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): January 21, 2025
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 January 21, 2025, the Registrant issued a press release announcing its results of operations and financial condition as of and for the three months ended December 31, 2024. 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 7.01 Regulation FD Disclosure.
Information is being furnished herein in Exhibit 99.2 with respect to the Quarterly Investor Update slide presentation prepared for use in connection with the Company's conference call and earnings webcast for the first quarter of fiscal 2025. The Quarterly Investor Update slide presentation is dated January 21, 2025 and the Company does not undertake to update the materials after that date. This presentation is also available under the Presentations link in the Investor Relations - Events & Presentations section of the Company's website at https://pathwardfinancial.com.
The information in this Item 7.01, including Exhibit 99.2, 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 January 21, 2025 regarding the results of operations and financial condition. |
| 99.2 | Quarterly Investor Update slide presentation for the First Quarter of Fiscal Year 2025, dated January 21, 2025, prepared for use with the Press Release. |
| 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: January 21, 2025 | By: | /s/ Gregory A. Sigrist |
| Gregory A. Sigrist | ||
| Executive Vice President and Chief Financial Officer |
Document
Exhibit 99.1
PATHWARD FINANCIAL, INC. ANNOUNCES RESULTS FOR 2025 FISCAL FIRST QUARTER
Sioux Falls, S.D., January 21, 2025 - Pathward Financial, Inc. (“Pathward Financial” or the “Company”) (Nasdaq: CASH) reported net income of $31.4 million, or $1.29 per share, for the three months ended December 31, 2024, compared to net income of $27.7 million, or $1.06 per share, for the three months ended December 31, 2023.
CEO Brett Pharr said, “Fiscal 2025 started out well as we made good progress against the strategy we laid out last year. During the quarter we completed the sale of our insurance premium finance business along with the subsequent sale of debt securities. This move was another large step toward optimizing our balance sheet by giving us the opportunity to put those funds into higher yielding assets or those with optionality. We also extended two contracts with large, existing partners in Partner Solutions and started tax season with 12% more enrolled tax offices than last year.”
Company Highlights and Business Developments
•On October 31, 2024, Pathward N.A. (the "Bank") completed the sale of substantially all of the assets and liabilities related to the Bank's commercial insurance premium finance business. The purchase price was $603.3 million, plus a $31.2 million premium. The Bank recorded a $16.4 million pre-tax gain on the sale.
•On November 30, 2024, the Bank sold $160.6 million of debt securities available for sale ("AFS") with a pre-tax loss on the sale of securities of $15.7 million. This loss largely offsets the gain from the sale of the commercial insurance premium finance business.
Financial Highlights for the 2025 Fiscal First Quarter
•Total revenue for the first quarter was $173.5 million, an increase of $10.7 million, or 7%, compared to the same quarter in fiscal 2024, driven by an increase in both net interest income and noninterest income.
•Net interest margin ("NIM") increased 61 basis points to 6.84% for the first quarter from 6.23% during the same period last year, primarily driven by increased yields and balances in the loan and lease portfolio and an improved earning asset mix from the continued balance sheet optimization. When including contractual, rate-related processing expenses associated with deposits on the Company's balance sheet, NIM would have been 5.41% in the fiscal 2025 first quarter compared to 4.76% during the fiscal 2024 first quarter. See non-GAAP reconciliation table below.
•Total gross loans and leases at December 31, 2024 increased $136.4 million to $4.56 billion compared to December 31, 2023 and increased $487.5 million when compared to September 30, 2024. When excluding the insurance premium finance loans of $671.0 million at December 31, 2023, total gross loans and leases at December 31, 2024 increased $807.4 million, or 22%, when compared to December 31, 2023.
•During the 2025 fiscal first quarter, the Company repurchased 701,860 shares of common stock at an average share price of $74.05. As of December 31, 2024, there were 6,298,140 shares available for repurchase under the current common stock share repurchase program.
Net Interest Income
Net interest income for the first quarter of fiscal 2025 was $116.1 million, an increase of 6% from the same quarter in fiscal 2024. The increase was mainly attributable to increased yields and balances in the loan and lease portfolio and an improved earning asset mix.
The Company’s average interest-earning assets for the first quarter of fiscal 2025 decreased by $296.0 million to $6.74 billion compared to the same quarter in fiscal 2024, due to decreases in average outstanding balances of total investments and interest earning cash balances, partially offset by an increase in total loan and lease balances. The first quarter average outstanding balance of loans and leases increased $107.6 million compared to the same quarter of the prior fiscal year, primarily due to increases in warehouse finance and tax services loans, partially offset by decreases in commercial finance and consumer finance loans. The decrease in the average outstanding balance of commercial finance loans and leases was primarily driven by the sale of the insurance premium finance loans, partially offset by an increase in term lending, asset-based lending, and SBA/USDA loans.
Fiscal 2025 first quarter NIM increased to 6.84% from 6.23% in the first fiscal quarter of 2024. When including contractual, rate-related processing expenses associated with deposits on the Company's balance sheet, NIM would have been 5.41% in the first quarter compared to 4.76% during the fiscal 2024 first quarter. See non-GAAP reconciliation table below. The overall reported tax-equivalent yield (“TEY”) on average interest-earning assets increased 47 basis points to 7.04% compared to the prior year quarter, driven by an improved earning asset mix. The yield on the loan and lease portfolio was 8.78% compared to 8.33% for the comparable period last year and the TEY on the securities portfolio was 3.10% compared to 3.15% over that same period.
The Company's cost of funds for all deposits and borrowings averaged 0.20% during the fiscal 2025 first quarter, as compared to 0.35% during the prior year quarter. The Company's overall cost of deposits was 0.05% in the fiscal first quarter of 2025, as compared to 0.21% during the prior year quarter. When including contractual, rate-related processing expenses associated with deposits on the Company's balance sheet, the Company's overall cost of deposits was 1.63% in the fiscal 2025 first quarter, as compared to 1.78% during the prior year quarter. See non-GAAP reconciliation table below.
Noninterest Income
Fiscal 2025 first quarter noninterest income increased 9% to $57.4 million, compared to $52.8 million for the same period of the prior year. During the first fiscal quarter of 2025, the Company recognized a gain on divestiture of $16.4 million from the sale of its commercial insurance premium finance business. This gain on divestiture was largely offset by a loss on sale of securities of $15.7 million also recognized during the current quarter. The increase in noninterest income when comparing the current period to the same period of the prior year was primarily driven by an increase in gain on sale of loans and leases, other income, tax services product fees, and rental income. The period-over-period increase was partially offset by a decrease in card and deposit fees and a reduction in gain on sale of other. The increase in gain on sale of loans was primarily driven by SBA/USDA loan sales.
The period-over-period decrease in card and deposit fee income was primarily related to lower servicing fee income due to a reduction in rates following reductions in the Effective Federal Funds Rate ("EFFR"). Servicing fee income on custodial deposits totaled $4.5 million during the 2025 fiscal first quarter, compared to $5.1 million for the same period of the prior year. For the fiscal quarter ended September 30, 2024, servicing fee income on custodial deposits totaled $3.2 million.
Noninterest Expense
Noninterest expense increased 4% to $123.6 million for the fiscal 2025 first quarter, from $119.3 million for the same quarter last year. The increase was primarily attributable to increases in compensation and benefits, operating lease depreciation, occupancy and equipment expense, other expense, and legal and consulting expense. The period-over-period increase was partially offset by decreases in card processing expense.
The card processing expense decrease was due to rate-related agreements with Partner Solutions relationships. 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 is based on a percentage of the EFFR and reprices immediately upon a change in the EFFR. Approximately 60% of the deposit portfolio was subject to these rate-related processing expenses during the fiscal 2025 first quarter. For the fiscal quarter ended December 31, 2024, contractual, rate-related processing expenses were $25.6 million, as compared to $26.3 million for the fiscal quarter ended September 30, 2024, and $26.8 million for the fiscal quarter ended December 31, 2023.
Income Tax Expense
The Company recorded an income tax expense of $6.3 million, representing an effective tax rate of 16.6%, for the fiscal 2025 first quarter, compared to an income tax expense of $5.7 million, representing an effective tax rate of 17.0%, for the first quarter last fiscal year. The current quarter increase in income tax expense compared to the prior year quarter was primarily due to an increase in income and a decrease in investment tax credits.
The Company originated $9.3 million in renewable energy leases during the fiscal 2025 first quarter, resulting in $3.2 million in total net investment tax credits. During the first quarter of fiscal 2024, the Company originated $12.2 million in renewable energy leases resulting in $4.4 million in total net investment tax credits. Investment tax credits related to renewable energy leases are recognized ratably based on income throughout each fiscal year.
Investments, Loans and Leases
| (Dollars in thousands) | December 31, 2024 | September 30, 2024 | June 30, 2024 | March 31, 2024 | December 31, 2023 | |||||
|---|---|---|---|---|---|---|---|---|---|---|
| Total investments | $ | 1,512,091 | $ | 1,774,313 | $ | 1,759,486 | $ | 1,814,140 | $ | 1,886,021 |
| Loans held for sale | ||||||||||
| Term lending | 7,860 | 4,567 | — | 1,977 | 2,500 | |||||
| Lease financing | 424 | — | — | — | 778 | |||||
| Insurance premium finance | — | 594,359 | — | — | — | |||||
| SBA/USDA | 21,786 | 65,734 | 7,030 | 7,372 | — | |||||
| Consumer finance | 42,578 | 24,210 | 22,350 | 16,597 | 66,240 | |||||
| Total loans held for sale | 72,648 | 688,870 | 29,380 | 25,946 | 69,518 | |||||
| Term lending | 1,735,539 | 1,554,641 | 1,533,722 | 1,489,054 | 1,452,274 | |||||
| Asset-based lending | 608,261 | 471,897 | 473,289 | 429,556 | 379,681 | |||||
| Factoring | 364,477 | 362,295 | 350,740 | 336,442 | 335,953 | |||||
| Lease financing | 138,305 | 152,174 | 155,044 | 168,616 | 188,889 | |||||
| Insurance premium finance | — | — | 617,054 | 522,904 | 671,035 | |||||
| SBA/USDA | 595,965 | 568,628 | 563,689 | 560,433 | 546,048 | |||||
| Other commercial finance | 174,097 | 185,964 | 166,653 | 149,056 | 160,628 | |||||
| Commercial finance | 3,616,644 | 3,295,599 | 3,860,191 | 3,656,061 | 3,734,508 | |||||
| Consumer finance | 280,001 | 248,800 | 253,358 | 267,031 | 301,510 | |||||
| Tax services | 45,051 | 8,825 | 43,184 | 84,502 | 33,435 | |||||
| Warehouse finance | 624,251 | 517,847 | 449,962 | 394,814 | 349,911 | |||||
| Total loans and leases | 4,565,947 | 4,071,071 | 4,606,695 | 4,402,408 | 4,419,364 | |||||
| Net deferred loan origination costs (fees) | (3,266) | 4,124 | 5,857 | 6,977 | 6,917 | |||||
| Total gross loans and leases | 4,562,681 | 4,075,195 | 4,612,552 | 4,409,385 | 4,426,281 | |||||
| Allowance for credit losses | (48,977) | (45,336) | (79,836) | (80,777) | (53,785) | |||||
| Total loans and leases, net | $ | 4,513,704 | $ | 4,029,859 | $ | 4,532,716 | $ | 4,328,608 | $ | 4,372,496 |
The Company's investment security balances at December 31, 2024 totaled $1.51 billion, as compared to $1.77 billion at September 30, 2024 and $1.89 billion at December 31, 2023. The sequential and year-over-year decreases were primarily related to the sale of $160.6 million of investment securities AFS during the first quarter of fiscal 2025.
