650 | 93,614 | 385,275 | 343,683 | |||||
| Income before income tax expense | 22,834 | 30,797 | 17,820 | 187,318 | 156,446 | |||||
| Income tax expense (benefit) | (1,272) | 6,958 | 1,101 | 27,964 | 10,701 | |||||
| Net income before noncontrolling interest | 24,106 | 23,839 | 16,719 | 159,354 | 145,745 | |||||
| Net income attributable to noncontrolling interest | 686 | 1,448 | 816 | 2,968 | 4,037 | |||||
| Net income attributable to parent | $ | 23,420 | $ | 22,391 | $ | 15,903 | $ | 156,386 | $ | 141,708 |
| Less: Allocation of Earnings to participating securities(1) | 393 | 377 | 297 | 2,566 | 2,698 | |||||
| Net income attributable to common shareholders(1) | 23,027 | 22,014 | 15,606 | 153,821 | 139,010 | |||||
| Earnings per common share: | ||||||||||
| Basic | $ | 0.81 | $ | 0.76 | $ | 0.50 | $ | 5.26 | $ | 4.38 |
| Diluted | $ | 0.81 | $ | 0.76 | $ | 0.50 | $ | 5.26 | $ | 4.38 |
| Shares used in computing earnings per common share: | ||||||||||
| Basic | 28,581,236 | 28,868,136 | 31,280,162 | 29,227,071 | 31,729,596 | |||||
| Diluted | 28,581,236 | 28,868,136 | 31,299,555 | 29,232,247 | 31,751,522 |
(1) Amounts presented are used in the two-class earnings per common share calculation.
Average Balances, Interest Rates and Yields
The following table presents, for the periods indicated, the total dollar amount of interest income from average interest-earning assets and the resulting yields, as well as the interest expense on average interest-bearing liabilities, expressed both in dollars and in rates. Only the yield/rate reflects tax-equivalent adjustments. Nonaccruing loans and leases have been included in the table as loans carrying a zero yield.
| Three Months Ended September 30, | 2022 | 2021 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (Dollars in thousands) | Average<br>Outstanding<br>Balance | Interest<br>Earned /<br>Paid | Yield /<br><br>Rate(1) | Average<br>Outstanding<br>Balance | Interest<br>Earned /<br>Paid | Yield /<br><br>Rate(1) | ||||||
| Interest-earning assets: | ||||||||||||
| Cash and fed funds sold | $ | 275,344 | $ | 1,467 | 2.11 | % | $ | 852,122 | $ | 1,248 | 0.58 | % |
| Mortgage-backed securities | 1,583,415 | 10,155 | 2.54 | % | 1,049,258 | 3,979 | 1.50 | % | ||||
| Tax exempt investment securities | 165,718 | 990 | 3.00 | % | 232,006 | 772 | 1.67 | % | ||||
| Asset-backed securities | 167,053 | 854 | 2.03 | % | 400,507 | 1,199 | 1.19 | % | ||||
| Other investment securities | 263,615 | 1,792 | 2.70 | % | 258,367 | 1,193 | 1.83 | % | ||||
| Total investments | 2,179,801 | 13,791 | 2.56 | % | 1,940,138 | 7,143 | 1.50 | % | ||||
| Commercial finance | 2,960,988 | 54,325 | 7.28 | % | 2,690,064 | 48,285 | 7.12 | % | ||||
| Consumer finance | 234,295 | 4,128 | 6.99 | % | 258,043 | 4,308 | 6.62 | % | ||||
| Tax services | 35,484 | (148) | (1.65) | % | 37,174 | 165 | 1.76 | % | ||||
| Warehouse finance | 387,910 | 6,658 | 6.81 | % | 388,477 | 6,332 | 6.47 | % | ||||
| Community banking | — | — | — | % | 272,554 | 4,575 | 6.66 | % | ||||
| Total loans and leases | 3,618,678 | 64,963 | 7.12 | % | 3,646,312 | 63,665 | 6.93 | % | ||||
| Total interest-earning assets | $ | 6,073,822 | $ | 80,222 | 5.26 | % | $ | 6,438,572 | $ | 72,056 | 4.45 | % |
| Noninterest-earning assets | 657,498 | 822,592 | ||||||||||
| Total assets | $ | 6,731,321 | $ | 7,261,164 | ||||||||
| Interest-bearing liabilities: | ||||||||||||
| Interest-bearing checking(2) | $ | 380 | $ | — | 0.33 | % | $ | 243,005 | $ | — | — | % |
| Savings | 67,937 | 6 | 0.04 | % | 89,110 | 5 | 0.02 | % | ||||
| Money markets | 104,570 | 55 | 0.21 | % | 67,083 | 58 | 0.34 | % | ||||
| Time deposits | 7,969 | 5 | 0.23 | % | 10,218 | 21 | 0.81 | % | ||||
| Wholesale deposits | 6,479 | 32 | 1.98 | % | 77,506 | 80 | 0.41 | % | ||||
| Total interest-bearing deposits | 187,335 | 99 | 0.21 | % | 486,922 | 164 | 0.13 | % | ||||
| Overnight fed funds purchased | 15,511 | 100 | 2.56 | % | — | — | — | % | ||||
| Subordinated debentures | 1,739 | 29 | 6.72 | % | 73,951 | 1,065 | 5.71 | % | ||||
| Other borrowings | 16,397 | 234 | 5.66 | % | 19,299 | 160 | 3.29 | % | ||||
| Total borrowings | 33,647 | 363 | 4.29 | % | 93,250 | 1,225 | 5.21 | % | ||||
| Total interest-bearing liabilities | 220,981 | 462 | 0.83 | % | 580,172 | 1,390 | 0.95 | % | ||||
| Noninterest-bearing deposits | 5,577,713 | — | — | % | 5,589,946 | — | — | % | ||||
| Total deposits and interest-bearing liabilities | $ | 5,798,694 | $ | 462 | 0.03 | % | $ | 6,170,118 | $ | 1,390 | 0.09 | % |
| Other noninterest-bearing liabilities | 201,711 | 204,726 | ||||||||||
| Total liabilities | 6,000,404 | 6,374,844 | ||||||||||
| Shareholders' equity | 730,916 | 886,320 | ||||||||||
| Total liabilities and shareholders' equity | $ | 6,731,321 | $ | 7,261,164 | ||||||||
| Net interest income and net interest rate spread including noninterest-bearing deposits | $ | 79,760 | 5.23 | % | $ | 70,667 | 4.36 | % | ||||
| Net interest margin | 5.21 | % | 4.35 | % | ||||||||
| Tax-equivalent effect | 0.02 | % | 0.01 | % | ||||||||
| Net interest margin, tax-equivalent(3) | 5.23 | % | 4.37 | % |
(1) Tax rate used to arrive at the TEY for the three months ended September 30, 2022 and 2021 was 21%.
