Pathward Financial, Inc. (“Pathward Financial” or the “Company”)
(Nasdaq: CASH) reported net income of $31.4 million, or $1.29 per
share, for the three months ended December 31, 2024, compared to
net income of $27.7 million, or $1.06 per share, for the three
months ended December 31, 2023.
CEO Brett Pharr said, “Fiscal 2025 started out well as we made
good progress against the strategy we laid out last year. During
the quarter we completed the sale of our insurance premium finance
business along with the subsequent sale of debt securities. This
move was another large step toward optimizing our balance sheet by
giving us the opportunity to put those funds into higher yielding
assets or those with optionality. We also extended two contracts
with large, existing partners in Partner Solutions and started tax
season with 12% more enrolled tax offices than last year.”
Company Highlights and Business Developments
- On October 31, 2024, Pathward N.A. (the "Bank") completed the
sale of substantially all of the assets and liabilities related to
the Bank's commercial insurance premium finance business. The
purchase price was $603.3 million, plus a $31.2 million premium.
The Bank recorded a $16.4 million pre-tax gain on the sale.
- On November 30, 2024, the Bank sold $160.6 million of debt
securities available for sale ("AFS") with a pre-tax loss on the
sale of securities of $15.7 million. This loss largely offsets the
gain from the sale of the commercial insurance premium finance
business.
Financial Highlights for the 2025 Fiscal First
Quarter
- Total revenue for the first quarter was $173.5 million, an
increase of $10.7 million, or 7%, compared to the same quarter in
fiscal 2024, driven by an increase in both net interest income and
noninterest income.
- Net interest margin ("NIM") increased 61 basis points to 6.84%
for the first quarter from 6.23% during the same period last year,
primarily driven by increased yields and balances in the loan and
lease portfolio and an improved earning asset mix from the
continued balance sheet optimization. When including contractual,
rate-related processing expenses associated with deposits on the
Company's balance sheet, NIM would have been 5.41% in the fiscal
2025 first quarter compared to 4.76% during the fiscal 2024 first
quarter. See non-GAAP reconciliation table below.
- Total gross loans and leases at December 31, 2024 increased
$136.4 million to $4.56 billion compared to December 31, 2023 and
increased $487.5 million when compared to September 30, 2024. When
excluding the insurance premium finance loans of $671.0 million at
December 31, 2023, total gross loans and leases at December 31,
2024 increased $807.4 million, or 22%, when compared to December
31, 2023.
- During the 2025 fiscal first quarter, the Company repurchased
701,860 shares of common stock at an average share price of $74.05.
As of December 31, 2024, there were 6,298,140 shares available for
repurchase under the current common stock share repurchase
program.
Net Interest Income
Net interest income for the first quarter of fiscal 2025 was
$116.1 million, an increase of 6% from the same quarter in fiscal
2024. The increase was mainly attributable to increased yields and
balances in the loan and lease portfolio and an improved earning
asset mix.
The Company’s average interest-earning assets for the first
quarter of fiscal 2025 decreased by $296.0 million to $6.74 billion
compared to the same quarter in fiscal 2024, due to decreases in
average outstanding balances of total investments and interest
earning cash balances, partially offset by an increase in total
loan and lease balances. The first quarter average outstanding
balance of loans and leases increased $107.6 million compared to
the same quarter of the prior fiscal year, primarily due to
increases in warehouse finance and tax services loans, partially
offset by decreases in commercial finance and consumer finance
loans. The decrease in the average outstanding balance of
commercial finance loans and leases was primarily driven by the
sale of the insurance premium finance loans, partially offset by an
increase in term lending, asset-based lending, and SBA/USDA
loans.
Fiscal 2025 first quarter NIM increased to 6.84% from 6.23% in
the first fiscal quarter of 2024. When including contractual,
rate-related processing expenses associated with deposits on the
Company's balance sheet, NIM would have been 5.41% in the first
quarter compared to 4.76% during the fiscal 2024 first quarter. See
non-GAAP reconciliation table below. The overall reported
tax-equivalent yield (“TEY”) on average interest-earning assets
increased 47 basis points to 7.04% compared to the prior year
quarter, driven by an improved earning asset mix. The yield on the
loan and lease portfolio was 8.78% compared to 8.33% for the
comparable period last year and the TEY on the securities portfolio
was 3.10% compared to 3.15% over that same period.
The Company's cost of funds for all deposits and borrowings
averaged 0.20% during the fiscal 2025 first quarter, as compared to
0.35% during the prior year quarter. The Company's overall cost of
deposits was 0.05% in the fiscal first quarter of 2025, as compared
to 0.21% during the prior year quarter. When including contractual,
rate-related processing expenses associated with deposits on the
Company's balance sheet, the Company's overall cost of deposits was
1.63% in the fiscal 2025 first quarter, as compared to 1.78% during
the prior year quarter. See non-GAAP reconciliation table
below.
Noninterest Income
Fiscal 2025 first quarter noninterest income increased 9% to
$57.4 million, compared to $52.8 million for the same period of the
prior year. During the first fiscal quarter of 2025, the Company
recognized a gain on divestiture of $16.4 million from the sale of
its commercial insurance premium finance business. This gain on
divestiture was largely offset by a loss on sale of securities of
$15.7 million also recognized during the current quarter. The
increase in noninterest income when comparing the current period to
the same period of the prior year was primarily driven by an
increase in gain on sale of loans and leases, other income, tax
services product fees, and rental income. The period-over-period
increase was partially offset by a decrease in card and deposit
fees and a reduction in gain on sale of other. The increase in gain
on sale of loans was primarily driven by SBA/USDA loan sales.
