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| Share Name | Share Symbol | Market | Type |
|---|---|---|---|
| Pathward Financial Inc | NASDAQ:CASH | NASDAQ | Common Stock |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| -0.81 | -0.96% | 83.48 | 77.99 | 132.55 | 84.01 | 82.94 | 83.70 | 117,762 | 22:30:00 |
From Sep 2024 to Nov 2024
Pathward Financial, Inc. (“Pathward Financial” or the “Company”) (Nasdaq: CASH) reported net income of $33.6 million, or $1.35 per share, for the three months ended September 30, 2024, compared to net income of $35.9 million, or $1.36 per share, for the three months ended September 30, 2023.
The Company reported net income of $168.4 million, or $6.62 per share, for the fiscal year ended September 30, 2024, compared to net income of $163.6 million, or $5.99 per share, for the fiscal year ended September 30, 2023. For the fiscal year ended September 30, 2024, the Company recognized return on average assets of 2.20% compared to 2.33% for the prior year period.
CEO Brett Pharr said, “2024 was a great year for Pathward. We recertified as a Great Place to Work, remained committed to our remote first approach, announced new partnerships and extended others, celebrated employees who won multiple awards, and, most recently, announced that our newly rebranded Partner Solutions team won Finovate’s Best Banking as a Service provider. These successes translated to solid financial results as well. We reported earnings per diluted share of $6.62 for the fiscal year, which was just above the high end of our updated guidance range and represents year-over-year growth of 11%.”
Company Highlights and Business Developments
Financial Highlights for the 2024 Fiscal Fourth Quarter
Net Interest Income
Net interest income for the fourth quarter of fiscal 2024 was $115.9 million, an increase of 10% 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 fourth quarter of fiscal 2024 increased by $201.1 million to $6.93 billion compared to the same quarter in fiscal 2023, due to growth in average outstanding balances of loans and leases, partially offset by a decrease in total investment security balances and a decrease in cash balances. The fourth quarter average outstanding balance of loans and leases increased $406.4 million compared to the same quarter of the prior fiscal year, primarily due to an increase in commercial finance and warehouse finance loans, partially offset by a decrease in consumer finance loans.
Fiscal 2024 fourth quarter NIM increased to 6.66% from 6.19% in the fourth fiscal quarter of last year. When including contractual, rate-related processing expense, NIM would have been 5.15% in the fiscal 2024 fourth quarter compared to 4.87% during the fiscal 2023 fourth quarter. See non-GAAP reconciliation table below. The overall reported tax-equivalent yield (“TEY”) on average earning asset yields increased 41 basis points to 6.89% compared to the prior year quarter, driven by an improved earning asset mix. The yield on the loan and lease portfolio was 8.67% compared to 8.33% for the comparable period last year and the TEY on the securities portfolio was 3.12% compared to 3.13% over that same period.
The Company's cost of funds for all deposits and borrowings averaged 0.24% during the fiscal 2024 fourth quarter, as compared to 0.29% during the prior year quarter. The Company's overall cost of deposits was 0.07% in the fiscal fourth quarter of 2024, as compared to 0.12% during the prior year quarter. When including contractual, rate-related processing expense, the Company's overall cost of deposits was 1.76% in the fiscal 2024 fourth quarter, as compared to 1.56% during the prior year quarter. See non-GAAP reconciliation table below.
Noninterest Income
Fiscal 2024 fourth quarter noninterest income decreased 7% to $52.0 million, compared to $56.1 million for the same period of the prior year. The decrease was primarily driven by a decrease in card and deposit fees, rental income, and other income. The period-over-period decrease was partially offset by an increase in gain on sale of other and tax services product fees.
The period-over-period decrease in card and deposit fee income was primarily related to lower servicing fee income due to a reduction in custodial deposits. Servicing fee income totaled $3.2 million during the 2024 fiscal fourth quarter, compared to $7.8 million for the same period of the prior year. For the fiscal quarter ended June 30, 2024, servicing fee income on custodial deposits totaled $8.6 million.