(2) At September 30, 2021, $242.7 million of the total balance were interest-bearing deposits where interest expense was paid by a third party and not by the Company. On October 1, 2021, the Company reclassified the balances related to that program to noninterest bearing checking due to the product moving to noninterest bearing.
(3) Net interest margin expressed on a fully-taxable-equivalent basis ("net interest margin, tax-equivalent") is a non-GAAP financial measure. The tax-equivalent adjustment to net interest income recognizes the estimated income tax savings when comparing taxable and tax-exempt assets and adjusting for federal and state exemption of interest income. The Company believes that it is a standard practice in the banking industry to present net interest margin expressed on a fully taxable equivalent basis and, accordingly, believes the presentation of this non-GAAP financial measure may be useful for peer comparison purposes.
Selected Financial Information
| As of and For the Three Months Ended | September 30,<br>2022 | June 30,<br>2022 | March 31,<br>2022 | December 31,<br>2021 | September 30,<br>2021 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity to total assets | 9.56 | % | 10.77 | % | 11.08 | % | 10.86 | % | 13.03 | % | |||||
| Book value per common share outstanding | $ | 22.41 | $ | 24.69 | $ | 26.00 | $ | 27.46 | $ | 27.53 | |||||
| Tangible book value per common share outstanding | $ | 10.77 | $ | 13.22 | $ | 14.46 | $ | 16.12 | $ | 16.71 | |||||
| Tangible book value per common share outstanding excluding AOCI | $ | 18.17 | $ | 17.70 | $ | 16.82 | $ | 16.10 | $ | 16.47 | |||||
| Common shares outstanding | 28,788,124 | 29,356,707 | 29,362,844 | 30,080,717 | 31,669,952 | ||||||||||
| Nonperforming assets to total assets | 0.46 | % | 0.40 | % | 0.56 | % | 0.58 | % | 0.92 | % | |||||
| Nonperforming loans and leases to total loans and leases | 0.82 | % | 0.71 | % | 0.95 | % | 1.16 | % | 1.52 | % | |||||
| Net interest margin | 5.21 | % | 4.76 | % | 4.80 | % | 4.59 | % | 4.35 | % | |||||
| Net interest margin, tax-equivalent | 5.23 | % | 4.77 | % | 4.81 | % | 4.61 | % | 4.37 | % | |||||
| Return on average assets | 1.39 | % | 1.32 | % | 2.49 | % | 3.49 | % | 0.88 | % | |||||
| Return on average equity | 12.82 | % | 11.93 | % | 24.16 | % | 29.69 | % | 7.18 | % | |||||
| Full-time equivalent employees | 1,141 | 1,178 | 1,167 | 1,140 | 1,124 |
Non-GAAP Reconciliations
| Adjusted Net Income and Adjusted Earnings Per Share | At and For the Three Months Ended | At and For the Year Ended | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| (Dollars in Thousands, Except Share and Per Share Data) | September 30,<br>2022 | June 30,<br>2022 | September 30,<br>2021 | September 30,<br>2022 | September 30,<br>2021 | |||||
| Net Income - GAAP | $ | 23,420 | $ | 22,391 | $ | 15,903 | $ | 156,386 | $ | 141,708 |
| Less: Gain on sale of trademarks | — | — | — | 50,000 | — | |||||
| Add: Rebranding expenses | 6,899 | 3,427 | — | 13,148 | — | |||||
| Add: Separation related expenses | 1,029 | 3,116 | 36 | 5,109 | 2,545 | |||||
| Add: Income tax effect resulting from gain on sale of trademarks and rebranding and separation expenses | (1,029) | (1,677) | (9) | 8,936 | (636) | |||||
| Adjusted net income | $ | 30,319 | $ | 27,257 | $ | 15,930 | $ | 133,579 | $ | 143,617 |
| Less: Adjusted allocation of earnings to participating securities | 508 | 458 | 297 | 2,191 | 2,734 | |||||
| Adjusted Net income attributable to common shareholders | 29,811 | 26,799 | 15,633 | 131,388 | 140,883 | |||||
| Weighted average diluted common shares outstanding | 28,581,236 | 28,868,136 | 31,299,555 | 29,232,247 | 31,751,522 | |||||
| Adjusted earnings per common share - diluted | $ | 1.04 | $ | 0.93 | $ | 0.50 | $ | 4.49 | $ | 4.44 |
| Adjusted Diluted Earnings Per Share Guidance | Fiscal Year Ended | |||||||||
| --- | --- | --- | ||||||||
| (Earnings per share amounts) | 2022 (Actual) | 2023 (Guidance) | ||||||||
| Diluted earnings per share - GAAP | $5.25 - $5.75 | |||||||||
| Less: Net extraordinary items, net of tax(1) | 0.77 | $0.15 | ||||||||
| Diluted earnings per share - Adjusted | $5.10 - $5.60 |
All values are in US Dollars.
