[10-Q] Pathward Financial, Inc. Quarterly Earnings Report
Filing Impact
Filing Sentiment
Form Type
10-Q
Rhea-AI Filing Summary
Pathward Financial, Inc. (CASH) reported operating results for the quarter ended March 31, 2025 showing revenue growth and continued balance sheet optimization. Total revenue for the second quarter was $274.8 million, up 7% year-over-year, driven by higher noninterest income and net interest income. Net interest margin rose 35 basis points to 7.12% as loan yields and earning asset mix improved. Total gross loans and leases were $4.46 billion and investment securities totaled $1.44 billion at March 31, 2025. Provision for credit losses for the quarter was $35.3 million and the allowance for credit losses increased to $102.9 million from $71.8 million at September 30, 2024. Management disclosed a material weakness in disclosure controls and is executing a remediation plan.
Pathward Financial, Inc. (CASH) ha comunicato i risultati operativi per il trimestre terminato il 31 marzo 2025, evidenziando una crescita dei ricavi e un continuo processo di ottimizzazione del bilancio. I ricavi totali per il secondo trimestre si sono attestati a 274,8 milioni di dollari, in aumento del 7% rispetto all'anno precedente, trainati da maggiori proventi non da interesse e da un incremento del margine di interesse netto. Il margine di interesse netto è salito di 35 punti base, raggiungendo il 7,12%, grazie al miglioramento dei rendimenti sui prestiti e della composizione degli attivi fruttiferi. I prestiti lordi e i leasing totali ammontavano a 4,46 miliardi di dollari e i titoli di investimento a 1,44 miliardi di dollari al 31 marzo 2025. La rettifica per perdite su crediti nel trimestre è stata di 35,3 milioni di dollari e l'accantonamento per perdite su crediti è aumentato a 102,9 milioni di dollari rispetto ai 71,8 milioni al 30 settembre 2024. La direzione ha segnalato una carenza significativa nei controlli di informativa e sta attuando un piano di rimedio.
Pathward Financial, Inc. (CASH) informó los resultados operativos del trimestre terminado el 31 de marzo de 2025, mostrando crecimiento de ingresos y una continua optimización del balance. Los ingresos totales del segundo trimestre fueron de 274.8 millones de dólares, un 7% más interanual, impulsados por mayores ingresos no financieros y por el aumento del ingreso neto por intereses. El margen de interés neto subió 35 puntos básicos hasta el 7.12% debido a la mejora en los rendimientos de los préstamos y en la composición de los activos productivos. Los préstamos brutos y arrendamientos totales sumaron 4.46 mil millones de dólares y los valores de inversión totalizaron 1.44 mil millones de dólares al 31 de marzo de 2025. La provisión para pérdidas crediticias del trimestre fue de 35.3 millones de dólares y la reserva para pérdidas crediticias aumentó a 102.9 millones desde 71.8 millones al 30 de septiembre de 2024. La dirección divulgó una debilidad material en los controles de divulgación y está ejecutando un plan de remediación.
Pathward Financial, Inc. (CASH)는 2025년 3월 31일로 끝난 분기에 대한 영업 실적을 공시했으며, 매출 성장과 대차대조표 최적화가 지속되었다고 밝혔습니다. 2분기 총수익은 2억7480만 달러로 전년 동기 대비 7% 증가했으며, 이는 비이자수익과 순이자수익의 증가에 힘입은 것입니다. 순이자마진은 대출 수익률과 수익자산 구성의 개선으로 35bp 상승하여 7.12%를 기록했습니다. 총 총대출 및 리스 잔액은 44.6억 달러, 투자유가증권은 14.4억 달러였습니다(2025년 3월 31일 기준). 분기 중 신용손실충당금전입액은 3530만 달러였고, 신용손실충당금은 2024년 9월 30일의 7180만 달러에서 1억290만 달러로 증가했습니다. 경영진은 공시 통제에서의 중대한 약점을 공개했으며 시정 계획을 실행하고 있습니다.
Pathward Financial, Inc. (CASH) a publié les résultats opérationnels du trimestre clos le 31 mars 2025, faisant état d'une croissance des revenus et d'une optimisation continue du bilan. Le chiffre d'affaires total du deuxième trimestre s'est élevé à 274,8 millions de dollars, en hausse de 7 % sur un an, soutenu par des revenus non liés aux intérêts plus élevés et une augmentation du produit net d'intérêts. La marge nette d'intérêt a progressé de 35 points de base pour atteindre 7,12 %, grâce à l'amélioration des rendements sur prêts et de la composition des actifs productifs. Le total des prêts bruts et des crédits-bails s'élevait à 4,46 milliards de dollars et les titres d'investissement totalisaient 1,44 milliard de dollars au 31 mars 2025. La provision pour pertes de crédit du trimestre s'est élevée à 35,3 millions de dollars et la réserve pour pertes sur crédits est passée de 71,8 millions au 30 septembre 2024 à 102,9 millions de dollars. La direction a signalé une faiblesse significative dans les contrôles d'information et met en œuvre un plan de remédiation.
Pathward Financial, Inc. (CASH) meldete die Betriebsergebnisse für das Quartal zum 31. März 2025 und berichtete von Umsatzwachstum sowie einer fortgesetzten Optimierung der Bilanz. Der Gesamtumsatz für das zweite Quartal belief sich auf 274,8 Millionen US-Dollar und stieg damit im Jahresvergleich um 7%, getragen von höheren nicht zinstragenden Erträgen und Nettozinserträgen. Die Nettozinsmarge erhöhte sich um 35 Basispunkte auf 7,12%, da die Kreditrenditen und die Zusammensetzung der zinstragenden Aktiva sich verbesserten. Die gesamten Bruttokredite und Leasingforderungen beliefen sich auf 4,46 Milliarden US-Dollar und die Anlagewerte auf 1,44 Milliarden US-Dollar zum 31. März 2025. Die Risikovorsorge für Kreditverluste im Quartal betrug 35,3 Millionen US-Dollar, und die Wertberichtigung für Kreditverluste stieg von 71,8 Millionen US-Dollar zum 30. September 2024 auf 102,9 Millionen US-Dollar. Das Management gab eine wesentliche Schwäche in den Offenlegungskontrollen bekannt und setzt einen Maßnahmenplan zur Nachbesserung um.
Positive
- None.
Negative
- None.
Insights
TL;DR: Revenue and margin improvement show operating momentum, but rising ACL and a disclosed material weakness temper near-term confidence.
Pathward delivered a 7% increase in quarterly revenue to $274.8 million and achieved a higher NIM of 7.12%, reflecting improved loan yields and balance growth. Loan portfolio expansion to $4.46 billion and strong tax services product income growth (29% for the first six months) support core earnings. However, the allowance for credit losses rose materially to $102.9 million and the company recorded a material weakness in disclosure controls, which raises near-term governance and reporting risk. Overall impact is mixed: operational progress offset by credit reserve build and control deficiencies.
TL;DR: Liquidity and funding improved, but elevated ACL, portfolio sales and governance weaknesses increase risk monitoring needs.
Cash and cash equivalents increased to $254.2 million and available liquidity exceeded $3.89 billion, indicating strong near-term funding flexibility. Management sold held-for-sale loans and certain securities to reposition the balance sheet, and repurchased shares during the quarter. Offsetting these positives, ACL rose from $71.8 million to $102.9 million and provision for credit losses increased to $35.3 million for the quarter; these movements, combined with a noted material weakness in internal controls, warrant focused monitoring of credit performance and remediation progress. Impact on investor confidence depends on remediation and future credit trends.
Pathward Financial, Inc. (CASH) ha comunicato i risultati operativi per il trimestre terminato il 31 marzo 2025, evidenziando una crescita dei ricavi e un continuo processo di ottimizzazione del bilancio. I ricavi totali per il secondo trimestre si sono attestati a 274,8 milioni di dollari, in aumento del 7% rispetto all'anno precedente, trainati da maggiori proventi non da interesse e da un incremento del margine di interesse netto. Il margine di interesse netto è salito di 35 punti base, raggiungendo il 7,12%, grazie al miglioramento dei rendimenti sui prestiti e della composizione degli attivi fruttiferi. I prestiti lordi e i leasing totali ammontavano a 4,46 miliardi di dollari e i titoli di investimento a 1,44 miliardi di dollari al 31 marzo 2025. La rettifica per perdite su crediti nel trimestre è stata di 35,3 milioni di dollari e l'accantonamento per perdite su crediti è aumentato a 102,9 milioni di dollari rispetto ai 71,8 milioni al 30 settembre 2024. La direzione ha segnalato una carenza significativa nei controlli di informativa e sta attuando un piano di rimedio.
Pathward Financial, Inc. (CASH) informó los resultados operativos del trimestre terminado el 31 de marzo de 2025, mostrando crecimiento de ingresos y una continua optimización del balance. Los ingresos totales del segundo trimestre fueron de 274.8 millones de dólares, un 7% más interanual, impulsados por mayores ingresos no financieros y por el aumento del ingreso neto por intereses. El margen de interés neto subió 35 puntos básicos hasta el 7.12% debido a la mejora en los rendimientos de los préstamos y en la composición de los activos productivos. Los préstamos brutos y arrendamientos totales sumaron 4.46 mil millones de dólares y los valores de inversión totalizaron 1.44 mil millones de dólares al 31 de marzo de 2025. La provisión para pérdidas crediticias del trimestre fue de 35.3 millones de dólares y la reserva para pérdidas crediticias aumentó a 102.9 millones desde 71.8 millones al 30 de septiembre de 2024. La dirección divulgó una debilidad material en los controles de divulgación y está ejecutando un plan de remediación.
Pathward Financial, Inc. (CASH)는 2025년 3월 31일로 끝난 분기에 대한 영업 실적을 공시했으며, 매출 성장과 대차대조표 최적화가 지속되었다고 밝혔습니다. 2분기 총수익은 2억7480만 달러로 전년 동기 대비 7% 증가했으며, 이는 비이자수익과 순이자수익의 증가에 힘입은 것입니다. 순이자마진은 대출 수익률과 수익자산 구성의 개선으로 35bp 상승하여 7.12%를 기록했습니다. 총 총대출 및 리스 잔액은 44.6억 달러, 투자유가증권은 14.4억 달러였습니다(2025년 3월 31일 기준). 분기 중 신용손실충당금전입액은 3530만 달러였고, 신용손실충당금은 2024년 9월 30일의 7180만 달러에서 1억290만 달러로 증가했습니다. 경영진은 공시 통제에서의 중대한 약점을 공개했으며 시정 계획을 실행하고 있습니다.
Pathward Financial, Inc. (CASH) a publié les résultats opérationnels du trimestre clos le 31 mars 2025, faisant état d'une croissance des revenus et d'une optimisation continue du bilan. Le chiffre d'affaires total du deuxième trimestre s'est élevé à 274,8 millions de dollars, en hausse de 7 % sur un an, soutenu par des revenus non liés aux intérêts plus élevés et une augmentation du produit net d'intérêts. La marge nette d'intérêt a progressé de 35 points de base pour atteindre 7,12 %, grâce à l'amélioration des rendements sur prêts et de la composition des actifs productifs. Le total des prêts bruts et des crédits-bails s'élevait à 4,46 milliards de dollars et les titres d'investissement totalisaient 1,44 milliard de dollars au 31 mars 2025. La provision pour pertes de crédit du trimestre s'est élevée à 35,3 millions de dollars et la réserve pour pertes sur crédits est passée de 71,8 millions au 30 septembre 2024 à 102,9 millions de dollars. La direction a signalé une faiblesse significative dans les contrôles d'information et met en œuvre un plan de remédiation.
Pathward Financial, Inc. (CASH) meldete die Betriebsergebnisse für das Quartal zum 31. März 2025 und berichtete von Umsatzwachstum sowie einer fortgesetzten Optimierung der Bilanz. Der Gesamtumsatz für das zweite Quartal belief sich auf 274,8 Millionen US-Dollar und stieg damit im Jahresvergleich um 7%, getragen von höheren nicht zinstragenden Erträgen und Nettozinserträgen. Die Nettozinsmarge erhöhte sich um 35 Basispunkte auf 7,12%, da die Kreditrenditen und die Zusammensetzung der zinstragenden Aktiva sich verbesserten. Die gesamten Bruttokredite und Leasingforderungen beliefen sich auf 4,46 Milliarden US-Dollar und die Anlagewerte auf 1,44 Milliarden US-Dollar zum 31. März 2025. Die Risikovorsorge für Kreditverluste im Quartal betrug 35,3 Millionen US-Dollar, und die Wertberichtigung für Kreditverluste stieg von 71,8 Millionen US-Dollar zum 30. September 2024 auf 102,9 Millionen US-Dollar. Das Management gab eine wesentliche Schwäche in den Offenlegungskontrollen bekannt und setzt einen Maßnahmenplan zur Nachbesserung um.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2025
or
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to .
Commission File Number: 0-22140
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | ||||
(Address of principal executive offices and Zip Code)
(877 ) 497-7497
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐ No ☒
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act:
| ☒ | Accelerated filer | ☐ | |||||||||
| Non-accelerated filer | ☐ | Smaller reporting company | |||||||||
| Emerging growth company | |||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
| Class: | Outstanding at September 5, 2025: | ||||||||||
| Common Stock, $.01 par value | Shares | ||||||||||
| Nonvoting Common Stock, $.01 par value | 0 | Nonvoting shares | |||||||||
PATHWARD FINANCIAL, INC.
FORM 10-Q
Table of Contents
| Description | Page | |||||||
| PART I - FINANCIAL INFORMATION | ||||||||
| Item 1. | Financial Statements | 2 | ||||||
Condensed Consolidated Statements of Financial Condition as of March 31, 2025 and September 30, 2024 | 2 | |||||||
Condensed Consolidated Statements of Operations for the Three and Six Months Ended March 31, 2025 and 2024 (As Restated) | 3 | |||||||
Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Six Months Ended March 31, 2025 and 2024 (As Restated) | 4 | |||||||
Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Three and Six Months Ended March 31, 2025 and 2024 (As Restated) | 5 | |||||||
Condensed Consolidated Statements of Cash Flows for the Six Months Ended March 31, 2025 and 2024 (As Restated) | 6 | |||||||
Notes to Condensed Consolidated Financial Statements | 7 | |||||||
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 39 | ||||||
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 52 | ||||||
| Item 4. | Controls and Procedures | 55 | ||||||
| PART II - OTHER INFORMATION | ||||||||
| Item 1. | Legal Proceedings | 57 | ||||||
| Item 1A. | Risk Factors | 57 | ||||||
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 57 | ||||||
| Item 3. | Defaults Upon Senior Securities | 57 | ||||||
| Item 4. | Mine Safety Disclosures | 57 | ||||||
| Item 5. | Other Information | 57 | ||||||
| Item 6. | Exhibits | 58 | ||||||
SIGNATURES | 59 | |||||||
i
Table of Contents
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
PATHWARD FINANCIAL, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Financial Condition
| (Dollars in thousands, except per share data) | March 31, 2025 | September 30, 2024 | |||||||||
| ASSETS | (Unaudited) | (Audited) | |||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Securities available for sale, at fair value | |||||||||||
Securities held to maturity, at amortized cost (fair value $ | |||||||||||
| Federal Reserve Bank and Federal Home Loan Bank Stock, at cost | |||||||||||
| Loans held for sale | |||||||||||
| Loans and leases | |||||||||||
| Allowance for credit losses | ( | ( | |||||||||
| Accrued interest receivable | |||||||||||
| Premises, furniture, and equipment, net | |||||||||||
| Rental equipment, net | |||||||||||
| Goodwill and intangible assets | |||||||||||
| Other assets | |||||||||||
| Total assets | $ | $ | |||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
| LIABILITIES | |||||||||||
| Deposits | $ | $ | |||||||||
| Short-term borrowings | |||||||||||
| Long-term borrowings | |||||||||||
| Accrued expenses and other liabilities | |||||||||||
| Total liabilities | |||||||||||
| STOCKHOLDERS’ EQUITY | |||||||||||
Preferred stock, | |||||||||||
Common stock, $ | |||||||||||
Common stock, Nonvoting, $ | |||||||||||
| Additional paid-in capital | |||||||||||
| Retained earnings | |||||||||||
| Accumulated other comprehensive loss | ( | ( | |||||||||
Treasury stock, at cost, | ( | ( | |||||||||
| Total equity attributable to parent | |||||||||||
| Noncontrolling interest | ( | ( | |||||||||
| Total stockholders’ equity | |||||||||||
| Total liabilities and stockholders’ equity | $ | $ | |||||||||
See Notes to Condensed Consolidated Financial Statements.