Noninterest Expense
Noninterest expense increased 10% to $129.9 million for the fiscal 2024 fourth quarter, from $118.2 million for the same quarter last year. The increase was primarily attributable to increases in compensation and benefits, card processing expense, other expense, and legal and consulting expense. The period-over-period increase was partially offset by a decrease in operating lease depreciation and amortization expenses.
The card processing expense increase 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 Effective Federal Funds Rate ("EFFR") and reprices immediately upon a change in the EFFR. Approximately 57% of the deposit portfolio was subject to these rate-related processing expenses during the fiscal 2024 fourth quarter. For the fiscal quarter ended September 30, 2024, contractual, rate-related processing expenses were $26.3 million, as compared to $27.6 million for the fiscal quarter ended June 30, 2024, and $22.5 million for the fiscal quarter ended September 30, 2023.
Income Tax Expense
The Company recorded an income tax expense of $3.1 million, representing an effective tax rate of 8.2%, for the fiscal 2024 fourth quarter, compared to an income tax benefit of $2.7 million, representing an effective tax rate of (7.9%), for the fourth quarter last fiscal year. The current quarter increase in income tax expense compared to the prior year quarter was primarily due to a decrease in investment tax credits.
The Company originated $26.1 million in renewable energy leases during the fiscal 2024 fourth quarter, resulting in $7.2 million in total net investment tax credits. During the fourth quarter of fiscal 2023, the Company originated $42.6 million in renewable energy leases resulting in $13.7 million in total net investment tax credits. For the fiscal year ended September 30, 2024, the Company originated $68.4 million in renewable energy leases, compared to $93.6 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.
Investments, Loans and Leases
(Dollars in thousands)
September 30, 2024
June 30, 2024
March 31, 2024
December 31, 2023
September 30, 2023
Total investments
$
1,774,313
$
1,759,486
$
1,814,140
$
1,886,021
$
1,840,819
Loans held for sale
Term lending
4,567
—
1,977
2,500
—
Lease financing
—
—
—
778
—
Insurance premium finance
594,359
—
—
—
—
SBA/USDA
65,734
7,030
7,372
—
—
Consumer finance
24,210
22,350
16,597
66,240
77,779
Total loans held for sale
688,870
29,380
25,946
69,518
77,779
Term lending
1,554,641
1,533,722
1,489,054
1,452,274
1,308,133
Asset-based lending
471,897
473,289
429,556
379,681
382,371
Factoring
362,295
350,740
336,442
335,953
358,344
Lease financing
152,174
155,044
168,616
188,889
183,392
Insurance premium finance
—
617,054
522,904
671,035
800,077
SBA/USDA
568,628
563,689
560,433
546,048
524,750
Other commercial finance
185,964
166,653
149,056
160,628
166,091
Commercial finance
3,295,599
3,860,191
3,656,061
3,734,508
3,723,158
Consumer finance
248,800
253,358
267,031
301,510
254,416
Tax services
8,825
43,184
84,502
33,435
5,192
Warehouse finance
517,847
449,962
394,814
349,911
376,915
Total loans and leases
4,071,071
4,606,695
4,402,408
4,419,364
4,359,681
Net deferred loan origination costs
4,124
5,857
6,977
6,917
6,435
Total gross loans and leases
4,075,195
4,612,552
4,409,385
4,426,281
4,366,116
Allowance for credit losses
(45,336
)
(79,836
)
(80,777
)
(53,785
)
(49,705
)
Total loans and leases, net
$
4,029,859
$
4,532,716
$
4,328,608
$
4,372,496
$
4,316,411
The Company's investment security balances at September 30, 2024 totaled $1.77 billion, as compared to $1.76 billion at June 30, 2024 and $1.84 billion at September 30, 2023.
Total gross loans and leases totaled $4.08 billion at September 30, 2024, as compared to $4.61 billion at June 30, 2024 and $4.37 billion at September 30, 2023. The primary driver for the sequential and year-over-year decrease was related to the insurance premium finance portfolio moving to held for sale. The decrease was partially offset by growth in total commercial finance loans, excluding insurance premium finance loans, and warehouse finance loans. A decrease in seasonal tax services loans also led to the sequential decrease. When excluding insurance premium finance loans, total gross loans and leases at September 30, 2024 increased $79.7 million, or 2%, compared to June 30, 2024 and increased $509.2 million, or 14%, when compared to September 30, 2023.