The period-over-period decrease in card and deposit fee income
was primarily related to lower servicing fee income due to a
reduction in rates following reductions in the Effective Federal
Funds Rate ("EFFR"). Servicing fee income on custodial deposits
totaled $4.5 million during the 2025 fiscal first quarter, compared
to $5.1 million for the same period of the prior year. For the
fiscal quarter ended September 30, 2024, servicing fee income on
custodial deposits totaled $3.2 million.
Noninterest Expense
Noninterest expense increased 4% to $123.6 million for the
fiscal 2025 first quarter, from $119.3 million for the same quarter
last year. The increase was primarily attributable to increases in
compensation and benefits, operating lease depreciation, occupancy
and equipment expense, other expense, and legal and consulting
expense. The period-over-period increase was partially offset by
decreases in card processing expense.
The card processing expense decrease was due to rate-related
agreements with Partner Solutions relationships. The amount of
expense paid under those agreements is based on an agreed upon rate
index that varies depending on the deposit levels, floor rates,
market conditions, and other performance conditions. Generally,
this rate index is based on a percentage of the EFFR and reprices
immediately upon a change in the EFFR. Approximately 60% of the
deposit portfolio was subject to these rate-related processing
expenses during the fiscal 2025 first quarter. For the fiscal
quarter ended December 31, 2024, contractual, rate-related
processing expenses were $25.6 million, as compared to $26.3
million for the fiscal quarter ended September 30, 2024, and $26.8
million for the fiscal quarter ended December 31, 2023.
Income Tax Expense
The Company recorded an income tax expense of $6.3 million,
representing an effective tax rate of 16.6%, for the fiscal 2025
first quarter, compared to an income tax expense of $5.7 million,
representing an effective tax rate of 17.0%, for the first quarter
last fiscal year. The current quarter increase in income tax
expense compared to the prior year quarter was primarily due to an
increase in income and a decrease in investment tax credits.
The Company originated $9.3 million in renewable energy leases
during the fiscal 2025 first quarter, resulting in $3.2 million in
total net investment tax credits. During the first quarter of
fiscal 2024, the Company originated $12.2 million in renewable
energy leases resulting in $4.4 million in total net investment tax
credits. Investment tax credits related to renewable energy leases
are recognized ratably based on income throughout each fiscal
year.
Investments, Loans and Leases
(Dollars in thousands)
December 31, 2024
September 30, 2024
June 30, 2024
March 31, 2024
December 31, 2023
Total investments
$
1,512,091
$
1,774,313
$
1,759,486
$
1,814,140
$
1,886,021
Loans held for sale
Term lending
7,860
4,567
—
1,977
2,500
Lease financing
424
—
—
—
778
Insurance premium finance
—
594,359
—
—
—
SBA/USDA
21,786
65,734
7,030
7,372
—
Consumer finance
42,578
24,210
22,350
16,597
66,240
Total loans held for sale
72,648
688,870
29,380
25,946
69,518
Term lending
1,735,539
1,554,641
1,533,722
1,489,054
1,452,274
Asset-based lending
608,261
471,897
473,289
429,556
379,681
Factoring
364,477
362,295
350,740
336,442
335,953
Lease financing
138,305
152,174
155,044
168,616
188,889
Insurance premium finance
—
—
617,054
522,904
671,035
SBA/USDA
595,965
568,628
563,689
560,433
546,048
Other commercial finance
174,097
185,964
166,653
149,056
160,628
Commercial finance
3,616,644
3,295,599
3,860,191
3,656,061
3,734,508
Consumer finance
280,001
248,800
253,358
267,031
301,510
Tax services
45,051
8,825
43,184
84,502
33,435
Warehouse finance
624,251
517,847
449,962
394,814
349,911
Total loans and leases
4,565,947
4,071,071
4,606,695
4,402,408
4,419,364
Net deferred loan origination costs
(fees)
(3,266
)
4,124
5,857
6,977
6,917
Total gross loans and leases
4,562,681
4,075,195
4,612,552
4,409,385
4,426,281
Allowance for credit losses
(48,977
)
(45,336
)
(79,836
)
(80,777
)
(53,785
)
Total loans and leases, net
$
4,513,704
$
4,029,859
$
4,532,716
$
4,328,608
$
4,372,496
The Company's investment security balances at December 31, 2024
totaled $1.51 billion, as compared to $1.77 billion at September
30, 2024 and $1.89 billion at December 31, 2023. The sequential and
year-over-year decreases were primarily related to the sale of
$160.6 million of investment securities AFS during the first
quarter of fiscal 2025.
Total gross loans and leases totaled $4.56 billion at December
31, 2024, as compared to $4.08 billion at September 30, 2024 and
$4.43 billion at December 31, 2023. The driver for the sequential
increase was growth across all loan portfolios. The year-over-year
increase was primarily due to increases in warehouse finance and
tax services loans, partially offset by decreases in commercial
finance and consumer finance. When excluding the insurance premium
finance loans of $671.0 million at December 31, 2023, total gross
loans and leases at December 31, 2024 increased $807.4 million, or
22%, when compared to December 31, 2023.