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PATHWARD FINANCIAL, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations (Unaudited)
| Three Months Ended March 31, | Six Months Ended March 31, | ||||||||||||||||||||||
| (Dollars in thousands, except per share data) | 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||
| (As Restated) | (As Restated) | ||||||||||||||||||||||
| Interest and dividend income: | |||||||||||||||||||||||
| Loans and leases, including fees | $ | $ | $ | $ | |||||||||||||||||||
| Mortgage-backed securities | |||||||||||||||||||||||
| Other investments | |||||||||||||||||||||||
| Interest expense: | |||||||||||||||||||||||
| Deposits | |||||||||||||||||||||||
| FHLB advances and other borrowings | |||||||||||||||||||||||
| Net interest income | |||||||||||||||||||||||
| Provision for credit loss | |||||||||||||||||||||||
| Net interest income after provision for credit loss | |||||||||||||||||||||||
| Noninterest income: | |||||||||||||||||||||||
| Refund transfer product fees | |||||||||||||||||||||||
| Refund advance and other tax fee income | |||||||||||||||||||||||
| Card and deposit fees | |||||||||||||||||||||||
| Rental income | |||||||||||||||||||||||
| (Loss) on sale of securities | ( | ( | |||||||||||||||||||||
| Gain (loss) on divestitures | ( | ||||||||||||||||||||||
| Secondary market revenue | |||||||||||||||||||||||
| Gain on sale of other | |||||||||||||||||||||||
| Other income | |||||||||||||||||||||||
| Total noninterest income | |||||||||||||||||||||||
| Noninterest expense: | |||||||||||||||||||||||
| Compensation and benefits | |||||||||||||||||||||||
| Refund transfer product expense | |||||||||||||||||||||||
| Refund advance expense | |||||||||||||||||||||||
| Card processing | |||||||||||||||||||||||
| Occupancy and equipment expense | |||||||||||||||||||||||
| Operating lease equipment depreciation | |||||||||||||||||||||||
| Legal and consulting | |||||||||||||||||||||||
| Intangible amortization | |||||||||||||||||||||||
| Impairment expense | |||||||||||||||||||||||
| Other expense | |||||||||||||||||||||||
| Total noninterest expense | |||||||||||||||||||||||
| Income before income tax expense | |||||||||||||||||||||||
| Income tax expense | |||||||||||||||||||||||
| Net income before noncontrolling interest | |||||||||||||||||||||||
| Net income attributable to noncontrolling interest | |||||||||||||||||||||||
| Net income attributable to parent | $ | $ | $ | $ | |||||||||||||||||||
| Earnings per common share: | |||||||||||||||||||||||
| Basic | $ | $ | $ | $ | |||||||||||||||||||
| Diluted | $ | $ | $ | $ | |||||||||||||||||||
See Notes to Condensed Consolidated Financial Statements.
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PATHWARD FINANCIAL, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Income (Unaudited)
| Three Months Ended March 31, | Six Months Ended March 31, | ||||||||||||||||||||||
| (Dollars in thousands) | 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||
| (As Restated) | (As Restated) | ||||||||||||||||||||||
| Net income before noncontrolling interest | $ | $ | $ | $ | |||||||||||||||||||
| Other comprehensive income (loss): | |||||||||||||||||||||||
| Change in net unrealized gain (loss) on debt securities | ( | ( | |||||||||||||||||||||
| Net loss realized on debt securities | |||||||||||||||||||||||
| ( | ( | ||||||||||||||||||||||
| Unrealized gain (loss) on currency translation | ( | ( | ( | ||||||||||||||||||||
| Deferred income tax effect | ( | ( | |||||||||||||||||||||
| Total other comprehensive income (loss) | ( | ( | |||||||||||||||||||||
| Total comprehensive income | |||||||||||||||||||||||
| Total comprehensive income attributable to noncontrolling interest | |||||||||||||||||||||||
| Comprehensive income attributable to parent | $ | $ | $ | $ | |||||||||||||||||||
See Notes to Condensed Consolidated Financial Statements.
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PATHWARD FINANCIAL, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Changes in Stockholders' Equity (Unaudited)
| Three Months Ended | ||||||||||||||||||||||||||
| (Dollars in thousands, except per share data) | Common Stock | Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Treasury Stock | Total Pathward Financial, Inc. Stockholders’ Equity | Noncontrolling interest | Total Stockholders’ Equity | ||||||||||||||||||
| Balance, December 31, 2024 (As Restated) | $ | $ | $ | $ | ( | $ | ( | $ | $ | ( | $ | |||||||||||||||
Cash dividends declared on common stock ($ | — | — | ( | — | — | ( | — | ( | ||||||||||||||||||
| Repurchases of common stock | ( | ( | — | — | ( | — | ( | |||||||||||||||||||
| Stock compensation | — | — | — | — | — | |||||||||||||||||||||
| Total other comprehensive income | — | — | — | — | — | |||||||||||||||||||||
| Net income | — | — | — | — | ||||||||||||||||||||||
| Net distribution to noncontrolling interest | — | — | — | — | — | — | ( | ( | ||||||||||||||||||
Balance, March 31, 2025 | $ | $ | $ | $ | ( | $ | ( | $ | $ | ( | $ | |||||||||||||||
| Balance, December 31, 2023 (As Restated) | $ | $ | $ | $ | ( | $ | ( | $ | $ | ( | $ | |||||||||||||||
Cash dividends declared on common stock ($ | — | — | ( | — | — | ( | — | ( | ||||||||||||||||||
| Issuance of common stock due to restricted stock | — | — | — | — | — | |||||||||||||||||||||
| Repurchases of common stock | ( | ( | — | ( | ( | — | ( | |||||||||||||||||||
| Stock compensation | — | — | — | — | — | |||||||||||||||||||||
| Total other comprehensive loss | — | — | — | ( | — | ( | — | ( | ||||||||||||||||||
| Net income (Restated) | — | — | — | — | ||||||||||||||||||||||
| Net distribution to noncontrolling interest | — | — | — | — | — | — | ( | ( | ||||||||||||||||||
Balance, March 31, 2024 (As Restated) | $ | $ | $ | $ | ( | $ | ( | $ | $ | ( | $ | |||||||||||||||
| Six Months Ended | ||||||||||||||||||||||||||
| (Dollars in thousands, except per share data) | Common Stock | Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Treasury Stock | Total Pathward Financial, Inc. Stockholders’ Equity | Noncontrolling interest | Total Stockholders’ Equity | ||||||||||||||||||
Balance, September 30, 2024 (As Restated) | $ | $ | $ | $ | ( | $ | ( | $ | $ | ( | $ | |||||||||||||||
Cash dividends declared on common stock ($ | — | — | ( | — | — | ( | — | ( | ||||||||||||||||||
| Repurchases of common stock | ( | ( | — | ( | ( | — | ( | |||||||||||||||||||
| Stock compensation | — | — | — | — | — | |||||||||||||||||||||
| Total other comprehensive loss | — | — | — | ( | — | ( | — | ( | ||||||||||||||||||
| Net income | — | — | — | — | ||||||||||||||||||||||
| Net distribution to noncontrolling interest | — | — | — | — | — | — | ( | ( | ||||||||||||||||||
Balance, March 31, 2025 | $ | $ | $ | $ | ( | $ | ( | $ | $ | ( | $ | |||||||||||||||
Balance, September 30, 2023 (As Restated) | $ | $ | $ | $ | ( | $ | ( | $ | $ | ( | $ | |||||||||||||||
Cash dividends declared on common stock ($ | — | — | ( | — | — | ( | — | ( | ||||||||||||||||||
| Issuance of common stock due to restricted stock | — | — | — | — | — | |||||||||||||||||||||
| Repurchases of common stock | ( | ( | — | ( | ( | — | ( | |||||||||||||||||||
| Stock compensation | — | — | — | — | — | |||||||||||||||||||||
| Total other comprehensive income | — | — | — | — | — | |||||||||||||||||||||
| Joint venture membership interest divestiture | — | — | ( | — | — | ( | — | ( | ||||||||||||||||||
| Net income (Restated) | — | — | — | — | ||||||||||||||||||||||
| Net distribution to noncontrolling interest | — | — | — | — | — | — | ||||||||||||||||||||
Balance, March 31, 2024 (As Restated) | $ | $ | $ | $ | ( | $ | ( | $ | $ | ( | $ | |||||||||||||||
See Notes to Condensed Consolidated Financial Statements.
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PATHWARD FINANCIAL, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Unaudited)
| Six Months Ended March 31, | |||||||||||
| (Dollars in thousands) | 2025 | 2024 | |||||||||
| Cash flows from operating activities: | (As Restated) | ||||||||||
| Net income before noncontrolling interest | $ | $ | |||||||||
| Adjustments to reconcile net income to net cash provided by (used in) operating activities: | |||||||||||
| Depreciation and amortization | |||||||||||
| Provision for credit loss | |||||||||||
| Provision for deferred taxes | |||||||||||
| Originations of loans held for sale | ( | ( | |||||||||
| Proceeds from sales of loans held for sale | |||||||||||
| Net change in loans held for sale | |||||||||||
| Net realized loss (gain) on securities available for sale | |||||||||||
| Net realized (gain) loss on loans held for sale | ( | ( | |||||||||
| Net realized (gain) loss on divestitures | ( | ||||||||||
| Net realized (gain) on other | ( | ( | |||||||||
| Impairment on rental equipment | |||||||||||
| Net change in accrued interest receivable | ( | ( | |||||||||
| Net change in other assets | ( | ( | |||||||||
| Net change in accrued expenses and other liabilities | ( | ||||||||||
| Stock compensation | |||||||||||
| Net cash provided by operating activities | |||||||||||
| Cash flows from investing activities: | |||||||||||
| Purchases of securities available for sale | ( | ||||||||||
| Proceeds from sales of securities available for sale | |||||||||||
| Proceeds from maturities of and principal collected on securities available for sale | |||||||||||
| Proceeds from maturities of and principal collected on securities held to maturity | |||||||||||
| Purchases of Federal Reserve Bank and Federal Home Loan Bank stock | ( | ( | |||||||||
| Redemption of Federal Reserve Bank and Federal Home Loan Bank stock | |||||||||||
| Purchases of loans and leases | ( | ( | |||||||||
| Net change in loans and leases | ( | ||||||||||
| Purchases of premises, furniture, and equipment | ( | ( | |||||||||
| Purchases of rental equipment | ( | ( | |||||||||
| Proceeds from sales of rental equipment | |||||||||||
| Net change in rental equipment | |||||||||||
| Proceeds from divestitures, net of transaction costs | |||||||||||
| Proceeds from sale of other assets | |||||||||||
| Proceeds from loans held for sale previously classified as portfolio loans | |||||||||||
| Net cash provided by (used in) investing activities | |||||||||||
| Cash flows from financing activities: | |||||||||||
| Net change in deposits | ( | ( | |||||||||
| Net change in short-term borrowings | ( | ||||||||||
| Principal payments on other liabilities | ( | ||||||||||
| Dividends paid on common stock | ( | ( | |||||||||
| Issuance of common stock due to restricted stock | |||||||||||
| Repurchases of common stock | ( | ( | |||||||||
| Investment by (distributions to) noncontrolling interest | ( | ||||||||||
| Net cash provided by (used in) financing activities | ( | ( | |||||||||
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| Effect of exchange rate changes on cash | ( | ||||||||||
| Net change in cash and cash equivalents | ( | ||||||||||
| Cash and cash equivalents at beginning of fiscal year | |||||||||||
| Cash and cash equivalents at end of fiscal period | $ | $ | |||||||||
| Six Months Ended March 31, | |||||||||||
| (Dollars in thousands) | 2025 | 2024 | |||||||||
| Supplemental disclosure of cash flow information | (As Restated) | ||||||||||
| Cash paid during the period for: | |||||||||||
| Interest | $ | $ | |||||||||
| Income taxes | |||||||||||
| Franchise and other taxes | |||||||||||
| Supplemental schedule of non-cash investing activities: | |||||||||||
| Transfers | |||||||||||
| Held for sale to loans and leases | $ | $ | |||||||||
| Loans and leases to held for sale | |||||||||||
| Loans and leases to rental equipment | |||||||||||
| Rental equipment to loan and leases | |||||||||||
| Recognition of operating lease ROU assets, net of measurements | |||||||||||
| Joint venture membership interest divestiture | |||||||||||
See Notes to Condensed Consolidated Financial Statements.
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PATHWARD FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
NOTE 1. BASIS OF PRESENTATION
The interim unaudited Condensed Consolidated Financial Statements contained herein should be read in conjunction with the audited consolidated financial statements and accompanying notes to the consolidated financial statements for the fiscal year ended September 30, 2024 included in Pathward Financial, Inc.’s ("Pathward Financial" or the “Company") Annual Report on Form 10-K, as amended by Amendment No. 1 thereto, filed with the Securities and Exchange Commission ("SEC") on August 29, 2025 (the "Form 10-K/A"). Accordingly, footnote disclosures which would substantially duplicate the disclosures contained in the audited consolidated financial statements have been omitted.
The financial information of the Company included herein has been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial reporting and has been prepared pursuant to the rules and regulations for reporting on Form 10-Q and Rule 10-01 of Regulation S-X. Such information reflects all adjustments (consisting of normal recurring adjustments) that are, in the opinion of management, necessary for a fair presentation of the financial position and results of operations for the periods presented. The results of the three and six months ended March 31, 2025 are not necessarily indicative of the results expected for the fiscal year ending September 30, 2025.