Commercial finance loans, which comprised 81% of the Company's loan and lease portfolio, totaled $3.30 billion at September 30, 2024, reflecting a decrease of $564.6 million from June 30, 2024 and a decrease of $427.6 million, or 11%, from September 30, 2023. The sequential decrease in commercial finance loans was primarily driven by the insurance premium finance portfolio moving to held for sale during the fourth quarter of fiscal 2024, which had a balance of $594.4 million at September 30, 2024. The decrease was partially offset by a $20.9 million increase in the term lending portfolio, a $19.3 million increase in the other commercial finance portfolio, and an $11.6 million increase in the factoring portfolio. The decrease in commercial finance loans when comparing the current period to the same period of the prior year was primarily driven by the aforementioned insurance premium finance loans along with a decrease in lease financing. This decrease was partially offset by increases in the term lending, asset-based lending, SBA/USDA, and other commercial finance portfolios. When excluding insurance premium finance loans, commercial finance loans at September 30, 2024 increased $52.5 million, or 2%, compared to June 30, 2024 and increased $372.5 million, or 13%, when compared to September 30, 2023.
Asset Quality
The Company’s allowance for credit losses ("ACL") totaled $45.3 million at September 30, 2024, a decrease compared to $79.8 million at June 30, 2024 and a decrease compared to $49.7 million at September 30, 2023. The decrease in the ACL at September 30, 2024, when compared to June 30, 2024, was primarily due to a $28.6 million decrease in the allowance related to the seasonal tax services portfolio, a $3.4 million decrease in the allowance related to the consumer finance portfolio, and $2.5 million decrease in the allowance related to the commercial finance portfolio.
The $4.4 million year-over-year decrease in the ACL was primarily driven by a $4.4 million decrease in the allowance related to the commercial finance portfolio and a $0.1 million decrease in the allowance related to the consumer finance portfolio, partially offset by a $0.1 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)
September 30, 2024
June 30, 2024
March 31, 2024
December 31, 2023
September 30, 2023
Commercial finance
1.29
%
1.17
%
1.21
%
1.30
%
1.26
%
Consumer finance
0.90
%
2.23
%
1.71
%
1.45
%
0.92
%
Tax services
0.03
%
66.35
%
37.31
%
1.52
%
0.04
%
Warehouse finance
0.10
%
0.10
%
0.10
%
0.10
%
0.10
%
Total loans and leases
1.11
%
1.73
%
1.83
%
1.22
%
1.14
%
Total loans and leases excluding tax services
1.12
%
1.12
%
1.14
%
1.21
%
1.14
%
The Company's ACL as a percentage of total loans and leases decreased to 1.11% at September 30, 2024 from 1.73% at June 30, 2024. The decrease in the total loans and leases coverage ratio was primarily driven by the consumer finance portfolio and the seasonal tax services portfolio, partially offset by an increase in the commercial finance portfolio. The decrease in the consumer finance loan coverage ratio was due to seasonal activity. The increase in the commercial finance loan and lease coverage ratio was primarily related to the $594.4 million of insurance premium finance loans that were held for sale as of September 30, 2024 and, as such, had no related ACL balance. That portfolio carried a lower reserve rate compared to the rest of the commercial finance portfolio.
Activity in the allowance for credit losses for the periods presented was as follows.