(1) Includes gain on sale of trademarks, rebrand related expenses and separation related expenses.
| Efficiency Ratio | For the Last Twelve Months Ended | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (Dollars in thousands) | September 30,<br>2022 | June 30,<br>2022 | March 31,<br>2022 | December 31,<br>2021 | September 30,<br>2021 | ||||||||||
| Noninterest expense: GAAP | $ | 385,275 | $ | 375,860 | $ | 360,733 | $ | 353,544 | $ | 343,683 | |||||
| Net interest income | 307,324 | 298,231 | 294,555 | 284,605 | 278,991 | ||||||||||
| Noninterest income | 293,807 | 299,893 | 308,352 | 312,039 | 270,903 | ||||||||||
| Total revenue: GAAP | $ | 601,131 | $ | 598,124 | $ | 602,907 | $ | 596,644 | $ | 549,894 | |||||
| Efficiency ratio | 64.09 | % | 62.84 | % | 59.83 | % | 59.26 | % | 62.50 | % | |||||
| Adjusted Efficiency Ratio | |||||||||||||||
| Noninterest expense: GAAP | $ | 385,275 | $ | 375,860 | $ | 360,733 | $ | 353,544 | $ | 343,683 | |||||
| Less: Rebranding expenses | 13,148 | 6,249 | 2,822 | 3 | — | ||||||||||
| Adjusted noninterest expense | 372,127 | 369,611 | 357,911 | 353,341 | 343,683 | ||||||||||
| Net interest income | 307,324 | 298,231 | 294,555 | 284,605 | 278,991 | ||||||||||
| Noninterest income | 293,807 | 299,893 | 308,352 | 312,039 | 270,903 | ||||||||||
| Less: Gain on sale of trademarks | 50,000 | 50,000 | 50,000 | 50,000 | — | ||||||||||
| Total adjusted revenue | $ | 551,131 | $ | 548,124 | $ | 552,907 | $ | 546,644 | $ | 549,984 | |||||
| Adjusted efficiency ratio | 67.52 | % | 67.43 | % | 64.73 | % | 64.67 | % | 62.50 | % |
16
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Quarterly Investor Update FOUR TH QUAR TER & F ISCA L YEAR END 2022 Pathward Financial, Inc. (Nasdaq: CASH) | Quarterly Investor Presentation
Pathward Financial, Inc. (Nasdaq: CASH) | Quarterly Investor Presentation2 FORWARD LOOKING STATEMENTS This investor update contains “forward-looking statements” which are made in good faith by the Company pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. You can identify forward-looking statements by words such as “may,” “hope,” “will,” “should,” “expect,” “plan,” “anticipate,” “intend,” “believe,” “estimate,” “predict,” “potential,” “continue,” “could,” “future,” or the negative of those terms, or other words of similar meaning or similar expressions. These forward-looking statements are based on information currently available to us and assumptions about future events, and include statements with respect to the Company’s beliefs, expectations, estimates, and intentions, which are subject to significant risks and uncertainties, and are subject to change based on various factors, some of which are beyond the Company’s control. Such risks, uncertainties and other factors may cause our actual growth, results of operations, financial condition, cash flows, performance and business prospects and opportunities to differ materially from those expressed in, or implied by, these forward-looking statements. Such statements address, among others, the following subjects: future operating results; the impact of measures expected to increase efficiencies or reduce expenses; customer retention; loan and other product demand; expectations concerning acquisitions and divestitures; new products and services; credit quality; the level of net charge-offs and the adequacy of the allowance for loan and lease losses; technology; and the Company's employees. The following factors, among others, could cause the Company's financial performance and results of operations to differ materially from the expectations, estimates, and intentions expressed in such forward-looking statements: maintaining our executive management team; expected growth opportunities may not be realized or may take longer to realize than expected; the potential adverse effects of the ongoing COVID-19 pandemic and any governmental or societal responses thereto, or other unusual and infrequently occurring events, including the impact on financial markets from geopolitical conflicts such as the military conflict between Russia and Ukraine; our ability to achieve brand recognition for Pathward equal to or greater than currently enjoyed for MetaBank; our ability to successfully implement measures designed to reduce expenses and increase efficiencies; changes in trade, monetary, and fiscal policies and laws, including actual changes in interest rates and the Fed Funds rate; changes in tax laws; the strength of the United States' economy, and the local economies in which the Company operates; inflation, market, and monetary fluctuations; the timely and efficient development of, new products and services offered by the Company or its strategic partners, as well as risks (including reputational and litigation) attendant thereto, and the perceived overall value of these products and services by users; Pathward’s ability to maintain its Durbin Amendment exemption; the risks of dealing with or utilizing third parties, including, in connection with the Company’s prepaid card and tax refund advance business, the risk of reduced volume of refund advance loans as a result of reduced customer demand for or usage of the Company’s strategic partners’ refund advance products; our relationship with, and any actions which may be initiated by, our regulators; changes in financial services laws and regulations, including laws and regulations relating to the tax refund industry and the insurance premium finance industry; technological changes, including, but not limited to, the protection of our electronic systems and information; the impact of acquisitions and divestitures; litigation risk; the growth of the Company’s business, as well as expenses related thereto; continued maintenance by Pathward of its status as a well-capitalized institution, changes in consumer spending and saving habits; losses from fraudulent or illegal activity, technological risks and developments and cyber threats, attacks or events; the success of the Company at maintaining its high quality asset level and managing and collecting assets of borrowers in default should problem assets increase; and the other factors described under the caption “Risk Factors” and in other sections of the Company’s Annual Report on Form 10-K for the Company's fiscal year ended September 30, 2021 and in other filings made by the Company with the Securities and Exchange Commission (“SEC”). The foregoing list of factors is not exclusive. We caution you not to place undue reliance on these forward-looking statements. The forward-looking statements included herein speak only as of the date of this investor update. The Company expressly disclaims any intent or obligation to update any forward-looking statements, whether written or oral, that may be made from time to time by or on behalf of the Company or its subsidiaries, whether as a result of new information, changed circumstances or future events or for any other reason.
Pathward Financial, Inc. (Nasdaq: CASH) | Quarterly Investor Presentation Since our founding, we have worked to advance financial inclusion. We seek out diverse partners, including fintechs, affinity groups, government agencies, and other banks and work with them to identify markets where people and businesses are underserved. Our national bank charter, coordination with regulators, and deep understanding of risk mitigation and compliance allow us to guide our partners and deliver financial products, services and funding to the people and businesses who need them the most. We are powering financial inclusion for allTM. AT PATHWARD, LEADING THE WAY TO FINANCIAL ACCESS IS THE HEART OF OUR BUSINESS. 3
Pathward Financial, Inc. (Nasdaq: CASH) | Quarterly Investor Presentation4 Pathward’s Unique Business Model Pathward’s resilient model secures low-cost funding1 via BaaS payments relationships, earns an outsized proportion of consistent payment fees, and operates a collateralized lending platform that outperforms in down-cycles BaaS Payments Platform Funding BaaS Payments Platform Fees Asset-Backed Lending Income 1 See slide 13 (Low-cost Deposits) for additional detail on deposit costs.