Certain prior fiscal year amounts have been reclassified to conform to the current year financial statement presentation. These reclassifications did not impact previously reported net income, comprehensive income or the statement of financial condition. Additionally, the Company began using "Secondary Market Revenue" on the Condensed Consolidated Statement of Operations for the interim period ending March 31, 2025 versus the previous caption of "Gain (Loss) on Sale of Loans and Leases". This line item exclusively comprises gains or losses realized from the sale of loans and leases, including any adjustments to record loans held for sale at the lower of amortized cost basis or fair value in accordance with ASC 860-20-50-5. There were no reclassifications of fiscal year amounts or prior period amounts as a result of this change in financial statement caption description.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RECENTLY ADOPTED ACCOUNTING STANDARDS UPDATES ("ASU")
Significant accounting policies in effect and disclosed within the Company’s most recent audited consolidated financial statements as of September 30, 2024 remain substantially unchanged.
The following ASU became effective for the Company on October 1, 2024, and did not have a material impact on the Company’s significant accounting policies or Condensed Consolidated Financial Statements:
ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. This ASU improves reportable segment disclosures primarily by enhancing disclosure requirements about significant segment expenses and additional interim disclosure requirements. The amendments will first be applied to the Company's annual financial statements for the year ending September 30, 2025 using a retrospective transition method. This ASU impacts disclosure only, and therefore does not have an impact on our consolidated financial statements.
The following ASUs have been issued and are considered applicable to the Company but have not yet been adopted.
ASU 2023-09, Income Taxes (ASC 740): Improvements to Income Tax Disclosures. This ASU requires enhanced income tax disclosures primarily related to the rate reconciliation and income taxes paid information to provide further transparency surrounding the Company’s income tax position. The amendments in this ASU will be effective for the Company beginning on October 1, 2025. This ASU impacts annual income tax disclosures only. The Company is currently evaluating the impact of such amendments to our Income Tax disclosures.
ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures. This ASU requires entities to disclose specified information about certain costs and expenses within relevant expense captions in both annual and interim financial reporting. If costs and expenses do not fall within one of the disaggregated captions, qualitative description is required. The amendments in this ASU will be effective for the Company beginning October 1, 2027. This ASU impacts disclosure only, and therefore will not impact our
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consolidated financial statements. The Company is currently evaluating the impact of this ASU on required annual and interim disclosures.
NOTE 3. DIVESTITURES
On October 31, 2024, the Company completed the sale of substantially all of the assets and liabilities related to the Bank's commercial insurance premium finance business, a component of the Company's Commercial segment, pursuant to the Asset Purchase and Sale Agreement (the "Purchase Agreement") dated August 28, 2024 with Honor Capital Corporation, a Florida corporation (the "Purchaser"), the successor by assignment to AFS IBEX Financial Services, LLC, and Honor Capital Holdings, LLC as guarantor. The purchase price at closing was based on the net asset value of the assets purchased and liabilities assumed pursuant to the Purchase Agreement plus a $31.2 million premium. The Company has summarized the results of the transaction as follows:
| (Dollars in thousands) | December 31, 2024 | Settlement Adjustments | March 31, 2025 | ||||||||||||||
| Assets Purchased and Liabilities Assumed | |||||||||||||||||
| Cash and cash equivalents | $ | $ | $ | ||||||||||||||
| Loans | ( | ||||||||||||||||
| Premises, furniture, and equipment, net | |||||||||||||||||
| Total assets purchased | $ | $ | ( | $ | |||||||||||||
| Deposits | $ | $ | $ | ||||||||||||||
| Accrued expenses and other liabilities | |||||||||||||||||
| Total liabilities assumed | $ | $ | $ | ||||||||||||||
| Net assets purchased | $ | $ | ( | $ | |||||||||||||
| Consideration paid at close | |||||||||||||||||
| Consideration due | ( | ||||||||||||||||
| Purchase price | ( | ||||||||||||||||
| Premium on transaction | |||||||||||||||||
| Other adjustments: | |||||||||||||||||
| Goodwill derecognition | ( | ( | |||||||||||||||
| Intangible derecognition | ( | ( | |||||||||||||||
| Building lease derecognition | |||||||||||||||||
| Deferred loan origination cost derecognition | ( | ( | |||||||||||||||
| Transaction costs | ( | ( | |||||||||||||||
| Total other adjustments | ( | ( | ( | ||||||||||||||
| Gain on divestitures | $ | $ | ( | $ | |||||||||||||
After final settlement adjustments, the sale resulted in an overall gain of $15.0 million before tax that was recognized within noninterest income on the Company's Condensed Consolidated Statements of Operations. The settlement adjustments during the three months ended March 31, 2025 resulted in a $1.4 million decrease of the previously recognized gain as of December 31, 2024 as a result of certain deferred loan origination costs that were excluded from the final settlement. See Note 8. Goodwill and Intangible Assets and Note 9. Operating Lease Right-of-Use Assets and Liabilities to the Condensed Consolidated Financial Statements for further information on the amounts included in the divestiture.
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NOTE 4. SECURITIES
The amortized cost, gross unrealized gains and losses and estimated fair values of debt securities available for sale ("AFS") and held to maturity ("HTM") are presented below.
| (Dollars in thousands) | Amortized Cost | Gross Unrealized Gains | Gross Unrealized (Losses) | Fair Value | ||||||||||
| Debt Securities AFS | ||||||||||||||
| March 31, 2025 | ||||||||||||||
| Corporate securities | $ | $ | $ | ( | $ | |||||||||
| SBA securities | ( | |||||||||||||
| Obligations of states and political subdivisions | ||||||||||||||
| Non-bank qualified obligations of states and political subdivisions | ( | |||||||||||||
| Asset-backed securities | ( | |||||||||||||
| Mortgage-backed securities | ( | |||||||||||||
| Total debt securities AFS | $ | $ | $ | ( | $ | |||||||||
| September 30, 2024 | ||||||||||||||
| Corporate securities | $ | $ | $ | ( | $ | |||||||||
| SBA securities | ( | |||||||||||||
| Obligations of states and political subdivisions | ( | |||||||||||||
| Non-bank qualified obligations of states and political subdivisions | ( | |||||||||||||
| Asset-backed securities | ( | |||||||||||||
| Mortgage-backed securities | ( | |||||||||||||
| Total debt securities AFS | $ | $ | $ | ( | $ | |||||||||
| Debt Securities HTM | ||||||||||||||
| March 31, 2025 | ||||||||||||||
| Non-bank qualified obligations of states and political subdivisions | $ | $ | $ | ( | $ | |||||||||
| Mortgage-backed securities | ( | |||||||||||||
| Total debt securities HTM | $ | $ | $ | ( | $ | |||||||||
| September 30, 2024 | ||||||||||||||
| Non-bank qualified obligations of states and political subdivisions | $ | $ | $ | ( | $ | |||||||||
| Mortgage-backed securities | ( | |||||||||||||
| Total debt securities HTM | $ | $ | $ | ( | $ | |||||||||
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Gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous loss position, were as follows:
| LESS THAN 12 MONTHS | OVER 12 MONTHS | TOTAL | ||||||||||||||||||||||||
| (Dollars in thousands) | Fair Value | Gross Unrealized (Losses) | Fair Value | Gross Unrealized (Losses) | Fair Value | Gross Unrealized (Losses) | ||||||||||||||||||||
| Debt Securities AFS | ||||||||||||||||||||||||||
| March 31, 2025 | ||||||||||||||||||||||||||
| Corporate securities | $ | $ | $ | $ | ( | $ | $ | ( | ||||||||||||||||||
| SBA securities | ( | ( | ||||||||||||||||||||||||
| Non-bank qualified obligations of states and political subdivisions | ( | ( | ||||||||||||||||||||||||
| Asset-backed securities | ( | ( | ( | |||||||||||||||||||||||
| Mortgage-backed securities | ( | ( | ( | |||||||||||||||||||||||
| Total debt securities AFS | $ | $ | ( | $ | $ | ( | $ | $ | ( | |||||||||||||||||
| September 30, 2024 | ||||||||||||||||||||||||||
| Corporate securities | $ | $ | $ | $ | ( | $ | $ | ( | ||||||||||||||||||
| SBA securities | ( | ( | ||||||||||||||||||||||||
| Obligations of state and political subdivisions | ( | ( | ||||||||||||||||||||||||
| Non-bank qualified obligations of states and political subdivisions | ( | ( | ||||||||||||||||||||||||
| Asset-backed securities | ( | ( | ( | |||||||||||||||||||||||
| Mortgage-backed securities | ( | ( | ( | |||||||||||||||||||||||
| Total debt securities AFS | $ | $ | ( | $ | $ | ( | $ | $ | ( | |||||||||||||||||
| Debt Securities HTM | ||||||||||||||||||||||||||
| March 31, 2025 | ||||||||||||||||||||||||||
| Non-bank qualified obligations of states and political subdivisions | $ | $ | $ | $ | ( | $ | $ | ( | ||||||||||||||||||
| Mortgage-backed securities | ( | ( | ||||||||||||||||||||||||
| Total debt securities HTM | $ | $ | $ | $ | ( | $ | $ | ( | ||||||||||||||||||
| September 30, 2024 | ||||||||||||||||||||||||||
| Non-bank qualified obligations of states and political subdivisions | $ | $ | $ | $ | ( | $ | $ | ( | ||||||||||||||||||
| Mortgage-backed securities | ( | ( | ||||||||||||||||||||||||
| Total debt securities HTM | $ | $ | $ | $ | ( | $ | $ | ( | ||||||||||||||||||
The decrease in the fair value of investment securities balances when comparing March 31, 2025 to September 30, 2024 was primarily driven by the sale of $217.9 million debt securities AFS and principal pay downs during the six months. The sale of debt securities AFS in the first quarter of fiscal 2025 stemmed from the decision to offset the gain on the sale of the commercial insurance premium finance business. The sale of debt securities AFS in the second quarter of fiscal 2025 stemmed from the decision to offset the gain on the sale of the transportation portfolio within working capital. Individual securities were identified for sale upon close of the transactions in order to reposition the debt securities AFS portfolio. At March 31, 2025, there were 152 debt securities AFS in an unrealized loss position. Management assessed each investment security with unrealized losses for credit loss by evaluating qualitative factors, including materiality of loss position as a percentage of book value, credit ratings, outstanding principal and interest payments, and changes in the underlying implicit or explicit guarantee of the security, and determined all unrealized losses on these securities were due to adverse market conditions and/or change in interest rates versus credit loss. As part of that assessment, management evaluated and concluded that it is more-likely-than-not that the Company will not be required and does not intend to sell any of the securities prior to recovery of the amortized cost. At March 31, 2025, there was no allowance for credit losses ("ACL") for debt securities AFS.
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The amortized cost and fair value of debt securities by contractual maturity are shown below. Certain securities have call features which allow the issuer to call the security prior to maturity. Expected maturities may differ from contractual maturities in MBS because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Therefore, MBS are not included in the maturity categories in the following maturity summary. The expected maturities of certain SBA securities may differ from contractual maturities because the borrowers may have the right to prepay the obligation. However, certain prepayment penalties may apply.
| (Dollars in thousands) | March 31, 2025 | September 30, 2024 | |||||||||||||||
| Debt Securities AFS | Amortized Cost | Fair Value | Amortized Cost | Fair Value | |||||||||||||
| Due in one year or less | $ | $ | $ | $ | |||||||||||||
| Due after one year through five years | |||||||||||||||||
| Due after five years through ten years | |||||||||||||||||
| Due after ten years | |||||||||||||||||
| Mortgage-backed securities | |||||||||||||||||
| Total debt securities AFS | $ | $ | $ | $ | |||||||||||||
| Debt Securities HTM | |||||||||||||||||
| Due after ten years | $ | $ | $ | $ | |||||||||||||
| Mortgage-backed securities | |||||||||||||||||
| Total debt securities HTM | $ | $ | $ | $ | |||||||||||||
Federal Reserve Bank ("FRB") Stock. The Bank is required by federal law to subscribe to capital stock (divided into shares of $100 each) as a member of the FRB of Minneapolis with an amount equal to six per centum of the paid-up capital stock and surplus. One-half of the subscription is paid at time of application, and one-half is subject to call of the Board of Governors of the Federal Reserve System. FRB of Minneapolis stock held by the Bank totaled $19.7
Federal Home Loan Bank ("FHLB") Stock. The Company's borrowings from the FHLB are secured by specific investment securities. Such advances can be made pursuant to several different credit programs, each of which has its own interest rate and range of maturities.
The investments in the FHLB stock are required investments related to the Company's membership in and current borrowings from the FHLB of Des Moines. The investments in the FHLB of Des Moines could be adversely impacted by the financial operations of the FHLB and actions of their regulator, the Federal Housing Finance Agency.
The FHLB stock is carried at cost since it is generally redeemable at par value. The carrying value of the stock held at the FHLB was $4.6 million and $16.3 million at March 31, 2025 and at September 30, 2024, respectively.
These equity securities are ‘restricted’ in that they can only be sold back to the respective institution from which they were acquired or another member institution at par. Therefore, FRB and FHLB stocks are less liquid than other marketable equity securities, and the cost approximates fair value.
Equity Securities. The Company held $3.6 million and $3.3 million in marketable equity securities within other assets on the Condensed Consolidated Statements of Financial Condition at March 31, 2025 and September 30, 2024, respectively. The Company recognized $0.1 million unrealized losses and no unrealized gains on marketable equity securities during the six months ended March 31, 2025 and 2024, respectively. No such securities were sold during the six months ended March 31, 2025.
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Non-marketable equity securities with a readily determinable fair value totaled $12.8 million and $11.8 million at March 31, 2025 and September 30, 2024, respectively. These securities are held within other assets on the Condensed Consolidated Statements of Financial Condition. The Company recognized $0.8 million and $0.4 million in unrealized gains during the six months ended March 31, 2025 and 2024, respectively. No such securities were sold during the six months ended March 31, 2025.
Non-marketable equity securities without readily determinable fair value totaled $14.7 million and $13.6 million at March 31, 2025 and September 30, 2024, respectively, reflecting Company ownership interests in other entities through its Pathward Venture Capital, LLC, a wholly-owned service corporation subsidiary of the Bank that was formed in 2017 for the purpose of making minority equity investments and other corporate investments. During the six months ended March 31, 2025, the Company recognized a $0.4 million gain on Visa shares which were carried at a cost basis of $0. This gain was recognized within the gain on sale of other on the Condensed Consolidated Statements of Operations. There were no additional such securities sold during the six months ended March 31, 2025.
Equity Securities Impairment. The Company evaluates impairment for investments held at cost on at least an annual basis based on the ultimate recoverability of the par value. All other equity investments, including those under the equity method, are reviewed for other-than-temporary impairment on at least a quarterly basis. The Company recognized no impairment for such investments for the six months ended March 31, 2025 and 2024.