Commercial finance loans, which comprised 79% of the Company's
loan and lease portfolio, totaled $3.62 billion at December 31,
2024, reflecting an increase of $321.0 million, 10%, from September
30, 2024 and a decrease of $117.9 million, or 3%, from December 31,
2023. The sequential increase was primarily driven by increases of
$180.9 million in term lending and $136.4 million in asset-based
lending. The year-over-year decrease was primarily related to the
sale of insurance premium finance loans during the first quarter of
fiscal 2025, partially offset by increases of $283.3 million in
term lending, $228.6 million in asset-based lending, and $49.9
million in SBA/USDA. When excluding the insurance premium finance
loans of $671.0 million at December 31, 2023, commercial finance
loans at December 31, 2024 increased by $553.2 million when
compared to December 31, 2023.
Asset Quality
The Company’s allowance for credit losses ("ACL") totaled $49.0
million at December 31, 2024, an increase compared to $45.3 million
at September 30, 2024 and a decrease compared to $53.8 million at
December 31, 2023. The increase in the ACL at December 31, 2024,
when compared to September 30, 2024, was primarily due to a $2.8
million increase in the allowance related to the consumer finance
portfolio due to seasonal activity and a $0.8 million increase in
the allowance related to the seasonal tax services portfolio.
The $4.8 million year-over-year decrease in the ACL was
primarily driven by a $6.0 million decrease in the allowance
related to the commercial finance portfolio, due in part to the
sale of the insurance premium finance loans, partially offset by a
$0.6 million increase in the allowance related to the consumer
finance portfolio, a $0.3 million increase in the allowance related
to the seasonal tax services portfolio, and a $0.3 million increase
in the allowance related to the warehouse finance portfolio.
The following table presents the Company's ACL as a percentage
of its total loans and leases.
As of the Period Ended
(Unaudited)
December 31, 2024
September 30, 2024
June 30, 2024
March 31, 2024
December 31, 2023
Commercial finance
1.18
%
1.29
%
1.17
%
1.21
%
1.30
%
Consumer finance
1.79
%
0.90
%
2.23
%
1.71
%
1.45
%
Tax services
1.75
%
0.02
%
66.35
%
37.31
%
1.52
%
Warehouse finance
0.10
%
0.10
%
0.10
%
0.10
%
0.10
%
Total loans and leases
1.07
%
1.11
%
1.73
%
1.83
%
1.22
%
Total loans and leases excluding tax
services
1.07
%
1.12
%
1.12
%
1.14
%
1.21
%
The Company's ACL as a percentage of total loans and leases
decreased to 1.07% at December 31, 2024 from 1.11% at September 30,
2024. The decrease in the total loans and leases coverage ratio was
primarily driven by the commercial finance portfolio, partially
offset by an increase in the seasonal tax services portfolio and
consumer finance portfolio. The increase in the tax services and
consumer finance portfolios loan coverage ratios was due to
seasonal activity.
Activity in the allowance for credit losses for the periods
presented was as follows.
(Unaudited)
Three Months Ended
(Dollars in thousands)
December 31, 2024
September 30, 2024
December 31, 2023
Beginning balance
$
45,336
$
79,836
$
49,705
Provision (reversal of) - tax services
loans
1,301
(297
)
1,356
Provision (reversal of) - all other loans
and leases
10,913
1,423
8,210
Charge-offs - tax services loans
(741
)
(28,815
)
(1,145
)
Charge-offs - all other loans and
leases
(8,935
)
(7,912
)
(5,725
)
Recoveries - tax services loans
228
461
294
Recoveries - all other loans and
leases
875
640
1,090
Ending balance
$
48,977
$
45,336
$
53,785
The Company recognized a provision for credit losses of $12.0
million for the quarter ended December 31, 2024, compared to $9.9
million for the comparable period in the prior fiscal year. The
period-over-period increase in provision for credit losses was
primarily due to increases in provision for credit losses in the
commercial finance portfolio of $1.9 million, the consumer finance
portfolio of $0.7 million, and the warehouse finance portfolio of
$0.1 million, partially offset by a decrease of $0.1 million in
provision for credit losses tax services portfolio. The Company
recognized net charge-offs of $8.6 million for the quarter ended
December 31, 2024, compared to net charge-offs of $5.5 million for
the quarter ended December 31, 2023. Net charge-offs attributable
to the commercial finance and seasonal tax services portfolios for
the current quarter were $8.1 million and $0.5 million,
respectively. Net charge-offs attributable to the commercial
finance, tax services, and consumer finance portfolios for the same
quarter of the prior year were $4.6 million, $0.8 million, and $0.1
million, respectively.
The Company's past due loans and leases were as follows for the
periods presented.
