CASH Pathward Financial Inc

Pathward Financial, Inc. (“Pathward Financial” or the “Company”) (Nasdaq: CASH) reported net income of $65.3 million, or $2.56 per share, for the three months ended March 31, 2024, compared to net income of $54.8 million, or $1.99 per share, for the three months ended March 31, 2023. For the fiscal quarter ended March 31, 2023, the Company recognized adjusted net income of $60.3 million, or $2.18 per share, when adjusting for the adverse financial impacts related to legacy mobile solar transactions and a venture capital investment impairment expense. See non-GAAP reconciliation table below.

CEO Brett Pharr said, “We continue to produce strong results by focusing on risk adjusted returns, enhancing our Banking as a Service offerings, and spending the off-season in tax services improving our data analytics, underwriting and monitoring processes. We delivered significant growth in net income and earnings per share through solid performance across the enterprise. The Pathward team continues to perform by maintaining our culture, focusing on risk and compliance, working closely with our partners, and embodying our purpose of financial inclusion. I am excited to be a part of this company and for what we can create in the future.”

Company Highlights

• On February 27, 2024, the Board of Directors (the "Board") of Pathward Financial appointed Neeraj Mehta as a member of the Board.
• On April 3, 2024, Pathward®, N.A. announced it became Certified™ by Great Place to Work® for the second year in a row. Great Place to Work describes itself as the global authority on workplace culture, employee experience, and the leadership behaviors proven to deliver market-leading revenue, employee retention and increased innovation.

Financial Highlights for the 2024 Fiscal Second Quarter

• Total revenue for the second quarter was $247.2 million, an increase of $18.8 million, or 8%, compared to the same quarter in fiscal 2023, driven by an increase in both net interest income and noninterest income.
• Net interest margin ("NIM") increased 11 basis points to 6.23% for the second quarter from 6.12% during the same period last year, primarily driven by increased yields on earning assets and an improved earning asset mix from the continued optimization of the portfolio. When including contractual, rate-related processing expense, NIM would have been 4.65% in the fiscal 2024 second quarter compared to 4.89% during the fiscal 2023 second quarter due to increases in rate-related card processing expenses from a higher rate environment. Servicing fee income on off-balance sheet deposits is not included in this calculation. See non-GAAP reconciliation table below.
• Total gross loans and leases at March 31, 2024 increased $683.8 million to $4.41 billion compared to March 31, 2023 and decreased $16.9 million when compared to December 31, 2023. The increase compared to the prior year quarter was due to growth across all loan portfolios. The primary driver for the sequential decrease was a reduction in the commercial and consumer finance loan portfolios, partially offset by growth in the warehouse finance and seasonal tax services loan portfolios.
• During the 2024 fiscal second quarter, the Company repurchased 764,185 shares of common stock at an average share price of $51.20. An additional 100,990 shares of common stock were repurchased at an average price of $49.47 in April 2024 through April 15, 2024. As of April 15, 2024, there were 7,568,673 shares available for repurchase under the current common stock share repurchase programs.
• The Company is narrowing its fiscal year 2024 GAAP earnings per diluted share guidance to a range of $6.30 to $6.60. See Outlook section below.

Tax Season

For the six months ended March 31, 2024, total tax services product revenue was $72.9 million, an increase of 1% compared to the same period of the prior year. Total tax services product fee income increased marginally compared to the prior year, while total tax services product expense and net interest income on tax services loans decreased.

Provision for credit losses for tax services portfolio decreased $6.5 million for the six months ended March 31, 2024 when compared to the same period of the prior year, due to improvements in data analytics, underwriting and monitoring.

Total tax services product income, net of losses and direct product expenses, increased 24% to $36.9 million from $29.7 million, when comparing the first six months of fiscal 2024 to the same period of the prior fiscal year.

For the 2024 tax season through March 31, 2024, Pathward originated $1.56 billion in refund advance loans compared to $1.46 billion during the 2023 tax season.

Net Interest Income

Net interest income for the second quarter of fiscal 2024 was $118.3 million, an increase of 17% from the same quarter in fiscal 2023. The increase was mainly attributable to increased yields, higher average interest-earning asset balances and an improved earning asset mix.

The Company’s average interest-earning assets for the second quarter of fiscal 2024 increased by $917.9 million to $7.64 billion compared to the same quarter in fiscal 2023, primarily due to growth in loans and leases and an increase in cash balances, partially offset by a decrease in total investment security balances. The second quarter average outstanding balance of loans and leases increased $889.1 million compared to the same quarter of the prior fiscal year, primarily due to an increase across all loan portfolios.

Fiscal 2024 second quarter NIM increased to 6.23% from 6.12% in the second fiscal quarter of last year. When including contractual, rate-related processing expense, NIM would have been 4.65% in the fiscal 2024 second quarter compared to 4.89% during the fiscal 2023 second quarter. See non-GAAP reconciliation table below. The overall reported tax-equivalent yield (“TEY”) on average earning asset yields increased 35 basis points to 6.69% compared to the prior year quarter, driven by an improved earning asset mix. The yield on the loan and lease portfolio was 8.43% compared to 8.47% for the comparable period last year and the TEY on the securities portfolio was 3.20% compared to 2.89% over that same period.

The Company's cost of funds for all deposits and borrowings averaged 0.47% during the fiscal 2024 second quarter, as compared to 0.21% during the prior year quarter. The Company's overall cost of deposits was 0.38% in the fiscal second quarter of 2024, as compared to 0.13% during the prior year quarter. When including contractual, rate-related processing expense, the Company's overall cost of deposits was 2.06% in the fiscal 2024 second quarter, as compared to 1.43% during the prior year quarter. See non-GAAP reconciliation table below.

Noninterest Income

Fiscal 2024 second quarter noninterest income increased 2% to $128.9 million, compared to $127.0 million for the same period of the prior year. The increase was primarily driven by an increase in refund advance fee income. The period-over-period increase was partially offset by a decrease in card and deposits fees.

The period-over-period decrease in card and deposit fee income was primarily related to servicing fee income on off-balance sheet deposits, which totaled $10.4 million during the 2024 fiscal second quarter, compared to $18.2 million for the same period of the prior year. The decrease in servicing fee income when compared to the prior year period was due to a reduction in off-balance sheet deposits. For the fiscal quarter ended December 31, 2023, servicing fee income on off-balance sheet deposits totaled $5.1 million.