NOTE 5. LOANS AND LEASES, NET
Loans and leases consist of the following:
| (Dollars in thousands) | March 31, 2025 | September 30, 2024 | |||||||||
| Term lending | $ | $ | |||||||||
| Asset-based lending | |||||||||||
| Factoring | |||||||||||
| Lease financing | |||||||||||
| SBA/USDA | |||||||||||
| Other commercial finance | |||||||||||
| Commercial finance | |||||||||||
| Consumer finance | |||||||||||
| Tax services | |||||||||||
| Warehouse finance | |||||||||||
| Total loans and leases | |||||||||||
| Net deferred loan origination costs (fees) | ( | ||||||||||
| Total gross loans and leases | |||||||||||
| Allowance for credit losses | ( | ( | |||||||||
| Total loans and leases, net | $ | $ | |||||||||
During the six months ended March 31, 2025 and 2024, the Company originated $1.38 billion and $933.8 million of commercial finance and consumer finance as held for sale, respectively.
The Company sold held for sale loans resulting in proceeds of $1.15 billion and a $19.8 million gain on sale during the six months ended March 31, 2025. The Company sold held for sale loans resulting in proceeds of $969.0 million and a $1.4 million gain on sale during the six months ended March 31, 2024. Gains and losses from the sale of loans and leases are included in secondary market revenue on the Condensed Consolidated Statements of Operations.
See Note 3. Divestitures to the Condensed Consolidated Financial Statements for further information on the sale of the Company's commercial insurance premium finance business.
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Loans purchased and sold by portfolio segment, including participation interests, were as follows:
| Three Months Ended March 31, | Six Months Ended March 31, | ||||||||||||||||||||||
| (Dollars in thousands) | 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||
| Loans Purchased | |||||||||||||||||||||||
| Loans held for investment: | |||||||||||||||||||||||
| Commercial finance | $ | $ | $ | $ | |||||||||||||||||||
| Warehouse finance | |||||||||||||||||||||||
| Total purchases | $ | $ | $ | $ | |||||||||||||||||||
| Loans Sold | |||||||||||||||||||||||
| Loans held for sale: | |||||||||||||||||||||||
| Commercial finance | $ | $ | $ | $ | |||||||||||||||||||
| Consumer finance | |||||||||||||||||||||||
| Total sales | $ | $ | $ | $ | |||||||||||||||||||
Leasing Portfolio. The net investment in direct financing and sales-type leases was comprised of the following:
| (Dollars in thousands) | March 31, 2025 | September 30, 2024 | |||||||||
| Minimum lease payments receivable | $ | $ | |||||||||
| Unguaranteed residual assets | |||||||||||
| Unamortized initial direct costs | |||||||||||
| Unearned income | ( | ( | |||||||||
| Total net investment in direct financing and sales-type leases | $ | $ | |||||||||
The components of total lease income were as follows:
| Three Months Ended March 31, | Six Months Ended March 31, | ||||||||||||||||||||||
| (Dollars in thousands) | 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||
| Interest income - loans and leases | |||||||||||||||||||||||
| Interest income on net investments in direct financing and sales-type leases | $ | $ | $ | $ | |||||||||||||||||||
| Leasing and equipment finance noninterest income | |||||||||||||||||||||||
| Lease income from operating lease payments | |||||||||||||||||||||||
Other(1) | |||||||||||||||||||||||
| Total leasing and equipment finance noninterest income | |||||||||||||||||||||||
| Total lease income | $ | $ | $ | $ | |||||||||||||||||||
(1) Other leasing and equipment finance noninterest income consists of gains (losses) on sales of leased equipment, fees and service charges on leases and gains (losses) on sales of leases. | |||||||||||||||||||||||
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Undiscounted future minimum lease payments receivable for direct financing and sales-type leases, and a reconciliation to the carrying amount recorded at March 31, 2025 were as follows:
| (Dollars in thousands) | |||||
| Remaining in 2025 | $ | ||||
| 2026 | |||||
| 2027 | |||||
| 2028 | |||||
| 2029 | |||||
| Thereafter | |||||
| Total undiscounted future minimum lease payments receivable for direct financing and sales-type leases | |||||
| Third-party residual value guarantees | |||||
| Total carrying amount of minimum lease payments for direct financing and sales-type leases | $ | ||||
The Company did not record any contingent rental income from direct financing and sales-type leases in the six months ended March 31, 2025.
A number of factors that began to affect the economic environment in 2023 have continued into 2025, including economic uncertainty, inflation, increased interest rates, with the Federal Reserve beginning to lower the target federal funds rate at the end of 2024, and geopolitical conflict. Since early 2025, global markets and the U.S. economy have also experienced disruption and volatility resulting from tariffs and other policies of the U.S. administration, which may continue during the remainder of 2025. Management continues to evaluate the loan and lease portfolio in order to assess the impact on repayment sources and underlying collateral that could result in additional losses and the impact to our customers and businesses as a result of these factors impacting the economy and will refine its estimate as developments occur and more information becomes available.
15
Table of Contents
Activity in the allowance for credit losses by portfolio segment was as follows:
| (Dollars in thousands) | Beginning Balance | Provision (Reversal) | Charge-offs | Recoveries | Ending Balance | ||||||||||||
| Three Months Ended March 31, 2025 | |||||||||||||||||
| Allowance for credit losses: | |||||||||||||||||
| Term lending | $ | $ | $ | ( | $ | $ | |||||||||||
| Asset-based lending | ( | ||||||||||||||||
| Factoring | ( | ( | |||||||||||||||
| Lease financing | ( | ||||||||||||||||
| SBA/USDA | ( | ||||||||||||||||
| Other commercial finance | ( | ||||||||||||||||
| Commercial finance | ( | ||||||||||||||||
| Consumer finance | ( | ||||||||||||||||
| Tax services | |||||||||||||||||
| Warehouse finance | |||||||||||||||||
| Total loans and leases | ( | ||||||||||||||||
Unfunded commitments(1) | |||||||||||||||||
| Total | $ | $ | $ | ( | $ | $ | |||||||||||
| (As Restated) | |||||||||||||||||
| Beginning Balance | Provision (Reversal) | Charge-offs | Recoveries | Ending Balance | |||||||||||||
| Three Months Ended March 31, 2024 | |||||||||||||||||
| Allowance for credit losses: | |||||||||||||||||
| Term lending | $ | $ | $ | ( | $ | $ | |||||||||||
| Asset-based lending | ( | ||||||||||||||||
| Factoring | ( | ( | |||||||||||||||
| Lease financing | ( | ||||||||||||||||
| Insurance premium finance | ( | ( | |||||||||||||||
| SBA/USDA | ( | ||||||||||||||||
| Other commercial finance | ( | ||||||||||||||||
| Commercial finance | ( | ||||||||||||||||
| Consumer finance | ( | ||||||||||||||||
| Tax services | |||||||||||||||||
| Warehouse finance | |||||||||||||||||
| Total loans and leases | ( | ||||||||||||||||
Unfunded commitments(1) | |||||||||||||||||
| Total | $ | $ | $ | ( | $ | $ | |||||||||||
(1) Reserve for unfunded commitments is recognized within other liabilities on the Condensed Consolidated Statements of Financial Condition. | |||||||||||||||||
16
Table of Contents
| (Dollars in thousands) | Beginning Balance | Provision (Reversal) | Charge-offs | Recoveries | Ending Balance | ||||||||||||
| Six Months Ended March 31, 2025 | |||||||||||||||||
| Allowance for credit losses: | |||||||||||||||||
| Term lending | $ | $ | $ | ( | $ | $ | |||||||||||
| Asset-based lending | ( | ||||||||||||||||
| Factoring | ( | ( | |||||||||||||||
| Lease financing | ( | ||||||||||||||||
| Insurance premium finance | ( | ||||||||||||||||
| SBA/USDA | ( | ||||||||||||||||
| Other commercial finance | ( | ||||||||||||||||
| Commercial finance | ( | ||||||||||||||||
| Consumer finance | ( | ||||||||||||||||
| Tax services | ( | ||||||||||||||||
| Warehouse finance | |||||||||||||||||
| Total loans and leases | ( | ||||||||||||||||
Unfunded commitments(1) | |||||||||||||||||
| Total | $ | $ | $ | ( | $ | $ | |||||||||||
| (As Restated) | |||||||||||||||||
| Beginning Balance | Provision (Reversal) | Charge-offs | Recoveries | Ending Balance | |||||||||||||
| Six Months Ended March 31, 2024 | |||||||||||||||||
| Allowance for credit losses: | |||||||||||||||||
| Term lending | $ | $ | $ | ( | $ | $ | |||||||||||
| Asset-based lending | ( | ||||||||||||||||
| Factoring | ( | ||||||||||||||||
| Lease financing | ( | ( | |||||||||||||||
| Insurance premium finance | ( | ( | |||||||||||||||
| SBA/USDA | ( | ||||||||||||||||
| Other commercial finance | ( | ||||||||||||||||
| Commercial finance | ( | ||||||||||||||||
| Consumer finance | ( | ||||||||||||||||
| Tax services | ( | ||||||||||||||||
| Warehouse finance | |||||||||||||||||
| Total loans and leases | ( | ||||||||||||||||
Unfunded commitments(1) | |||||||||||||||||
| Total | $ | $ | $ | ( | $ | $ | |||||||||||
(1) Reserve for unfunded commitments is recognized within other liabilities on the Condensed Consolidated Statements of Financial Condition. | |||||||||||||||||
Information on loans and leases that are deemed to be collateral dependent and are evaluated individually for the ACL was as follows:
17
Table of Contents
| (Dollars in thousands) | March 31, 2025 | September 30, 2024 | |||||||||
| Term lending | $ | $ | |||||||||
| Asset-based lending | |||||||||||
| Factoring | |||||||||||
| Lease financing | |||||||||||
| SBA/USDA | |||||||||||
Commercial finance(1) | |||||||||||
| Total | $ | $ | |||||||||
(1) For commercial finance, collateral dependent financial assets have collateral in the form of cash, equipment, or other business assets. | |||||||||||
Management has identified certain structured finance credits for alternative energy projects in which a substantial cash collateral account has been established to mitigate credit risk. Due to the nature of the transactions and significant cash collateral positions, these credits are evaluated individually. The balance of these pass rated cash collateral loans totaled $117.5 million and $105.1 million at March 31, 2025 and at September 30, 2024, respectively.
Federal regulations provide for the classification of loans and other assets such as debt and equity securities considered by the Bank's primary regulator, the OCC, to be of lesser quality as “substandard,” “doubtful” or “loss.” The loan classification and risk rating definitions are as follows:
Pass - A pass asset is of sufficient quality in terms of repayment, collateral and management to preclude a special mention or an adverse rating.
Watch - A watch asset is generally a credit performing well under current terms and conditions but with identifiable weakness meriting additional scrutiny and corrective measures. Watch is not a regulatory classification but can be used to designate assets that are exhibiting one or more weaknesses that deserve management’s attention. These assets are of better quality than special mention assets.
Special Mention - A special mention asset is a credit with potential weaknesses deserving management’s close attention and, if left uncorrected, may result in deterioration of the repayment prospects for the asset. Special mention assets are not adversely classified and do not expose an institution to sufficient risk to warrant adverse classification. Special mention is a temporary status with aggressive credit management required to garner adequate progress and move to watch or higher.
The adverse classifications are as follows:
Substandard - A substandard asset is inadequately protected by the net worth and/or repayment ability or by a weak collateral position. Assets so classified will have well-defined weaknesses creating a distinct possibility the Bank will sustain some loss if the weaknesses are not corrected. Loss potential does not have to exist for an asset to be classified as substandard.
Doubtful - A doubtful asset has weaknesses similar to those classified substandard, with the degree of weakness causing the likely loss of some principal in any reasonable collection effort. Due to pending factors, the asset’s classification as loss is not yet appropriate.
Loss - A loss asset is considered uncollectible and of such little value that the asset’s continuance on the Bank’s balance sheet is no longer warranted. This classification does not necessarily mean an asset has no recovery or salvage value leaving room for future collection efforts.
Loans and leases, or portions thereof, are generally charged off when collection of principal becomes doubtful. Typically, this is associated with a delay or shortfall in payments of 120 days or more for consumer credit products and leases, and 90 days or more for commercial finance loans. Action is taken to charge off electronic return originator ("ERO") loans if such loans have not been collected by the end of June and refund advance loans if such loans have not been collected by the end of the calendar year. The Company individually evaluates loans and leases that do not share similar risk characteristics with other financial assets, which generally means loans and leases identified as modifications or loans and leases on nonaccrual status.
18
Table of Contents
The Company recognizes that concentrations of credit may naturally occur and may take the form of a large volume of related loans and leases to an individual, a specific industry, or a geographic location. Credit concentration is a direct, indirect, or contingent obligation that has a common bond where the aggregate exposure equals or exceeds a certain percentage of the Company’s Tier 1 Capital plus the allowable Allowance for Credit Losses.
The Company has various portfolios of consumer finance 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 its evaluation of the appropriateness of the ACL on these portfolios, and as such, these loans are not included in the asset classification table below. The outstanding balances of consumer finance loans and tax services loans were $246.2 million and $56.0 million at March 31, 2025, respectively, and $248.8 million and $8.8 million at September 30, 2024, respectively.