(Unaudited)
Three Months Ended
Fiscal Year Ended
(Dollars in thousands)
September 30, 2024
June 30, 2024
September 30, 2023
September 30, 2024
September 30, 2023
Beginning balance
$
79,836
$
80,777
$
81,916
$
49,705
$
45,947
Provision (reversal of) - tax services loans
(297
)
(3,285
)
2,945
22,995
35,775
Provision (reversal of) - all other loans and leases
1,423
8,926
6,124
19,243
21,673
Charge-offs - tax services loans
(28,815
)
(820
)
(36,606
)
(30,780
)
(38,741
)
Charge-offs - all other loans and leases
(7,912
)
(7,772
)
(6,227
)
(26,902
)
(21,158
)
Recoveries - tax services loans
461
1,230
531
7,785
2,963
Recoveries - all other loans and leases
640
780
1,022
3,290
3,246
Ending balance
$
45,336
$
79,836
$
49,705
$
45,336
$
49,705
The Company recognized a provision for credit losses of $0.8 million for the quarter ended September 30, 2024, compared to $9.0 million for the comparable period in the prior fiscal year. The period-over-period decrease in provision for credit losses was primarily due to decreases in provision for credit losses in the commercial finance portfolio of $4.7 million and the tax services portfolio of $3.2 million, partially offset by an increase of $0.1 million in provision for credit losses in the warehouse finance portfolio. The decrease in provision for credit losses in the commercial finance portfolio was primarily due to the insurance premium finance portfolio moving to held for sale during the quarter and reversing out the provision for credit losses on that portfolio. The Company recognized net charge-offs of $35.6 million for the quarter ended September 30, 2024, compared to net charge-offs of $41.3 million for the quarter ended September 30, 2023. Net charge-offs attributable to the seasonal tax services, consumer finance, and commercial finance portfolios for the current quarter were $28.4 million, $3.9 million, and $3.3 million, respectively. Net charge-offs attributable to the tax services, commercial finance and consumer finance portfolios for the same quarter of the prior year were $36.1 million, $5.1 million, and $0.1 million, respectively.
The Company's past due loans and leases were as follows for the periods presented.
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
As of June 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
$
—
$
—
$
—
$
—
$
29,380
$
29,380
$
—
$
—
$
—
Commercial finance
28,224
7,348
17,071
52,643
3,807,548
3,860,191
8,427
27,613
36,040
Consumer finance
4,496
3,534
8,588
16,618
236,740
253,358
8,588
—
8,588
Tax services
—
43,184
—
43,184
—
43,184
—
—
—
Warehouse finance
—
—
—
—
449,962
449,962
—
—
—
Total loans and leases held for investment
32,720
54,066
25,659
112,445
4,494,250
4,606,695
17,015
27,613
44,628
Total loans and leases
$
32,720
$
54,066
$
25,659
$
112,445
$
4,523,629
$
4,636,074
$
17,015
$
27,613
$
44,628
The Company's nonperforming assets at September 30, 2024 were $43.0 million, representing 0.57% of total assets, compared to $46.3 million, or 0.61% of total assets at June 30, 2024 and $58.0 million, or 0.77% of total assets at September 30, 2023.
The decrease in the nonperforming assets as a percentage of total assets at September 30, 2024 compared to June 30, 2024, was primarily driven by a decrease in nonperforming loans in the commercial finance and consumer finance portfolios, partially offset by an increase in nonperforming loans in the tax services portfolio due to seasonal activity. 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 portfolio, partially offset by increases in the seasonal tax services portfolio and consumer finance portfolio.
The Company's nonperforming loans and leases at September 30, 2024, were $41.6 million, representing 0.87% of total gross loans and leases, compared to $44.6 million, or 0.96% of total gross loans and leases at June 30, 2024 and $56.2 million, or 1.26% of total gross loans and leases at September 30, 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 September 30, 2024
Commercial finance
$
2,524,429
$
486,670
$
93,257
$
180,942
$
10,301
$
3,295,599
Warehouse finance
517,847
—
—
—
—
517,847
Total loans and leases
$
3,042,276
$
486,670
$
93,257
$
180,942
$
10,301
$
3,813,446
Asset Classification
(Dollars in thousands)
Pass
Watch
Special Mention
Substandard
Doubtful
Total
As of June 30, 2024
Commercial finance
$
3,058,737
$
537,278
$
63,523
$
192,473
$
8,180
$
3,860,191
Warehouse finance
449,962
—
—
—
—
449,962
Total loans and leases
$
3,508,699
$
537,278
$
63,523
$
192,473
$
8,180
$
4,310,153
Deposits, Borrowings and Other Liabilities
The average balance of total deposits and interest-bearing liabilities was $6.38 billion for the three-month period ended September 30, 2024, compared to $6.39 billion for the same period in the prior fiscal year. Total average deposits for the fiscal 2024 fourth quarter decreased by $5.7 million to $6.20 billion compared to the same period in fiscal 2023. The decrease in average deposits was due to decreases in wholesale deposits and savings deposits, partially offset by increases noninterest bearing deposits and money market deposits.