Noninterest Expense

Noninterest expense increased 10% to $140.4 million for the fiscal 2024 second quarter, from $127.1 million for the same quarter last year. The increase was primarily attributable to increases in card processing expense, compensation and benefits expense, impairment expense, legal and consulting expense, and occupancy and equipment expense. The period-over-period increase was partially offset by decreases in operating lease equipment depreciation, other expense, refund transfer product expense, and intangible amortization expense.

The card processing expense increase was due to rate-related agreements with BaaS partners. The amount of expense paid under those agreements is based on an agreed upon rate index that varies depending on the deposit levels, floor rates, market conditions, and other performance conditions. Generally, this rate index is based on a percentage of the Effective Federal Funds Rate ("EFFR") and reprices immediately upon a change in the EFFR. Approximately 56% of the deposit portfolio was subject to these rate-related processing expenses during the fiscal 2024 second quarter. For the fiscal quarter ended March 31, 2024, contractual, rate-related processing expenses were $30.1 million, as compared to $26.8 million for the fiscal quarter ended December 31, 2023, and $20.4 million for the fiscal quarter ended March 31, 2023.

Income Tax Expense

The Company recorded income tax expense of $15.2 million, representing an effective tax rate of 18.9%, for the fiscal 2024 second quarter, compared to $9.2 million, representing an effective tax rate of 14.2%, for the second quarter last fiscal year. The current quarter increase in income tax expense compared to the prior year quarter was primarily due to increased earnings and also a decrease in investment tax credits recognized ratably when compared to the prior year quarter.

The Company originated $25.9 million in renewable energy leases during the fiscal 2024 second quarter, resulting in $7.0 million in total net investment tax credits. During the second quarter of fiscal 2023, the Company originated $18.1 million in renewable energy leases resulting in $4.9 million in total net investment tax credits. For the six months ended March 31, 2024, the Company originated $38.1 million in renewable energy leases, compared to $29.5 million for the comparable prior year period. Investment tax credits related to renewable energy leases are recognized ratably based on income throughout each fiscal year.

Outlook

The following forward-looking statements reflect the Company’s expectations as of the date of this release and are subject to substantial uncertainty. The Company's results may be materially affected by many factors, such as changes in economic conditions and customer demand, changes in interest rates, adverse developments in the financial services industry generally, inflation, competition, and other factors detailed below under “Forward-looking Statements.”

The Company is narrowing its fiscal year 2024 GAAP earnings per diluted share guidance to a range of $6.30 to $6.60. As part of this guidance, the Company is reiterating its expectation that the annual effective tax rate in fiscal year 2024 will be in a range between 16% and 20%.

Investments, Loans and Leases

(Dollars in thousands)

March 31, 2024

 

December 31, 2023

 

September 30, 2023

 

June 30, 2023

 

March 31, 2023

Total investments

$

1,814,140

 

 

$

1,886,021

 

 

$

1,840,819

 

 

$

1,951,996

 

 

$

1,864,276

 

 

 

 

 

 

 

 

 

 

 

Loans held for sale

 

 

 

 

 

 

 

 

 

Term lending

 

1,977

 

 

 

2,500

 

 

 

—

 

 

 

3,000

 

 

 

—

 

Lease financing

 

—

 

 

 

778

 

 

 

—

 

 

 

—

 

 

 

—

 

SBA/USDA

 

7,372

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Consumer finance

 

16,597

 

 

 

66,240

 

 

 

77,779

 

 

 

84,351

 

 

 

24,780

 

Total loans held for sale

 

25,946

 

 

 

69,518

 

 

 

77,779

 

 

 

87,351

 

 

 

24,780

 

 

 

 

 

 

 

 

 

 

 

Term lending

 

1,489,054

 

 

 

1,452,274

 

 

 

1,308,133

 

 

 

1,253,841

 

 

 

1,235,453

 

Asset-based lending

 

429,556

 

 

 

379,681

 

 

 

382,371

 

 

 

373,160

 

 

 

377,965

 

Factoring

 

336,442

 

 

 

335,953

 

 

 

358,344

 

 

 

351,133

 

 

 

338,884

 

Lease financing

 

168,616

 

 

 

188,889

 

 

 

183,392

 

 

 

201,996

 

 

 

170,645

 

Insurance premium finance

 

522,904

 

 

 

671,035

 

 

 

800,077

 

 

 

666,265

 

 

 

437,700

 

SBA/USDA

 

560,433

 

 

 

546,048

 

 

 

524,750

 

 

 

422,389

 

 

 

405,612

 

Other commercial finance

 

149,056

 

 

 

160,628

 

 

 

166,091

 

 

 

171,954

 

 

 

166,402

 

Commercial finance

 

3,656,061

 

 

 

3,734,508

 

 

 

3,723,158

 

 

 

3,440,738

 

 

 

3,132,661

 

Consumer finance

 

267,031

 

 

 

301,510

 

 

 

254,416

 

 

 

200,121

 

 

 

148,648

 

Tax services

 

84,502

 

 

 

33,435

 

 

 

5,192

 

 

 

47,194

 

 

 

61,553

 

Warehouse finance

 

394,814

 

 

 

349,911

 

 

 

376,915

 

 

 

380,458

 

 

 

377,036

 

Total loans and leases

 

4,402,408

 

 

 

4,419,364

 

 

 

4,359,681

 

 

 

4,068,511

 

 

 

3,719,898

 

Net deferred loan origination costs

 

6,977

 

 

 

6,917

 

 

 

6,435

 

 

 

4,388

 

 

 

5,718

 

Total gross loans and leases

 

4,409,385

 

 

 

4,426,281

 

 

 

4,366,116

 

 

 

4,072,899

 

 

 

3,725,616

 

Allowance for credit losses

 

(80,777

)

 

 

(53,785

)

 

 

(49,705

)

 

 

(81,916

)

 

 

(84,304

)

Total loans and leases, net

$

4,328,608

 

 

$

4,372,496

 

 

$

4,316,411

 

 

$

3,990,983

 

 

$

3,641,312

 

The Company's investment security balances at March 31, 2024 totaled $1.81 billion, as compared to $1.89 billion at December 31, 2023 and $1.86 billion at March 31, 2023.

Total gross loans and leases totaled $4.41 billion at March 31, 2024, as compared to $4.43 billion at December 31, 2023 and $3.73 billion at March 31, 2023. The primary driver for the sequential decrease was a decrease in commercial finance loans and consumer finance loans. This was partially offset by an increase in warehouse finance loans and seasonal tax service loans. The year-over-year increase was due to growth across all loan portfolios.