As of December 31, 2024
Accruing and Nonaccruing Loans
and Leases
Nonperforming Loans and
Leases
(Dollars in thousands)
30-59 Days Past Due
60-89 Days Past Due
> 89 Days Past Due
Total Past Due
Current
Total Loans and Leases
Receivable
> 89 Days Past Due and
Accruing
Nonaccrual Balance
Total
Loans held for sale
$
—
$
—
$
—
$
—
$
72,648
$
72,648
$
—
$
—
$
—
Commercial finance
25,080
8,966
23,545
57,591
3,559,053
3,616,644
5,555
27,231
32,786
Consumer finance
4,502
2,936
2,423
9,861
270,140
280,001
2,423
—
2,423
Tax services
—
—
—
—
45,051
45,051
—
—
—
Warehouse finance
—
—
—
—
624,251
624,251
—
—
—
Total loans and leases held for
investment
29,582
11,902
25,968
67,452
4,498,495
4,565,947
7,978
27,231
35,209
Total loans and leases
$
29,582
$
11,902
$
25,968
$
67,452
$
4,571,143
$
4,638,595
$
7,978
$
27,231
$
35,209
As of September 30, 2024
Accruing and Nonaccruing Loans
and Leases
Nonperforming Loans and
Leases
(Dollars in thousands)
30-59 Days Past Due
60-89 Days Past Due
> 89 Days Past Due
Total Past Due
Current
Total Loans and Leases
Receivable
> 89 Days Past Due and
Accruing
Nonaccrual Balance
Total
Loans held for sale
$
2,266
$
1,361
$
1,050
$
4,677
$
684,193
$
688,870
$
1,050
$
—
$
1,050
Commercial finance
23,381
7,671
19,975
51,027
3,244,572
3,295,599
2,314
26,412
28,726
Consumer finance
3,962
3,186
3,053
10,201
238,599
248,800
3,053
—
3,053
Tax services
—
—
8,733
8,733
92
8,825
8,733
—
8,733
Warehouse finance
—
—
—
—
517,847
517,847
—
—
—
Total loans and leases held for
investment
27,343
10,857
31,761
69,961
4,001,110
4,071,071
14,100
26,412
40,512
Total loans and leases
$
29,609
$
12,218
$
32,811
$
74,638
$
4,685,303
$
4,759,941
$
15,150
$
26,412
$
41,562
The Company's nonperforming assets at December 31, 2024 were
$37.5 million, representing 0.49% of total assets, compared to
$43.0 million, or 0.57% of total assets at September 30, 2024 and
$42.4 million, or 0.53% of total assets at December 31, 2023.
The decrease in the nonperforming assets as a percentage of
total assets at December 31, 2024 compared to September 30, 2024,
was primarily driven by a decrease in nonperforming loans in the
seasonal tax services and consumer finance portfolios, partially
offset by an increase in nonperforming loans in the commercial
finance portfolio. When comparing the current period to the same
period of the prior year, the decrease in nonperforming assets was
primarily due to decreases in nonperforming loans in the commercial
finance and consumer finance portfolios.
The Company's nonperforming loans and leases at December 31,
2024, were $35.2 million, representing 0.76% of total gross loans
and leases, compared to $41.6 million, or 0.87% of total gross
loans and leases at September 30, 2024 and $39.5 million, or 0.88%
of total gross loans and leases at December 31, 2023.
Deposits, Borrowings and Other Liabilities
The average balance of total deposits and interest-bearing
liabilities was $6.25 billion for the three-month period ended
December 31, 2024, compared to $6.71 billion for the same period in
the prior fiscal year. Total average deposits for the fiscal 2025
first quarter decreased by $477.0 million to $6.08 billion compared
to the same period in fiscal 2024. The decrease in average deposits
was primarily due to decreases in noninterest bearing deposits and
wholesale deposits.
Total end-of-period deposits decreased 6% to $6.52 billion at
December 31, 2024, compared to $6.94 billion at December 31, 2023.
The decrease in end-of-period deposits was primarily driven by
decreases in noninterest-bearing deposits of $264.9 million and
wholesale deposits of $140.6 million.
As of December 31, 2024, the Company had $416.1 million in
deposits related to government stimulus programs.
As of December 31, 2024, the Company managed $840.5 million of
customer deposits at other banks in its capacity as custodian.
These deposits provide the Company with the ability to earn
servicing fee income, typically reflective of the EFFR. The
sequential quarter increase in these customer deposits held at
other banks reflects normal seasonal patterns during the first
quarter of the fiscal year.
Regulatory Capital
The Company and its subsidiary Pathward®, N.A. (the "Bank")
remained above the federal regulatory minimum capital requirements
at December 31, 2024, and continued to be classified as
well-capitalized, and in good standing with the regulatory
agencies. Regulatory capital ratios of the Company and the Bank are
stated in the table below. Regulatory capital is not affected by
the unrealized loss on accumulated other comprehensive income
(“AOCI”). The securities portfolio is primarily comprised of
amortizing securities that should provide consistent cash flow.
The tables below include certain non-GAAP financial measures
that are used by investors, analysts and bank regulatory agencies
to assess the capital position of financial services companies.
Management reviews these measures along with other measures of
capital as part of its financial analysis.