Total end-of-period deposits decreased 11% to $5.88 billion at September 30, 2024, compared to $6.59 billion at September 30, 2023. The decrease in end-of-period deposits was primarily driven by decreases in noninterest-bearing deposits of $715.8 million, money market deposits of $10.6 million, and savings deposits of $10.3 million, partially offset by an increase in wholesale deposits of $20.1 million.
As of September 30, 2024, the Company had $433.3 million in deposits related to government stimulus programs. Of the total amount of government stimulus program deposits, $198.2 million are on activated cards while $235.1 million are on inactivated cards.
As of September 30, 2024, the Company managed $201.9 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 decrease in these customer deposits held at other banks reflects normal seasonal patterns in deposits on balance sheet as well as the Company retaining more deposits on its balance sheet to fund loan growth by the Company during the current quarter.
Regulatory Capital
The Company and its subsidiary Pathward®, N.A. (the "Bank") remained above the federal regulatory minimum capital requirements at September 30, 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
September 30, 2024(1)
June 30, 2024
March 31, 2024
December 31, 2023
September 30, 2023
Company
Tier 1 leverage capital ratio
9.26
%
9.13
%
7.75
%
7.96
%
8.11
%
Common equity Tier 1 capital ratio
12.60
%
12.44
%
12.30
%
11.43
%
11.25
%
Tier 1 capital ratio
12.86
%
12.70
%
12.56
%
11.69
%
11.50
%
Total capital ratio
14.08
%
14.33
%
14.21
%
13.12
%
12.84
%
Bank
Tier 1 leverage ratio
9.44
%
9.36
%
7.92
%
8.15
%
8.32
%
Common equity Tier 1 capital ratio
13.12
%
13.02
%
12.83
%
11.97
%
11.81
%
Tier 1 capital ratio
13.12
%
13.02
%
12.83
%
11.97
%
11.81
%
Total capital ratio
13.97
%
14.27
%
14.09
%
13.01
%
12.76
%
(1)
September 30, 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)
September 30, 2024
June 30, 2024
March 31, 2024
December 31, 2023
September 30, 2023
Total stockholders' equity
$
839,605
$
765,248
$
739,462
$
729,282
$
650,625
Adjustments:
LESS: Goodwill, net of associated deferred tax liabilities
296,105
296,496
296,889
297,283
297,679
LESS: Certain other intangible assets
18,018
18,315
19,146
20,093
21,228
LESS: Net deferred tax assets from operating loss and tax credit carry-forwards
13,253
11,880
15,862
20,253
19,679
LESS: Net unrealized (losses) on available for sale securities
(152,328
)
(206,584
)
(205,460
)
(187,901
)
(254,294
)
LESS: Noncontrolling interest
(277
)
(506
)
(420
)
(510
)
(1,005
)
ADD: Adoption of Accounting Standards Update 2016-13
1,345
1,345
1,345
1,345
2,017
Common Equity Tier 1(1)
666,179
646,992
614,790
581,409
569,355
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
(150
)
(374
)
(311
)
(410
)
(826
)
Total Tier 1 capital
679,690
660,279
628,140
594,660
582,190
Allowance for credit losses
44,687
65,182
62,715
53,037
47,960
Subordinated debentures, net of issuance costs
19,693
19,668
19,642
19,617
19,591
Total capital
$
774,070
$
745,129
$
710,497
$
667,314
$
649,741
(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, October 23, 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 291724.