The amortized cost basis of loans and leases by asset classification and year of origination was as follows:
| Amortized Cost Basis | ||||||||||||||||||||||||||
| (Dollars in thousands) | Term Loans and Leases by Origination Year | Revolving Loans and Leases | Total | |||||||||||||||||||||||
| March 31, 2025 | 2025 | 2024 | 2023 | 2022 | 2021 | Prior | ||||||||||||||||||||
| Term lending | ||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Watch | ||||||||||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||
| Total | ||||||||||||||||||||||||||
| Current period charge-offs | ||||||||||||||||||||||||||
| Asset-based lending | ||||||||||||||||||||||||||
| Pass | ||||||||||||||||||||||||||
| Watch | ||||||||||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||
| Total | ||||||||||||||||||||||||||
| Current period charge-offs | ||||||||||||||||||||||||||
| Factoring | ||||||||||||||||||||||||||
| Pass | ||||||||||||||||||||||||||
| Watch | ||||||||||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||
| Total | ||||||||||||||||||||||||||
| Current period charge-offs | ||||||||||||||||||||||||||
| Lease financing | ||||||||||||||||||||||||||
| Pass | ||||||||||||||||||||||||||
| Watch | ||||||||||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||
| Total | ||||||||||||||||||||||||||
| Current period charge-offs | ||||||||||||||||||||||||||
| Insurance premium finance | ||||||||||||||||||||||||||
| Current period charge-offs | ||||||||||||||||||||||||||
| SBA/USDA | ||||||||||||||||||||||||||
| Pass | ||||||||||||||||||||||||||
| Watch | ||||||||||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||
19
Table of Contents
| Substandard | ||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||
| Total | ||||||||||||||||||||||||||
| Current period charge-offs | ||||||||||||||||||||||||||
| Other commercial finance | ||||||||||||||||||||||||||
| Pass | ||||||||||||||||||||||||||
| Watch | ||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||
| Total | ||||||||||||||||||||||||||
| Current period charge-offs | ||||||||||||||||||||||||||
| Warehouse finance | ||||||||||||||||||||||||||
| Pass | ||||||||||||||||||||||||||
| Total | ||||||||||||||||||||||||||
| Current period charge-offs | ||||||||||||||||||||||||||
| Total loans and leases | ||||||||||||||||||||||||||
| Pass | ||||||||||||||||||||||||||
| Watch | ||||||||||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Current period charge-offs | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Amortized Cost Basis | ||||||||||||||||||||||||||
| (Dollars in thousands) | Term Loans and Leases by Origination Year | Revolving Loans and Leases | Total | |||||||||||||||||||||||
| September 30, 2024 | 2024 | 2023 | 2022 | 2021 | 2020 | Prior | ||||||||||||||||||||
| Term lending | ||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Watch | ||||||||||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||
| Total | ||||||||||||||||||||||||||
| Current period charge-offs | ||||||||||||||||||||||||||
| Asset-based lending | ||||||||||||||||||||||||||
| Pass | ||||||||||||||||||||||||||
| Watch | ||||||||||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||
| Total | ||||||||||||||||||||||||||
| Current period charge-offs | ||||||||||||||||||||||||||
| Factoring | ||||||||||||||||||||||||||
| Pass | ||||||||||||||||||||||||||
| Watch | ||||||||||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||
| Total | ||||||||||||||||||||||||||
| Current period charge-offs | ||||||||||||||||||||||||||
| Lease financing | ||||||||||||||||||||||||||
| Pass | ||||||||||||||||||||||||||
| Watch | ||||||||||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||
20
Table of Contents
| Doubtful | ||||||||||||||||||||||||||
| Total | ||||||||||||||||||||||||||
| Current period charge-offs | ||||||||||||||||||||||||||
| Insurance premium finance | ||||||||||||||||||||||||||
| Current period charge-offs | ||||||||||||||||||||||||||
| SBA/USDA | ||||||||||||||||||||||||||
| Pass | ||||||||||||||||||||||||||
| Watch | ||||||||||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||
| Total | ||||||||||||||||||||||||||
| Current period charge-offs | ||||||||||||||||||||||||||
| Other commercial finance | ||||||||||||||||||||||||||
| Pass | ||||||||||||||||||||||||||
| Watch | ||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||
| Total | ||||||||||||||||||||||||||
| Current period charge-offs | ||||||||||||||||||||||||||
| Warehouse finance | ||||||||||||||||||||||||||
| Pass | ||||||||||||||||||||||||||
| Total | ||||||||||||||||||||||||||
| Current period charge-offs | ||||||||||||||||||||||||||
| Total loans and leases | ||||||||||||||||||||||||||
| Pass | ||||||||||||||||||||||||||
| Watch | ||||||||||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Current period charge-offs | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
21
Table of Contents
Past due loans and leases were as follows:
| 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 | |||||||||||||||||||||||
| March 31, 2025 | ||||||||||||||||||||||||||||||||
| Loans held for sale | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Term lending | ||||||||||||||||||||||||||||||||
| Asset-based lending | ||||||||||||||||||||||||||||||||
| Factoring | ||||||||||||||||||||||||||||||||
| Lease financing | ||||||||||||||||||||||||||||||||
| SBA/USDA | ||||||||||||||||||||||||||||||||
| Other commercial finance | ||||||||||||||||||||||||||||||||
| Commercial finance | ||||||||||||||||||||||||||||||||
| Consumer finance | ||||||||||||||||||||||||||||||||
| Tax services | ||||||||||||||||||||||||||||||||
| Warehouse finance | ||||||||||||||||||||||||||||||||
| Total loans and leases held for investment | ||||||||||||||||||||||||||||||||
| Total loans and leases | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| September 30, 2024 | ||||||||||||||||||||||||||||||||
| Loans held for sale | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Term lending | ||||||||||||||||||||||||||||||||
| Asset-based lending | ||||||||||||||||||||||||||||||||
| Factoring | ||||||||||||||||||||||||||||||||
| Lease financing | ||||||||||||||||||||||||||||||||
| SBA/USDA | ||||||||||||||||||||||||||||||||
| Other commercial finance | ||||||||||||||||||||||||||||||||
| Commercial finance | ||||||||||||||||||||||||||||||||
| Consumer finance | ||||||||||||||||||||||||||||||||
| Tax services | ||||||||||||||||||||||||||||||||
| Warehouse finance | ||||||||||||||||||||||||||||||||
| Total loans and leases held for investment | ||||||||||||||||||||||||||||||||
| Total loans and leases | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
22
Table of Contents
Nonaccrual loans and leases by year of origination were as follows:
| Amortized Cost Basis | |||||||||||||||||||||||||||||
| (Dollars in thousands) | Term Loans and Leases by Origination Year | Revolving Loans and Leases | Total | Nonaccrual with No ACL | |||||||||||||||||||||||||
| March 31, 2025 | 2025 | 2024 | 2023 | 2022 | 2021 | Prior | |||||||||||||||||||||||
| Term lending | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||
| Asset-based lending | |||||||||||||||||||||||||||||
| Factoring | |||||||||||||||||||||||||||||
| Lease financing | |||||||||||||||||||||||||||||
| SBA/USDA | |||||||||||||||||||||||||||||
| Commercial finance | |||||||||||||||||||||||||||||
| Total nonaccrual loans and leases | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||
| Amortized Cost Basis | |||||||||||||||||||||||||||||
| (Dollars in thousands) | Term Loans and Leases by Origination Year | Revolving Loans and Leases | Total | Nonaccrual with No ACL | |||||||||||||||||||||||||
| September 30, 2024 | 2024 | 2023 | 2022 | 2021 | 2020 | Prior | |||||||||||||||||||||||
| Term lending | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||
| Factoring | |||||||||||||||||||||||||||||
| Lease financing | |||||||||||||||||||||||||||||
| SBA/USDA | |||||||||||||||||||||||||||||
| Commercial finance | |||||||||||||||||||||||||||||
| Total nonaccrual loans and leases | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||
Loans and leases that are 90 days or more delinquent and accruing by year of origination were as follows:
| Amortized Cost Basis | ||||||||||||||||||||||||||
| (Dollars in thousands) | Term Loans and Leases by Origination Year | Revolving Loans and Leases | Total | |||||||||||||||||||||||
| March 31, 2025 | 2025 | 2024 | 2023 | 2022 | 2021 | Prior | ||||||||||||||||||||
| Term lending | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| SBA/USDA | ||||||||||||||||||||||||||
| Commercial finance | ||||||||||||||||||||||||||
| Consumer finance | ||||||||||||||||||||||||||
| Total loans and leases held for investment | ||||||||||||||||||||||||||
| Total 90 days or more delinquent and accruing | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Amortized Cost Basis | ||||||||||||||||||||||||||
| (Dollars in thousands) | Term Loans and Leases by Origination Year | Revolving Loans and Leases | Total | |||||||||||||||||||||||
| September 30, 2024 | 2024 | 2023 | 2022 | 2021 | 2020 | Prior | ||||||||||||||||||||
| Loans held for sale | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Term lending | ||||||||||||||||||||||||||
| Lease financing | ||||||||||||||||||||||||||
| SBA/USDA | ||||||||||||||||||||||||||
| Commercial finance | ||||||||||||||||||||||||||
| Consumer finance | ||||||||||||||||||||||||||
| Tax services | ||||||||||||||||||||||||||
| Total loans and leases held for investment | ||||||||||||||||||||||||||
| Total 90 days or more delinquent and accruing | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
23
Table of Contents
Certain loans and leases 90 days or more past due as to interest or principal continue to accrue because they are (1) well-secured and in the process of collection or (2) consumer loans exempt under regulatory rules from being classified as nonaccrual until later delinquency, usually 120 days past due.
The following table provides the average recorded investment in nonaccrual loans and leases:
| Three Months Ended March 31, | Six Months Ended March 31, | ||||||||||||||||||||||
| (Dollars in thousands) | 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||
| Term lending | $ | $ | $ | $ | |||||||||||||||||||
| Asset-based lending | |||||||||||||||||||||||
| Factoring | |||||||||||||||||||||||
| Lease financing | |||||||||||||||||||||||
| SBA/USDA | |||||||||||||||||||||||
| Commercial finance | |||||||||||||||||||||||
| Total loans and leases | $ | $ | $ | $ | |||||||||||||||||||
The recognized interest income on the Company's nonaccrual loans and leases for the three and six months ended March 31, 2025 and 2024 was not significant.
Modifications made to borrowers experiencing financial difficulty during the three and six months ended March 31, 2025 were $5.9 million and $9.1 million, respectively, in the commercial finance loan portfolio. The types of modifications granted were term extensions. Modifications made to borrowers experiencing financial difficulty during the three and six months ended March 31, 2024 were $1.6
During the six months ended March 31, 2025, the Company had $6.1 million of commercial finance loans where a modification was granted in the previous 12 months in which there was a payment default. As of March 31, 2025, no modifications granted during the current six month period were in the 60-89 days past due category. During the six months ended March 31, 2024, the Company had no modifications granted in the previous 12 months in which there was a payment default.
NOTE 6. EARNINGS PER COMMON SHARE ("EPS")
The Company has granted restricted share awards with dividend rights that are considered to be participating securities. Accordingly, a portion of the Company’s earnings is allocated to those participating securities in the earnings per share calculation under the two-class method. Basic EPS is computed using the two-class method by dividing income available to common stockholders after the allocation of dividends and undistributed earnings to the participating securities by the weighted average number of common shares outstanding for the period. Diluted EPS is calculated using the more dilutive of the two-class method or the treasury stock method. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised, and is computed after giving consideration to the weighted average dilutive effect upon vesting of performance share units ("PSUs") and restricted stock grants, and after the allocation of earnings to the participating securities. Antidilutive securities are disregarded in earnings per share calculations. Diluted EPS shown below reflects the two-class method, as diluted EPS under the two-class method was more dilutive than under the treasury stock method.
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A reconciliation of net income and common stock share amounts used in the computation of basic and diluted earnings per share is presented below.
| Three Months Ended March 31, | Six Months Ended March 31, | ||||||||||||||||||||||
| (Dollars in thousands, except per share data) | 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||
| (As Restated) | (As Restated) | ||||||||||||||||||||||
| Basic income per common share: | |||||||||||||||||||||||
| Net income attributable to Pathward Financial, Inc. | $ | $ | $ | $ | |||||||||||||||||||
| Dividends and undistributed earnings allocated to participating securities | ( | ( | ( | ( | |||||||||||||||||||
| Basic net earnings available to common stockholders | |||||||||||||||||||||||
| Undistributed earnings allocated to nonvested restricted stockholders | |||||||||||||||||||||||
| Reallocation of undistributed earnings to nonvested restricted stockholders | ( | ( | ( | ( | |||||||||||||||||||
| Diluted net earnings available to common stockholders | $ | $ | $ | $ | |||||||||||||||||||
| Total weighted-average basic common shares outstanding | |||||||||||||||||||||||
Effect of dilutive securities(1) | |||||||||||||||||||||||
| PSUs | |||||||||||||||||||||||
| Total effect of dilutive securities | |||||||||||||||||||||||
| Total weighted-average diluted common shares outstanding | |||||||||||||||||||||||
| Net earnings per common share: | |||||||||||||||||||||||
| Basic earnings per common share | $ | $ | $ | $ | |||||||||||||||||||
Diluted earnings per common share(2) | $ | $ | $ | $ | |||||||||||||||||||
(1) Represents the effect of the assumed vesting of PSUs and restricted stock, as applicable, utilizing the treasury stock method.
(2) Excluded from the computation of diluted earnings per share for the three months ended March 31, 2025 and 2024, respectively, were 83,665 and 204,877 weighted average share of nonvested restricted stock because their inclusion would be anti-dilutive. Excluded from the computation of diluted earnings per share for the six months ended March 31, 2025 and 2024, respectively, were 92,172 and 206,060 weighted average shares of nonvested restricted stock because their inclusion would be anti-dilutive.
NOTE 7. RENTAL EQUIPMENT, NET
Rental equipment consists of the following:
| (Dollars in thousands) | March 31, 2025 | September 30, 2024 | |||||||||
| Computers and IT networking equipment | $ | $ | |||||||||
| Motor vehicles and other | |||||||||||
| Other furniture and equipment | |||||||||||
| Solar panels and equipment | |||||||||||
| Total | |||||||||||
| Accumulated depreciation | ( | ( | |||||||||
| Unamortized initial direct costs | |||||||||||
| Net book value | $ | $ | |||||||||
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Future minimum lease payments expected to be received for operating leases at March 31, 2025 were as follows:
| (Dollars in thousands) | |||||
| Remaining in 2025 | $ | ||||
| 2026 | |||||
| 2027 | |||||
| 2028 | |||||
| 2029 | |||||
| Thereafter | |||||
| Total | $ | ||||
NOTE 8. GOODWILL AND INTANGIBLE ASSETS
The Company held a total of $297.9 million of goodwill at March 31, 2025. The recorded goodwill is a result of multiple business combinations that occurred from 2015 to 2018. During the six months ended March 31, 2025, the Company closed on the sale of the commercial insurance premium finance business and derecognized the goodwill associated with that reporting unit. The goodwill was included in the carrying amount of the disposed business. See Note 3. Divestitures to the Condensed Consolidated Financial Statements for further information.
The changes in the carrying amount of the Company's goodwill were as follows:
| (Dollars in thousands) | Consumer | Commercial | Corporate Services/Other | Total | ||||||||||
| September 30, 2024 | $ | $ | $ | $ | ||||||||||
| Divestiture | ( | ( | ||||||||||||
| March 31, 2025 | $ | $ | $ | $ | ||||||||||
| September 30, 2023 | $ | $ | $ | $ | ||||||||||
| March 31, 2024 | $ | $ | $ | $ | ||||||||||
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The changes in the carrying amount of the Company’s intangible assets during the six months ended March 31, 2025 include certain intangibles disposed of as part of the commercial insurance premium finance business sale. The relevant intangibles were included in the carrying amount of the disposed business. See Note 3. Divestitures to the Condensed Consolidated Financial Statements for further information.
| (Dollars in thousands) | Trademark(1) | Non-Compete | Customer Relationships(2) | All Others(3) | Total | ||||||||||||
| September 30, 2024 | $ | $ | $ | $ | $ | ||||||||||||
| Amortization during the period | ( | ( | ( | ( | |||||||||||||
| Write-offs and disposals during the period | ( | ( | |||||||||||||||
| March 31, 2025 | $ | $ | $ | $ | $ | ||||||||||||
| Gross carrying amount | $ | $ | $ | $ | $ | ||||||||||||
| Accumulated amortization | ( | ( | ( | ( | ( | ||||||||||||
| Accumulated impairment | ( | ( | ( | ||||||||||||||
| March 31, 2025 | $ | $ | $ | $ | $ | ||||||||||||
| September 30, 2023 | $ | $ | $ | $ | $ | ||||||||||||
| Amortization during the period | ( | ( | ( | ( | |||||||||||||
| March 31, 2024 | $ | $ | $ | $ | $ | ||||||||||||
| Gross carrying amount | $ | $ | $ | $ | $ | ||||||||||||
| Accumulated amortization | ( | ( | ( | ( | ( | ||||||||||||
| Accumulated impairment | ( | ( | ( | ||||||||||||||
| March 31, 2024 | $ | $ | $ | $ | $ | ||||||||||||
(1) Book amortization period of 5 -15 years. Amortized using the straight line and accelerated methods.
