CASH Pathward Financial Inc

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

• On August 28, 2024, Pathward announced the sale of its commercial insurance premium finance business. The Company expects this transaction will close by October 31, 2024.

• On September 25, 2024, Pathward, N.A., (“Bank” or “Pathward”), a subsidiary of Pathward Financial, celebrated its 20th year serving the payments industry with the announcement it renamed its "Banking as a Service" business line to "Partner Solutions."

• On September 30, 2024, Pathward Financial and Pathward announced the Bank’s Partner Solutions line of business won the 2024 Finovate Award for Best Banking as a Service Provider. According to Finovate, its awards recognize the companies driving fintech innovation forward and the individuals bringing new ideas to life.

Financial Highlights for the 2024 Fiscal Fourth Quarter

• Total revenue for the fourth quarter was $167.9 million, an increase of $6.9 million, or 4%, compared to the same quarter in fiscal 2023, driven by an increase in net interest income, partially offset by a reduction in noninterest income.

• Net interest margin ("NIM") increased 47 basis points to 6.66% for the fourth quarter from 6.19% 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, which includes the expenses associated with custodial deposits, NIM would have been 5.15% in the fiscal 2024 fourth quarter compared to 4.87% during the fiscal 2023 fourth quarter. Servicing fee income on off-balance sheet custodial deposits is not included in this calculation. See non-GAAP reconciliation table below.

• Total gross loans and leases at September 30, 2024 decreased $290.9 million to $4.08 billion compared to September 30, 2023 and decreased $537.4 million when compared to June 30, 2024. When excluding insurance premium finance loans of $800.1 million and $617.1 million, respectively, total gross loans and leases at September 30, 2024 increased $509.2 million, or 14%, when compared to September 30, 2023 and increased $79.7 million, or 2%, compared to June 30, 2024.

• During the 2024 fiscal fourth quarter, the Company repurchased 236,308 shares of common stock at an average share price of $63.44. As of September 30, 2024, there were 7,000,000 shares available for repurchase under the current common stock share repurchase program.

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

• Piper Sandler East Coast Financial Services Conference, Nov. 14, 2024 | Naples, FL

About Pathward Financial, Inc.

Pathward Financial, Inc. (Nasdaq: CASH) is a U.S.-based financial holding company driven by its purpose to power financial inclusion for all. Through our subsidiary, Pathward®, N.A., we strive to increase financial availability, choice, and opportunity across our 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/

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