Total gross loans and leases totaled $4.56 billion at December 31, 2024, as compared to $4.08 billion at September 30, 2024 and $4.43 billion at December 31, 2023. The driver for the sequential increase was growth across all loan portfolios. The year-over-year increase was primarily due to increases in warehouse finance and tax services loans, partially offset by decreases in commercial finance and consumer finance. When excluding the insurance premium finance loans of $671.0 million at December 31, 2023, total gross loans and leases at December 31, 2024 increased $807.4 million, or 22%, when compared to December 31, 2023.
Commercial finance loans, which comprised 79% of the Company's loan and lease portfolio, totaled $3.62 billion at December 31, 2024, reflecting an increase of $321.0 million, 10%, from September 30, 2024 and a decrease of $117.9 million, or 3%, from December 31, 2023. The sequential increase was primarily driven by increases of $180.9 million in term lending and $136.4 million in asset-based lending. The year-over-year decrease was primarily related to the sale of insurance premium finance loans during the first quarter of fiscal 2025, partially offset by increases of $283.3 million in term lending, $228.6 million in asset-based lending, and $49.9 million in SBA/USDA. When excluding the insurance premium finance loans of $671.0 million at December 31, 2023, commercial finance loans at December 31, 2024 increased by $553.2 million when compared to December 31, 2023.
Asset Quality
The Company’s allowance for credit losses ("ACL") totaled $49.0 million at December 31, 2024, an increase compared to $45.3 million at September 30, 2024 and a decrease compared to $53.8 million at December 31, 2023. The increase in the ACL at December 31, 2024, when compared to September 30, 2024, was primarily due to a $2.8 million increase in the allowance related to the consumer finance portfolio due to seasonal activity and a $0.8 million increase in the allowance related to the seasonal tax services portfolio.
The $4.8 million year-over-year decrease in the ACL was primarily driven by a $6.0 million decrease in the allowance related to the commercial finance portfolio, due in part to the sale of the insurance premium finance loans, partially offset by a $0.6 million increase in the allowance related to the consumer finance portfolio, a $0.3 million increase in the allowance related to the seasonal tax services portfolio, and a $0.3 million increase in the allowance related to the warehouse 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) | December 31, 2024 | September 30, 2024 | June 30, 2024 | March 31, 2024 | December 31, 2023 | |||||
| Commercial finance | 1.18 | % | 1.29 | % | 1.17 | % | 1.21 | % | 1.30 | % |
| Consumer finance | 1.79 | % | 0.90 | % | 2.23 | % | 1.71 | % | 1.45 | % |
| Tax services | 1.75 | % | 0.02 | % | 66.35 | % | 37.31 | % | 1.52 | % |
| Warehouse finance | 0.10 | % | 0.10 | % | 0.10 | % | 0.10 | % | 0.10 | % |
| Total loans and leases | 1.07 | % | 1.11 | % | 1.73 | % | 1.83 | % | 1.22 | % |
| Total loans and leases excluding tax services | 1.07 | % | 1.12 | % | 1.12 | % | 1.14 | % | 1.21 | % |
The Company's ACL as a percentage of total loans and leases decreased to 1.07% at December 31, 2024 from 1.11% at September 30, 2024. The decrease in the total loans and leases coverage ratio was primarily driven by the commercial finance portfolio, partially offset by an increase in the seasonal tax services portfolio and consumer finance portfolio. The increase in the tax services and consumer finance portfolios loan coverage ratios was due to seasonal activity.
Activity in the allowance for credit losses for the periods presented was as follows.
| (Unaudited) | Three Months Ended | |||||
|---|---|---|---|---|---|---|
| (Dollars in thousands) | December 31, 2024 | September 30, 2024 | December 31, 2023 | |||
| Beginning balance | $ | 45,336 | $ | 79,836 | $ | 49,705 |
| Provision (reversal of) - tax services loans | 1,301 | (297) | 1,356 | |||
| Provision (reversal of) - all other loans and leases | 10,913 | 1,423 | 8,210 | |||
| Charge-offs - tax services loans | (741) | (28,815) | (1,145) | |||
| Charge-offs - all other loans and leases | (8,935) | (7,912) | (5,725) | |||
| Recoveries - tax services loans | 228 | 461 | 294 | |||
| Recoveries - all other loans and leases | 875 | 640 | 1,090 | |||
| Ending balance | $ | 48,977 | $ | 45,336 | $ | 53,785 |
The Company recognized a provision for credit losses of $12.0 million for the quarter ended December 31, 2024, compared to $9.9 million for the comparable period in the prior fiscal year. The period-over-period increase in provision for credit losses was primarily due to increases in provision for credit losses in the commercial finance portfolio of $1.9 million, the consumer finance portfolio of $0.7 million, and the warehouse finance portfolio of $0.1 million, partially offset by a decrease of $0.1 million in provision for credit losses tax services portfolio. The Company recognized net charge-offs of $8.6 million for the quarter ended December 31, 2024, compared to net charge-offs of $5.5 million for the quarter ended December 31, 2023. Net charge-offs attributable to the commercial finance and seasonal tax services portfolios for the current quarter were $8.1 million and $0.5 million, respectively. Net charge-offs attributable to the commercial finance, tax services, and consumer finance portfolios for the same quarter of the prior year were $4.6 million, $0.8 million, and $0.1 million, respectively.
The Company's past due loans and leases were as follows for the periods presented.
| As of December 31, 2024 | 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 | $ | — | $ | — | $ | — | $ | — | $ | 72,648 | $ | 72,648 | $ | — | $ | — | $ | — |
| Commercial finance | 25,080 | 8,966 | 23,545 | 57,591 | 3,559,053 | 3,616,644 | 5,555 | 27,231 | 32,786 | |||||||||
| Consumer finance | 4,502 | 2,936 | 2,423 | 9,861 | 270,140 | 280,001 | 2,423 | — | 2,423 | |||||||||
| Tax services | — | — | — | — | 45,051 | 45,051 | — | — | — | |||||||||
| Warehouse finance | — | — | — | — | 624,251 | 624,251 | — | — | — | |||||||||
| Total loans and leases held for investment | 29,582 | 11,902 | 25,968 | 67,452 | 4,498,495 | 4,565,947 | 7,978 | 27,231 | 35,209 | |||||||||
| Total loans and leases | $ | 29,582 | $ | 11,902 | $ | 25,968 | $ | 67,452 | $ | 4,571,143 | $ | 4,638,595 | $ | 7,978 | $ | 27,231 | $ | 35,209 |
| As of September 30, 2024 | 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 | $ | 2,266 | $ | 1,361 | $ | 1,050 | $ | 4,677 | $ | 684,193 | $ | 688,870 | $ | 1,050 | $ | — | $ | 1,050 |
| Commercial finance | 23,381 | 7,671 | 19,975 | 51,027 | 3,244,572 | 3,295,599 | 2,314 | 26,412 | 28,726 | |||||||||
| Consumer finance | 3,962 | 3,186 | 3,053 | 10,201 | 238,599 | 248,800 | 3,053 | — | 3,053 | |||||||||
| Tax services | — | — | 8,733 | 8,733 | 92 | 8,825 | 8,733 | — | 8,733 | |||||||||
| Warehouse finance | — | — | — | — | 517,847 | 517,847 | — | — | — | |||||||||
| Total loans and leases held for investment | 27,343 | 10,857 | 31,761 | 69,961 | 4,001,110 | 4,071,071 | 14,100 | 26,412 | 40,512 | |||||||||
| Total loans and leases | $ | 29,609 | $ | 12,218 | $ | 32,811 | $ | 74,638 | $ | 4,685,303 | $ | 4,759,941 | $ | 15,150 | $ | 26,412 | $ | 41,562 |
The Company's nonperforming assets at December 31, 2024 were $37.5 million, representing 0.49% of total assets, compared to $43.0 million, or 0.57% of total assets at September 30, 2024 and $42.4 million, or 0.53% of total assets at December 31, 2023.
The decrease in the nonperforming assets as a percentage of total assets at December 31, 2024 compared to September 30, 2024, was primarily driven by a decrease in nonperforming loans in the seasonal tax services and consumer finance portfolios, partially offset by an increase in nonperforming loans in the commercial finance portfolio. When comparing the current period to the same period of the prior year, the decrease in nonperforming assets was primarily due to decreases in nonperforming loans in the commercial finance and consumer finance portfolios.
The Company's nonperforming loans and leases at December 31, 2024, were $35.2 million, representing 0.76% of total gross loans and leases, compared to $41.6 million, or 0.87% of total gross loans and leases at September 30, 2024 and $39.5 million, or 0.88% of total gross loans and leases at December 31, 2023.
Deposits, Borrowings and Other Liabilities
The average balance of total deposits and interest-bearing liabilities was $6.25 billion for the three-month period ended December 31, 2024, compared to $6.71 billion for the same period in the prior fiscal year. Total average deposits for the fiscal 2025 first quarter decreased by $477.0 million to $6.08 billion compared to the same period in fiscal 2024. The decrease in average deposits was primarily due to decreases in noninterest bearing deposits and wholesale deposits.
Total end-of-period deposits decreased 6% to $6.52 billion at December 31, 2024, compared to $6.94 billion at December 31, 2023. The decrease in end-of-period deposits was primarily driven by decreases in noninterest-bearing deposits of $264.9 million and wholesale deposits of $140.6 million.
As of December 31, 2024, the Company had $416.1 million in deposits related to government stimulus programs.