As of the Periods Indicated
December 31, 2024(1)
September 30, 2024
June 30, 2024
March 31, 2024
December 31,
2023
Company
Tier 1 leverage capital ratio
9.15
%
9.26
%
9.13
%
7.75
%
7.96
%
Common equity Tier 1 capital ratio
12.53
%
12.61
%
12.44
%
12.30
%
11.43
%
Tier 1 capital ratio
12.79
%
12.86
%
12.70
%
12.56
%
11.69
%
Total capital ratio
14.11
%
14.08
%
14.33
%
14.21
%
13.12
%
Bank
Tier 1 leverage ratio
9.42
%
9.44
%
9.36
%
7.92
%
8.15
%
Common equity Tier 1 capital ratio
13.16
%
13.12
%
13.02
%
12.83
%
11.97
%
Tier 1 capital ratio
13.16
%
13.12
%
13.02
%
12.83
%
11.97
%
Total capital ratio
14.10
%
13.97
%
14.27
%
14.09
%
13.01
%
(1)
December 31, 2024 percentages are
preliminary pending completion and filing of the Company's
regulatory reports. Regulatory capital ratios for periods presented
reflect the Company's election of the five-year CECL transition for
regulatory capital purposes.
The following table provides the non-GAAP financial measures
used to compute certain of the ratios included in the table above,
as well as a reconciliation of such non-GAAP financial measures to
the most directly comparable financial measure in accordance with
GAAP:
Standardized
Approach(1)
As of the Periods Indicated
(Dollars in thousands)
December 31,
2024
September 30,
2024
June 30, 2024
March 31, 2024
December 31,
2023
Total stockholders' equity
$
776,430
$
839,605
$
765,248
$
739,462
$
729,282
Adjustments:
LESS: Goodwill, net of associated deferred
tax liabilities
286,171
296,105
296,496
296,889
297,283
LESS: Certain other intangible assets
16,951
18,018
18,315
19,146
20,093
LESS: Net deferred tax assets from
operating loss and tax credit carry-forwards
12,298
13,253
11,880
15,862
20,253
LESS: Net unrealized (losses) on available
for sale securities
(187,834
)
(152,328
)
(206,584
)
(205,460
)
(187,901
)
LESS: Noncontrolling interest
(756
)
(277
)
(506
)
(420
)
(510
)
ADD: Adoption of Accounting Standards
Update 2016-13
672
1,345
1,345
1,345
1,345
Common Equity Tier 1(1)
650,272
666,179
646,992
614,790
581,409
Long-term borrowings and other instruments
qualifying as Tier 1
13,661
13,661
13,661
13,661
13,661
Tier 1 minority interest not included in
common equity Tier 1 capital
(462
)
(150
)
(374
)
(311
)
(410
)
Total Tier 1 capital
663,471
679,690
660,279
628,140
594,660
Allowance for credit losses
48,818
44,687
65,182
62,715
53,037
Subordinated debentures, net of issuance
costs
19,719
19,693
19,668
19,642
19,617
Total capital
$
732,008
$
744,070
$
745,129
$
710,497
$
667,314
(1)
Capital ratios were determined using the
Basel III capital rules that became effective on January 1, 2015.
Basel III revised the definition of capital, increased minimum
capital ratios, and introduced a minimum CET1 ratio; those changes
were fully phased in through the end of calendar year 2021.
Conference Call
The Company will host a conference call and earnings webcast
with a corresponding presentation at 4:00 p.m. Central Time (5:00
p.m. Eastern Time) on Tuesday, January 21, 2025. The live webcast
of the call can be accessed from Pathward’s Investor Relations
website at www.pathwardfinancial.com. Telephone participants may
access the conference call by dialing 1-833-470-1428 approximately
10 minutes prior to start time and reference access code
228214.
The Quarterly Investor Update slide presentation prepared for
use in connection with the Company's conference call and earnings
webcast is available under the Presentations link in the Investor
Relations - Events & Presentations section of the Company's
website at www.pathwardfinancial.com. A webcast replay will also be
archived at www.pathwardfinancial.com for one year.
About Pathward Financial, Inc.
Pathward Financial, Inc. (Nasdaq: CASH) is a U.S.-based
financial holding company driven by its purpose to power financial
inclusion for all. Through our subsidiary, Pathward®, N.A., we
strive to increase financial availability, choice, and opportunity
across our Partner Solutions and Commercial Finance business lines.
These strategic business lines provide support to individuals and
businesses. Learn more at www.pathwardfinancial.com.
Forward-Looking Statements
The Company and the Bank may from time to time make written or
oral “forward-looking statements,” including statements contained
in this press release, the Company’s filings with the Securities
and Exchange Commission ("SEC"), the Company’s reports to
stockholders, and in other communications by the Company and the
Bank, which are made in good faith by the Company pursuant to the
“safe harbor” provisions of the Private Securities Litigation
Reform Act of 1995.
You can identify forward-looking statements by words such as
“may,” “hope,” “will,” “should,” “expect,” “plan,” “anticipate,”
“intend,” “believe,” “estimate,” “predict,” “potential,”
“continue,” “could,” “future,” "target," or the negative of those
terms, or other words of similar meaning or similar expressions.