2 3 4 1 Record of strong earnings growth and profitability above banking industry averages Resilient Commercial Finance loan portfolio produces attractive returns throughout economic cycles Leader in fast-growing Banking as a Service (BaaS) sector, with diversified portfolio of high-quality financial partners Highly advantageous national bank charter, with well-developed risk mitigation and compliance capabilities Why Invest? Excess capital generating business enables ongoing return of value to shareholders 5
Pathward Financial, Inc. (Nasdaq: CASH) | Quarterly Investor Presentation6 Record of Strong Earnings Growth and Profitability 2.20% 1.13% 1.12% 1.55% 1.45% 1.74% 1.88% 2017 2018 2019 2020 2021 2022 Return on Average Assets ROAA inclusive of one-time items Net Interest Margin Return on Average Tangible Equity 35.42% 17.63% 16.78% 22.34% 21.87% 28.66% 30.25% 2017 2018 2019 2020 2021 2022 ROATE inclusive of one-time items Earnings Per Common Share $5.26 $1.61 $1.67 $2.49 $2.94 $4.38 $4.49 2017 2018 2019 2020 2021 2022 EPS inclusive of one-time items FY17-FY21 display GAAP earnings; FY22 reflects GAAP and Adjusted earnings 2.58% 3.14% 4.91% 4.09% 3.83% 4.84% 2017 2018 2019 2020 2021 2022
Pathward’s track record of profitability and strong earnings growth, combined with its commitment to maintaining the size of its balance sheet, enables the return of the majority of earnings through repurchases and dividends. Targeting to maintain regulatory capital leverage ratio above 8% and total risk weighted capital ratio above 12%. Paid dividend every quarter dating back to 1994. Executed $21.2 million of share repurchases in 4Q22. Issued $20 million of subordinated debt in 4Q22 for general corporate purposes and potential share repurchases. Pathward Financial, Inc, (Nasdaq: CASH) | Quarterly Investor Presentation7 Return of Capital to Shareholders HIGHLIGHTS Generation of Excess Capital Enables Ongoing Return of Value to Shareholders $422.8M TOTAL SHARE REPURCHASES 1Q19 TO 4Q22 $27.3M TOTAL DIVIDENDS PAID 1Q19 TO 4Q22 Capital Returned to Shareholders Note: Repurchased common shares include shares withheld to cover income taxes owed by participants related to share-based incentive plans. 39,405,508 28,788,124 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 Common Shares Outstanding
Pathward Financial, Inc. (Nasdaq: CASH) | Quarterly Investor Presentation8 Continued Progress on Key Strategic Initiatives OPTIMIZE INTEREST-EARNING PORTFOLIO, TO EMPHASIZE HIGHER -RETURN ASSETS • Improved yield on earning assets to 5.26% for 4Q22 as compared to 4.45% for 4Q21. • Grew commercial finance loans by $298 million, or 11%, from September 30, 2021. • $1.9 billion securities portfolio provides cash flow for future commercial finance loan growth. • Executed the sale of the $82 million student loan portfolio in fourth quarter of fiscal year 2022. OPTIMIZE DEPOSIT MIX , TO MAINTAIN A STABLE, LOW- COST DEPOSIT BASE • Low cost of deposits2 driven by high levels of noninterest deposits (96% of total deposits). • Achieved 0.03% cost of funds from all deposits and borrowings and total cost of deposits of 0.01% for 4Q22. • $1.31 billion of off-balance sheet customer deposits in custody of partner banks. • Prioritizing acquisition of stable BaaS deposits, which can generate higher levels of fee income. TARGET OF 2X OPER ATING LEVER AGE • Efficiency ratio of 64.09% compared to 62.50% as of September 30, 2021.1 • Ongoing initiatives to drive long-term simplification and optimize existing business platforms through the establishment of a business transformation office in fiscal year 2022. • Reduced office space footprint in fiscal year 2022. • Acted on expense reduction initiatives which included $5.1 million in separation agreement expenses for fiscal year 2022. 1 Adjusted efficiency ratio (excluding the gain on sale of trademarks and rebranding expenses) for the twelve months ended September 30, 2022 was 67.52%. See appendix for Non-GAAP financial measures reconciliations. 2 See slide 13 (Low-cost Deposits) for additional detail on deposit costs.
Pathward Financial, Inc. (Nasdaq: CASH) | Quarterly Investor Presentation9 Earnings Guidance 1 Includes gain on sale of trademarks, rebranding-related expenses, and separation agreement expenses. 2 The percentage change is calculated by using the midpoint of the respective ranges. (Earnings per share amounts) Fiscal Year 2022 (Actuals) Fiscal Year 2023 (Guidance) % Change2 Diluted earnings per share - GAAP $5.26 $5.25 - $5.75 5% Less: Net extraordinary items, net of tax1 $0.77 $0.15 Diluted earnings per share - Adjusted $4.49 $5.10 - $5.60 19% KEY DRIVERS OF EARNINGS PER SHARE GROW TH Commercial Finance loan and lease growth while maintaining collateral-based discipline Maintain leadership in BaaS producing fee income and low- cost deposits3 Expansion of Net Interest Margin Continued share repurchases 3 See slide 13 (Low-cost Deposits) for additional detail on deposit costs.