As of December 31, 2024, the Company managed $840.5 million of customer deposits at other banks in its capacity as custodian. These deposits provide the Company with the ability to earn servicing fee income, typically reflective of the EFFR. The sequential quarter increase in these customer deposits held at other banks reflects normal seasonal patterns during the first quarter of the fiscal year.
Regulatory Capital
The Company and its subsidiary Pathward®, N.A. (the "Bank") remained above the federal regulatory minimum capital requirements at December 31, 2024, 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 primarily comprised of amortizing securities that should provide consistent cash flow.
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 | December 31, 2024(1) | September 30, 2024 | June 30,<br>2024 | March 31,<br>2024 | December 31,<br>2023 | |||||
|---|---|---|---|---|---|---|---|---|---|---|
| Company | ||||||||||
| Tier 1 leverage capital ratio | 9.15 | % | 9.26 | % | 9.13 | % | 7.75 | % | 7.96 | % |
| Common equity Tier 1 capital ratio | 12.53 | % | 12.61 | % | 12.44 | % | 12.30 | % | 11.43 | % |
| Tier 1 capital ratio | 12.79 | % | 12.86 | % | 12.70 | % | 12.56 | % | 11.69 | % |
| Total capital ratio | 14.11 | % | 14.08 | % | 14.33 | % | 14.21 | % | 13.12 | % |
| Bank | ||||||||||
| Tier 1 leverage ratio | 9.42 | % | 9.44 | % | 9.36 | % | 7.92 | % | 8.15 | % |
| Common equity Tier 1 capital ratio | 13.16 | % | 13.12 | % | 13.02 | % | 12.83 | % | 11.97 | % |
| Tier 1 capital ratio | 13.16 | % | 13.12 | % | 13.02 | % | 12.83 | % | 11.97 | % |
| Total capital ratio | 14.10 | % | 13.97 | % | 14.27 | % | 14.09 | % | 13.01 | % |
(1) December 31, 2024 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) | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| As of the Periods Indicated<br><br><br><br>(Dollars in thousands) | December 31,<br>2024 | September 30,<br>2024 | June 30,<br>2024 | March 31,<br>2024 | December 31,<br>2023 | |||||
| Total stockholders' equity | $ | 776,430 | $ | 839,605 | $ | 765,248 | $ | 739,462 | $ | 729,282 |
| Adjustments: | ||||||||||
| LESS: Goodwill, net of associated deferred tax liabilities | 286,171 | 296,105 | 296,496 | 296,889 | 297,283 | |||||
| LESS: Certain other intangible assets | 16,951 | 18,018 | 18,315 | 19,146 | 20,093 | |||||
| LESS: Net deferred tax assets from operating loss and tax credit carry-forwards | 12,298 | 13,253 | 11,880 | 15,862 | 20,253 | |||||
| LESS: Net unrealized (losses) on available for sale securities | (187,834) | (152,328) | (206,584) | (205,460) | (187,901) | |||||
| LESS: Noncontrolling interest | (756) | (277) | (506) | (420) | (510) | |||||
| ADD: Adoption of Accounting Standards Update 2016-13 | 672 | 1,345 | 1,345 | 1,345 | 1,345 | |||||
| Common Equity Tier 1(1) | 650,272 | 666,179 | 646,992 | 614,790 | 581,409 | |||||
| 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 | (462) | (150) | (374) | (311) | (410) | |||||
| Total Tier 1 capital | 663,471 | 679,690 | 660,279 | 628,140 | 594,660 | |||||
| Allowance for credit losses | 48,818 | 44,687 | 65,182 | 62,715 | 53,037 | |||||
| Subordinated debentures, net of issuance costs | 19,719 | 19,693 | 19,668 | 19,642 | 19,617 | |||||
| Total capital | $ | 732,008 | $ | 744,070 | $ | 745,129 | $ | 710,497 | $ | 667,314 |
(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.
Conference Call
The Company will host a conference call and earnings webcast with a corresponding presentation at 4:00 p.m. Central Time (5:00 p.m. Eastern Time) on Tuesday, January 21, 2025. 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 1-833-470-1428 approximately 10 minutes prior to start time and reference access code 228214.
The Quarterly Investor Update slide presentation prepared for use in connection with the Company's conference call and earnings webcast is available under the Presentations link in the Investor Relations - Events & Presentations section of the Company's website at www.pathwardfinancial.com. A webcast replay will also be archived at www.pathwardfinancial.com for one year.
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 Partner Solutions and Commercial Finance business lines. These strategic business lines provide support to individuals and businesses. Learn more at www.pathwardfinancial.com.
| Investor Relations Contact |
|---|
| Darby Schoenfeld, CPA |
| SVP, Chief of Staff & Investor Relations |
| 877-497-7497 |
| investorrelations@pathward.com |
| Media Relations Contact |
| mediarelations@pathward.com |
Forward-Looking Statements
The Company and the Bank 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 Securities and Exchange Commission ("SEC"), the Company’s reports to stockholders, and in other communications by the Company and the Bank, 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,” "target," 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 including our earnings per diluted share guidance, annual effective tax rate and related performance expectations; progress on key strategic initiatives; expected results of our partnerships; underwriting and monitoring processes; expected nonperforming loan resolutions and net charge off rates; the performance of our securities portfolio; the impact of card balances related to government stimulus programs; customer retention; loan and other product demand; new products and services; credit quality; the level of net charge-offs and the adequacy of the allowance for credit losses; and technology. 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 unusual and infrequently occurring events, including the impact on financial markets from geopolitical conflicts such as the military conflicts in Ukraine and the Middle East, weather-related disasters, or public health events, such as pandemics, and any governmental or societal responses thereto; 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, and their related impacts on macroeconomic conditions, customer behavior, funding costs and loan and securities portfolios; changes in tax laws; the strength of the United States' economy and the local economies in which the Company operates; adverse developments in the financial services industry generally such as bank failures, responsive measures to mitigate and manage such developments, related supervisory and regulatory actions and costs, and related impacts on customer behavior; inflation, market, and monetary fluctuations; our liquidity and capital positions, including the sufficiency of our liquidity; 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 and acceptance of these products and services by users; the Bank'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 the Bank's strategic partners’ refund advance products; our relationship with and any actions which may be initiated by our regulators, and any related increases in compliance and other costs; 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 the Bank of its status as a well-capitalized institution; changes in consumer borrowing, 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, 2024, and in other filings made with the SEC. The Company expressly disclaims any intent or obligation to update, revise or clarify 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) | December 31, 2024 | September 30, 2024 | June 30, 2024 | March 31, 2024 | December 31, 2023 | |||||
|---|---|---|---|---|---|---|---|---|---|---|
| ASSETS | ||||||||||
| Cash and cash equivalents | $ | 597,396 | $ | 158,337 | $ | 298,926 | $ | 347,888 | $ | 671,630 |
| Securities available for sale, at fair value | 1,480,090 | 1,741,221 | 1,725,460 | 1,779,458 | 1,850,581 | |||||
| Securities held to maturity, at amortized cost | 32,001 | 33,092 | 34,026 | 34,682 | 35,440 | |||||
| Federal Reserve Bank and Federal Home Loan Bank Stock, at cost | 24,454 | 36,014 | 24,449 | 25,844 | 23,694 | |||||
| Loans held for sale | 72,648 | 688,870 | 29,380 | 25,946 | 69,518 | |||||
| Loans and leases | 4,562,681 | 4,075,195 | 4,612,552 | 4,409,385 | 4,426,281 | |||||
| Allowance for credit losses | (48,977) | (45,336) | (79,836) | (80,777) | (53,785) | |||||
| Accrued interest receivable | 35,279 | 31,385 | 31,755 | 30,294 | 27,080 | |||||
| Premises, furniture, and equipment, net | 38,263 | 39,055 | 36,953 | 37,266 | 38,270 | |||||
| Rental equipment, net | 206,754 | 205,339 | 209,544 | 215,885 | 228,916 | |||||
| Goodwill and intangible assets | 313,074 | 326,094 | 327,018 | 328,001 | 329,241 | |||||
| Other assets | 308,679 | 260,070 | 280,053 | 283,245 | 280,571 | |||||
| Total assets | $ | 7,622,342 | $ | 7,549,336 | $ | 7,530,280 | $ | 7,437,117 | $ | 7,927,437 |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||
| LIABILITIES | ||||||||||
| Deposits | 6,518,953 | 5,875,085 | 6,431,516 | 6,368,344 | 6,936,055 | |||||
| Short-term borrowings | — | 377,000 | — | 31,000 | — | |||||
| Long-term borrowings | 33,380 | 33,354 | 33,329 | 33,373 | 33,614 | |||||
| Accrued expenses and other liabilities | 293,579 | 424,292 | 300,187 | 264,938 | 228,486 | |||||
| Total liabilities | 6,845,912 | 6,709,731 | 6,765,032 | 6,697,655 | 7,198,155 | |||||
| STOCKHOLDERS’ EQUITY | ||||||||||
| Preferred stock | — | — | — | — | — | |||||
| Common stock, $.01 par value | 241 | 248 | 251 | 254 | 260 | |||||
| Common stock, Nonvoting, $.01 par value | — | — | — | — | — | |||||
| Additional paid-in capital | 640,422 | 638,803 | 636,284 | 634,415 | 629,737 | |||||
| Retained earnings | 332,322 | 354,474 | 343,392 | 317,964 | 293,463 | |||||
| Accumulated other comprehensive loss | (190,917) | (153,394) | (207,992) | (206,570) | (188,433) | |||||
| Treasury stock, at cost | (4,882) | (249) | (6,181) | (6,181) | (5,235) | |||||
| Total equity attributable to parent | 777,186 | 839,882 | 765,754 | 739,882 | 729,792 | |||||
| Noncontrolling interest | (756) | (277) | (506) | (420) | (510) | |||||
| Total stockholders’ equity | 776,430 | 839,605 | 765,248 | 739,462 | 729,282 | |||||
| Total liabilities and stockholders’ equity | $ | 7,622,342 | $ | 7,549,336 | $ | 7,530,280 | $ | 7,437,117 | $ | 7,927,437 |
Condensed Consolidated Statements of Operations (Unaudited)
| Three Months Ended | ||||||
|---|---|---|---|---|---|---|
| (Dollars in Thousands, Except Share and Per Share Data) | December 31, 2024 | September 30, 2024 | December 31, 2023 | |||
| Interest and dividend income: | ||||||
| Loans and leases, including fees | $ | 102,731 | $ | 102,292 | $ | 94,963 |
| Mortgage-backed securities | 8,986 | 9,607 | 10,049 | |||
| Other investments | 7,522 | 7,851 | 10,886 | |||
| 119,239 | 119,750 | 115,898 | ||||
| Interest expense: | ||||||
| Deposits | 775 | 1,119 | 3,526 | |||
| FHLB advances and other borrowings | 2,331 | 2,709 | 2,336 | |||
| 3,106 | 3,828 | 5,862 | ||||
| Net interest income | 116,133 | 115,922 | 110,036 | |||
| Provision for credit loss | 12,032 | 838 | 9,890 | |||
| Net interest income after provision for credit loss | 104,101 | 115,084 | 100,146 | |||