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
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 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; 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)
September 30, 2024
June 30, 2024
March 31, 2024
December 31, 2023
September 30, 2023
ASSETS
Cash and cash equivalents
$
158,337
$
298,926
$
347,888
$
671,630
$
375,580
Securities available for sale, at fair value
1,741,221
1,725,460
1,779,458
1,850,581
1,804,228
Securities held to maturity, at amortized cost
33,092
34,026
34,682
35,440
36,591
Federal Reserve Bank and Federal Home Loan Bank Stock, at cost
36,014
24,449
25,844
23,694
28,210
Loans held for sale
688,870
29,380
25,946
69,518
77,779
Loans and leases
4,075,195
4,612,552
4,409,385
4,426,281
4,366,116
Allowance for credit losses
(45,336
)
(79,836
)
(80,777
)
(53,785
)
(49,705
)
Accrued interest receivable
31,385
31,755
30,294
27,080
23,282
Premises, furniture, and equipment, net
39,055
36,953
37,266
38,270
39,160
Rental equipment, net
205,339
209,544
215,885
228,916
211,750
Goodwill and intangible assets
326,094
327,018
328,001
329,241
330,225
Other assets
260,070
280,053
283,245
280,571
292,327
Total assets
$
7,549,336
$
7,530,280
$
7,437,117
$
7,927,437
$
7,535,543
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES
Deposits
5,875,085
6,431,516
6,368,344
6,936,055
6,589,182
Short-term borrowings
377,000
—
31,000
—
13,000
Long-term borrowings
33,354
33,329
33,373
33,614
33,873
Accrued expenses and other liabilities
424,292
300,187
264,938
228,486
248,863
Total liabilities
6,709,731
6,765,032
6,697,655
7,198,155
6,884,918
STOCKHOLDERS’ EQUITY
Preferred stock
—
—
—
—
—
Common stock, $.01 par value
248
251
254
260
262
Common stock, Nonvoting, $.01 par value
—
—
—
—
—
Additional paid-in capital
638,803
636,284
634,415
629,737
628,500
Retained earnings
354,474
343,392
317,964
293,463
278,655
Accumulated other comprehensive loss
(153,394
)
(207,992
)
(206,570
)
(188,433
)
(255,443
)
Treasury stock, at cost
(249
)
(6,181
)
(6,181
)
(5,235
)
(344
)
Total equity attributable to parent
839,882
765,754
739,882
729,792
651,630
Noncontrolling interest
(277
)
(506
)
(420
)
(510
)
(1,005
)
Total stockholders’ equity
839,605
765,248
739,462
729,282
650,625
Total liabilities and stockholders’ equity
$
7,549,336
$
7,530,280
$
7,437,117
$
7,927,437
$
7,535,543
Condensed Consolidated Statements of Operations (Unaudited)
Three Months Ended
Fiscal Year Ended
(Dollars in Thousands, Except Share and Per Share Data)
September 30, 2024
June 30, 2024
September 30, 2023
September 30, 2024
September 30, 2023
Interest and dividend income:
Loans and leases, including fees
$
102,292
$
95,871
$
90,085
$
395,876
$
323,602
Mortgage-backed securities
9,607
9,748
10,225
39,402
41,197
Other investments
7,851
8,323
9,332
41,073
33,936
119,750
113,942
109,642
476,351
398,735
Interest expense:
Deposits
1,119
1,689
1,954
13,019
4,356
FHLB advances and other borrowings
2,709
1,394
2,754
8,214
6,518
3,828
3,083
4,708
21,233
10,874
Net interest income
115,922
110,859
104,934
455,118
387,861
Provision for credit loss
838
5,881
9,042
42,661
57,354
Net interest income after provision for credit loss
115,084
104,978
95,892
412,457
330,507
Noninterest income:
Refund transfer product fees
1,703
9,111
308
40,178
39,452
Refund advance fee income
229
(67
)
(252
)
43,473
37,433
Card and deposit fees
26,441
33,408
31,233
125,943
150,746
Rental income
13,199
13,779
14,562
54,157
54,190
Gain on sale of trademarks
—
—
—
—
10,000