You should carefully read statements that contain these words
because they discuss our future expectations or state other
“forward-looking” information. These forward-looking statements are
based on information currently available to us and assumptions
about future events, and include statements with respect to the
Company’s beliefs, expectations, estimates, and intentions, which
are subject to significant risks and uncertainties, and are subject
to change based on various factors, some of which are beyond the
Company’s control. Such risks, uncertainties and other factors may
cause our actual growth, results of operations, financial
condition, cash flows, performance and business prospects and
opportunities to differ materially from those expressed in, or
implied by, these forward-looking statements. Such statements
address, among others, the following subjects: future operating
results including our earnings per diluted share guidance, annual
effective tax rate and related performance expectations; progress
on key strategic initiatives; expected results of our partnerships;
underwriting and monitoring processes; expected nonperforming loan
resolutions and net charge off rates; the performance of our
securities portfolio; the impact of card balances related to
government stimulus programs; customer retention; loan and other
product demand; new products and services; credit quality; the
level of net charge-offs and the adequacy of the allowance for
credit losses; and technology. The following factors, among others,
could cause the Company's financial performance and results of
operations to differ materially from the expectations, estimates,
and intentions expressed in such forward-looking statements:
maintaining our executive management team; expected growth
opportunities may not be realized or may take longer to realize
than expected; the potential adverse effects of unusual and
infrequently occurring events, including the impact on financial
markets from geopolitical conflicts such as the military conflicts
in Ukraine and the Middle East, weather-related disasters, or
public health events, such as pandemics, and any governmental or
societal responses thereto; our ability to successfully implement
measures designed to reduce expenses and increase efficiencies;
changes in trade, monetary, and fiscal policies and laws, including
actual changes in interest rates and the Fed Funds rate, and their
related impacts on macroeconomic conditions, customer behavior,
funding costs and loan and securities portfolios; changes in tax
laws; the strength of the United States' economy and the local
economies in which the Company operates; adverse developments in
the financial services industry generally such as bank failures,
responsive measures to mitigate and manage such developments,
related supervisory and regulatory actions and costs, and related
impacts on customer behavior; inflation, market, and monetary
fluctuations; our liquidity and capital positions, including the
sufficiency of our liquidity; the timely and efficient development
of new products and services offered by the Company or its
strategic partners, as well as risks (including reputational and
litigation) attendant thereto, and the perceived overall value and
acceptance of these products and services by users; the Bank's
ability to maintain its Durbin Amendment exemption; the risks of
dealing with or utilizing third parties, including, in connection
with the Company’s prepaid card and tax refund advance businesses,
the risk of reduced volume of refund advance loans as a result of
reduced customer demand for or usage of the Bank's strategic
partners’ refund advance products; our relationship with and any
actions which may be initiated by our regulators, and any related
increases in compliance and other costs; changes in financial
services laws and regulations, including laws and regulations
relating to the tax refund industry and the insurance premium
finance industry; technological changes, including, but not limited
to, the protection of our electronic systems and information; the
impact of acquisitions and divestitures; litigation risk; the
growth of the Company’s business, as well as expenses related
thereto; continued maintenance by the Bank of its status as a
well-capitalized institution; changes in consumer borrowing,
spending and saving habits; losses from fraudulent or illegal
activity; technological risks and developments and cyber threats,
attacks, or events; and the success of the Company at maintaining
its high quality asset level and managing and collecting assets of
borrowers in default should problem assets increase.
The foregoing list of factors is not exclusive. We caution you
not to place undue reliance on these forward-looking statements.
The forward-looking statements included in this press release speak
only as of the date hereof. Additional discussions of factors
affecting the Company’s business and prospects are reflected under
the caption “Risk Factors” and in other sections of the Company’s
Annual Report on Form 10-K for the Company’s fiscal year ended
September 30, 2024, and in other filings made with the SEC. The
Company expressly disclaims any intent or obligation to update,