| Noninterest income: | ||||||
| Refund transfer product fees | 410 | 1,703 | 422 | |||
| Refund advance fee income | 459 | 229 | 111 | |||
| Card and deposit fees | 29,066 | 26,441 | 30,750 | |||
| Rental income | 13,708 | 13,199 | 13,459 | |||
| (Loss) on sale of securities | (15,671) | — | — | |||
| Gain on divestitures | 16,404 | — | — | |||
| Gain (loss) on sale of loans and leases | 4,378 | 2,829 | (31) | |||
| Gain on sale of other | 987 | 630 | 2,871 | |||
| Other income | 7,637 | 6,979 | 5,179 | |||
| Total noninterest income | 57,378 | 52,010 | 52,761 | |||
| Noninterest expense: | ||||||
| Compensation and benefits | 49,292 | 52,298 | 46,652 | |||
| Refund transfer product expense | 108 | 168 | 192 | |||
| Refund advance expense | 34 | 20 | 30 | |||
| Card processing | 33,314 | 33,877 | 34,584 | |||
| Occupancy and equipment expense | 9,706 | 9,376 | 8,848 | |||
| Operating lease equipment depreciation | 11,426 | 10,445 | 10,423 | |||
| Legal and consulting | 5,225 | 8,414 | 4,892 | |||
| Intangible amortization | 812 | 924 | 984 | |||
| Other expense | 13,642 | 14,348 | 12,669 | |||
| Total noninterest expense | 123,559 | 129,870 | 119,274 | |||
| Income before income tax expense | 37,920 | 37,224 | 33,633 | |||
| Income tax expense (benefit) | 6,294 | 3,052 | 5,719 | |||
| Net income before noncontrolling interest | 31,626 | 34,172 | 27,914 | |||
| Net income attributable to noncontrolling interest | 199 | 575 | 257 | |||
| Net income attributable to parent | $ | 31,427 | $ | 33,597 | $ | 27,657 |
| Less: Allocation of Earnings to participating securities(1) | 130 | 348 | 220 | |||
| Net income attributable to common shareholders(1) | 31,297 | 33,249 | 27,437 | |||
| Earnings per common share: | ||||||
| Basic | $ | 1.29 | $ | 1.35 | $ | 1.06 |
| Diluted | $ | 1.29 | $ | 1.35 | $ | 1.06 |
| Shares used in computing earnings per common share: | ||||||
| Basic | 24,221,697 | 24,676,329 | 25,776,845 | |||
| Diluted | 24,280,371 | 24,715,021 | 25,801,538 |
(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 December 31, | 2024 | 2023 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (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 | $ | 239,614 | $ | 2,258 | 3.74 | % | $ | 337,975 | $ | 4,103 | 4.83 | % |
| Mortgage-backed securities | 1,309,926 | 8,986 | 2.72 | % | 1,486,854 | 10,049 | 2.69 | % | ||||
| Tax-exempt investment securities | 120,707 | 845 | 3.52 | % | 136,470 | 930 | 3.43 | % | ||||
| Asset-backed securities | 188,163 | 2,604 | 5.49 | % | 250,172 | 3,565 | 5.67 | % | ||||
| Other investment securities | 234,087 | 1,815 | 3.07 | % | 284,625 | 2,288 | 3.20 | % | ||||
| Total investments | 1,852,883 | 14,250 | 3.10 | % | 2,158,121 | 16,832 | 3.15 | % | ||||
| Commercial finance | 3,686,450 | 77,430 | 8.33 | % | 3,762,910 | 75,345 | 7.97 | % | ||||
| Consumer finance | 316,402 | 10,405 | 13.05 | % | 362,935 | 10,585 | 11.60 | % | ||||
| Tax services | 36,785 | 132 | 1.43 | % | 28,050 | (11) | (0.16) | % | ||||
| Warehouse finance | 603,824 | 14,764 | 9.70 | % | 381,931 | 9,044 | 9.42 | % | ||||
| Total loans and leases | 4,643,461 | 102,731 | 8.78 | % | 4,535,826 | 94,963 | 8.33 | % | ||||
| Total interest-earning assets | $ | 6,735,958 | $ | 119,239 | 7.04 | % | $ | 7,031,922 | $ | 115,898 | 6.57 | % |
| Noninterest-earning assets | 649,450 | 543,418 | ||||||||||
| Total assets | $ | 7,385,408 | $ | 7,575,340 | ||||||||
| Interest-bearing liabilities: | ||||||||||||
| Interest-bearing checking | $ | 685 | $ | — | 0.21 | % | $ | 426 | $ | — | 0.34 | % |
| Savings | 45,469 | 3 | 0.03 | % | 54,783 | 6 | 0.04 | % | ||||
| Money markets | 180,104 | 385 | 0.85 | % | 183,255 | 576 | 1.25 | % | ||||
| Time deposits | 4,208 | 3 | 0.25 | % | 5,517 | 4 | 0.25 | % | ||||
| Wholesale deposits | 26,892 | 384 | 5.67 | % | 211,281 | 2,940 | 5.54 | % | ||||
| Total interest-bearing deposits (a) | 257,358 | 775 | 1.19 | % | 455,262 | 3,526 | 3.08 | % | ||||
| Overnight fed funds purchased | 131,337 | 1,670 | 5.05 | % | 117,153 | 1,656 | 5.62 | % | ||||
| Subordinated debentures | 19,702 | 355 | 7.14 | % | 19,600 | 357 | 7.24 | % | ||||
| Other borrowings | 13,661 | 306 | 8.89 | % | 14,178 | 323 | 9.07 | % | ||||
| Total borrowings | 164,700 | 2,331 | 5.62 | % | 150,931 | 2,336 | 6.16 | % | ||||
| Total interest-bearing liabilities | 422,058 | 3,106 | 2.92 | % | 606,193 | 5,862 | 3.85 | % | ||||
| Noninterest-bearing deposits (b) | 5,823,877 | — | — | % | 6,102,928 | — | — | % | ||||
| Total deposits and interest-bearing liabilities | $ | 6,245,935 | $ | 3,106 | 0.20 | % | $ | 6,709,121 | $ | 5,862 | 0.35 | % |
| Other noninterest-bearing liabilities | 335,743 | 210,468 | ||||||||||
| Total liabilities | 6,581,678 | 6,919,589 | ||||||||||
| Shareholders' equity | 803,730 | 655,751 | ||||||||||
| Total liabilities and shareholders' equity | $ | 7,385,408 | $ | 7,575,340 | ||||||||
| Net interest income and net interest rate spread including noninterest-bearing deposits | $ | 116,133 | 6.84 | % | $ | 110,036 | 6.22 | % | ||||
| Net interest margin | 6.84 | % | 6.23 | % | ||||||||
| Tax-equivalent effect | 0.01 | % | 0.01 | % | ||||||||
| Net interest margin, tax-equivalent(2) | 6.85 | % | 6.24 | % | ||||||||
| Total cost of deposits (a+b) | 6,081,235 | 775 | 0.05 | % | 6,558,190 | 3,526 | 0.21 | % |
(1) Tax rate used to arrive at the TEY for the three months ended December 31, 2024 and 2023 was 21%.
(2) 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 | December 31,<br>2024 | September 30,<br>2024 | June 30,<br>2024 | March 31,<br>2024 | December 31,<br>2023 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity to total assets | 10.19 | % | 11.12 | % | 10.16 | % | 9.94 | % | 9.20 | % | |||||
| Book value per common share outstanding | $ | 32.19 | $ | 33.79 | $ | 30.51 | $ | 29.14 | $ | 28.06 | |||||
| Tangible book value per common share outstanding | $ | 19.21 | $ | 20.67 | $ | 17.47 | $ | 16.21 | $ | 15.39 | |||||
| Common shares outstanding | 24,119,416 | 24,847,353 | 25,085,230 | 25,377,986 | 25,988,230 | ||||||||||
| Nonperforming assets to total assets | 0.49 | % | 0.57 | % | 0.61 | % | 0.50 | % | 0.53 | % | |||||
| Nonperforming loans and leases to total loans and leases | 0.76 | % | 0.87 | % | 0.96 | % | 0.78 | % | 0.88 | % | |||||
| Net interest margin | 6.84 | % | 6.66 | % | 6.56 | % | 6.23 | % | 6.23 | % | |||||
| Net interest margin, tax-equivalent | 6.85 | % | 6.67 | % | 6.57 | % | 6.24 | % | 6.24 | % | |||||
| Return on average assets | 1.69 | % | 1.79 | % | 2.28 | % | 3.17 | % | 1.46 | % | |||||
| Return on average equity | 15.51 | % | 16.80 | % | 22.62 | % | 35.72 | % | 16.87 | % | |||||
| Return on average tangible equity | 25.65 | % | 28.40 | % | 40.59 | % | 64.92 | % | 33.95 | % | |||||
| Full-time equivalent employees | 1,170 | 1,241 | 1,232 | 1,204 | 1,218 |
Non-GAAP Reconciliations
| Net Interest Margin and Cost of Deposits | At and For the Three Months Ended | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| (Dollars in thousands) | December 31, 2024 | September 30, 2024 | December 31, 2023 | ||||||
| Average interest earning assets | $ | 6,735,958 | $ | 6,925,315 | $ | 7,031,922 | |||
| Net interest income | $ | 116,133 | $ | 115,922 | $ | 110,036 | |||
| Net interest margin | 6.84 | % | 6.66 | % | 6.23 | % | |||
| Quarterly average total deposits | $ | 6,081,235 | $ | 6,199,271 | $ | 6,558,190 | |||
| Deposit interest expense | $ | 775 | $ | 1,119 | $ | 3,526 | |||
| Cost of deposits | 0.05 | % | 0.07 | % | 0.21 | % | |||
| Adjusted Net Interest Margin with contractual, rate-related card expenses associated with deposits on the Company's balance sheet | |||||||||
| Average interest earning assets | $ | 6,735,958 | $ | 6,925,315 | $ | 7,031,922 | |||
| Net interest income | 116,133 | 115,922 | 110,036 | ||||||
| Less: Contractual, rate-related processing expense | 24,241 | 24,631 | 25,891 | ||||||
| Adjusted net interest income | $ | 91,892 | $ | 91,291 | $ | 84,145 | |||
| Adjusted net interest margin | 5.41 | % | 5.24 | % | 4.76 | % | |||
| Average total deposits | $ | 6,081,235 | $ | 6,199,271 | $ | 6,558,190 | |||
| Deposit interest expense | 775 | 1,119 | 3,526 | ||||||
| Add: Contractual, rate-related processing expense | 24,241 | 24,631 | 25,891 | ||||||
| Adjusted deposit expense | $ | 25,016 | $ | 25,750 | $ | 29,417 | |||
| Adjusted cost of deposits | 1.63 | % | 1.65 | % | 1.78 | % |
14
a1qfy25irquarterlydeck_f
THE PATHWARD STORY UPDATED JANUARY 21, 2025
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 Pathward Financial, Inc. (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,” “target,” 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 including our earnings per diluted share guidance, future effective tax rate, and related performance expectations; progress on key strategic initiatives; expected results of our partnerships; underwriting and monitoring processes; expected nonperforming loan resolutions and net charge-off rates; the performance of our securities portfolio; the impact of card balances related to government stimulus programs; customer retention; loan and other product demand; new products and services; credit quality; the level of net charge-offs and the adequacy of the allowance for credit losses; and technology. 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 unusual and infrequently occurring events, including the impact on financial markets from geopolitical conflicts such as the military conflicts in Ukraine and the Middle East, weather-related disasters, or public health events, such as pandemics and any governmental or societal responses thereto; 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, and their related impacts on macroeconomic conditions, customer behavior, funding costs and loan and securities portfolios; changes in tax laws; the strength of the United States' economy, and the local economies in which the Company operates; adverse developments in the financial services industry generally such as bank failures, responsive measures to mitigate and manage such developments, related supervisory and regulatory actions and costs, and related impacts on customer behavior; inflation, market, and monetary fluctuations; our liquidity and capital positions, including the sufficiency of our liquidity; 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 and acceptance of these products and services by users; the ability of the Company’s subsidiary Pathward®, N.A. (“Pathward”) 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 the Company’s strategic partners’ refund advance products; our relationship with and any actions which may be initiated by our regulators, and any related increases in compliance and other costs; 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 borrowing, 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, 2024 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, revise or clarify 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.