Commercial finance loans, which comprised 83% of the Company's loan and lease portfolio, totaled $3.66 billion at March 31, 2024, reflecting a decrease of $78.4 million from December 31, 2023 and an increase of $523.4 million, or 17%, from March 31, 2023. The sequential decrease in commercial finance loans was primarily driven by a $148.1 million decrease in the insurance premium finance portfolio, a $20.3 million decrease in the lease financing portfolio, and a $11.6 million decrease in the other commercial finance portfolio, partially offset by increases in the asset-based lending, term lending, SBA/USDA, and factoring loan portfolios. The increase in commercial finance loans when comparing the current period to the same period of the prior year was primarily driven by increases in the term lending, SBA/USDA, insurance premium finance, and asset-based lending portfolios, partially offset by reductions in the factoring, lease financing, and other commercial finance portfolios.

Asset Quality

The Company’s allowance for credit losses ("ACL") totaled $80.8 million at March 31, 2024, an increase compared to $53.8 million at December 31, 2023 and a decrease compared to $84.3 million at March 31, 2023. The increase in the ACL at March 31, 2024, when compared to December 31, 2023, was primarily due to a $31.0 million increase in the allowance related to the seasonal tax services portfolio, partially offset by a $4.3 million decrease in the allowance related to the commercial finance portfolio.

The $3.5 million year-over-year decrease in the ACL was primarily driven by a $3.6 million decrease in the allowance related to the commercial finance portfolio and a $1.5 million decrease in the allowance related to the seasonal tax services portfolio, partially offset by a $1.6 million increase in the allowance related to the consumer 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)

March 31, 2024

December 31, 2023

September 30, 2023

June 30, 2023

March 31, 2023

Commercial finance

1.21

%

1.30

%

1.26

%

1.35

%

1.53

%

Consumer finance

1.71

%

1.45

%

0.92

%

0.92

%

1.99

%

Tax services

37.31

%

1.52

%

0.04

%

70.20

%

53.77

%

Warehouse finance

0.10

%

0.10

%

0.10

%

0.10

%

0.10

%

Total loans and leases

1.83

%

1.22

%

1.14

%

2.01

%

2.27

%

Total loans and leases excluding tax services

1.14

%

1.21

%

1.14

%

1.21

%

1.40

%

The Company's ACL as a percentage of total loans and leases increased to 1.83% at March 31, 2024 from 1.22% at December 31, 2023. The increase in the total loans and leases coverage ratio was primarily driven by seasonality in both the tax services portfolio and consumer finance portfolio.

Activity in the allowance for credit losses for the periods presented was as follows.

(Unaudited)

Three Months Ended

 

Six Months Ended

(Dollars in thousands)

March 31, 2024

December 31, 2023

March 31, 2023

 

March 31, 2024

March 31, 2023

Beginning balance

$

53,785

 

$

49,705

 

$

52,592

 

 

$

49,705

 

$

45,947

 

Provision (reversal of) - tax services loans

 

25,221

 

 

1,356

 

 

31,422

 

 

 

26,577

 

 

33,059

 

Provision (reversal of) - all other loans and leases

 

684

 

 

8,210

 

 

5,264

 

 

 

8,894

 

 

13,490

 

Charge-offs - tax services loans

 

—

 

 

(1,145

)

 

—

 

 

 

(1,145

)

 

(1,731

)

Charge-offs - all other loans and leases

 

(5,492

)

 

(5,725

)

 

(6,625

)

 

 

(11,218

)

 

(9,334

)

Recoveries - tax services loans

 

5,800

 

 

294

 

 

1,063

 

 

 

6,094

 

 

1,761

 

Recoveries - all other loans and leases

 

779

 

 

1,090

 

 

588

 

 

 

1,870

 

 

1,112

 

Ending balance

$

80,777

 

$

53,785

 

$

84,304

 

 

$

80,777

 

$

84,304

 

The Company recognized a provision for credit losses of $26.1 million for the quarter ended March 31, 2024, compared to $36.8 million for the comparable period in the prior fiscal year. The period-over-period decrease in provision for credit losses was due to improvements in the Company's data analytics, underwriting and monitoring in the Independent Tax space along with a decrease in provision for credit losses in the commercial finance portfolio primarily due to a mix shift in the loan portfolio and a benign credit environment. The Company recognized net recoveries of $1.1 million for the quarter ended March 31, 2024, compared to net charge-offs of $5.0 million for the quarter ended March 31, 2023. Net charge-offs attributable to the commercial finance portfolio for the current quarter were $4.7 million, while recoveries of $5.8 million were recognized in the tax services portfolio. Net charge-offs attributable to the commercial finance and consumer finance portfolios for the same quarter of the prior year were $5.9 million and $0.2 million, respectively, while a recovery of $1.1 million was recognized in the tax services portfolio.

The Company's past due loans and leases were as follows for the periods presented.

As of March 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

$

323

 

$

546

 

$

843

 

$

1,712

 

$

24,234

 

$

25,946

 

$

843

 

$

—

 

$

843

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial finance

 

36,482

 

 

23,986

 

 

15,596

 

 

76,064

 

 

3,579,997

 

 

3,656,061

 

 

2,679

 

 

27,781

 

 

30,460

Consumer finance

 

4,293

 

 

3,001

 

 

3,093

 

 

10,387

 

 

256,644

 

 

267,031

 

 

3,093

 

 

—

 

 

3,093

Tax services

 

1,123

 

 

—

 

 

—

 

 

1,123

 

 

83,379

 

 

84,502

 

 

—

 

 

—

 

 

—

Warehouse finance

 

—

 

 

—

 

 

—

 

 

—

 

 

394,814

 

 

394,814

 

 

—

 

 

—

 

 

—

Total loans and leases held for investment

 

41,898

 

 

26,987

 

 

18,689

 

 

87,574

 

 

4,314,834

 

 

4,402,408

 

 

5,772

 

 

27,781

 

 

33,553

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total loans and leases

$

42,221

 

$

27,533

 

$

19,532

 

$

89,286

 

$

4,339,068

 

$

4,428,354

 

$

6,615

 

$

27,781

 

$

34,396

As of December 31, 2023

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

$

1,173

 

$

786

 

$

661

 

$

2,620

 

$

66,898

 

$

69,518

 

$

661

 