Pathward Financial, Inc, (Nasdaq: CASH) | Quarterly Investor Presentation10 Summary Financial Results Fourth Quarter Ended September 30, 2022 INCOME STATEMENT ($ in thousands, except per share data) 4Q21 3Q22 4Q22 Net interest income 70,667 72,151 79,760 Provision for credit losses 8,775 (1,302) (2,648) Total noninterest income 49,542 53,994 43,456 Total noninterest expense 93,614 96,650 103,030 Net income before taxes 17,820 30,797 22,834 Income tax expense (benefit) 1,101 6,958 (1,272) Net income before non-controlling interest 16,719 23,839 24,106 Net income (loss) attributable to non-controlling interest 816 1,448 686 Net income attributable to parent 15,903 22,391 23,420 Less: Allocation of earnings to participating securities1 297 377 393 Net income attributable to common shareholders1 15,606 22,014 23,027 Earnings per share, diluted $0.50 $0.76 $0.81 Average diluted shares 31,299,555 28,868,136 28,581,236 Revenue of $123.2 million, a 3% increase compared to $120.2 million for the same quarter in fiscal 2021. • Net interest income increased $9.1 million compared to the prior year due to increased yields and an improved earning asset mix. • Reversal of provision for credit losses of $2.6 million was primarily due to the sale of student loans and commercial finance recoveries. • Payments card and deposit fee income increased $3.1 million, which included $5.9 million from servicing fee income on off balance sheet deposits. • Includes $1.9 million loss on sale of securities related to a venture capital investment and a $4.8 million loss from the sale of the remaining student loan portfolio. Noninterest expense of $103.0 million, an increase of 10% compared to $93.6 million for the fiscal 2021 fourth quarter. • The increase in expense was primarily driven by compensation, rebranding costs and contractual card processing expenses. • Card processing expenses related to structured agreements with BaaS partners were $7.4 million for the quarter, as compared to $0.2 million in the prior year. • Expenses for the fourth quarter of fiscal 2022 included $6.9 million related to rebranding and $1.0 million of separation related expenses. Noninterest expense was up 2% over the prior year quarter when excluding these one-time expenses for the quarter. 1 Amounts presented are used in the two-class earnings per common share calculation.
Pathward Financial Inc. (Nasdaq: CASH) | Quarterly Investor Presentation11 Balance Sheet Highlights Fourth Quarter Ended September 30, 2022 BALANCE SHEET PERIOD ENDING ($ in thousands) 4Q21 3Q22 4Q22 Cash and cash equivalents 314,019 157,260 388,038 Investments 1,921,568 2,000,400 1,924,551 Loans held for sale 56,194 67,571 21,071 Loans and leases (HFI) 3,609,563 3,688,566 3,536,305 Allowance for credit losses (68,281) (75,206) (45,947) Other assets 857,587 889,587 923,392 Total assets 6,690,650 6,728,178 6,747,410 Total deposits 5,514,971 5,710,799 5,866,037 Total borrowings 92,834 16,616 36,028 Other liabilities 210,961 275,989 200,205 Total liabilities 5,818,766 6,003,404 6,102,270 Total stockholders’ equity 871,884 724,774 645,140 Total liabilities and stockholders’ equity 6,690,650 6,728,178 6,747,410 Loans (HFI) / Deposits 65 % 65 % 60 % Net Interest Margin 4.35 % 4.76 % 5.21 % Return on Average Assets 0.88 % 1.32 % 1.39 % Return on Average Equity 7.18 % 11.93 % 12.82 %
Deposits held on Balance Sheet Pathward’s BaaS business generates fee income and low-cost deposits leading to high levels of noninterest- bearing deposits (96% of total deposits). The BaaS business’ ability to attract and maintain these low-cost deposits provides a powerful competitive advantage. Noninterest-bearing deposits as a percentage of total deposits has increased every year since 2018, from 54% in 4Q18 to 96% as of 4Q22. $1.31 billion of off-balance sheet customer deposits currently held in custody at partner banks. These off- balance sheet deposits earn recordkeeping service fee income, typically reflective of the Effective Fed Funds Rate. Pathward Financial, Inc. (Nasdaq: CASH) | Quarterly Investor Presentation12 Deposit Growth HIGHLIGHTS Deposit Breakdown End of Period Deposits ($B) 7.1 7.2 1.4 1.3 1.4 1.7 2.4 3.2 4.4 4.3 5.0 5.5 5.9 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Total Deposits, including those held at partner banks 96.27% 3.60% 0.13% Non Interest Bearing Deposits Interest Bearing Non- Time Deposits Time Deposits
Pathward is benefitting from the deposit optimization strategy that included transitioning away from higher cost interest-bearing wholesale deposits in favor of growing BaaS deposits. As of September 30, 2022, approximately 37% of the deposit balances were subject to variable card processing expenses, derived from contractual agreements with certain BaaS partners tied to a rate index, typically the Effective Fed Funds Rate. Contractual card processing costs are more impactful in today’s environment than they were in 2019-2021 due to the meaningful growth in BaaS deposits. These costs reprice immediately upon a change in the applicable rate index, leading to an instant cost increase as compared to the earning-asset yields that will generally experience more of a lag in repricing. Pathward Financial, Inc. (Nasdaq: CASH) | Quarterly Investor Presentation13 Low-cost Deposits HIGHLIGHTS Cost of Deposits 1.03% 0.51% 1.99% 0.21% 0.91% 0.01% 2.22% 2.18% 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 Total Cost Including Contractual Card Processing Expense Cost of Interest Bearing Deposits Cost of Total Deposits Monthly Average Effective Fed Funds Rate
Noninterest income continues to represent greater than 40% of total revenue. Majority of non-interest income fees are generated by the Company’s BaaS business line. Other major items include fee income from loan and lease rental and sale income. Pathward’s large fee income base provides stability through interest rate cycles, while propelling continued revenue growth. In Fiscal Year 2022, the Company recognized $50 million of fee income associated with the sale of the Meta trademarks. Pathward Financial, Inc. (Nasdaq: CASH) | Quarterly Investor Presentation14 Diversified Noninterest Income Streams HIGHLIGHTS Refund Transfer Product Fees 16% Refund Advance Product Fees 17% Payments Card and Deposit Fees 43% Rental Income 19% Other Income 5% FY22 Noninterest Income Breakdown1 1 Excludes gain on sale of trademarks. Noninterest income 44% Net interest income 56% FY22 Revenue Breakdown1
Pathward Financial, Inc. (Nasdaq: CASH) | Quarterly Investor Presentation 15 Overview of Loan Portfolio ($ in millions) Business Line Balance Sheet Category 4Q21 3Q22 4Q22 MRQ Yield % of Total Commercial Finance Structured Finance Guaranteed portion of US govt SBA/USDA loans SBA/USDA 61.9 59.4 194.9 Unguaranteed portion of US govt SBA/USDA loans SBA/USDA 89.8 135.0 150.8 Paycheck Protection Program (PPP) loans SBA/USDA 96.0 21.1 13.5 Renewable energy debt financing¹ (term lending only) Term lending 259.7 212.6 153.9 Other Term lending 235.1 304.1 353.5 TOTAL 742.6 732.2 866.6 5.29% 25% Equipment Finance Large ticket Lease financing 232.5 192.7 187.6 Term lending 201.8 268.1 340.0 Small ticket Lease financing 24.4 16.3 14.2 Term lending 264.4 263.0 242.9 Other Lease financing 9.1 9.8 8.9 TOTAL 732.3 749.9 793.6 6.88% 22% Working Capital Asset-based lending 300.2 402.5 351.7 Factoring 363.7 408.8 372.6 TOTAL 663.9 811.3 724.3 11.69% 21% Specialty Finance Insurance premium finance 428.9 481.2 479.8 Other commercial finance 157.9 173.3 159.4 TOTAL 586.8 654.5 639.2 5.22% 18% Consumer Lending Consumer credit programs Consumer credit programs 129.3 152.1 144.4 Private student loans Other consumer finance 96.7 83.3 - Other consumer lending Other consumer finance 26.9 23.8 25.3 TOTAL 252.9 259.2 169.7 6.99% 5% Tax Services Tax preparer loans Tax services 2.4 - 0.2 Refund advance loans Tax services 8.0 41.6 8.9 TOTAL 10.4 41.6 9.1 < 1% < 1% Corporate Warehouse finance 419.9 434.8 326.9 Community banking 199.1 - - TOTAL 619.1 434.8 326.9 6.81% 9% Total Lending Portfolio (HFI) 3607.8 3,683.5 3,529.3 7.12% 100% 1Total renewable energy debt financing outstanding was $378.6 million as of 4Q22. Majority of balances in term lending balance sheet category.