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. AT PATHWARD®, LEADING THE WAY TO FINANCIAL ACCESS IS THE HEART OF OUR BUSINESS. 3 Pathward Financial, Inc. (Nasdaq: CASH) | Quarterly Investor Presentation
BUILDING A DIVERSIFIED COMPANY DEDICATED TO FINANCIAL EMPOWERMENT FOR INDIVIDUALS AND BUSINESSES 4 1993 Listed on Nasdaq: CASH 2015 / 2016 Entered Tax Services business by acquiring Refund Advantage, SCS, and EPS 2020 Completed sale of Retail Bank division to focus on national banking operations and payments Developed a governance structure that aligns with key sustainability efforts Converted to National Bank Charter 2004 Created Prepaid Card Sponsorship business - now Partner Solutions 2014 Acquired AFS/IBEX, an insurance premium finance company 2018 Acquired Crestmark Bancorp, a commercial lending company Dramatic growth in deposits from Payments business heavily invested in securities, treasuries, and bond portfolio. 1954 Founded as a savings and loan bank 2021 Sold Meta trademarks and began rebranding initiative 2022 Completed rebranding as Pathward Financial 4 Pathward Financial, Inc. (Nasdaq: CASH) | Quarterly Investor Presentation 2024 Completed sale of Insurance Premium Finance business line to focus on higher return on asset verticals Note: Timeline and years presented are on a calendar year basis.
Stable funding from deposits via Partner Solutions relationships Funding Earns consistent fees from the Partner Solutions business Operates a Commercial Finance collateralized lending platform Revenue 5 RESILIENT BUSINESS MODEL IN ECONOMIC CYCLES Pathward Financial, Inc. (Nasdaq: CASH) | Quarterly Investor Presentation
COLLABORATE WITH PARTNERS TO PROVIDE INNOVATIVE PARTNER SOLUTIONS 6 Pathward Financial, Inc. (Nasdaq: CASH) | Quarterly Investor Presentation Issuing Acquiring Digital Payments Financial Institution Solutions Credit Solutions Professional Tax Solutions A leading debit and prepaid card issuer holding funds for partner programs Enable partners’ lending solutions to serve diverse credit needs Partner with a network of tax preparers offering a variety of products Partner with financial institutions to offer additional financial services Enable partners to move money quickly, efficiently and at a large scale across multiple payment rails Accepting and processing merchant payments on behalf of our partners
COMMERCIAL FINANCE HELPS BUSINESSES ACCESS NEEDED FUNDS THROUGH VARIOUS SOLUTIONS Pathward Financial, Inc. (Nasdaq: CASH) | Quarterly Investor Presentation7 Working Capital Finance Equipment Finance Structured Finance Ready cash for liquidity needs to new or growing companies in cyclical or seasonal industries Providing access to equipment financing, through loans and leases, without sacrificing cash flows Assisting small and mid- sized businesses and rural borrowers with primarily SBA and USDA lending to fund growth, expansion and refinancing
RECORD OF STRONG EARNINGS GROWTH AND PROFITABILITY ABOVE BANKING INDUSTRY AVERAGES EXCESS CAPITAL GENERATING BUSINESS ENABLES ONGOING RETURN OF VALUE TO SHAREHOLDERS INVESTMENT HIGHLIGHTS 2 3 4 1 5 EXPERIENCED LEADER IN FAST-GROWING PAYMENTS SECTOR, WITH DIVERSIFIED PORTFOLIO OF HIGH- QUALITY FINANCIAL PARTNERS RESILIENT COMMERCIAL FINANCE LOAN PORTFOLIO PRODUCES ATTRACTIVE RETURNS THROUGHOUT ECONOMIC CYCLES MATURE RISK MITIGATION AND COMPLIANCE CAPABILITIES WITH HIGHLY ADVANTAGEOUS NATIONAL BANK CHARTER 8 Pathward Financial, Inc. (Nasdaq: CASH) | Quarterly Investor Presentation
Earnings Per Common Share $5.26 $5.99 $2.94 $4.38 $4.49 $6.62 $0.56 $0.84 $0.78 $0.98 $1.06 $1.29 2020 2021 2022 2023 2024 YTD25 EPS inclusive of one- time items CAGR 22% RECORD OF STRONG EARNINGS GROWTH & PROFITABILITY1 2.20% 1.45% 1.74% 1.88% 2.33% 2.20% 1.69% 2020 2021 2022 2023 2024 YTD25 Return on Average Assets ROAA inclusive of one-time items Total Revenue2 ($ in millions) Return on Average Tangible Equity 35.42% 21.87% 28.66% 30.25% 48.32% 41.74% 25.65% 2020 2021 2022 2023 2024 YTD25 ROATE inclusive of one-time items 1FY20-FY21 display GAAP earnings; FY22 reflects GAAP and adjusted earnings. FY23-FY25 display GAAP earnings as the net adjustments for the periods are insignificant. See appendix for non-GAAP reconciliations $499 $550 $601 $704 $755 $174 2020 2021 2022 2023 2024 YTD25 Pathward Financial, Inc. (Nasdaq: CASH) | Quarterly Investor Presentation9 3Peer data includes commercial insured banks with assets between $3-10 billion. Return on average assets information gathered from the Federal Financial Institutions Examination Council database. Gain on sale of trademarks Peer average3 2FY22 and FY23 includes $50.0 million and $10.0 million gain on sale of trademarks, respectively 1 2 3 4 5 1st Quarter Earnings Remaining Fiscal Year Earnings
TRACK RECORD OF STRONG EARNINGS GROWTH AND RIGHT-SIZED BALANCE SHEET ENABLES ONGOING RETURN OF CAPITAL 10 1 2 3 4 5 $671.9M TOTAL SHARE REPURCHASES 2Q19 TO 1Q25 $37.0M TOTAL DIVIDENDS PAID 2Q19 TO 1Q25 Note: Repurchased common shares include shares withheld to cover income taxes owed by participants related to share-based incentive plans. Pathward Financial, Inc. (Nasdaq: CASH) | Quarterly Investor Presentation
PATHWARD SERVES AS A HUB OF THE PAYMENTS ECOSYSTEM 11 1 2 3 4 5 Fed / Settlement ATM Sponsorship Processor AcquiringProcessor Issuing FinTech / Program Manager Partners Financial Institution Clients Debit/Credit Networks End User Card Holder / Consumer End User Merchants Issuing/Acquiring/ Originating Bank Regulatory/Compliance Oversight OCC Primary Regulator Pathward Financial, Inc. (Nasdaq: CASH) | Quarterly Investor Presentation
COMMERCIAL FINANCE PORTFOLIO PRODUCES STABLE ANNUAL NET CHARGE-OFF RATES 12 Fiscal Year End Commercial Finance Loan Balances ($ in millions) $126 $113 $92 $140 $158 $207 $324 $368 $414 $474 $591 $665 $858 $1,510 $1,916 $2,308 $2,725 $3,024 $3,723 $3,296 0.0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1.0 0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 2005 1.67% 2006 1.72% 2007 1.10% 2008 1.17% 2009 1.61% 2010 0.68% 2011 0.04% 2012 0.69% 2013 0.67% 2014 0.36% 2015 -0.01% 2016 0.33% 2017 0.67% 2018 0.78% 2019 0.50% 2020 0.67% 2021 0.56% 2022 0.66% 2023 0.49% 2024 0.52% Fiscal Year NCO% 1 2 3 4 5 Pathward Acquires Crestmark Pathward Financial, Inc. (Nasdaq: CASH) | Quarterly Investor Presentation Insurance premium finance portfolio moved to held for sale during 4QFY24
MATURE RISK MITIGATION AND COMPLIANCE CAPABILITIES 13 1 2 3 4 5 Enterprise Risk Management Our Enterprise Risk Management (ERM) program applies corporate governance to risk-taking activities. The ERM program sets strategy across the enterprise and works closely with the lines of business to ensure that risks are appropriately identified and managed. Third-Party Risk Management Just as Pathward’s ERM program oversees our own actions, our Third- Party Risk Management program ensures that our third-party relationships are controlled and mitigated. Our policy and strategy encourage us to protect our company from risk, monitor third- party activities, and report risk events. Business Continuity Management Business Continuity Management (BCM) sets standards and testing to ensure our company remains resilient in case of disaster. Our standards comply with Federal Financial Institutions Examination Council (FFIEC) and Office of the Comptroller of the Currency (OCC) guidance. Bank Secrecy Act / Anti- Money Laundering To protect our customers, partners and company from the risks of fraud, money laundering, terrorist financing and other illicit activity, Pathward’s compliance programs are designed to keep us compliant with all federal programs and sanctions. Pathward Financial, Inc. (Nasdaq: CASH) | Quarterly Investor Presentation
QUARTERLY INVESTOR UPDATE FIRST Q UARTER F ISCAL YEAR 2025
Net Income $31.4 million in net income; an increase of 14% compared to Q1 FY 2024 Diluted Earnings Per Share $1.29 in diluted earnings per share; an increase of 22% compared to Q1 FY 2024 Net Interest Margin Net interest margin (“NIM”) of 6.84% compared to 6.23% in prior year period; Adjusted NIM1, including contractual, rate-related processing expenses associated with deposits on the Company’s balance sheet, of 5.41% compared to 4.76% in prior year period Return Metrics2 Q1 FY 2025 return on average assets (“ROAA”) of 1.69% compared to 1.46% in prior year period; Q1 FY 2025 return on average tangible equity (“ROATE”) of 25.65% compared to 33.95% in prior year period Q1 FY 2025 HIGHLIGHTS Pathward Financial, Inc. (Nasdaq: CASH) | Quarterly Investor Presentation15 1 See slide 41 for reconciliation to most directly comparable GAAP measure. 2 ROAA and ROATE are annualized for periods presented.