$

—

 

$

661

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial finance

 

33,406

 

 

8,341

 

 

20,739

 

 

62,486

 

 

3,672,022

 

 

3,734,508

 

 

7,862

 

 

28,099

 

 

35,961

Consumer finance

 

4,258

 

 

3,345

 

 

2,859

 

 

10,462

 

 

291,048

 

 

301,510

 

 

2,859

 

 

—

 

 

2,859

Tax services

 

—

 

 

—

 

 

—

 

 

—

 

 

33,435

 

 

33,435

 

 

—

 

 

—

 

 

—

Warehouse finance

 

—

 

 

—

 

 

—

 

 

—

 

 

349,911

 

 

349,911

 

 

—

 

 

—

 

 

—

Total loans and leases held for investment

 

37,664

 

 

11,686

 

 

23,598

 

 

72,948

 

 

4,346,416

 

 

4,419,364

 

 

10,721

 

 

28,099

 

 

38,820

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total loans and leases

$

38,837

 

$

12,472

 

$

24,259

 

$

75,568

 

$

4,413,314

 

$

4,488,882

 

$

11,382

 

$

28,099

 

$

39,481

The Company's nonperforming assets at March 31, 2024 were $37.2 million, representing 0.50% of total assets, compared to $42.4 million, or 0.53% of total assets at December 31, 2023 and $30.1 million, or 0.44% of total assets at March 31, 2023.

The decrease in the nonperforming assets as a percentage of total assets at March 31, 2024 compared to December 31, 2023, was primarily driven by a decrease in nonperforming loans in the commercial finance portfolio, partially offset by an increase in nonperforming loans in the consumer finance portfolio. When comparing the current period to the same period of the prior year, the increase in nonperforming assets was primarily due to an increase in nonperforming loans in the commercial finance portfolio.

The Company's nonperforming loans and leases at March 31, 2024, were $34.4 million, representing 0.78% of total gross loans and leases, compared to $39.5 million, or 0.88% of total gross loans and leases at December 31, 2023 and $28.5 million, or 0.76% of total gross loans and leases at March 31, 2023.

The Company has various portfolios of consumer lending and tax services loans that present unique risks that are statistically managed. Due to the unique risks associated with these portfolios, the Company monitors other credit quality indicators in their evaluation of the appropriateness of the allowance for credit losses on these portfolios, and as such, these loans are not included in the asset classification table below. The Company's loans and leases held for investment by asset classification were as follows for the periods presented.

 

Asset Classification

(Dollars in thousands)

Pass

Watch

Special Mention

Substandard

Doubtful

Total

As of March 31, 2024

 

 

 

 

 

 

Commercial finance

$

2,893,892

$

447,110

$

87,657

$

218,108

$

9,294

$

3,656,061

Warehouse finance

 

394,814

 

—

 

—

 

—

 

—

 

394,814

Total loans and leases

$

3,288,706

$

447,110

$

87,657

$

218,108

$

9,294

$

4,050,875

 

Asset Classification

(Dollars in thousands)

Pass

Watch

Special Mention

Substandard

Doubtful

Total

As of December 31, 2023

 

Commercial finance

$

2,895,451

$

535,057

$

96,172

$

197,682

$

10,146

$

3,734,508

Warehouse finance

 

349,911

 

—

 

—

 

—

 

—

 

349,911

Total loans and leases

$

3,245,362

$

535,057

$

96,172

$

197,682

$

10,146

$

4,084,419

Deposits, Borrowings and Other Liabilities

The average balance of total deposits and interest-bearing liabilities was $7.28 billion for the three-month period ended March 31, 2024, compared to $6.47 billion for the same period in the prior fiscal year, representing an increase of 13%. Total average deposits for the fiscal 2024 second quarter increased by $782.1 million to $7.17 billion compared to the same period in fiscal 2023. The increase in average deposits was due to increases in noninterest bearing deposits, wholesale deposits, and money market deposits, partially offset by decreases in savings and time deposits.

Total end-of-period deposits increased 8% to $6.37 billion at March 31, 2024, compared to $5.90 billion at March 31, 2023. The increase in end-of-period deposits was primarily driven by increases in noninterest-bearing deposits of $329.4 million, wholesale deposits of $96.1 million, and money market deposits of $53.7 million, partially offset by slight decreases in savings and time deposits.

As of March 31, 2024, the Company had $740.8 million in deposits related to government stimulus programs. Of the total amount of government stimulus program deposits, $323.3 million are on activated cards while $417.5 million are on inactivated cards. During the remainder of fiscal year 2024, these deposit balances are expected to decline by approximately $219 million as the Company actively returns unclaimed balances to the U.S. Treasury.

As of March 31, 2024, the Company managed $1.2 billion of customer deposits at other banks in its capacity as custodian. These deposits provide the Company with excess deposits that can earn servicing fee income, typically reflective of the EFFR.

Regulatory Capital

The Company and its subsidiary Pathward®, N.A. (the "Bank") remained above the federal regulatory minimum capital requirements at March 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. The decrease in Tier 1 leverage capital ratio for the period is the result of higher quarterly average assets related to the Company's seasonal tax business. The Bank's Tier 1 leverage capital ratio using end of period assets of 8.77% better reflects the expected capital position of the Company post tax season. See non-GAAP reconciliation 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 Company does not intend to sell these securities, or recognize the unrealized losses on its income statement, to fund future loan growth.

The tables below include certain non-GAAP financial measures that are used by investors, analysts and bank regulatory agencies to assess the capital position of financial services companies. Management reviews these measures along with other measures of capital as part of its financial analysis.