Pathward Financial, Inc. (Nasdaq: CASH) | Quarterly Investor Presentation16 Commercial Finance Attributes by Asset Class WORKING CAPITAL FINANCE • Provides working capital for new or growing companies to meet short-term operational requirements • Primarily variable rate loans with majority of floors at or above 6% • Bank typically has dominion of funds • Heavily collateral-managed • Historically excels during economic downturns EQUIPMENT FINANCE • Loan and lease financing to provide access to needed equipment • Typically secured with mission- critical equipment • Borrowers range from start-up companies to investment grade companies • Primarily fixed rate loans and leases • Flexibility to sell direct originations to secondary market STRUCTURED FINANCE • Funding to small and midsized businesses and rural borrowers to fund growth, expansion, and restructuring • SBA, USDA, and conventional loans with fixed or variable interest rates • Debt refinance, leveraged acquisitions, and alternative energy project finance • SBA and USDA guarantees can be sold on the secondary market INSUR ANCE PREMIUM FINANCE • Short-term financing to facilitate the purchase of property, casualty, and liability insurance premiums • Average term of 10 months • Fixed rate loans • Collateralized by insurance premiums • Very low historical loss rate
As of September 30, 2022, $1.2B, or 33% of loans and leases contained floating or variable interest rates. Of these, $1.0B are tied to Fed Funds or Prime, with the remaining tied to either LIBOR or the CMT. Of the $1.2B variable interest rate loans, approximately 75% utilized floor rates in some capacity. As of September 30, 2022, 99% of variable loans with floors were at or above their floors. This compares to 94% as of June 30, 2022, and 60% as of September 30, 2021. Due to the recent sharp rise in interest rates, asset mix changes and market conditions, a lag is expected before the new and existing loans reprice and are reflected within the loan yields. Pathward Financial, Inc. (Nasdaq: CASH) | Quarterly Investor Presentation17 Loan Portfolio Interest Rate Sensitivity HIGHLIGHTS 1 Fixed rate loans and leases are shown for contractual periods. 33% 17% 50% Fixed Rate > 1 Year Total Loan and Lease Portfolio Pricing Attributes1 Fixed Rate < 1 Year Floating or Variable Net Interest Margin and Loan Yields 4.94% 4.78% 3.28% 3.77% 4.65% 3.07% 3.75% 4.35% 4.59% 4.80% 4.76% 5.21% 4.92% 4.71% 3.28% 3.77% 4.64% 3.06% 3.75% 4.34% 4.59% 4.79% 4.62% 4.73% 7.32% 6.76% 6.65% 6.98% 7.00% 6.74% 6.90% 6.93% 6.96% 7.22% 6.69% 7.12% 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 NIM Non-GAAP NIM Loan Yields 1 Declines in NIM in FY20 and FY21 associated with elevated cash balances from government stimulus programs 2 Non-GAAP NIM includes contractual card processing expenses associated with higher interest rates 1 2
Pathward Financial, Inc. (Nasdaq: CASH) | Quarterly Investor Presentation18 Interest Rate Risk Management September 30, 2022 -2,000 0 2,000 4,000 Month 1-12 Month 13-36 Month 37-60 Month 61-180 V ol um e ($ M M ) Period Variance Total Assets Total Liabilities Asset/Liability Gap Analysis 1 Fixed rate securities, loans and leases are shown for contractual periods. 6% 22% 10% 62% Fixed Rate > 1 Year Earning Asset Pricing Attributes1 Fixed Rate < 1 Year Floating or Variable Federal Reserve Bank Deposits (Floating or Variable) • Data presented on this page is reflective of the company’s asset mix at a point in time and calculated for regulatory purposes. Future rate changes would impact a multitude of variables beyond the company’s control, and as a result, the data presented is not intended to be used for forward-looking modeling purposes. • Management’s focus is on selectively adding duration to improve yield and protect margin against falling rates. • Interest rate risk modeling shows asset sensitive balance sheet; net interest income graph shows impact of an instantaneous, parallel rate shock, a gradual parallel ramp, and an alternative view. • Management employs rigorous modeling techniques under a variety of yield curve shapes, twists and ramps. -10% 5% 20% 35% -100 +100 +200 +300 Parallel Shock Ramp Alternative Year 1 12-Month Interest Rate Sensitivity from Base Net Interest Income Parallel Shock is a statutorily required calculation of the impact of an immediate rise in rates, assuming other variables remain unchanged. Ramp reflects additional modeling of more gradual increases in interest rates. Alternative Year 1 mirrors the Parallel Shock scenario with the additional incorporation of the company’s card fee income and card processing expenses impacted by interest rates.