revise or clarify any forward-looking statements, whether written
or oral, that may be made from time to time by or on behalf of the
Company or its subsidiaries, whether as a result of new
information, changed circumstances, or future events or for any
other reason.
Condensed Consolidated
Statements of Financial Condition (Unaudited)
(Dollars in Thousands, Except Share
Data)
December 31, 2024
September 30, 2024
June 30, 2024
March 31, 2024
December 31, 2023
ASSETS
Cash and cash equivalents
$
597,396
$
158,337
$
298,926
$
347,888
$
671,630
Securities available for sale, at fair
value
1,480,090
1,741,221
1,725,460
1,779,458
1,850,581
Securities held to maturity, at amortized
cost
32,001
33,092
34,026
34,682
35,440
Federal Reserve Bank and Federal Home Loan
Bank Stock, at cost
24,454
36,014
24,449
25,844
23,694
Loans held for sale
72,648
688,870
29,380
25,946
69,518
Loans and leases
4,562,681
4,075,195
4,612,552
4,409,385
4,426,281
Allowance for credit losses
(48,977
)
(45,336
)
(79,836
)
(80,777
)
(53,785
)
Accrued interest receivable
35,279
31,385
31,755
30,294
27,080
Premises, furniture, and equipment,
net
38,263
39,055
36,953
37,266
38,270
Rental equipment, net
206,754
205,339
209,544
215,885
228,916
Goodwill and intangible assets
313,074
326,094
327,018
328,001
329,241
Other assets
308,679
260,070
280,053
283,245
280,571
Total assets
$
7,622,342
$
7,549,336
$
7,530,280
$
7,437,117
$
7,927,437
LIABILITIES AND STOCKHOLDERS’
EQUITY
LIABILITIES
Deposits
6,518,953
5,875,085
6,431,516
6,368,344
6,936,055
Short-term borrowings
—
377,000
—
31,000
—
Long-term borrowings
33,380
33,354
33,329
33,373
33,614
Accrued expenses and other liabilities
293,579
424,292
300,187
264,938
228,486
Total liabilities
6,845,912
6,709,731
6,765,032
6,697,655
7,198,155
STOCKHOLDERS’ EQUITY
Preferred stock
—
—
—
—
—
Common stock, $.01 par value
241
248
251
254
260
Common stock, Nonvoting, $.01 par
value
—
—
—
—
—
Additional paid-in capital
640,422
638,803
636,284
634,415
629,737
Retained earnings
332,322
354,474
343,392
317,964
293,463
Accumulated other comprehensive loss
(190,917
)
(153,394
)
(207,992
)
(206,570
)
(188,433
)
Treasury stock, at cost
(4,882
)
(249
)
(6,181
)
(6,181
)
(5,235
)
Total equity attributable to
parent
777,186
839,882
765,754
739,882
729,792
Noncontrolling interest
(756
)
(277
)
(506
)
(420
)
(510
)
Total stockholders’ equity
776,430
839,605
765,248
739,462
729,282
Total liabilities and stockholders’
equity
$
7,622,342
$
7,549,336
$
7,530,280
$
7,437,117
$
7,927,437
Condensed Consolidated
Statements of Operations (Unaudited)
Three Months Ended
(Dollars in Thousands, Except Share and
Per Share Data)
December 31, 2024
September 30, 2024
December 31, 2023
Interest and dividend income:
Loans and leases, including fees
$
102,731
$
102,292
$
94,963
Mortgage-backed securities
8,986
9,607
10,049
Other investments
7,522
7,851
10,886
119,239
119,750
115,898
Interest expense:
Deposits
775
1,119
3,526
FHLB advances and other borrowings
2,331
2,709
2,336
3,106
3,828
5,862
Net interest income
116,133
115,922
110,036
Provision for credit loss
12,032
838
9,890
Net interest income after provision for
credit loss
104,101
115,084
100,146
Noninterest income:
Refund transfer product fees
410
1,703
422
Refund advance fee income
459
229
111
Card and deposit fees
29,066
26,441
30,750
Rental income
13,708
13,199
13,459
(Loss) on sale of securities
(15,671
)
—
—
Gain on divestitures
16,404
—
—
Gain (loss) on sale of loans and
leases
4,378
2,829
(31
)
Gain on sale of other
987
630
2,871
Other income
7,637
6,979
5,179
Total noninterest income
57,378
52,010
52,761
Noninterest expense:
Compensation and benefits
49,292
52,298
46,652
Refund transfer product expense
108
168
192
Refund advance expense
34
20
30
Card processing
33,314
33,877
34,584
Occupancy and equipment expense
9,706
9,376
8,848
Operating lease equipment depreciation
11,426
10,445
10,423
Legal and consulting
5,225
8,414
4,892
Intangible amortization
812
924
984
Other expense
13,642
14,348
12,669
Total noninterest expense
123,559
129,870
119,274
Income before income tax
expense
37,920
37,224
33,633
Income tax expense (benefit)
6,294
3,052
5,719
Net income before noncontrolling
interest
31,626
34,172
27,914
Net income attributable to noncontrolling
interest
199
575
257
Net income attributable to
parent
$
31,427
$
33,597
$
27,657
Less: Allocation of Earnings to
participating securities(1)
130
348
220
Net income attributable to common
shareholders(1)
31,297
33,249
27,437
Earnings per common share:
Basic
$
1.29
$
1.35
$
1.06
Diluted
$
1.29
$
1.35
$
1.06
Shares used in computing earnings per
common share:
Basic
24,221,697
24,676,329
25,776,845
Diluted
24,280,371
24,715,021
25,801,538
(1)
Amounts presented are used in the
two-class earnings per common share calculation.
Average Balances, Interest Rates and
Yields
The following table presents, for the periods indicated, the
total dollar amount of interest income from average
interest-earning assets and the resulting yields, as well as the
interest expense on average interest-bearing liabilities, expressed
both in dollars and in rates. Only the yield/rate reflects
tax-equivalent adjustments. Nonaccruing loans and leases have been
included in the table as loans carrying a zero yield.