Gain on sale of other
3,459
4,675
2,006
12,669
2,663
Other income
6,979
4,965
8,194
23,167
22,115
Total noninterest income
52,010
65,871
56,051
299,587
316,599
Noninterest expense:
Compensation and benefits
52,298
48,449
46,352
201,472
184,318
Refund transfer product expense
168
2,136
28
9,862
9,723
Refund advance expense
20
47
(6
)
1,943
1,863
Card processing
33,877
34,314
29,549
137,938
105,498
Occupancy and equipment expense
9,376
9,070
9,274
36,587
34,691
Operating lease equipment depreciation
10,445
10,465
10,846
41,757
45,710
Legal and consulting
8,414
5,410
7,633
24,857
27,102
Intangible amortization
924
983
1,110
4,131
4,971
Impairment expense
—
999
—
3,012
3,273
Other expense
14,348
11,806
13,416
51,694
47,826
Total noninterest expense
129,870
123,679
118,202
513,253
464,975
Income before income tax expense
37,224
47,170
33,741
198,791
182,131
Income tax expense (benefit)
3,052
5,123
(2,672
)
29,141
16,324
Net income before noncontrolling interest
34,172
42,047
36,413
169,650
165,807
Net income attributable to noncontrolling interest
575
212
507
1,293
2,192
Net income attributable to parent
$
33,597
$
41,835
$
35,906
$
168,357
$
163,615
Less: Allocation of Earnings to participating securities(1)
348
432
531
1,540
2,445
Net income attributable to common shareholders(1)
33,249
41,403
35,375
166,817
161,162
Earnings per common share:
Basic
$
1.35
$
1.66
$
1.37
$
6.63
$
6.01
Diluted
$
1.35
$
1.66
$
1.36
$
6.62
$
5.99
Shares used in computing earnings per common share:
Basic
24,676,329
24,946,085
25,883,807
25,169,937
26,833,079
Diluted
24,715,021
24,979,818
25,991,449
25,201,750
26,925,606
(1) Amounts presented are used in the two-class earnings per common share calculation.
Average Balances, Interest Rates and Yields
The following table presents, for the periods indicated, the total dollar amount of interest income from average interest-earning assets and the resulting yields, as well as the interest expense on average interest-bearing liabilities, expressed both in dollars and in rates. Only the yield/rate reflects tax-equivalent adjustments. Nonaccruing loans and leases have been included in the table as loans carrying a zero yield.
Three Months Ended September 30,
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
$
214,921
$
1,868
3.46
%
$
230,032
$
2,425
4.18
%
Mortgage-backed securities
1,412,359
9,607
2.71
%
1,514,318
10,225
2.68
%
Tax exempt investment securities
124,944
858
3.46
%
141,328
964
3.43
%
Asset-backed securities
200,382
2,967
5.89
%
260,460
3,656
5.57
%
Other investment securities
278,197
2,158
3.09
%
289,980
2,287
3.13
%
Total investments
2,015,882
15,590
3.12
%
2,206,086
17,132
3.13
%
Commercial finance
3,909,498
83,453
8.49
%
3,543,353
74,157
8.30
%
Consumer finance
274,675
6,413
9.29
%
312,292
7,125
9.05
%
Tax services
39,437
136
1.38
%
44,192
(147
)
(1.32
)%
Warehouse finance
470,902
12,290
10.38
%
388,230
8,950
9.15
%
Total loans and leases
4,694,512
102,292
8.67
%
4,288,067
90,085
8.33
%
Total interest-earning assets
$
6,925,315
$
119,750
6.89
%
$
6,724,185
$
109,642
6.48
%
Noninterest-earning assets
573,503
566,890
Total assets
$
7,498,818
$
7,291,075
Interest-bearing liabilities:
Interest-bearing checking
$
650
$
—
0.19
%
$
364
$
—
0.33
%
Savings
47,193
3
0.03
%
58,907
6
0.04
%
Money markets
174,465
561
1.28
%
156,671
237
0.60
%
Time deposits
4,205
3
0.25
%
5,589
3
0.19
%
Wholesale deposits
41,299
552
5.32
%
128,155
1,708
5.29
%
Total interest-bearing deposits (a)
267,812
1,119
1.66
%
349,686
1,954
2.22
%