(2) Book amortization period of 10 -30 years. Amortized using the accelerated method.
(3) Book amortization period of 3 -20 years. Amortized using the straight line method.
The estimated amortization expense of intangible assets assumes no activities, such as acquisitions, which would result in additional amortizable intangible assets. Estimated amortization expense of intangible assets in the remaining six months of fiscal 2025 and subsequent fiscal years at March 31, 2025 was as follows:
| (Dollars in thousands) | |||||
| Remaining in 2025 | $ | ||||
| 2026 | |||||
| 2027 | |||||
| 2028 | |||||
| 2029 | |||||
| Thereafter | |||||
| Total anticipated intangible amortization | $ | ||||
There were no
NOTE 9. OPERATING LEASE RIGHT-OF-USE ASSETS AND LIABILITIES
Operating lease right-of-use ("ROU") assets, included in , were $24.1 million and $24.4 million at March 31, 2025 and September 30, 2024, respectively.
Operating lease liabilities, included in , were $25.2 million and $26.0 million at March 31, 2025 and September 30, 2024, respectively.
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The decreases in lease ROU assets and liabilities relate to normal amortization and lease payments made during the six months ended March 31, 2025, but also include adjustments for lease assignments that occurred as a result of the commercial insurance premium finance business sale during the first quarter. Two office locations, Newport Beach, California and Addison, Texas, were included in the sale of the commercial insurance premium finance business and the relevant lease ROU assets and liabilities are no longer reflected in the Company's Condensed Consolidated Financial Statements after the transaction closed. The derecognition of the relevant lease ROU assets and liabilities resulted in a $0.5 million gain on remeasurement that was recognized as part of the overall gain on divestitures from the commercial insurance premium finance business sale. See Note 3. Divestitures to the Condensed Consolidated Financial Statements for further information.
Undiscounted future minimum operating lease payments and a reconciliation to the amount recorded as operating lease liabilities at March 31, 2025 were as follows:
| (Dollars in thousands) | |||||
| Remaining in 2025 | $ | ||||
| 2026 | |||||
| 2027 | |||||
| 2028 | |||||
| 2029 | |||||
| Thereafter | |||||
| Total undiscounted future minimum lease payments | |||||
| Discount | ( | ||||
| Total operating lease liabilities | $ | ||||
The weighted-average discount rate and remaining lease term for operating leases were as follows:
| March 31, 2025 | September 30, 2024 | ||||||||||
| Weighted-average discount rate | % | % | |||||||||
| Weighted-average remaining lease term (years) | |||||||||||
The components of total lease costs for operating leases were as follows:
| Three Months Ended March 31, | Six Months Ended March 31, | ||||||||||||||||||||||
| (Dollars in thousands) | 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||
| Lease expense | $ | $ | $ | $ | |||||||||||||||||||
| Short-term and variable lease cost | |||||||||||||||||||||||
| Sublease income | ( | ( | ( | ( | |||||||||||||||||||
| Total lease cost for operating leases | $ | $ | $ | $ | |||||||||||||||||||
NOTE 10. STOCKHOLDERS' EQUITY
Repurchase of Common Stock. The Company's Board of Directors authorized the September 3, 2021 share repurchase program to repurchase up to 6,000,000 shares of the Company's outstanding common stock. This authorization was effective from September 3, 2021 through September 30, 2024, with 146,435 shares authorized by this repurchase program not repurchased when it expired. On August 25, 2023, the Company's Board of Directors announced a share repurchase program to repurchase up to an additional 7,000,000 shares of the Company's outstanding common stock on or before September 30, 2028. During the six months ended March 31, 2025 and 2024, the Company repurchased 1,277,664 and 996,773 shares, respectively, as part of the share repurchase programs.
Under the repurchase programs, repurchased shares were retired and designated as authorized but unissued shares. The Company accounts for repurchased shares using the par value method under which the repurchase price is credited to paid-in capital up to the par value of those shares. When the repurchase price is greater than the original issue proceeds, the excess is charged to retained earnings. As of March 31, 2025, 5,722,336 shares of common stock remained available for repurchase.
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For the six months ended March 31, 2025 and 2024, the Company also repurchased 66,446 and 122,452 shares, or $4.6 million and $5.8 million, of common stock, respectively, in settlement of employee tax withholding obligations due upon the vesting of restricted stock.
Retirement of Treasury Stock. The Company accounts for the retirement of repurchased shares, including treasury stock, using the par value method under which the repurchase price is charged to paid-in capital up to the amount of the original proceeds of those shares. When the repurchase price is greater than the original issue proceeds, the excess is charged to retained earnings. The Company retired no
NOTE 11. STOCK COMPENSATION
On February 27, 2024, the shareholders of the Company voted to approve the Pathward Financial, Inc. 2023 Omnibus Incentive Plan (the "Plan"). The Plan permits the granting of various types of awards including but not limited to nonvested (restricted) shares and PSUs to certain officers and directors of the Company. Awards may be granted by the Compensation Committee of the Board of Directors based on the performance of the award recipients or other relevant factors.
Shares have previously been granted each year to executives and senior leadership members under the applicable Company incentive plan. These shares vest at various times ranging from immediately to three years based on circumstances at time of grant. The fair value is determined based on the fair market value of the Company’s stock on the grant date. Director shares are issued to the Company’s directors, and these shares have historically vested from immediately to up to one year from the grant date.
The Company also grants selected executives PSU awards. The vesting of these awards is contingent on meeting company-wide performance goals, including earnings per share. PSUs are generally granted at the market value of the underlying share on the date of grant, adjusted for dividends, as PSUs do not participate in dividends. The awards contingently vest over a period of three years and have payout levels ranging from a threshold of 50 % to a maximum of 200 %. Upon vesting, each PSU earned is converted into one share of common stock.
The fair value of the PSUs is determined by the dividend-adjusted fair value on the grant date for those awards subject to a performance condition. For those PSUs subject to a market condition, a simulation valuation is performed.
In addition, during the first and second quarters of fiscal year 2017, shares were granted to certain executive officers of the Company in connection with their signing of employment agreements with the Company. These stock awards vest in equal installments over eight years .
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The following tables show the activity of share awards (including shares of restricted stock subject to vesting, fully-vested restricted stock, and PSUs) granted, exercised or forfeited under all of the Company's incentive plans during the six months ended March 31, 2025.
| Number of Shares | Weighted Average Fair Value at Grant | |||||||
| Restricted Stock Awards | ||||||||
| Nonvested shares outstanding, September 30, 2024 | $ | |||||||
| Granted | ||||||||
| Vested | ( | |||||||
| Forfeited or expired | ( | |||||||
| Nonvested shares outstanding, March 31, 2025 | $ | |||||||
| Restricted Stock Units | ||||||||
| Nonvested shares outstanding, September 30, 2024 | $ | |||||||
| Granted | ||||||||
| Vested | ||||||||
| Forfeited or expired | ( | |||||||
| Nonvested shares outstanding, March 31, 2025 | $ | |||||||
| Number of Units | Weighted Average Fair Value at Grant | |||||||
| PSUs | ||||||||
| PSUs outstanding, September 30, 2024 | $ | |||||||
| Granted | ||||||||
| Vested | ( | |||||||
| Forfeited or expired | ||||||||
| PSUs outstanding, March 31, 2025 | $ | |||||||
Compensation expense for share-based awards is recorded over the vesting period at the fair value of the award at the time of the grant. The exercise price of fair value of nonvested (restricted) shares and PSUs granted under the Company’s incentive plans is equal to the fair market value of the underlying stock at the grant date, adjusted for dividends where applicable. The Company has elected to record forfeitures as they occur.
As of March 31, 2025, stock-based compensation expense not yet recognized in income totaled $11.7 million, which is expected to be recognized over a weighted average remaining period of 1.78 years.
NOTE 12. INCOME TAXES
The Company recorded an income tax expense of $22.2 million for the six months ended March 31, 2025, resulting in an effective tax rate of 17.38 %, compared to an income tax expense of $24.6 million, or an effective tax rate of 18.95 %, for the six months ended March 31, 2024. The Company’s effective tax rate was lower than the U.S. statutory rate of 21% primarily because of the effect of investment tax credits during fiscal year 2025. The Company's effective tax rate in the future will depend in part on actual investment tax credits generated from qualified renewable energy property.
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The table below compares the income tax expense components for the periods presented.
| Six Months Ended March 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| (Dollars in thousands) | (As Restated) | ||||||||||
| Provision at statutory rate | $ | $ | |||||||||
| Tax-exempt income | ( | ( | |||||||||
| State income taxes | |||||||||||
| Interim period effective rate adjustment | ( | ||||||||||
| Tax credit investments, net - federal | ( | ( | |||||||||
| IRC 162(m) nondeductible compensation | |||||||||||
| Other, net | ( | ( | |||||||||
| Income tax expense | $ | $ | |||||||||
| Effective tax rate | % | % | |||||||||
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NOTE 13. REVENUE FROM CONTRACTS WITH CUSTOMERS
Topic 606 applies to all contracts with customers unless such revenue is specifically addressed under existing guidance. The table below presents the Company’s revenue by operating segment. For additional descriptions of the Company’s operating segments, including additional financial information and the underlying management accounting process, see Note 14. Segment Reporting to the Condensed Consolidated Financial Statements.
| (Dollars in thousands) | Consumer | Commercial | Corporate Services/Other | Consolidated Company | |||||||||||||||||||||||||||||||
| (As Restated) | (As Restated) | (As Restated) | (As Restated) | ||||||||||||||||||||||||||||||||
| Three Months Ended March 31, | 2025 | 2024 | 2025 | 2024 | 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||||||||||
Net interest income(1) | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Noninterest income: | |||||||||||||||||||||||||||||||||||
| Refund transfer product fees | |||||||||||||||||||||||||||||||||||
Refund advance and other tax fee income(1) | |||||||||||||||||||||||||||||||||||
| Card and deposit fees | |||||||||||||||||||||||||||||||||||
Rental income(1) | |||||||||||||||||||||||||||||||||||
(Loss) on sale of securities(1) | ( | ( | |||||||||||||||||||||||||||||||||
(Loss) on divestitures(1) | ( | ( | |||||||||||||||||||||||||||||||||
Secondary market revenue(1) | ( | ||||||||||||||||||||||||||||||||||
Gain on sale of other(1) | |||||||||||||||||||||||||||||||||||
Other income(1) | |||||||||||||||||||||||||||||||||||
| Total noninterest income | |||||||||||||||||||||||||||||||||||
| Revenue | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Six Months Ended March 31, | |||||||||||||||||||||||||||||||||||
Net interest income(1) | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Noninterest income: | |||||||||||||||||||||||||||||||||||
| Refund transfer product fees | |||||||||||||||||||||||||||||||||||
Refund advance and other tax fee income(1) | |||||||||||||||||||||||||||||||||||
| Card and deposit fees | |||||||||||||||||||||||||||||||||||
Rental income(1) | |||||||||||||||||||||||||||||||||||
(Loss) on sale of securities(1) | ( | ( | |||||||||||||||||||||||||||||||||
Gain on divestitures(1) | |||||||||||||||||||||||||||||||||||
Secondary market revenue(1) | ( | ||||||||||||||||||||||||||||||||||
Gain on sale of other(1) | |||||||||||||||||||||||||||||||||||
Other income(1) | |||||||||||||||||||||||||||||||||||
| Total noninterest income | |||||||||||||||||||||||||||||||||||
| Revenue | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
(1) These revenues are not within the scope of Topic 606. Additional details are included in other footnotes to the accompanying financial statements. The scope of Topic 606 explicitly excludes net interest income as well as many other revenues for financial assets and liabilities, including loans, leases, and securities. | |||||||||||||||||||||||||||||||||||
Following is a discussion of key revenues within the scope of Topic 606. The Company provides services to customers that have related performance obligations that must be completed to recognize revenue. Revenues are generally recognized immediately upon the completion of the service or over time as services are performed. Any services performed over time generally require that the Company renders services each period; therefore, the Company measures progress in completing these services based upon the passage of time. Revenue from contracts with customers did not generate significant contract assets and liabilities for the six months ended March 31, 2025.
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Refund Transfer Product Fees. Refund transfer fees are specific to the Partner Solutions business line and reflect product fees offered by the Company through third-party tax preparers and tax preparation software providers where the Company acts as the partnering financial institution. A refund transfer allows a taxpayer to pay tax preparation and filing fees directly from their federal or state government tax refund, with the remainder of the refund being disbursed in accordance with the terms and conditions of the taxpayer agreement, which may include satisfaction of other disbursement obligations before going directly to the taxpayer via check, direct deposit, or prepaid card. Refund transfer fees are recognized by the Company immediately after the taxpayer's refund has been disbursed in accordance with the contract and are based on standalone pricing included within the terms and conditions. Certain expenses to tax preparation software providers are netted with refund transfer fee income as the Company is considered the agent in these contractual relationships. All refund transfer fees are recorded within the Consumer reporting segment.
Card and Deposit Fees. Card fees relate to the Partner Solutions business line and consist of income from prepaid cards and merchant services, including interchange fees from prepaid cards processed through card association networks, merchant services and other card related services. Interchange rates are generally set by card association networks based on transaction volume and other factors. Since interchange fees are generated by cardholder activity, the Company recognizes the income as transactions occur. Fee income for merchant services and other card related services reflect account management and transaction fees charged to merchants for processing card association network transactions. The associated income is recognized as transactions occur or as services are performed. For the Company's internally managed prepaid card programs, fees are based on standalone pricing within the terms and conditions of the cardholder agreement. The Company is considered the principal of these relationships resulting in all fee income being presented on a gross basis within the Condensed Consolidated Statement of Operations. For the Company's sponsorship prepaid card programs where a third-party is considered the Program Manager, the fees are based on standalone pricing within the terms and conditions of the Program Agreement. For these relationships, the Company is considered the agent and certain expenses with the Program Manager, networks and associations are netted with card fee revenue. All card fee income is included in the Consumer reporting segment.
Deposit fees relate to the Partner Solutions and Commercial Finance business lines and consist of income from banking and deposit-related services, including account services, overdraft protection, and wire transfers. Fee income for account services is recognized over the course of the month as the performance obligation is satisfied. Fee income for overdraft protection and wire transfers is recognized at the point in time when such event occurs. For partner solutions, the fees for account services and overdraft protection are based on standalone pricing within the terms and conditions of the Program Agreement with the sponsorship partner. For these relationships, the Company is considered the agent and certain expenses with the partner are netted with deposit fee revenue. For Commercial Finance, fees for wire transfers are based on standalone pricing within the terms and conditions of the customer deposit agreement. Bank and deposit fees for the Partner Solutions and Commercial Finance business lines are included in the Consumer and Commercial reporting segments, respectively. Also included within Card and Deposit Fees for the Consumer reporting segment are servicing fees the Company recognizes for off-balance sheet custodial deposits. This fee income is for services the Bank performs to maintain records of cardholder funds placed at one or more third-party banks insured by the Federal Deposit Insurance Corporation ("FDIC"). The servicing fee is typically reflective of the effective federal funds rate ("EFFR").