STRONG RESULTS FROM OPTIMIZED BALANCE SHEET • Completed sale of the Insurance Premium Finance business • Announced strategic partnership to support renewable energy growth • Q1 FY25 originations were strong in renewable energy, equipment finance and working capital • Continue to focus on credit sponsorship 16 Pathward Financial, Inc. (Nasdaq: CASH) | Quarterly Investor Presentation
• Extended contracts with two of our top partners, one for an additional two years and the other for an additional five years • Pipeline continues to be strong • Started tax season with 12% more enrolled offices than last year PARTNER SOLUTIONS EXTENDS CURRENT CONTRACTS Pathward Financial, Inc. (Nasdaq: CASH) | Quarterly Investor Presentation17
TRUSTED PLATFORM THAT ENABLES OUR PARTNERS TO THRIVE 18 Optimized balance sheet with optimized asset mix Technology to facilitate evolution and scalability People and culture are important assets Mature risk and compliance framework Pathward Financial, Inc. (Nasdaq: CASH) | Quarterly Investor Presentation
NET INTEREST INCOME DRIVES SOLID RESULTS ($ IN MILLIONS, EXCEPT PER SHARE DATA) Pathward Financial, Inc. (Nasdaq: CASH) | Quarterly Investor Presentation19 Q1 2024 Q1 2025 $110.0 $116.1 +6% Net Interest Income Q1 2024 Q1 2025 $119.3 123.6 +4% Noninterest Expense Q1 2024 Q1 2025 $52.8 $57.4 +9% Noninterest Income Q1 2024 Q1 2025 $27.7 $31.4 +14% Net Income Attributable to Parent $1.06 $1.29 Q1 2024 Q1 2025 +22% Earnings per Diluted Share
Decrease in deposits at December 31, 2024 when compared to the prior year period was primarily due to a reduction in wholesale deposits and the return of inactive EIP deposits to the U.S. Treasury. Average Q1 2025 off-balance sheet custodial deposits held in custody at program banks of $388 million compared to $379 million during the prior year period. $840 million of off-balance sheet custodial deposits as of December 31, 2024, compared to $1.1 billion as of December 31, 2023. These off-balance sheet custodial deposits earn recordkeeping servicing fee income, typically reflective of the Effective Fed Funds Rate. DEPOSIT BASE SUPPORTS ASSET GROWTH Q1 2024 Q1 2025 $6,936.1 $6,519.0 -6% DEPOSITS 1 Period ending ($ in millions) Pathward Financial, Inc. (Nasdaq: CASH) | Quarterly Investor Presentation20 1 Does not include off-balance sheet custodial deposits
TOTAL LOANS AND LEASES INCREASED FROM Q1 2024 Increase primarily driven by term lending, warehouse finance and asset-based lending. Growth was partially offset by the sale of insurance premium finance loans during Q1FY25. Nonperforming loans and leases of 0.76% compared to 0.88% at December 31, 2023. Annualized adjusted net charge-off rate of 0.70% for 1Q251. Q1 2024 Q1 2025 $4,426.3 $4,562.7 +3% TOTAL LOANS AND LEASES Period ending ($ in millions) Pathward Financial, Inc. (Nasdaq: CASH) | Quarterly Investor Presentation21 1 See slide 40 for reconciliation to most directly comparable GAAP measure.
STRONG BALANCE SHEET ALLOWS FOR RETURN OF CAPITAL TO SHAREHOLDERS Pathward Financial, Inc. (Nasdaq: CASH) | Quarterly Investor Presentation22 $1,175 $1,052 $840 $597 $204 $159 1These off balance sheet custodial deposits can be brought back on balance sheet, as needed, as they are immediately callable. ($ in millions) Q1 2025 701,860 Share RepurchasesLiquidity Sources Off Balance Sheet Custodial Deposits1 Cash and Cash Equivalents Unpledged Investment Securities FHLB Borrowing Capacity Fed Discount Window Funds Unsecured Funding and Other Wholesale Funding Options $4,027
FISCAL YEAR 2025 GUIDANCE1 Pathward Financial, Inc. (Nasdaq: CASH) | Quarterly Investor Presentation23 $7.25- $7.75 EPS Assumes no additional rate cuts Effective tax rate 18-22% Includes expected share repurchases 1 Information on this slide is presented as of January 21, 2025, reflects the Company’s updated financial outlook, certain of the Company’s financial targets, and key assumptions, and will not be updated or affirmed unless and until the Company publicly announces such an update or affirmation. The guidance for fiscal 2025, the Company’s financial targets and key economic assumptions contain forward-looking statements and actual results or conditions may differ materially. See the information set forth below the heading "Forward Looking Statements" on slide 2 of this presentation.
Q&A Pathward Financial, Inc. (Nasdaq: CASH) | Quarterly Investor Presentation24
Noninterest income represents 33% of year-to- date total revenue. Majority of noninterest income fees are generated by the Company’s Partner Solutions business line. Other major items include leasing rental income and other loan & lease fees. Pathward’s large fee income base provides stability through interest rate and credit cycles, while propelling continued revenue growth. The majority of Pathward’s tax season revenue is recorded as noninterest income during the second quarter of each fiscal year. DIVERSIFIED NONINTEREST INCOME STREAMS Pathward Financial, Inc. (Nasdaq: CASH) | Quarterly Investor Presentation25 Refund Transfer Product Fees 1% Refund Advance Product Fees 1% Card and Deposit Fees 50% Rental Income 24% Other Income 24% FYTD 2025 NONINTEREST INCOME BREAKDOWN . Noninterest income 33% Net interest income 67% FYTD 2025 REVENUE BREAKDOWN
During the 2025 fiscal first quarter, approximately 60% of the deposit balances were subject to variable card processing expenses, derived from contractual agreements with certain Partner Solutions relationships tied to a rate index, typically the Effective Fed Funds Rate. These costs reprice immediately upon a change in the applicable rate index, leading to an instant cost change as compared to the earning-asset yields that will generally experience a lag in repricing. As of December 31, 2024, Pathward also managed $840 million in off-balance sheet custodial deposits and earned $4.5 million of recordkeeping servicing fee income during the fiscal first quarter. That income is also typically reflective of the Effective Fed Funds Rate. COST OF DEPOSITS Pathward Financial, Inc. (Nasdaq: CASH) | Quarterly Investor Presentation26 COST OF DEPOSITS 1.63% 1.19% 4.65% 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 4Q23 1Q24 2Q24 3Q24 4Q24 1Q25 Adjusted Cost of Deposits Cost of Interest Bearing Deposits Quarterly Average Effective Fed Funds Rate Note: Adjusted Cost of Deposits represents cost of total deposits with the additional incorporation of the Company’s noninterest variable card processing expenses impacted by interest rates associated with deposits on the Company’s balance sheet.
As of December 31, 2024, $2.8B, or 62% of loans and leases contained floating or variable interest rates. Of these, $1.7B are tied to Fed Funds or Prime, with the remaining tied to either SOFR or the CMT. As of December 31, 2024, 97% of variable loans with floors were at or above their floors. Remain focused on smart growth in the Commercial Finance loan portfolio. 1Q25 yields increased by continued optimization of the balance sheet. $1.5 billion securities portfolio provides cash flow for future commercial finance loan growth. LOAN PORTFOLIO INTEREST RATE SENSITIVITY Pathward Financial, Inc. (Nasdaq: CASH) | Quarterly Investor Presentation27 1 Fixed rate loans and leases are shown for contractual periods. 62% 4% 34% Fixed Rate > 1 Year TOTAL LOAN AND LEASE PORTFOLIO PRICING ATTRIBUTES1 Fixed Rate < 1 Year Floating or Variable NET INTEREST MARGIN AND LOAN YIELDS 4.59% 4.80% 4.76% 5.21% 5.62% 6.12% 6.18% 6.19% 6.23% 6.23% 6.56% 6.66% 6.84% 4.59% 4.79% 4.63% 4.77% 4.91% 5.25% 5.02% 4.90% 4.76% 4.76% 5.06% 5.24% 5.41% 6.96% 7.22% 6.69% 7.12% 7.70% 8.47% 8.31% 8.33% 8.33% 8.43% 8.56% 8.67% 8.78% 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 4Q23 1Q24 2Q24 3Q24 4Q24 1Q25 NIM Adjusted NIM Loan Yields 2 Adjusted NIM includes contractual card processing expenses associated with deposits on the Company’s balance sheet and which have higher interest rates. See appendix for Non-GAAP financial measures reconciliation. 2
Loan and lease financing to provide access to needed equipment Focus on equipment critical to business operations Borrowers are investment grade companies Primarily fixed rate loans and leases Flexibility to sell direct originations to secondary market EQUIPMENT FINANCE COMMERCIAL FINANCE Pathward Financial, Inc. (Nasdaq: CASH) | Quarterly Investor Presentation28 7.46% Q1 2025 Quarterly Yield1 17% Of Loan Portfolio Business Line Balance Sheet Category 1Q24 4Q24 1Q25 Large ticket Lease financing $178.6 $146.8 $133.5 Term lending 561.7 488.6 530.1 Small ticket Lease financing 5.2 2.2 1.5 Term lending 172.2 121.7 103.2 TOTAL $917.7 $759.3 $768.3 ($ in millions) 1Interest income does not include any potential gain(loss) on sale of equipment that was previously on a lease.