Overnight fed funds purchased
147,425
2,044
5.52
%
148,837
2,077
5.54
%
Subordinated debentures
19,676
355
7.17
%
19,574
357
7.23
%
Other borrowings
13,661
310
9.02
%
14,484
320
8.76
%
Total borrowings
180,762
2,709
5.96
%
182,895
2,754
5.97
%
Total interest-bearing liabilities
448,574
3,828
3.39
%
532,581
4,708
3.51
%
Noninterest-bearing deposits (b)
5,931,459
—
—
%
5,855,248
—
—
%
Total deposits and interest-bearing liabilities
$
6,380,033
$
3,828
0.24
%
$
6,387,829
$
4,708
0.29
%
Other noninterest-bearing liabilities
318,818
223,242
Total liabilities
6,698,851
6,611,071
Shareholders' equity
799,967
680,004
Total liabilities and shareholders' equity
$
7,498,818
$
7,291,075
Net interest income and net interest rate spread including noninterest-bearing deposits
$
115,922
6.65
%
$
104,934
6.19
%
Net interest margin
6.66
%
6.19
%
Tax-equivalent effect
0.01
%
0.02
%
Net interest margin, tax-equivalent(2)
6.67
%
6.21
%
Total cost of deposits (a+b)
6,199,271
1,119
0.07
%
6,204,934
1,954
0.12
%
(1) Tax rate used to arrive at the TEY for the three months ended September 30, 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
September 30, 2024
June 30, 2024
March 31, 2024
December 31, 2023
September 30, 2023
Equity to total assets
11.12
%
10.16
%
9.94
%
9.20
%
8.63
%
Book value per common share outstanding
$
33.79
$
30.51
$
29.14
$
28.06
$
24.85
Tangible book value per common share outstanding
$
20.67
$
17.47
$
16.21
$
15.39
$
12.24
Common shares outstanding
24,847,353
25,085,230
25,377,986
25,988,230
26,183,583
Nonperforming assets to total assets
0.57
%
0.61
%
0.50
%
0.53
%
0.77
%
Nonperforming loans and leases to total loans and leases
0.87
%
0.96
%
0.78
%
0.88
%
1.26
%
Net interest margin
6.66
%
6.56
%
6.23
%
6.23
%
6.19
%
Net interest margin, tax-equivalent
6.67
%
6.57
%
6.24
%
6.24
%
6.21
%
Return on average assets
1.79
%
2.28
%
3.17
%
1.46
%
1.97
%
Return on average equity
16.80
%
22.62
%
35.72
%
16.87
%
21.12
%
Return on average tangible equity
28.40
%
40.59
%
64.92
%
33.95
%
41.15
%
Full-time equivalent employees
1,241
1,232
1,204
1,218
1,193
Non-GAAP Reconciliations
Net Interest Margin and Cost of Deposits
At and For the Three Months Ended
(Dollars in thousands)
September 30, 2024
June 30, 2024
September 30, 2023
Average interest earning assets
$
6,925,315
$
6,801,888
$
6,724,185
Net interest income
$
115,922
$
110,859
$
104,934
Net interest margin
6.66
%
6.56
%
6.19
%
Quarterly average total deposits
$
6,199,271
$
6,260,990
$
6,204,934
Deposit interest expense
$
1,119
$
1,689
$
1,954
Cost of deposits
0.07
%
0.11
%
0.12
%
Adjusted Net Interest Margin and Adjusted Cost of Deposits
Average interest earning assets
$
6,925,315
$
6,801,888
$
6,724,185
Net interest income
115,922
110,859
104,934
Less: Contractual, rate-related processing expense
26,274
27,595
22,473
Adjusted net interest income
$
89,648
$
83,264
$
82,461
Adjusted net interest margin
5.15
%
4.92
%
4.87
%
Average total deposits
$
6,199,271
$
6,260,990
$
6,204,934
Deposit interest expense
1,119
1,689
1,954
Add: Contractual, rate-related processing expense
26,274
27,595
22,473
Adjusted deposit expense
$
27,393
$
29,284
$
24,427
Adjusted cost of deposits
1.76
%
1.88
%
1.56
%
View source version on businesswire.com: https://www.businesswire.com/news/home/20241023397948/en/
Investor Relations Contact Darby Schoenfeld, CPA SVP, Chief of Staff & Investor Relations 877-497-7497 investorrelations@pathward.com Media Relations Contact mediarelations@pathward.com
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