NOTE 14. SEGMENT REPORTING
An operating segment is generally defined as a component of a business for which discrete financial information is available and whose results are reviewed by the chief operating decision-maker. Operating segments are aggregated into reportable segments if certain criteria are met.
The Company reports its results of operations through the following three business segments: Consumer, Commercial, and Corporate Services/Other. The Partner Solutions business line is reported in the Consumer segment. The Commercial Finance business line is reported in the Commercial segment. The Corporate Services/Other segment includes certain shared services as well as treasury related functions such as the investment portfolio, warehouse finance, wholesale deposits, and borrowings.
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The following table presents segment data for the Company:
| (Dollars in thousands) | Consumer | Commercial | Corporate Services/Other | Total | |||||||||||||||||||||||||||||||
| (As Restated) | (As Restated) | (As Restated) | (As Restated) | ||||||||||||||||||||||||||||||||
| Three Months Ended March 31, | 2025 | 2024 | 2025 | 2024 | 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||||||||||
| Net interest income | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Provision for credit loss | |||||||||||||||||||||||||||||||||||
| Noninterest income | |||||||||||||||||||||||||||||||||||
| Noninterest expense | |||||||||||||||||||||||||||||||||||
| Income (loss) before income tax expense | ( | ( | |||||||||||||||||||||||||||||||||
| Total assets | |||||||||||||||||||||||||||||||||||
| Total goodwill | |||||||||||||||||||||||||||||||||||
| Total deposits | |||||||||||||||||||||||||||||||||||
| Six Months Ended March 31, | |||||||||||||||||||||||||||||||||||
| Net interest income | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Provision for credit loss | |||||||||||||||||||||||||||||||||||
| Noninterest income | |||||||||||||||||||||||||||||||||||
| Noninterest expense | |||||||||||||||||||||||||||||||||||
| Income (loss) before income tax expense | ( | ( | |||||||||||||||||||||||||||||||||
| Total assets | |||||||||||||||||||||||||||||||||||
| Total goodwill | |||||||||||||||||||||||||||||||||||
| Total deposits | |||||||||||||||||||||||||||||||||||
NOTE 15. FAIR VALUES OF FINANCIAL INSTRUMENTS
ASC 820, Fair Value Measurements defines fair value, establishes a framework for measuring the fair value of assets and liabilities using a hierarchy system and requires disclosures about fair value measurement. It clarifies that fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the market in which the reporting entity transacts.
The fair value hierarchy is as follows:
Level 1 Inputs - Valuation is based upon quoted prices for identical instruments traded in active markets that the Company has the ability to access at measurement date.
Level 2 Inputs - Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques for which significant assumptions are observable in the market.
Level 3 Inputs - Valuation is generated from model-based techniques that use significant assumptions not observable in the market and are used only to the extent that observable inputs are not available. These unobservable assumptions reflect the Company’s own estimates of assumptions that market participants would use in pricing the asset or liability.
Debt Securities AFS and HTM. Debt securities AFS are recorded at fair value on a recurring basis and debt securities HTM are carried at amortized cost.
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The fair value of debt securities AFS, categorized primarily as Level 2, is recorded using prices obtained from independent asset pricing services that are based on observable transactions, but not quoted markets. Management reviews the prices obtained from independent asset pricing services for unusual fluctuations and compares to current market trading activity.
Equity Securities. Marketable equity securities and certain non-marketable equity securities are recorded at fair value on a recurring basis. The fair values of marketable equity securities are determined by obtaining quoted prices on nationally recognized securities exchanges (Level 1 inputs).
Derivatives. The Bank's use of derivatives is limited to the Consumer Lending Programs. Under these Programs, the Bank has an agreement with a third party to originate consumer loans that are included in the Bank's held for investment or held for sale portfolios. The third party provides a target return to the Company on the portfolio of loans retained by the Bank and all interest received from borrowers on such loans above the target return and after all charge-offs have been covered is paid to the third party as excess interest and servicing. The primary drivers of the derivative value include the Company's ability to settle the loans at par value and the third party partners' rights of first refusal to purchase loans that the Company intends to sell. The Company estimates the fair value of the derivative instrument using a market approach considering primarily the average interest rate on the underlying loans and the credit spread relative to the risk-free rate in order to validate that the value of the loans is in excess of par and thus the derivative could be settled by either party at no cost. The Company considers this derivative instrument to be within Level 3 of the fair value hierarchy, as it utilizes inputs from sales or securitization transactions involving similar loans. As of March 31, 2025 and September 30, 2024, the Company determined the derivatives had no fair value, respectively, thus eliminating the need for further disclosures regarding Level 3 inputs as outlined in ASC 820.
The following table summarizes the fair values of debt securities AFS and equity securities as they are measured at fair value on a recurring basis.
| (Dollars in thousands) | Total | Level 1 | Level 2 | Level 3 | ||||||||||
| March 31, 2025 | ||||||||||||||
| Debt securities AFS | ||||||||||||||
| Corporate securities | $ | $ | $ | $ | ||||||||||
| SBA securities | ||||||||||||||
| Obligations of states and political subdivisions | ||||||||||||||
| Non-bank qualified obligations of states and political subdivisions | ||||||||||||||
| Asset-backed securities | ||||||||||||||
| Mortgage-backed securities | ||||||||||||||
| Total debt securities AFS | $ | $ | $ | $ | ||||||||||
Common equities and mutual funds(1) | $ | $ | $ | $ | ||||||||||
Non-marketable equity securities(2) | $ | $ | $ | $ | ||||||||||
| September 30, 2024 | ||||||||||||||
| Debt securities AFS | ||||||||||||||
| Corporate securities | $ | $ | $ | $ | ||||||||||
| SBA securities | ||||||||||||||
| Obligations of states and political subdivisions | ||||||||||||||
| Non-bank qualified obligations of states and political subdivisions | ||||||||||||||
| Asset-backed securities | ||||||||||||||
| Mortgage-backed securities | ||||||||||||||
| Total debt securities AFS | $ | $ | $ | $ | ||||||||||
Common equities and mutual funds(1) | $ | $ | $ | $ | ||||||||||
Non-marketable equity securities(2) | $ | $ | $ | $ | ||||||||||
(1) Equity securities at fair value are included within other assets on the Condensed Consolidated Statements of Financial Condition at March 31, 2025 and September 30, 2024.
(2) Consists of certain non-marketable equity securities that are measured at fair value using net asset value ("NAV") per share (or its equivalent) as a practical expedient and are excluded from the fair value hierarchy.
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Loans and Leases. The Company does not record loans and leases at fair value on a recurring basis. However, if a loan or lease is individually evaluated for risk of credit loss and repayment is expected to be solely provided by the values of the underlying collateral, the Company measures fair value on a nonrecurring basis. Fair value is determined by the fair value of the underlying collateral less estimated costs to sell. The fair value of the collateral is determined based on the internal estimates and/or assessment provided by third-party appraisers and the valuation relies on discount rates ranging from 3 % to 28 %.
The following table summarizes the assets of the Company that are measured at fair value in the Condensed Consolidated Statements of Financial Condition on a nonrecurring basis:
| (Dollars in thousands) | Total | Level 1 | Level 2 | Level 3 | ||||||||||
| March 31, 2025 | ||||||||||||||
| Loans and leases, net individually evaluated for credit loss | ||||||||||||||
| Commercial finance | $ | $ | $ | $ | ||||||||||
| Total loans and leases, net individually evaluated for credit loss | ||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||
| September 30, 2024 | ||||||||||||||
| Loans and leases, net individually evaluated for credit loss | ||||||||||||||
| Commercial finance | $ | $ | $ | $ | ||||||||||
| Total loans and leases, net individually evaluated for credit loss | ||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||
| Quantitative Information About Level 3 Fair Value Measurements | |||||||||||||||||
| (Dollars in thousands) | Fair Value at March 31, 2025 | Fair Value at September 30, 2024 | Valuation Technique | Unobservable Input | Range of Inputs | ||||||||||||
| Loans and leases, net individually evaluated for credit loss | $ | $ | Market approach | Appraised values(1) | |||||||||||||
(1) The Company generally relies on external appraisers to develop this information. Management reduced the appraised value by estimating selling costs and other inputs in a range of 3 % to 28 %.
Management discloses the estimated fair value of financial instruments, including assets and liabilities on and off the Condensed Consolidated Statements of Financial Condition, for which it is practicable to estimate fair value. These fair value estimates were made at March 31, 2025 and September 30, 2024 based on relevant market information and information about financial instruments. Fair value estimates are intended to represent the price at which an asset could be sold or a liability could be settled. However, since there is no active market for certain financial instruments of the Company, the estimates of fair value are subjective in nature, involve uncertainties, and include matters of significant judgment. Changes in assumptions as well as tax considerations could significantly affect the estimated values. Accordingly, the aggregate fair value estimates are not intended to represent the underlying value of the Company, on either a going concern or a liquidation basis.
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The following tables present the carrying amount and estimated fair value of the financial instruments held by the Company:
| March 31, 2025 | |||||||||||||||||
| (Dollars in thousands) | Carrying Amount | Estimated Fair Value | Level 1 | Level 2 | Level 3 | ||||||||||||
| Financial assets | |||||||||||||||||
| Cash and cash equivalents | $ | $ | $ | $ | $ | ||||||||||||
| Debt securities available for sale | |||||||||||||||||
| Debt securities held to maturity | |||||||||||||||||
Common equities and mutual funds(1) | |||||||||||||||||
Non-marketable equity securities(1)(2) | |||||||||||||||||
| Loans held for sale | |||||||||||||||||
| Loans and leases | |||||||||||||||||
| Federal Reserve Bank and Federal Home Loan Bank stocks | |||||||||||||||||
| Accrued interest receivable | |||||||||||||||||
| Financial liabilities | |||||||||||||||||
| Deposits | |||||||||||||||||
| Other short- and long-term borrowings | |||||||||||||||||
| Accrued interest payable | |||||||||||||||||
(1) Equity securities at fair value are included within other assets on the Condensed Consolidated Statements of Financial Condition at March 31, 2025.
(2) Includes certain non-marketable equity securities that are measured at fair value using NAV per share (or its equivalent) as a practical expedient and are excluded from the fair value hierarchy.
| September 30, 2024 | |||||||||||||||||
| (Dollars in thousands) | Carrying Amount | Estimated Fair Value | Level 1 | Level 2 | Level 3 | ||||||||||||
| Financial assets | |||||||||||||||||
| Cash and cash equivalents | $ | $ | $ | $ | $ | ||||||||||||
| Debt securities available for sale | |||||||||||||||||
| Debt securities held to maturity | |||||||||||||||||
Common equities and mutual funds(1) | |||||||||||||||||
Non-marketable equity securities(1)(2) | |||||||||||||||||
| Loans held for sale | |||||||||||||||||
| Loans and leases | |||||||||||||||||
| Federal Reserve Bank and Federal Home Loan Bank stocks | |||||||||||||||||
| Accrued interest receivable | |||||||||||||||||
| Financial liabilities | |||||||||||||||||
| Deposits | |||||||||||||||||
| Overnight federal funds purchased | |||||||||||||||||
| Other short- and long-term borrowings | |||||||||||||||||
| Accrued interest payable | |||||||||||||||||
(1) Equity securities at fair value are included within other assets on the Consolidated Statements of Financial Condition at September 30, 2024.
(2) Includes certain non-marketable equity securities that are measured at fair value using NAV per share (or its equivalent) as a practical expedient and are excluded from the fair value hierarchy.
NOTE 16. SUBSEQUENT EVENTS
Management has evaluated subsequent events that occurred after March 31, 2025. During this period, up to the filing date of this Quarterly Report on Form 10-Q, management did not identify any material subsequent events that would require recognition or disclosure in our Condensed Consolidated Financial Statements as of or for the quarter ended March 31, 2025.
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NOTE 17. RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
FORWARD-LOOKING STATEMENTS
PATHWARD FINANCIAL, INC. ("Pathward Financial" or the "Company" or "us") and its wholly-owned subsidiary, Pathward®, National Association ("Pathward®, N.A" or "Pathward" or "the Bank") may from time to time make written or oral “forward-looking statements,” including statements contained in this Quarterly Report on Form 10-Q, the Company’s other filings with the Securities and Exchange Commission (the "SEC"), the Company’s reports to stockholders, and other communications by the Company and Pathward, N.A, 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 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 changes in international trade policies, tariffs and treaties affecting imports and exports, and their related impacts on macroeconomic conditions, customer behavior, funding costs and loan and securities portfolios; changes in tax laws; trade disputes, barriers to trade or the emergence of trade restrictions; 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; 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 Quarterly Report on Form 10-Q speak only as of the date hereof. All subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. 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/A for the Company’s fiscal year ended September 30, 2024, and in the Company's 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.
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GENERAL
The Company, a registered bank holding company that has elected to be a financial holding company, is a Delaware corporation, the principal assets of which are all the issued and outstanding shares of the Bank, a chartered national bank, the accounts of which are insured up to applicable limits by the FDIC as administrator of the Deposit Insurance Fund. Unless the context otherwise requires, references herein to the Company include Pathward Financial and the Bank, and all direct or indirect subsidiaries of Pathward Financial on a consolidated basis.
The Company’s common stock trades on the NASDAQ Global Select Market under the symbol “CASH.”
The following discussion focuses on the consolidated financial condition of the Company at March 31, 2025, compared to September 30, 2024, and the consolidated results of operations for the three and six months ended March 31, 2025 and 2024. This discussion should be read in conjunction with the Company’s consolidated financial statements, and notes thereto, for the fiscal year ended September 30, 2024 and the related management's discussion and analysis of financial condition and results of operations contained in the Company's Annual Report on Form 10-K/A for the fiscal year ended September 30, 2024.
As described in Note 17. "Restatement of Previously Issued Financial Statements" to the condensed consolidated financial statements, the Company has restated its unaudited historical consolidated financial statements as of March 31, 2024 and for the three and six months ended March 31, 2024. Prior period financial information restated for three and six months ended March 31, 2024, was restated in the Form 10-K/A for the fiscal year ended September 30, 2024. As a result the previously reported financial information as of March 31, 2024 and for the three and six months ended March 31, 2024 in this management's discussion and analysis has been updated to reflect the restatements.
EXECUTIVE SUMMARY
Company Highlights and Business Developments
•On March 20, 2025, the Company's subsidiary Pathward®, N.A. announced it became Certified™ by Great Place to Work® for the third year in a row. Great Place to Work describes itself as the global authority on workplace culture, employee experience, and the leadership behaviors proven to deliver market-leading revenue, employee retention and increased innovation.
Financial Highlights for the 2025 Fiscal Second Quarter
•Total tax services product income, net of losses and direct product expenses, increased 29% to $47.6 million from $36.9 million, when comparing the first six months of fiscal 2025 to the same period of the prior fiscal year.