• Provides working capital for 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 WORKING CAPITAL FINANCE COMMERCIAL FINANCE Pathward Financial, Inc. (Nasdaq: CASH) | Quarterly Investor Presentation29 12.22% Q1 2025 Quarterly Yield 21% Of Loan Portfolio Business Line Balance Sheet Category 1Q24 4Q24 1Q25 Working Capital Asset-based lending $379.7 $471.9 $608.3 Factoring 336.0 362.3 364.5 TOTAL $715.7 $834.2 $972.8 ($ in millions)
• Funding small and midsized businesses, including rural borrowers • 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 STRUCTURED FINANCE COMMERCIAL FINANCE Pathward Financial, Inc. (Nasdaq: CASH) | Quarterly Investor Presentation30 6.60% Q1 2025 Quarterly Yield1 36% Of Loan Portfolio ($ in millions) Business Line Balance Sheet Category 1Q24 4Q24 1Q25 Guaranteed portion of US govt SBA/USDA loans SBA/USDA $356.0 $344.4 $364.7 Unguaranteed portion of US govt SBA/USDA loans SBA/USDA 190.1 224.2 231.3 Renewable energy debt financing2 (term lending only) Term lending 412.3 635.7 802.9 Other Term lending 306.0 308.6 299.3 TOTAL $1,264.4 $1,512.9 $1,698.2 2Total renewable energy debt financing outstanding was $1.43 billion as of 1Q25. The majority of these balances are in the term lending and SBA/USDA balance sheet categories. 1Interest income does not include any gain(loss) on sale of loans.
• Consumer credit programs with marketplace lenders offer Pathward a risk adjusted return • Protected by certain layers of credit support and balance sheet flexibility • Programs are offered to strategic partners with payments distribution potential • Agreements typically provide for “excess spread” build-up and protection through a priority of payment within a waterfall CONSUMER Pathward Financial, Inc. (Nasdaq: CASH) | Quarterly Investor Presentation31 13.05% Q1 2025 Quarterly Yield 7% Of Loan Portfolio ($ in millions) Business Line Balance Sheet Category 1Q24 4Q24 1Q25 Consumer Consumer finance $301.5 $248.8 $280.0 TOTAL $301.5 $248.8 $280.0 Consumer Payments - Principal, Interest, Fees Collection Account Servicing Principal Losses to Pathward Principal Repayment to Pathward Pathward’s agreed upon interest return Remaining excess spread to Pathward-owned escrow reserve Reserve release to partner is conditional (subordinate) based on product performance Waterfall
• Asset-backed warehouse lines of credit used to support strategic initiatives • Lines are primarily secured by consumer receivables, whereby Pathward is in a senior, secured position as the first out participant • Have never had a charge off or loss • Agreements trigger waterfall protection for the “First Out” participant WAREHOUSE Pathward Financial, Inc. (Nasdaq: CASH) | Quarterly Investor Presentation32 9.70% Q1 2025 Quarterly Yield 14% Of Loan Portfolio ($ in millions) Business Line Balance Sheet Category 1Q24 4Q24 1Q25 Warehouse Warehouse finance $349.9 $517.8 $624.3 TOTAL $349.9 $517.8 $624.3 Waterfall All Loan/Collateral Cash Flows Admin Fees (0-5%) Junior Tranche $40MM (40%) Equity Tranche $10MM (10%) First-Out Tranche (Pathward Position) $50MM (50%) $100M Facility EXAMPLE
Pathward Financial, Inc. (Nasdaq: CASH) | Quarterly Investor Presentation33 COMMERCIAL FINANCE CONCENTRATIONS BY INDUSTRY1 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 $206.8M MANUFACTURING 39% Term lending 39% Asset based lending 9% Factoring 7% Rental equipment, net 6% Other TRANSPORTATION & WAREHOUSING 44% Term lending 38% Factoring 8% Asset based lending 6% Rental equipment, net 4% Other UTILITIES 52% Term lending 35% SBA/USDA 8% Rental equipment, net 5% Other $984 $875 $730 $369 $294 $255 $117 $114 $104 $97 $89 $89 $84 $54 $52 $48 $30 $16 $13 $11 $4 $3 Utilities Finance and Insurance Manufacturing Transportation and Warehousing Wholesale Trade Mining, Quarrying, and Oil and Gas Extraction Public Administration Administrative and Support and Waste Management and Remediation Services Construction Null Health Care and Social Assistance Nonclassifiable Establishments Professional, Scientific, and Technical Services Real Estate and Rental and Leasing Retail Trade Accommodation and Food Services Information Agriculture, Forestry, Fishing and Hunting Other Services (except Public Administration) Arts, Entertainment, and Recreation Educational Services Management of Companies and Enterprises $ in millions
Pathward Financial, Inc. (Nasdaq: CASH) | Quarterly Investor Presentation34 INTEREST RATE RISK MANAGEMENT DECEMBER 31, 2024 Asset/Liability Gap Analysis 1 Fixed rate securities, loans and leases are shown for contractual periods. 8% 44% 3% 45% 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. • Interest rate risk modeling shows asset sensitive balance sheet; net interest income graph shows impact of an instantaneous, parallel rate shock and alternative views of a gradual parallel ramp and a parallel rate shock. • Management employs rigorous modeling techniques under a variety of yield curve shapes, twists and ramps. -15% 0% 15% 30% -200 -100 +100 +200 Parallel Shock Alternative Parallel Shock Alternative Ramp 12-Month Interest Rate Sensitivity from Base Net Interest Income Parallel Shock is a statutory required calculation of the impact of an immediate change in rates, assuming other variables remain unchanged. Ramp reflects additional modeling of more gradual increases in interest rates. The Alternative scenarios mirror the Parallel Shock and Ramp with the additional incorporation of the Company’s card fee income and card processing expenses impacted by interest rates. -2,000 0 2,000 4,000 6,000 Month 1-12 Month 13-36 Month 37-60 Month 61-180 V o lu m e ($ M M ) Period Variance Total Assets Total Liabilities
Pathward Financial, Inc. (Nasdaq: CASH) | Quarterly Investor Presentation35 ASSET QUALITY $4.6 $4.7 $7.0 $7.3 $8.1 0.41% 0.43% 0.63% 0.62% 0.70% 0.50% 0.45% 0.49% 0.52% 0.60% 1Q24 2Q24 3Q24 4Q24 1Q25 Period Ended Adj. NCOs Adj. NCOs / Adj. Average Loans Adj. NCOs / Adj. Average Loans - LTM Adjusted Net Charge-Offs (“NCOs”)1 Excludes Tax Services NCOs and Related Seasonal Average Loans ($ in millions) KEY CREDIT METRICS • Annualized adjusted net charge-offs1: – 0.70% of average loans in 1Q25 – 0.60% of average loans over last 12 months • Allowance for credit loss (“ACL”) of $49.0 million as of December 31, 2024. • ACL as a % of total loans and leases was 1.07% for 1Q25, a 15 bps decrease from the prior year. • The decrease in NPAs / NPLs compared to the sequential quarter was primarily driven by a decrease in nonperforming loans in the seasonal tax services portfolio and consumer finance portfolio, partially offset by an increase in the commercial finance portfolio. 1 See appendix for Non-GAAP financial measures reconciliation. 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. $39.6 $34.4 $44.6 $41.6 $35.2 0.88% 0.78% 0.96% 0.87% 0.76% 1Q24 2Q24 3Q24 4Q24 1Q25 Period Ended NPLs NPLs / Total Loans Nonperforming Assets (“NPAs”) ($ in millions) Nonperforming Loans (“NPLs”) ($ in millions) $42.4 $37.2 $46.3 $43.0 $37.5 0.53% 0.50% 0.61% 0.57% 0.49% 1Q24 2Q24 3Q24 4Q24 1Q25 Period Ended NPAs NPAs / Total Assets
Pathward Financial, Inc. (Nasdaq: CASH) | Quarterly Investor Presentation36 CAPITAL AND SOURCES OF LIQUIDITY Regulatory Capital as of December 31, 2024 At December 31, 2024¹ Pathward Financial, Inc. Pathward, N.A. Tier 1 Leverage 9.15% 9.42% Common Equity Tier 1 12.53% 13.16% Tier 1 Capital 12.79% 13.16% Total Capital 14.11% 14.10% Primary & Secondary Liquidity Sources ($ in millions) Cash and Cash Equivalents $597 Unpledged Investment Securities $159 FHLB Borrowing Capacity $1,052 Funds Available through Fed Discount Window $204 Unsecured Funding Providers $1,175 Deposit Balances Held at Other Banks $840 Total Liquidity $4,027 1 Regulatory capital reflects the Company's election of the five-year CECL transition for regulatory capital purposes. Amounts are preliminary pending completion and filing of the Company's regulatory reports. . 7.96% 7.75% 9.13% 9.26% 9.15% 8.15% 7.92% 9.36% 9.44% 9.42% 1Q24 2Q24 3Q24 4Q24 1Q25 Tier 1 Leverage Ratio 13.12% 14.21% 14.33% 14.08% 14.11% 13.01% 14.09% 14.27% 13.97% 14.10% 1Q24 2Q24 3Q24 4Q24 1Q25 Total Capital Ratio Pathward Financial, Inc. Pathward, N.A. Minimum Requirement to be Well-Capitalized under Prompt Corrective Action Provisions
APPENDIX Pathward Financial, Inc. (Nasdaq: CASH) | Quarterly Investor Presentation37
Pathward Financial, Inc. (Nasdaq: CASH) | Quarterly Investor Presentation38 EFFICIENCY RATIO For the last twelve months ended ($ in thousands) Dec 31, 2023 Mar 31, 2024 Jun 30, 2024 Sep 30, 2024 Dec 31, 2024 Noninterest expense – GAAP 479,190 492,485 501,586 513,253 517,538 Net interest income 413,840 430,736 444,130 455,118 461,215 Noninterest income 303,583 305,490 303,628 299,587 304,204 Total Revenue: GAAP 717,423 736,226 747,758 754,705 765,419 Efficiency ratio, LTM 66.79% 66.89% 67.08% 68.01% 67.61% Efficiency Ratio
Pathward Financial, Inc. (Nasdaq: CASH) | Quarterly Investor Presentation39 NON-GAAP RECONCILIATION 1 Amounts presented are used in the two-class earnings per common share calculation. Adjusted Net Income and Adjusted Earnings Per Share For the year ended ($ in thousands, except share and per share data) 2022 Net income – GAAP a 156,386 Less: Gain on sale of trademarks 50,000 Add: Rebranding expenses 13,148 Add: Separation related expenses 5,109 Add: Income tax effect 8,936 Adjusted net income b 133,579 Less: Allocation of earnings to participating securities1 2,191 Adjusted net income attributable to common shareholders 131,388 Adjusted earnings per common share, diluted $4.49 Average diluted shares 29,232,247 Adjusted Return on Average Assets and Adjusted Return on Average Tangible Equity Average assets c 7,103,874 Return on average assets (a / c) 2.20% Adjusted return on average assets (b / c) 1.88% Average equity d 780,705 Less: Average goodwill and intangible assets 339,179 Average tangible equity e 441,526 Return on average tangible equity (a / e) 35.42% Adjusted return on average tangible equity (b / e) 30.25%