Pathward Financial, Inc. (Nasdaq: CASH) | Quarterly Investor Presentation19 Asset Quality $7.0 $3.4 $11.4 $4.2 $4.1 0.77% 0.37% 1.25% 0.46% 0.45% 0.50% 0.48% 0.68% 0.71% 0.63% 4Q21 1Q22 2Q22 3Q22 4Q22 Period Ended Adj. NCOs Adj. NCOs / Adj. Average Loans Adj. NCOs / Adj. Average Loans - LTM Adjusted Net Charge-Offs (“NCOs”)1 Excludes Tax Services NCOs and Related Seasonal Average Loans ($ in millions) KEY CREDIT METRICS • Annualized adjusted net charge-offs1: – 0.45% of average loans in 4Q22 – 0.63% of average loans over last 12 months • Allowance for credit loss of $45.9 million, or 1.30% of total loans and leases, a 59bps decrease from the prior year. • Reduction in the 4Q22 allowance for credit loss compared to 3Q22 was attributable to seasonal tax loan charge-offs, release of allowance stemming from the sale of the student loan portfolio, and a decrease in the commercial finance coverage ratio due to the resolution of two longstanding workouts. • The slight increase in NPAs / NPLs was driven by an increase in past due tax loans, which is due to seasonal timing. Commercial finance and consumer finance both improved in 4Q22 as compared to 3Q22. $61.8 $44.3 $38.3 $26.8 $30.9 0.92% 0.58% 0.56% 0.40% 0.46% 4Q21 1Q22 2Q22 3Q22 4Q22 Period Ended NPAs NPAs / Total Assets 1 Non-GAAP financial measures, see appendix for reconciliations. Tax services NCOs and related seasonal average loans are excluded to adjust for the cyclicality of activity related to the overall economics of the tax services business line. $55.9 $43.2 $35.8 $26.6 $29.2 1.52% 1.16% 0.95% 0.71% 0.82% 4Q21 1Q22 2Q22 3Q22 4Q22 Period Ended NPLs NPLs / Total Loans Nonperforming Assets (“NPAs”) ($ in millions) Nonperforming Loans (“NPLs”) ($ in millions)
Pathward Financial, Inc. (Nasdaq: CASH) | Quarterly Investor Presentation20 Capital and Sources of Liquidity Regulatory Capital as of September 30, 2022 At September 30, 2022¹ Pathward Financial, Inc. Pathward, N.A. Tier 1 Leverage 8.10% 8.19% Common Equity Tier 1 12.07% 12.55% Tier 1 Capital 12.39% 12.55% Total Capital 13.88% 13.57% Pathward remains well-capitalized. Tier 1 Leverage ratios impacted from government stimulus programs during fiscal 2020 and fiscal 2021. Capital levels have returned to a more normalized rate. Primary & Secondary Liquidity Sources ($ in millions) Cash and Cash Equivalents $385 Unpledged Investment Securities $190 FHLB Borrowing Capacity $690 Funds Available through Fed Discount Window $200 PPP Loan Collateral $10 Unsecured Lines of Credit $925 - $970 Deposit Balances Held at Other Banks $1,313 1 Regulatory capital reflects the Company's election of the five-year CECL transition for regulatory capital purposes. Amounts are preliminary pending completion and filing of the Company's regulatory reports. . 7.67% 7.39% 6.80% 8.23% 8.10% 8.69% 8.52% 7.79% 8.22% 8.19% 4Q21 1Q22 2Q22 3Q22 4Q22 Tier 1 Leverage Ratio 15.45% 13.80% 14.16% 13.44% 13.88% 15.38% 14.16% 14.52% 13.43% 13.57% 4Q21 1Q22 2Q22 3Q22 4Q22 Total Capital Ratio Pathward Financial, Inc. Pathward, N.A. Minimum Requirement to be Well-Capitalized under Prompt Corrective Action Provisions
APPENDIX
Pathward Financial, Inc. (Nasdaq: CASH) | Quarterly Investor Presentation22 Non-GAAP Reconciliation Adjusted Net Income and Adjusted Earnings Per Share For the quarter ended For the year ended ($ in thousands, except per share data) 4Q21 3Q 22 4Q 22 2021 2022 Net income - GAAP 15,903 22,391 23.420 141,708 156,386 Less: Gain on sale of trademarks - - - - 50,000 Add: Rebranding Expenses - 3,427 6,899 - 13,148 Add: Separation related expenses 36 3,116 1,029 2,545 5,109 Add: Income tax effect (9) (1,677) (1,029) (636) 8,936 Adjusted Net Income 15,930 27,257 30,319 143,617 133,579 Less: Allocation of earnings to participating securities1 297 458 508 2,734 2,191 Adjusted net income attributable to common shareholders 15,633 26,799 29,811 140,883 131,388 Adjusted earnings per common share, diluted $0.50 $0.93 $1.04 $4.44 $4.49 Average diluted shares 31,299,555 28,868,136 28,581,236 31,751,522 29,232,247 1 Amounts presented are used in the two-class earnings per common share calculation.