As of the Periods Indicated

March 31, 2024(1)

 

December 31, 2023

 

September 30, 2023

 

June 30, 2023

 

March 31, 2023

Company

 

 

 

 

 

 

 

 

 

Tier 1 leverage capital ratio

7.75

%

 

7.96

%

 

8.11

%

 

8.40

%

 

7.53

%

Common equity Tier 1 capital ratio

12.30

%

 

11.43

%

 

11.25

%

 

11.52

%

 

12.05

%

Tier 1 capital ratio

12.56

%

 

11.69

%

 

11.50

%

 

11.79

%

 

12.35

%

Total capital ratio

14.21

%

 

13.12

%

 

12.84

%

 

13.45

%

 

14.06

%

Bank

 

 

 

 

 

 

 

 

 

Tier 1 leverage ratio

7.92

%

 

8.15

%

 

8.32

%

 

8.67

%

 

7.79

%

Common equity Tier 1 capital ratio

12.83

%

 

11.97

%

 

11.81

%

 

12.17

%

 

12.77

%

Tier 1 capital ratio

12.83

%

 

11.97

%

 

11.81

%

 

12.17

%

 

12.77

%

Total capital ratio

14.09

%

 

13.01

%

 

12.76

%

 

13.42

%

 

14.03

%

(1)

March 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

 

(Dollars in thousands)

March 31, 2024

 

December 31, 2023

 

September 30, 2023

 

June 30, 2023

 

March 31, 2023

Total stockholders' equity

$

739,462

 

 

$

729,282

 

 

$

650,625

 

 

$

677,721

 

 

$

673,244

 

Adjustments:

 

 

 

 

 

 

 

 

 

LESS: Goodwill, net of associated deferred tax liabilities

 

296,889

 

 

 

297,283

 

 

 

297,679

 

 

 

298,092

 

 

 

298,390

 

LESS: Certain other intangible assets

 

19,146

 

 

 

20,093

 

 

 

21,228

 

 

 

22,372

 

 

 

23,553

 

LESS: Net deferred tax assets from operating loss and tax credit carry-forwards

 

15,862

 

 

 

20,253

 

 

 

19,679

 

 

 

12,157

 

 

 

13,219

 

LESS: Net unrealized (losses) on available for sale securities

 

(205,460

)

 

 

(187,901

)

 

 

(254,294

)

 

 

(207,358

)

 

 

(186,796

)

LESS: Noncontrolling interest

 

(420

)

 

 

(510

)

 

 

(1,005

)

 

 

(631

)

 

 

(551

)

ADD: Adoption of Accounting Standards Update 2016-13

 

1,345

 

 

 

1,345

 

 

 

2,017

 

 

 

2,017

 

 

 

2,017

 

Common Equity Tier 1(1)

 

614,790

 

 

 

581,409

 

 

 

569,355

 

 

 

555,106

 

 

 

527,446

 

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

 

(311

)

 

 

(410

)

 

 

(826

)

 

 

(454

)

 

 

(404

)

Total Tier 1 capital

 

628,140

 

 

 

594,660

 

 

 

582,190

 

 

 

568,313

 

 

 

540,703

 

Allowance for credit losses

 

62,715

 

 

 

53,037

 

 

 

47,960

 

 

 

60,489

 

 

 

55,058

 

Subordinated debentures, net of issuance costs

 

19,642

 

 

 

19,617

 

 

 

19,591

 

 

 

19,566

 

 

 

19,540

 

Total capital

$

710,497

 

 

$

667,314

 

 

$

649,741

 

 

$

648,368

 

 

$

615,301

 

(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 Wednesday, April 24, 2024. 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 082173.

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.

Upcoming Investor Events

• Jefferies Global FinTech Conference, June 12, 2024 | New York, NY

About Pathward Financial, Inc.

Pathward Financial, Inc. (Nasdaq: CASH) is a U.S.-based financial holding company driven by its purpose to power financial inclusion for all. Through our subsidiary, Pathward®, N.A., we strive to increase financial availability, choice, and opportunity across our Banking as a Service and Commercial Finance business lines. These strategic business lines provide end-to-end support to individuals and businesses. Learn more at www.pathwardfinancial.com.

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; impacts of our improved data analytics, underwriting and monitoring processes; our goals regarding the addition of recurring revenue and related expected performance impacts; 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; 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, 2023, 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)

March 31, 2024

 

December 31, 2023

 

September 30, 2023

 

June 30, 2023

 

March 31, 2023

ASSETS

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

$

347,888

 

 

$

671,630

 

 

$

375,580

 

 

$

515,271

 

 

$

432,598

 

Securities available for sale, at fair value

 

1,779,458

 

 

 

1,850,581

 

 

 

1,804,228

 

 

 

1,914,271

 

 

 

1,825,563

 

Securities held to maturity, at amortized cost

 

34,682

 

 

 

35,440

 

 

 

36,591

 

 

 

37,725

 

 

 

38,713

 

Federal Reserve Bank and Federal Home Loan Bank Stock, at cost

 

25,844

 

 

 

23,694

 

 

 

28,210

 

 

 

30,890

 

 

 

29,387

 

Loans held for sale

 

25,946

 

 

 

69,518

 

 

 

77,779

 

 

 

87,351

 

 

 

24,780

 

Loans and leases

 

4,409,385

 

 

 

4,426,281

 

 

 

4,366,116

 

 

 

4,072,899

 

 

 

3,725,616

 

Allowance for credit losses

 

(80,777

)

 

 

(53,785

)

 

 

(49,705

)

 

 

(81,916

)

 

 

(84,304

)

Accrued interest receivable

 

30,294

 

 

 

27,080

 

 

 

23,282

 

 

 

22,332

 

 

 

22,434

 

Premises, furniture, and equipment, net

 

37,266

 

 

 

38,270

 

 

 

39,160

 

 

 

38,601

 

 

 

39,735

 

Rental equipment, net

 

215,885

 

 

 

228,916

 

 

 

211,750

 

 

 

224,212

 

 

 

210,844

 

Goodwill and intangible assets

 

328,001

 

 

 

329,241

 

 

 

330,225

 

 

 

331,335

 

 

 

332,503

 

Other assets

 

283,245

 

 

 

280,571

 

 

 

292,327

 

 

 

265,654

 

 

 

270,387

 

Total assets

$

7,437,117

 

 

$

7,927,437

 

 

$

7,535,543

 

 

$

7,458,625

 

 

$

6,868,256

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

 

 

 

 

Deposits

 

6,368,344

 

 

 

6,936,055

 

 

 

6,589,182

 

 

 

6,306,976

 

 

 

5,902,696

 

Short-term borrowings

 

31,000

 

 

 

—

 

 

 

13,000

 

 

 

230,000

 

 

 

43,000

 

Long-term borrowings

 

33,373

 

 

 

33,614

 

 

 

33,873

 

 

 

34,178

 

 

 

34,543

 

Accrued expenses and other liabilities

 

264,938

 

 

 

228,486

 

 

 

248,863

 

 

 

209,750

 

 

 

214,773

 

Total liabilities

 

6,697,655

 

 

 

7,198,155

 

 

 

6,884,918

 

 

 

6,780,904

 

 

 

6,195,012

 

 

 

 

 

 