Three Months Ended December 31,
2024
2023
(Dollars in thousands)
Average
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
$
239,614
$
2,258
3.74
%
$
337,975
$
4,103
4.83
%
Mortgage-backed securities
1,309,926
8,986
2.72
%
1,486,854
10,049
2.69
%
Tax-exempt investment securities
120,707
845
3.52
%
136,470
930
3.43
%
Asset-backed securities
188,163
2,604
5.49
%
250,172
3,565
5.67
%
Other investment securities
234,087
1,815
3.07
%
284,625
2,288
3.20
%
Total investments
1,852,883
14,250
3.10
%
2,158,121
16,832
3.15
%
Commercial finance
3,686,450
77,430
8.33
%
3,762,910
75,345
7.97
%
Consumer finance
316,402
10,405
13.05
%
362,935
10,585
11.60
%
Tax services
36,785
132
1.43
%
28,050
(11
)
(0.16
)%
Warehouse finance
603,824
14,764
9.70
%
381,931
9,044
9.42
%
Total loans and leases
4,643,461
102,731
8.78
%
4,535,826
94,963
8.33
%
Total interest-earning assets
$
6,735,958
$
119,239
7.04
%
$
7,031,922
$
115,898
6.57
%
Noninterest-earning assets
649,450
543,418
Total assets
$
7,385,408
$
7,575,340
Interest-bearing liabilities:
Interest-bearing checking
$
685
$
—
0.21
%
$
426
$
—
0.34
%
Savings
45,469
3
0.03
%
54,783
6
0.04
%
Money markets
180,104
385
0.85
%
183,255
576
1.25
%
Time deposits
4,208
3
0.25
%
5,517
4
0.25
%
Wholesale deposits
26,892
384
5.67
%
211,281
2,940
5.54
%
Total interest-bearing deposits (a)
257,358
775
1.19
%
455,262
3,526
3.08
%
Overnight fed funds purchased
131,337
1,670
5.05
%
117,153
1,656
5.62
%
Subordinated debentures
19,702
355
7.14
%
19,600
357
7.24
%
Other borrowings
13,661
306
8.89
%
14,178
323
9.07
%
Total borrowings
164,700
2,331
5.62
%
150,931
2,336
6.16
%
Total interest-bearing
liabilities
422,058
3,106
2.92
%
606,193
5,862
3.85
%
Noninterest-bearing deposits (b)
5,823,877
—
—
%
6,102,928
—
—
%
Total deposits and interest-bearing
liabilities
$
6,245,935
$
3,106
0.20
%
$
6,709,121
$
5,862
0.35
%
Other noninterest-bearing liabilities
335,743
210,468
Total liabilities
6,581,678
6,919,589
Shareholders' equity
803,730
655,751
Total liabilities and shareholders'
equity
$
7,385,408
$
7,575,340
Net interest income and net interest rate
spread including noninterest-bearing deposits
$
116,133
6.84
%
$
110,036
6.22
%
Net interest margin
6.84
%
6.23
%
Tax-equivalent effect
0.01
%
0.01
%
Net interest margin,
tax-equivalent(2)
6.85
%
6.24
%
Total cost of deposits (a+b)
6,081,235
775
0.05
%
6,558,190
3,526
0.21
%
(1)
Tax rate used to arrive at the TEY for the
three months ended December 31, 2024 and 2023 was 21%.
(2)
Net interest margin expressed on a
fully-taxable-equivalent basis ("net interest margin,
tax-equivalent") is a non-GAAP financial measure. The
tax-equivalent adjustment to net interest income recognizes the
estimated income tax savings when comparing taxable and tax-exempt
assets and adjusting for federal and state exemption of interest
income. The Company believes that it is a standard practice in the
banking industry to present net interest margin expressed on a
fully taxable equivalent basis and, accordingly, believes the
presentation of this non-GAAP financial measure may be useful for
peer comparison purposes.
Selected Financial
Information
As of and For the Three Months
Ended
December 31,
2024
September 30,
2024
June 30, 2024
March 31, 2024
December 31,
2023
Equity to total assets
10.19
%
11.12
%
10.16
%
9.94
%
9.20
%
Book value per common share
outstanding
$
32.19
$
33.79
$
30.51
$
29.14
$
28.06
Tangible book value per common share
outstanding
$
19.21
$
20.67
$
17.47
$
16.21
$
15.39
Common shares outstanding
24,119,416
24,847,353
25,085,230
25,377,986
25,988,230
Nonperforming assets to total assets
0.49
%
0.57
%
0.61
%
0.50
%
0.53
%
Nonperforming loans and leases to total
loans and leases
0.76
%
0.87
%
0.96
%
0.78
%
0.88
%
Net interest margin
6.84
%
6.66
%
6.56
%
6.23
%
6.23
%
Net interest margin, tax-equivalent
6.85
%
6.67
%
6.57
%
6.24
%
6.24
%
Return on average assets
1.69
%
1.79
%
2.28
%
3.17
%
1.46
%
Return on average equity
15.51
%
16.80
%
22.62
%
35.72
%
16.87
%
Return on average tangible equity
25.65
%
28.40
%
40.59
%
64.92
%
33.95
%
Full-time equivalent employees
1,170
1,241
1,232
1,204
1,218
Non-GAAP
Reconciliations
Net Interest Margin and Cost of
Deposits
At and For the Three Months
Ended
(Dollars in thousands)
December 31, 2024
September 30, 2024
December 31, 2023
Average interest earning assets
$
6,735,958
$
6,925,315
$
7,031,922
Net interest income
$
116,133
$
115,922
$
110,036
Net interest margin
6.84
%
6.66
%
6.23
%
Quarterly average total deposits
$
6,081,235
$
6,199,271
$
6,558,190
Deposit interest expense
$
775
$
1,119
$
3,526
Cost of deposits
0.05
%
0.07
%
0.21
%
Adjusted Net Interest Margin with
contractual, rate-related card expenses associated with deposits on
the Company's balance sheet
Average interest earning assets
$
6,735,958
$
6,925,315
$
7,031,922
Net interest income
116,133
115,922
110,036
Less: Contractual, rate-related processing
expense
24,241
24,631
25,891
Adjusted net interest income
$
91,892
$
91,291
$
84,145
Adjusted net interest margin
5.41
%
5.24
%
4.76
%
Average total deposits
$
6,081,235
$
6,199,271
$
6,558,190
Deposit interest expense
775
1,119
3,526
Add: Contractual, rate-related processing
expense
24,241
24,631
25,891
Adjusted deposit expense
$
25,016
$
25,750
$
29,417
Adjusted cost of deposits
1.63
%
1.65
%
1.78
%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20250121901856/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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