Pathward Financial, Inc. (Nasdaq: CASH) | Quarterly Investor Presentation23 Non-GAAP Reconciliation 1 Tax Services NCOs and average loans are excluded to adjust for the cyclicality of activity related to the overall economics of the Company's tax services business line. For the quarter ended ($ in thousands) Sep 30, 2021 Dec 31, 2021 Mar 31, 2022 Jun 30, 2022 Sep 30, 2022 Net Charge-offs 31,753 1,129 11,226 12,198 26,664 Less: Tax services net charge-offs 24,798 (2,313) (183) 7,992 22,594 Adjusted Net Charge-offs 6,955 3,442 11,409 4,206 4,050 Quarterly Average Loans and Leases 3,646,312 3,706,975 4,244,644 3,747,631 3,618,678 Less: Quarterly Average Tax Services Loans 31,174 33,604 594,166 62,934 35,484 Adjusted Quarterly Average Loans and Leases 3,609,138 3,673,371 3,650,478 3,684,697 3,583,194 Annualized NCOs/Average Loans and Leases 3.48% 0.12% 1.06% 1.30% 2.95% Adjusted Annualized NCOs/Adjusted Average Loans and Leases1 0.77% 0.37% 1.25% 0.46% 0.45% Adjusted Annualized NCOs and Adjusted Loans and Leases
Pathward Financial, Inc. (Nasdaq: CASH) | Quarterly Investor Presentation24 Non-GAAP Reconciliation For the last twelve months ended ($ in thousands) Sep 30, 2021 Dec 31, 2021 Mar 31, 2022 Jun 30, 2022 Sep 30, 2022 Noninterest Expense - GAAP 343,683 353,544 360,733 375,860 385,275 Net Interest Income 278,991 284,605 294,555 298,231 307,324 Noninterest Income 270,903 312,039 308,352 299,893 293,807 Total Revenue: GAAP 549,894 596,644 602,907 598,124 601,131 Efficiency Ratio, LTM 62.50% 59.26% 59.83% 62.84% 64.09% For the last twelve months ended ($ in thousands) Sep 30, 2021 Dec 31, 2021 Mar 31, 2022 Jun 30, 2022 Sep 30, 2022 Noninterest Expense - GAAP 343,683 353,544 360,733 375,860 385,275 Less: Rebranding Expenses - 3 2,822 6,249 13,148 Adjusted noninterest Expense 343,683 353,541 357,911 369,611 372,127 Net Interest Income 278,991 284,605 294,555 298,231 307,324 Noninterest Income 270,903 312,039 308,352 299,893 293,807 Less: Gain on sale of trademarks - 50,000 50,000 50,000 50,000 Total Adjusted Revenue: 549,894 546,644 552,907 548,124 551,131 Efficiency Ratio, LTM 62.50% 64.67% 64.73% 67.43% 67.52% Efficiency Ratio Adjusted Efficiency Ratio
Pathward Financial, Inc. (Nasdaq: CASH) | Quarterly Investor Presentation25 Commercial Finance Industry Concentrations1 Manufacturing Transportation and Warehousing Utilities Wholesale Trade Health Care and Social Assistance Finance and Insurance Construction Administrative and Support and Waste Management and Remediation… Professional, Scientific, and Technical Services Mining, Quarrying, and Oil and Gas Extraction Accommodation and Food Services Retail Trade Real Estate and Rental and Leasing Other Services (except Public Administration) Information Arts, Entertainment, and Recreation Agriculture, Forestry, Fishing and Hunting Management of Companies and Enterprises Educational Services Public Administration $- $100 $200 $300 $400 $ in millions 1 Distribution by NAICS codes; excludes certain joint ventures; calculated based on aggregate principal amount of commercial finance loans and leases; includes operating lease rental equipment of $204.4M MANUFACTURING 41% Asset-based lending 18% Other 14% Lease financing 14% Factoring 13% Term lending TRANSPORTATION & WAREHOUSING 42% Factoring 36% Insurance premium finance 14% Term lending 8% Other UTILITIES 47% SBA/USDA 45% Term lending 5% Rental equipment, net 3% Other
Document
Exhibit 99.3
Pathward Financial, Inc. Announces 2023 CFO Succession Plan
Sonja Theisen, EVP, Governance, Risk & Compliance, named as successor to Glen Herrick, Chief Financial Officer effective April, 2023
SIOUX FALLS, S.D., October 27, 2022 - Pathward Financial, Inc.™ ("Pathward Financial" the “Company”) (Nasdaq: CASH) today announced that Sonja Theisen, 41, currently Executive Vice President, Governance, Risk and Compliance, will succeed Glen W. Herrick, 60, as Chief Financial Officer, effective April 30, 2023.
Brett Pharr, Chief Executive Officer, said, “On behalf of the entire Pathward team, we thank Glen for his invaluable contributions over his decade as our CFO. Glen was a key architect of our earnings growth and balance sheet strategies, along with overseeing five acquisitions and two divestitures. During his tenure, Pathward’s market capitalization grew from $150 million in 2013 to over $1 billion.
“Glen is leaving a lasting legacy through the outstanding finance and accounting team he has built, including the development of a strong cadre of emerging leaders. We appreciate his dedication to Pathward and his support for a seamless and successful transition to Sonja Theisen, with whom he has worked with for nearly a decade,” Pharr added.
Glen Herrick, Chief Financial Officer, said, “It has been my honor and privilege to serve Pathward and support its special mission of Financial Inclusion for All™ over the last ten years. I want to thank the Board, Brett, and all my colleagues for the opportunity to be a part of this incredible journey. I am most proud of the strong and talented bench that we have built at the Company and could not be more pleased to hand over the CFO reigns to Sonja, who brings years of finance, accounting, and compliance leadership experience to this role. I look forward to a seamless transition with her. Finally, as an ongoing shareholder, I am very optimistic about Pathward’s growth outlook.”
Ms. Theisen, who joined Pathward in 2013, has held leaderships roles across the organization including Chief Accounting Officer, Chief of Staff, and EVP, Governance, Risk and Compliance. Prior to joining the Company, Ms. Theisen served in finance and accounting roles at Great Western Bank, Eide Bailly and KPMG. She holds a Bachelor of Arts in Accounting and a Master of Public Accounting from the University of South Dakota and is a Certified Public Accountant.
Sonja Theisen, EVP, Governance, Risk and Compliance, said, “I am honored and excited that the Board has appointed me to succeed Glen as Pathward’s CFO. I look forward to working with Brett and the team, and to leading our best-in-class finance and accounting teams to continue to execute our strategy, deliver value for our shareholders and fulfill our mission of Financial Inclusion for All.”
About Pathward Financial, Inc.™
Pathward Financial, Inc.™ (Nasdaq: CASH) is a U.S.-based financial holding company driven by its purpose to power financial inclusion for all™. Through our subsidiary, Pathward™, N.A., we strive to increase financial availability, choice and opportunity across our Banking as a Service and Commercial Finance business lines. These strategic business lines provide end-to-end support to individuals and businesses. Learn more at www.pathwardfinancial.com.
| Investor Relations Contact |
|---|
| Justin Schempp |
| 877-497-7497 |
| jschempp@pathward.com |
| Media Relations Contact |
| mediarelations@pathward.com |