 

 

 

 

 

STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

Preferred stock

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Common stock, $.01 par value

 

254

 

 

 

260

 

 

 

262

 

 

 

266

 

 

 

271

 

Common stock, Nonvoting, $.01 par value

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Additional paid-in capital

 

634,415

 

 

 

629,737

 

 

 

628,500

 

 

 

625,825

 

 

 

623,250

 

Retained earnings

 

317,964

 

 

 

293,463

 

 

 

278,655

 

 

 

267,100

 

 

 

245,046

 

Accumulated other comprehensive loss

 

(206,570

)

 

 

(188,433

)

 

 

(255,443

)

 

 

(207,896

)

 

 

(187,829

)

Treasury stock, at cost

 

(6,181

)

 

 

(5,235

)

 

 

(344

)

 

 

(6,943

)

 

 

(6,943

)

Total equity attributable to parent

 

739,882

 

 

 

729,792

 

 

 

651,630

 

 

 

678,352

 

 

 

673,795

 

Noncontrolling interest

 

(420

)

 

 

(510

)

 

 

(1,005

)

 

 

(631

)

 

 

(551

)

Total stockholders’ equity

 

739,462

 

 

 

729,282

 

 

 

650,625

 

 

 

677,721

 

 

 

673,244

 

Total liabilities and stockholders’ equity

$

7,437,117

 

 

$

7,927,437

 

 

$

7,535,543

 

 

$

7,458,625

 

 

$

6,868,256

 

Condensed Consolidated Statements of Operations (Unaudited)

 

 

Three Months Ended

 

Six Months Ended

(Dollars in Thousands, Except Share and Per Share Data)

March 31, 2024

 

December 31, 2023

 

March 31, 2023

 

March 31, 2024

 

March 31, 2023

Interest and dividend income:

 

 

 

 

 

 

 

 

 

Loans and leases, including fees

$

102,750

 

$

94,963

 

$

83,879

 

 

$

197,713

 

$

152,275

 

Mortgage-backed securities

 

9,998

 

 

10,049

 

 

10,326

 

 

 

20,047

 

 

20,738

 

Other investments

 

14,013

 

 

10,886

 

 

10,482

 

 

 

24,899

 

 

16,734

 

 

 

126,761

 

 

115,898

 

 

104,687

 

 

 

242,659

 

 

189,747

 

Interest expense:

 

 

 

 

 

 

 

 

 

Deposits

 

6,685

 

 

3,526

 

 

2,096

 

 

 

10,211

 

 

2,238

 

FHLB advances and other borrowings

 

1,775

 

 

2,336

 

 

1,186

 

 

 

4,111

 

 

2,047

 

 

 

8,460

 

 

5,862

 

 

3,282

 

 

 

14,322

 

 

4,285

 

 

 

 

 

 

 

 

 

 

 

Net interest income

 

118,301

 

 

110,036

 

 

101,405

 

 

 

228,337

 

 

185,462

 

 

 

 

 

 

 

 

 

 

 

Provision for credit loss

 

26,052

 

 

9,890

 

 

36,763

 

 

 

35,942

 

 

46,539

 

 

 

 

 

 

 

 

 

 

 

Net interest income after provision for credit loss

 

92,249

 

 

100,146

 

 

64,642

 

 

 

192,395

 

 

138,923

 

 

 

 

 

 

 

 

 

 

 

Noninterest income:

 

 

 

 

 

 

 

 

 

Refund transfer product fees

 

28,942

 

 

422

 

 

30,205

 

 

 

29,364

 

 

30,882

 

Refund advance fee income

 

43,200

 

 

111

 

 

37,995

 

 

 

43,311

 

 

38,612

 

Card and deposit fees

 

35,344

 

 

30,750

 

 

42,087

 

 

 

66,094

 

 

79,805

 

Rental income

 

13,720

 

 

13,459

 

 

12,940

 

 

 

27,179

 

 

25,648

 

Gain on sale of trademarks

 

—

 

 

—

 

 

—

 

 

 

—

 

 

10,000

 

Gain (loss) on sale of other

 

1,695

 

 

2,840

 

 

(666

)

 

 

4,535

 

 

(164

)

Other income

 

6,044

 

 

5,179

 

 

4,477

 

 

 

11,223

 

 

8,032

 

Total noninterest income

 

128,945

 

 

52,761

 

 

127,038

 

 

 

181,706

 

 

192,815

 

 

 

 

 

 

 

 

 

 

 

Noninterest expense:

 

 

 

 

 

 

 

 

 

Compensation and benefits

 

54,073

 

 

46,652

 

 

47,547

 

 

 

100,725

 

 

90,564

 

Refund transfer product expense

 

7,366

 

 

192

 

 

7,863

 

 

 

7,558

 

 

7,968

 

Refund advance expense

 

1,846

 

 

30

 

 

1,603

 

 

 

1,876

 

 

1,630

 

Card processing

 

35,163

 

 

34,584

 

 

26,924

 

 

 

69,747

 

 

49,607

 

Occupancy and equipment expense

 

9,293

 

 

8,848

 

 

8,510

 

 

 

18,141

 

 

16,822

 

Operating lease equipment depreciation

 

10,424

 

 

10,423

 

 

14,719

 

 

 

20,847

 

 

24,347

 

Legal and consulting

 

6,141

 

 

4,892

 

 

4,921

 

 

 

11,033

 

 

14,380

 

Intangible amortization

 

1,240

 

 

984

 

 

1,435

 

 

 

2,224

 

 

2,693

 

Impairment expense

 

2,013

 

 

—

 

 

500

 

 

 

2,013

 

 

524

 

Other expense

 

12,872

 

 

12,669

 

 

13,114

 

 

 

25,541

 

 

23,660

 

Total noninterest expense

 

140,431

 

 

119,274

 

 

127,136

 

 

 

259,705

 

 

232,195

 

 

 

 

 

 

 

 

 

 

 

Income before income tax expense

 

80,763

 

 

33,633

 

 

64,544

 

 

 

114,396

 

 

99,543

 

 

 

 

 

 

 

 

 

 

 

Income tax expense (benefit)

 

15,246

 

 

5,719

 

 

9,176

 

 

 

20,965

 

 

15,753

 

 

 

 

 

 

 

 

 

 

 

Net income before noncontrolling interest

 

65,517

 

 

27,914

 

 

55,368

 

 

 

93,431

 

 

83,790

 