Pathward Financial, Inc. (Nasdaq: CASH) | Quarterly Investor Presentation40 NON-GAAP RECONCILIATION 1 Tax services NCOs and average loans are excluded to adjust for the cyclicality of activity related to the overall economics of the Company's tax services business line. For the quarter ended ($ in thousands) Dec 31, 2023 Mar 31, 2024 Jun 30, 2024 Sep 30, 2024 Dec 31, 2024 Net charge-offs 5,486 (1,087) 6,582 35,626 8,573 Less: Tax services net charge-offs (recoveries) 851 (5,800) (410) 28,354 513 Adjusted net charge-offs 4,635 4,713 6,992 7,272 8,060 Quarterly average loans and leases 4,535,826 4,903,175 4,506,674 4,694,512 4,643,461 Less: Quarterly average tax services loans 28,050 493,168 56,836 39,437 36,785 Adjusted quarterly average loans and leases 4,507,776 4,410,007 4,449,838 4,655,075 4,606,676 Annualized NCOs/average loans and leases 0.48% -0.09% 0.58% 3.04% 0.74% Adjusted annualized NCOs/adjusted average loans and leases1 0.41% 0.43% 0.63% 0.62% 0.70% Adjusted Annualized NCOs and Adjusted Average Loans and Leases For the last twelve months ended ($ in thousands) Dec 31, 2023 Mar 31, 2024 Jun 30, 2024 Sep 30, 2024 Dec 31, 2024 Net charge-offs 55,959 49,897 52,261 46,607 49,694 Less: Tax services net charge-offs (recoveries) 35,597 30,860 30,716 22,995 22,657 Adjusted net charge-offs 20,362 19,037 21,545 23,612 27,037 Average loans and leases 4,189,308 4,411,573 4,558,436 4,660,047 4,686,956 Less: Average tax services loans 143,345 154,472 155,561 154,373 156,556 Adjusted Average loans and leases 4,045,963 4,257,104 4,402,874 4,505,674 4,530,400 NCOs/average loans and leases 1.34% 1.13% 1.15% 1.00% 1.06% Adjusted NCOs/adjusted average loans and leases1 0.50% 0.45% 0.49% 0.52% 0.60%
Pathward Financial, Inc. (Nasdaq: CASH) | Quarterly Investor Presentation41 NON-GAAP RECONCILIATION For the quarter ended ($ in thousands) Dec-21 Mar-22 Jun-22 Sep-22 Dec-22 Mar-23 Jun-23 Sep-23 Dec-23 Mar-24 Jun-24 Sep-24 Dec-24 Average interest earning assets 6,183,646 7,082,417 6,082,329 6,073,822 5,934,431 6,717,918 6,326,750 6,724,185 7,031,922 7,635,842 6,801,888 6,925,315 6,735,958 Net interest income 71,613 83,800 72,151 79,760 84,057 101,405 97,465 104,934 110,036 118,301 110,859 115,922 116,133 Net interest margin 4.59% 4.80% 4.76% 5.21% 5.62% 6.12% 6.18% 6.19% 6.23% 6.23% 6.56% 6.66% 6.84% Average total deposits 5,921,384 6,679,422 5,741,072 5,765,048 5,636,658 6,386,592 5,895,242 6,204,934 6,558,189 7,168,673 6,260,990 6,199,271 6,081,235 Deposit interest expense 141 165 94 99 142 2,096 164 1,954 3,526 6,685 1,689 1,119 775 Cost of deposits 0.01% 0.01% 0.01% 0.01% 0.01% 0.13% 0.01% 0.12% 0.21% 0.38% 0.11% 0.07% 0.05% Net Interest Margin and Cost of Deposits Adjusted Net Interest Margin With Contractual, Rate-Related Card Expenses Associated With Deposits on the Company’s Balance Sheet For the quarter ended ($ in thousands) Dec-21 Mar-22 Jun-22 Sep-22 Dec-22 Mar-23 Jun-23 Sep-23 Dec-23 Mar-24 Jun-24 Sep-24 Dec-24 Average interest earning assets 6,183,646 7,082,417 6,082,329 6,073,822 5,934,431 6,717,918 6,326,750 6,724,185 7,031,922 7,635,842 6,801,888 6,925,315 6,735,958 Net interest income 71,613 83,800 72,151 79,760 84,057 101,405 97,465 104,934 110,036 118,301 110,859 115,922 116,133 Less: Contractual, rate-related processing expense 85 183 1,966 6,698 10,660 14,415 18,358 21,929 25,891 28,024 25,320 24.631 24,241 Adjusted net interest income 71,528 83, 617 70,185 73,062 73,397 86,990 79,107 83,005 84,145 90,277 85,539 91,291 91,892 Adjusted net interest margin 4.59% 4.79% 4.63% 4.77% 4.91% 5.25% 5.02% 4.90% 4.76% 4.76% 5.06% 5.24% 5.41% Average total deposits 5,921,384 6,679,422 5,741,072 5,765,048 5,636,658 6,386,592 5,895,242 6,204,934 6,558,189 7,168,673 6,260,990 6,199,271 6,081,235 Deposit interest expense 141 165 94 99 142 2,096 164 1,954 3,526 6,685 1,689 1,119 775 Add: Contractual, rate-related processing expense 85 183 1,966 6,698 10,660 14,415 18,358 21,929 25,891 28,024 25,320 24,631 24,241 Adjusted deposit expense 226 348 2,060 6,797 10,802 16,511 18,522 23,883 29,417 34,709 27,009 25,750 25,016 Adjusted cost of deposits 0.02% 0.02% 0.14% 0.47% 0.76% 1.05% 1.26% 1.53% 1.78% 1.95% 1.74% 1.65% 1.63%
Industry Terms 42 Types of Payment Cards Banking-as-a-Service (BaaS): Providing financial services and solutions to third parties to offer through their distribution channels. Push-to-debit: The ability to move money directly to an end user. At Pathward, our push-to-debit capabilities are called “Faster Payments”. Debit Card: A type of payment card typically tied to funds held in a deposit account. Credit Card: A type of payment card typically attached to a line of credit that a user can make purchases against. Prepaid Card: A type of payment card that holds a finite amount of funds and is not directly tied to a bank account or line of credit. Virtual Card: A digital counterpart to a payment card, generated with a unique card number to settle a particular transaction by an authorized user. These are often used for one-time, business-to-business payments. Payment Players Acquiring Bank: An acquiring bank provides merchant accounts that allow a business to accept card payments and works in conjunction with the acquirer processor. In some cases, the acquiring bank and acquirer processor are a single entity. Acquiring Processors: Acquiring processors connect directly with merchants, the network and the acquiring bank, or via a payment gateway, to facilitate payment acceptance at the merchant. They provide the technical capabilities to create the system of record to communicate with authorization and settlement entities. In some cases, the acquiring bank and acquirer processor are a single entity. Issuing Bank: The issuing bank enters a relationship with the cardholder, program manager, and enables cards on a given network. The issuing bank fills three primary roles in payment processing: it is a “network sponsor,” which means it can issue cards on a given payments network; it is a holder of funds (for example, for gift cards, deposit accounts and other non-credit cards); and it is a “settlement point,” managing a consumer’s account and paying out to the merchant’s account after a purchase. Issuing Processor: Connects directly with the networks and issuing bank to provide the system of record, authorize transactions and communicate with settlement entities. Fintech: Fintech refers to the integration of technology into offerings by financial services companies in order to improve use and delivery to consumers. Merchant: A merchant simply refers to any business that accepts card-based payments either via a physical swipe (at the point-of-sale) or virtually online. Program Manager: Businesses that manage various elements of a card program on behalf of the issuing bank. The Program Manager is responsible for defining the program, operating the program, and managing its profitability. The program manager typically is responsible for establishing relationships with processors, banks, payment networks, and distributors and for establishing account(s) at banks. DEFINITIONS Pathward Financial, Inc. (Nasdaq: CASH) | Quarterly Investor Presentation Commercial Lending Terms Asset-Based Lending: Asset-Based Lending (ABL) refers to business loans that are secured based on assets as collateral, generally accounts receivable, inventory, equipment or other balance sheet assets. Accounts Receivable: Accounts Receivable (A/R) financing refers to financing based on the value of a company’s accounts receivable (their invoices for goods or services) to another company. It is a subset of asset-based lending and is also known as factoring. Equipment Financing: Equipment Financing refers to a loan used to purchase business equipment. The financing is provided through leases such as $1 Buyout, Fair Market Value (FMV), or through term loans. Leases may appear in Loans & Leases or Rental Equipment. Factoring: Factoring refers to financing based on the purchase of a company’s accounts receivables, their invoices for goods or services. It is a subset of asset-based lending and is also known as accounts receivable financing. Insurance Premium Finance: Insurance Premium Finance refers to short-term collateralized financing to facilitate the purchases of property, casualty, and liability insurance premiums for the commercial market. Government Guaranteed Lending: A government guaranteed loan is a loan guaranteed by a government agency and financed through a lending financial entity. Government guaranteed loans include SBA loans and USDA loans. SBA Loan: An SBA loan refers to financing that is guaranteed by the Small Business Administration (SBA) and provided by a lending financial institution. SBA loans, such as an SBA 7(a) loan, may be easier for a small business to obtain because of the reduced risk for the lender. Lenders must meet sufficient requirements to be eligible as a lending entity. Term Loan: A Term loan is a loan for a specific amount that has a specified interest rate and regular payment schedule to be repaid over a set period of time. USDA Loan: A USDA loan refers to financing guaranteed by the U.S. Department of Agriculture (USDA) as part of the Rural Development program and provided by a lending financial institution. USDA business loans, such as the USDA Business & Industry (B & I) loan, may be easier for a business to obtain because of the reduced risk for the lender. Lenders must meet sufficient requirements to be eligible as a lending entity.