Net income attributable to noncontrolling interest

 

249

 

 

257

 

 

597

 

 

 

506

 

 

1,177

 

Net income attributable to parent

$

65,268

 

$

27,657

 

$

54,771

 

 

$

92,925

 

$

82,613

 

 

 

 

 

 

 

 

 

 

 

Less: Allocation of Earnings to participating securities(1)

 

524

 

 

220

 

 

839

 

 

 

744

 

 

1,228

 

Net income attributable to common shareholders(1)

 

64,744

 

 

27,437

 

 

53,932

 

 

 

92,181

 

 

81,382

 

Earnings per common share:

 

 

 

 

 

 

 

 

 

Basic

$

2.56

 

$

1.06

 

$

1.99

 

 

$

3.61

 

$

2.95

 

Diluted

$

2.56

 

$

1.06

 

$

1.99

 

 

$

3.61

 

$

2.95

 

Shares used in computing earnings per common share:

 

 

 

 

 

 

 

 

 

Basic

 

25,281,743

 

 

25,776,845

 

 

27,078,048

 

 

 

25,529,186

 

 

27,555,197

 

Diluted

 

25,311,144

 

 

25,801,538

 

 

27,169,569

 

 

 

25,555,656

 

 

27,632,737

 

(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 March 31,

2024

 

2023

(Dollars in thousands)

Average Outstanding Balance

 

Interest Earned / Paid

 

Yield / Rate(1)

 

Average Outstanding Balance

 

Interest Earned / Paid

 

Yield / Rate(1)

Interest-earning assets:

 

 

 

 

 

 

 

 

 

 

 

Cash and fed funds sold

$

616,288

 

$

7,422

 

4.84

%

 

$

564,656

 

$

5,843

 

4.20

%

Mortgage-backed securities

 

1,464,530

 

 

9,998

 

2.75

%

 

 

1,549,240

 

 

10,326

 

2.70

%

Tax exempt investment securities

 

132,733

 

 

932

 

3.57

%

 

 

149,912

 

 

990

 

3.39

%

Asset-backed securities

 

237,421

 

 

3,368

 

5.71

%

 

 

141,968

 

 

1,273

 

3.64

%

Other investment securities

 

281,695

 

 

2,291

 

3.27

%

 

 

298,030

 

 

2,376

 

3.23

%

Total investments

 

2,116,379

 

 

16,589

 

3.20

%

 

 

2,139,150

 

 

14,965

 

2.89

%

Commercial finance

 

3,650,845

 

 

74,330

 

8.19

%

 

 

3,056,293

 

 

60,765

 

8.06

%

Consumer finance

 

351,459

 

 

9,144

 

10.46

%

 

 

187,826

 

 

6,301

 

13.60

%

Tax services

 

493,168

 

 

9,014

 

7.35

%

 

 

448,659

 

 

10,555

 

9.54

%

Warehouse finance

 

407,703

 

 

10,262

 

10.12

%

 

 

321,334

 

 

6,258

 

7.90

%

Total loans and leases

 

4,903,175

 

 

102,750

 

8.43

%

 

 

4,014,112

 

 

83,879

 

8.47

%

Total interest-earning assets

$

7,635,842

 

$

126,761

 

6.69

%

 

$

6,717,918

 

$

104,687

 

6.34

%

Noninterest-earning assets

 

600,354

 

 

 

 

 

 

612,020

 

 

 

 

Total assets

$

8,236,196

 

 

 

 

 

$

7,329,938

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing liabilities:

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing checking

$

266

 

$

—

 

0.31

%

 

$

267

 

$

—

 

0.33

%

Savings

 

59,914

 

 

5

 

0.04

%

 

 

70,024

 

 

6

 

0.03

%

Money markets

 

190,143

 

 

598

 

1.26

%

 

 

125,193

 

 

71

 

0.23

%

Time deposits

 

5,027

 

 

4

 

0.29

%

 

 

6,948

 

 

2

 

0.11

%

Wholesale deposits

 

439,785

 

 

6,078

 

5.56

%

 

 

186,421

 

 

2,017

 

4.39

%

Total interest-bearing deposits

 

695,135

 

 

6,685

 

3.87

%

 

 

388,853

 

 

2,096

 

2.19

%

Overnight fed funds purchased

 

79,484

 

 

1,107

 

5.60

%

 

 

46,735

 

 

543

 

4.71

%

Subordinated debentures

 

19,625

 

 

355

 

7.27

%

 

 

19,523

 

 

354

 

7.34

%

Other borrowings

 

13,901

 

 

313

 

9.07

%

 

 

15,283

 

 

289

 

7.68

%

Total borrowings

 

113,010

 

 

1,775

 

6.32

%

 

 

81,541

 

 

1,186

 

5.90

%

Total interest-bearing liabilities

 

808,145

 

 

8,460

 

4.21

%

 

 

470,394

 

 

3,282

 

2.83

%

Noninterest-bearing deposits

 

6,473,538

 

 

—

 

—

%

 

 

5,997,739

 

 

—

 

—

%

Total deposits and interest-bearing liabilities

$

7,281,683

 

$

8,460

 

0.47

%

 

$

6,468,133

 

$

3,282

 

0.21

%

Other noninterest-bearing liabilities

 

223,560

 

 

 

 

 

 

191,360

 

 

 

 

Total liabilities

 

7,505,243

 

 

 

 

 

 

6,659,493

 

 

 

 

Shareholders' equity

 

730,953

 

 

 

 

 

 

670,445

 

 

 

 

Total liabilities and shareholders' equity

$

8,236,196

 

 

 

 

 

$

7,329,938

 

 

 

 

Net interest income and net interest rate spread including noninterest-bearing deposits

 

 

$

118,301

 

6.22

%

 

 

 

$

101,405

 

6.13

%

 

 

 

 

 

 

 

 

 

 

 

 

Net interest margin

 

 

 

 

6.23

%

 

 

 

 

 

6.12

%

Tax-equivalent effect

 

 

 

 

0.01

%

 

 

 

 

 

0.02

%

Net interest margin, tax-equivalent(2)

 

 

 

 

6.24

%

 

 

 

 

 

6.14

%

(1)

Tax rate used to arrive at the TEY for the three months ended March 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

March 31, 2024

 

December 31, 2023

 

September 30, 2023

 

June 30, 2023

 

March 31, 2023

Equity to total assets

 

9.94

%

 

 

9.20

%

 

 

8.63

%

 

 

9.09

%

 

 

9.80

%

Book value per common share outstanding

$

29.14

 

 

$

28.06

 

 

$

24.85

 

 

$

25.54

 

 

$

24.88

 

Tangible book value per common share outstanding

$

16.21

 

 

$

15.39

 

 

$

12.24

 

 

$

13.05

 

 

$

12.59

 

Common shares outstanding

 

25,377,986

 

 

 

25,988,230

 

 

 

26,183,583

 

 

 

26,539,272

 

 

 

27,055,727

 

Nonperforming assets to total assets

 

0.50

%

 

 

0.53

%

 

 

0.77

%

 

 

0.55

%

 

 

0.44

%

Nonperforming loans and leases to total loans and leases

 

0.78

%

 

 

0.88

%

 

 

1.26

%

 

 

0.93

%

 

 

0.76

%

Net interest margin

 

6.23

%

 

 

6.23

%

 

 

6.19

%

 

 

6.18

%

 

 

6.12

%

Net interest margin, tax-equivalent

 

6.24

%

 

 

6.24

%

 

 

6.21

%

 

 

6.20

%

 

 

6.14

%

Return on average assets

 

3.17

%

 

 

1.46

%

 

 

1.97

%

 

 

2.61

%

 

 

2.99

%

Return on average equity

 

35.72

%

 

 

16.87

%

 

 

21.12

%

 

 

26.26

%

 

 

32.68

%

Full-time equivalent employees

 

1,204

 

 

 

1,218

 

 

 

1,193

 

 

 

1,186

 

 

 

1,164

 

Non-GAAP Reconciliations

 

Adjusted Net Income and Adjusted Earnings Per Share

At and For the Three Months Ended

 

At and For the Six Months Ended

(Dollars in Thousands, Except Share and Per Share Data)

March 31, 2023

 

March 31, 2023

Net Income - GAAP

$

54,771

 

 

$

82,613

 

Less: Gain on sale of trademarks

 

—

 

 

 

10,000

 

Less: Loss on disposal of certain mobile solar generators

 

(1,993

)

 

 

(1,993

)

Add: Accelerated depreciation on certain mobile solar generators

 

4,822

 

 

 

4,822

 

Add: Rebranding expenses

 

—

 

 

 

3,737

 

Add: Separation related expenses

 

—

 

 

 

11

 

Add: Impairment on Venture Capital investments

 

500

 

 

 

500

 

Add: Income tax effect resulting from the above listed items

 

(1,829

)

 

 

(253

)

Adjusted net income

$

60,257

 

 

$

83,423

 

Less: Adjusted allocation of earnings to participating securities

 

923

 

 

 

1,241

 

Adjusted Net income attributable to common shareholders

 

59,334

 

 

 

82,182

 

Weighted average diluted common shares outstanding

 

27,169,569

 

 

 

27,632,737

 

Adjusted earnings per common share - diluted

$

2.18

 

 

$

2.97

 

Net Interest Margin and Cost of Deposits

At and For the Three Months Ended

(Dollars in thousands)

March 31, 2024

December 31, 2023

March 31, 2023

Average interest earning assets

$

7,635,842

 

$

7,031,922

 

$

6,717,918

 

Net interest income

$

118,301

 

$

110,036

 

$

101,405

 

Net interest margin

 

6.23

%

 

6.23

%

 

6.12

%

Quarterly average total deposits

$

7,168,673

 

$

6,558,190

 

$

6,386,592

 

Deposit interest expense

$

6,685

 

$

3,526

 

$

2,096

 

Cost of deposits

 

0.38

%

 

0.21

%

 

0.13

%

 

 

 

 

Adjusted Net Interest Margin and Adjusted Cost of Deposits

 

 

 

Average interest earning assets

$

7,635,842

 

$

7,031,922

 

$

6,717,918

 

Net interest income

 

118,301

 

 

110,036

 

 

101,405

 

Less: Contractual, rate-related processing expense

 

30,094

 

 

26,793

 

 

20,369

 

Adjusted net interest income

$

88,207

 

$

83,243

 

$

81,036

 

Adjusted net interest margin

 

4.65

%

 

4.71

%

 

4.89

%

Average total deposits

$

7,168,673

 

$

6,558,190

 

$

6,386,592

 

Deposit interest expense

 

6,685

 

 

3,526

 

 

2,096

 

Add: Contractual, rate-related processing expense

 

30,094

 

 

26,793

 

 

20,369

 

Adjusted deposit expense

$

36,779

 

$

30,319

 

$

22,465

 

Adjusted cost of deposits

 

2.06

%

 

1.84

%

 

1.43

%

 

 

Pathward, N.A. Period-end Tier 1 Leverage

 

(Dollars in thousands)

March 31, 2024

Total stockholders' equity

$

765,910

 

Adjustments:

 

Less: Goodwill, net of associated deferred tax liabilities

 

296,888

 

Less: Certain other intangible assets

 

19,145

 

Less: Net deferred tax assets from operating loss and tax credit carry-forwards

 

15,862

 

Less: Net unrealized gains (losses) on available for sale securities

 

(205,460

)

Less: Noncontrolling interest

 

(420

)

Add: Adoption of Accounting Standards Update 2016-13

 

1,345

 

Common Equity Tier 1

 

641,240

 

Tier 1 minority interest not included in common equity Tier 1 capital

 

—

 

Total Tier 1 capital

$

641,240

 

 

 

Total Assets (Quarter Average)

$

8,229,652

 

Add: Available for sale securities amortized cost

 

266,591

 

Add: Deferred tax

 

(66,675

)

Add: Adoption of Accounting Standards Updated 2016-13

 

1,345

 

Less: Deductions from CET1

 

331,895

 

Adjusted total assets

$

8,099,018

 

Pathward, N.A. Regulatory Tier 1 Leverage

 

7.92

%

 

 

Total Assets (Period End)

$

7,435,034

 

Add: Available for sale securities amortized cost

 

273,983

 

Add: Deferred tax

 

(68,523

)

Add: Adoption of Accounting Standards Updated 2016-13

 

1,345

 

Less: Deductions from CET1

 

331,895

 

Adjusted total assets

$

7,309,944

 

Pathward, N.A. Period-end Tier 1 Leverage

 

8.77

%

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240424036567/en/

Investor Relations Contact Darby Schoenfeld, CPA SVP, Investor Relations 877-497-7497 investorrelations@pathward.com

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