•Total revenue for the second quarter was $274.8 million, an increase of $17.2 million, or 7%, compared to the same quarter in fiscal 2024, driven by an increase in both noninterest income and net interest income.
•Net interest margin ("NIM") increased 35 basis points to 7.12% for the second quarter from 6.77% during the same period of 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.
•Total gross loans and leases at March 31, 2025 increased $52.9 million to $4.46 billion compared to March 31, 2024 and decreased $97.8 million when compared to December 31, 2024. When excluding the insurance premium finance loans, which sold during the first quarter of fiscal 2025, of $525.5 million at March 31, 2024, total gross loans and leases at March 31, 2025 increased $578.4 million, or 15%, when compared to March 31, 2024.
•During the 2025 fiscal second quarter, the Company repurchased 575,804 shares of common stock at an average share price of $78.11. As of March 31, 2025, there were 5,722,336 shares available for repurchase under the current common stock share repurchase program.
Tax Season
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For the six months ended March 31, 2025, total tax services product revenue was $85.0 million, an increase of 17% compared to the same period of the prior year. Total tax services product fee income increased by $9.5 million and net interest income on tax services loans increased $2.6 million, while total tax services product expense increased marginally when compared to the prior year.
Provision for credit losses for the tax services portfolio increased $0.9 million for the six months ended March 31, 2025 when compared to the same period of the prior year, primarily due to an increase in loan originations.
Total tax services product income, net of losses and direct product expenses, increased 29% to $47.6 million from $36.9 million, when comparing the first six months of fiscal 2025 to the same period of the prior fiscal year. This increase was primarily due to a 13% increase in independent tax office enrollments this tax season as compared to the prior year period.
For the 2025 tax season through March 31, 2025, Pathward originated $1.66 billion in refund advance loans compared to $1.56 billion during the 2024 tax season.
FINANCIAL CONDITION
At March 31, 2025, the Company’s total assets decreased to $6.99 billion compared to $7.53 billion at September 30, 2024, primarily due to reductions of $645.9 million in loans held for sale and $329.7 million in securities AFS, partially offset by growth of $389.7 million in loans and leases and $95.9 million in cash and cash equivalents.
Total cash and cash equivalents were $254.2 million at March 31, 2025, increasing from $158.3 million at September 30, 2024. The increase is primarily due to the proceeds from the sale of the commercial insurance premium finance business, net transaction costs, the sale of the transportation portfolio within working capital, and the sale of debt securities AFS, partially offset by the repayment of short-term borrowings during the six months ended March 31, 2025. The Company maintains its cash investments primarily in interest-bearing overnight deposits with the FHLB of Des Moines and the FRB. At March 31, 2025, the Company did not have any federal funds sold.
The Company's investment security balances at March 31, 2025 totaled $1.44 billion, as compared to $1.77 billion at September 30, 2024. The decrease is primarily due to $217.9 million of debt securities AFS sold by the Bank during the six months ended March 31, 2025. The Company’s portfolio of securities customarily consists primarily of MBS, which have expected lives much shorter than the stated final maturity, non-bank qualified obligations of states and political subdivisions, which mature in approximately 15 years or less, and other tax exempt municipal mortgage related pass through securities which have average lives much shorter than their stated final maturities. During the six months ended March 31, 2025, the Company made $2.3 million of purchases of investment securities.
Through the Bank, the Company owns stock in the FHLB due to the Bank’s membership and participation in this banking system as well as stock in the FRB. The FHLB requires a level of stock investment based on a pre-determined formula. The Company’s investment in these stocks was $24.3 million at March 31, 2025 and $36.0 million at September 30, 2024, as redemptions were partially offset by purchases of FHLB membership stock during the six months ended March 31, 2025.
Loans held for sale at March 31, 2025 totaled $45.8 million, decreasing from $691.7 million at September 30, 2024. This decrease was primarily driven by the sale of the commercial insurance premium finance loans and a reduction in SBA/USDA loans held for sale, partially offset by growth in consumer credit products held for sale at March 31, 2025 compared to September 30, 2024.
Total gross loans and leases totaled $4.46 billion at March 31, 2025, as compared to $4.08 billion at September 30, 2024. The increase was due to growth in the commercial finance, tax services, and warehouse finance loan portfolios, partially offset by a reduction in the consumer finance loan portfolio. See Note 5. Loans and Leases, Net to the “Notes to Condensed Consolidated Financial Statements” of this Quarterly Report on Form 10-Q.
Commercial finance loans, which comprised 79% of the Company's loan and lease portfolio, totaled $3.52 billion at March 31, 2025, reflecting an increase of $229.2 million, 7%, from September 30, 2024. The increase was primarily driven by increases of $211.8 million in term lending, $133.1 million in SBA/USDA, and $70.6 million in asset-based lending, partially offset by decreases of $137.8 million in factoring loans and $31.2 million in other commercial finance.
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Total end-of-period deposits decreased 1% to $5.82 billion at March 31, 2025, compared to $5.88 billion at September 30, 2024, primarily driven by decreases in noninterest-bearing deposits of $63.0 million and in wholesale deposits of $25.0 million, partially offset by increases in interest-bearing deposits of $21.1 million and in savings deposits of $15.9 million.
As of March 31, 2025, the Company had $386.7 million in deposits related to government stimulus programs.
The Company's total borrowings decreased from $410.4 million at September 30, 2024 to $33.4 million at March 31, 2025, primarily driven by a decrease in short-term borrowings of $377.0 million as the Company used total deposits to fund loans and leases and investment balances. The Company's short-term borrowings fluctuate on a daily basis due to the nature of a portion of its noninterest-bearing deposit base.
At March 31, 2025, the Company’s stockholders’ equity totaled $814.0 million, a decrease of $8.1 million, from $822.2 million at September 30, 2024. The decrease was primarily attributable to an increase in accumulated other comprehensive loss, partially offset by an increase in additional paid-in capital and retained earnings. The Company and Bank remained above the federal regulatory minimum capital requirements at March 31, 2025, and continued to be classified as well-capitalized, and in good standing with the regulatory agencies. See “Liquidity and Capital Resources” for further information.
Noninterest-bearing Checking Deposits. The Company may hold negative balances associated with cardholder programs in the Partner Solutions business line that are included within noninterest-bearing deposits on the Company's Condensed Consolidated Statements of Financial Condition. Negative balances can relate to any of the following payments functions:
–Prefundings: The Company deploys funds to cards prior to receiving cash (typically 2-3 days) where the prefunding balance is netted at a pooled partner level utilizing ASC 210-20.
–Discount fundings: The Company funds cards in alignment to expected breakage values on the card. Consumers may spend more than is estimated. These discounts are netted at a pooled partner level using ASC 210-20. The majority of these discount fundings relate to a small number of partners and are analyzed on an ongoing basis.
–Demand Deposit Account ("DDA") overdrafts: Certain programs offered allow cardholders traditional DDA overdraft protection services whereby cardholders can spend a limited amount in excess of their available card balance. When overdrawn, these accounts are re-classed as loans on the balance sheet within the Consumer Finance category.
The Company meets the Right of Set off criteria in ASC 210-20, Balance Sheet - Offsetting, for all payments negative deposit balances with the exception of DDA overdrafts. The following table summarizes the Company's negative deposit balances within the Partner Solutions business line:
| (Dollars in thousands) | March 31, 2025 | September 30, 2024 | |||||||||
| Noninterest-bearing deposits | $ | 5,930,963 | $ | 5,982,992 | |||||||
| Prefunding | (318,916) | (315,994) | |||||||||
| Discount funding | (43,620) | (38,665) | |||||||||
| DDA overdrafts | (14,375) | (11,236) | |||||||||
| Noninterest-bearing checking, net | $ | 5,554,052 | $ | 5,617,097 | |||||||
Off-Balance Sheet Custodial Deposits. The Bank utilizes a custodial deposit transference structure for certain prepaid and deposit programs whereby the Bank, acting as custodian of cardholder funds, places a portion of such cardholder funds that are not needed to support near term settlement at one or more third-party banks insured by the FDIC (each, a “Program Bank”). Accounts opened at Program Banks are established in the Bank’s name as custodian, for the benefit of the Bank’s cardholders. The Bank remains the issuer of all cards and holder of all accounts under the applicable cardholder agreements and has sole custodial control and transaction authority over the accounts opened at Program Banks.
The Bank maintains the records of each cardholder’s deposits maintained at Program Banks. Program Banks undergo robust due diligence prior to becoming a Program Bank and are also subject to continuous monitoring.
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As of March 31, 2025, the Company managed $1.12 billion 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.
RESULTS OF OPERATIONS
The following tables present, for the periods indicated, the Company’s 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 rates. The balances presented in the tables below are calculated on a daily average basis. Tax-equivalent adjustments have been made in yields on interest-bearing assets and NIM. Nonaccruing loans and leases have been included in the table as loans or leases carrying a zero yield.
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| Three Months Ended March 31, | |||||||||||||||||||||||
| (As Restated) | |||||||||||||||||||||||
| 2025 | 2024 | ||||||||||||||||||||||
| (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 | $ | 926,841 | $ | 9,088 | 3.98 | % | $ | 616,288 | $ | 7,422 | 4.84 | % | |||||||||||
| Mortgage-backed securities | 1,240,243 | 8,580 | 2.81 | % | 1,464,530 | 9,998 | 2.75 | % | |||||||||||||||
| Tax-exempt investment securities | 116,976 | 797 | 3.50 | % | 132,733 | 932 | 3.57 | % | |||||||||||||||
| Asset-backed securities | 180,750 | 2,228 | 5.00 | % | 237,421 | 3,368 | 5.71 | % | |||||||||||||||
| Other investment securities | 207,973 | 1,556 | 3.03 | % | 281,695 | 2,291 | 3.27 | % | |||||||||||||||
| Total investments | 1,745,942 | 13,161 | 3.11 | % | 2,116,379 | 16,589 | 3.20 | % | |||||||||||||||
| Commercial finance | 3,597,280 | 73,053 | 8.24 | % | 3,653,910 | 73,910 | 8.14 | % | |||||||||||||||
| Consumer finance | 295,099 | 19,976 | 27.45 | % | 351,459 | 19,897 | 22.77 | % | |||||||||||||||
| Tax services | 557,229 | 11,913 | 8.67 | % | 493,168 | 9,014 | 7.35 | % | |||||||||||||||
| Warehouse finance | 638,747 | 14,813 | 9.41 | % | 407,703 | 10,262 | 10.12 | % | |||||||||||||||
| Total loans and leases | 5,088,355 | 119,755 | 9.54 | % | 4,906,240 | 113,083 | 9.27 | % | |||||||||||||||
| Total interest-earning assets | 7,761,138 | $ | 142,004 | 7.43 | % | 7,638,907 | $ | 137,094 | 7.23 | % | |||||||||||||
| Noninterest-earning assets | 611,851 | 575,437 | |||||||||||||||||||||
| Total assets | $ | 8,372,989 | $ | 8,214,344 | |||||||||||||||||||
| Interest-bearing liabilities: | |||||||||||||||||||||||
| Interest-bearing checking | $ | 2,462 | $ | — | 0.04 | % | $ | 266 | $ | — | 0.31 | % | |||||||||||
| Savings | 53,120 | 3 | 0.02 | % | 59,914 | 5 | 0.04 | % | |||||||||||||||
| Money markets | 179,591 | 270 | 0.61 | % | 190,143 | 598 | 1.26 | % | |||||||||||||||
| Time deposits | 4,213 | 3 | 0.25 | % | 5,027 | 4 | 0.29 | % | |||||||||||||||
| Wholesale deposits | 349,706 | 3,810 | 4.42 | % | 439,785 | 6,078 | 5.56 | % | |||||||||||||||
| Total interest-bearing deposits (a) | 589,092 | 4,086 | 2.81 | % | 695,135 | 6,685 | 3.87 | % | |||||||||||||||
| Overnight fed funds purchased | 88,522 | 1,003 | 4.60 | % | 79,484 | 1,107 | 5.60 | % | |||||||||||||||
| Subordinated debentures | 19,728 | 355 | 7.29 | % | 19,625 | 355 | 7.27 | % | |||||||||||||||
| Other borrowings | 13,661 | 281 | 8.34 | % | 13,901 | 313 | 9.07 | % | |||||||||||||||
| Total borrowings | 121,911 | 1,639 | 5.45 | % | 113,010 | 1,775 | 6.32 | % | |||||||||||||||
| Total interest-bearing liabilities | 711,003 | 5,725 | 3.27 | % | 808,145 | 8,460 | 4.21 | % | |||||||||||||||
| Noninterest-bearing deposits (b) | 6,592,216 | — | — | % | 6,473,538 | — | — | % | |||||||||||||||
| Total deposits and interest-bearing liabilities | 7,303,219 | $ | 5,725 | 0.32 | % | 7,281,683 | $ | 8,460 | 0.47 | % | |||||||||||||
| Other noninterest-bearing liabilities | 294,080 | 223,670 | |||||||||||||||||||||
| Total liabilities | 7,597,299 | 7,505,353 | |||||||||||||||||||||
| Shareholders' equity | 775,690 | 708,991 | |||||||||||||||||||||
| Total liabilities and shareholders' equity | $ | 8,372,989 | $ | 8,214,344 | |||||||||||||||||||
| Net interest income and net interest rate spread including noninterest-bearing deposits | $ | 136,279 | 7.11 | % | $ | 128,634 | 6.76 | % | |||||||||||||||
| Net interest margin | 7.12 | % | 6.77 | % | |||||||||||||||||||
| Tax-equivalent effect | 0.01 | % | 0.02 | % | |||||||||||||||||||
Net interest margin, tax-equivalent(2) | 7.13 | % | 6.79 | % | |||||||||||||||||||
| Total cost of deposits (a+b) | 7,181,308 | 4,086 | 0.23 | % | 7,168,673 | 6,685 | 0.38 | % | |||||||||||||||
(1) Tax rate used to arrive at the TEY for the three months ended March 31, 2025 and 2024 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. | |||||||||||||||||||||||
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| Six Months Ended March 31, | |||||||||||||||||||||||
| (As Restated) | |||||||||||||||||||||||
| 2025 | 2024 | ||||||||||||||||||||||
| (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 | $ | 579,452 | $ | 11,346 | 3.93 | % | $ | 476,371 | $ | 11,525 | 4.84 | % | |||||||||||
| Mortgage-backed securities | 1,275,467 | 17,566 | 2.76 | % | 1,475,753 | 20,047 | 2.72 | % | |||||||||||||||
| Tax-exempt investment securities | 118,862 | 1,642 | 3.51 | % | 134,612 | 1,862 | 3.50 | % | |||||||||||||||
| Asset-backed securities | 184,497 | 4,832 | 5.25 | % | 243,831 | 6,933 | 5.69 | % | |||||||||||||||
| Other investment securities | 221,173 | 3,370 | 3.06 | % | 283,168 | 4,579 | 3.23 | % | |||||||||||||||
| Total investments | 1,799,999 | 27,410 | 3.10 | % | 2,137,364 | 33,421 | 3.17 | % | |||||||||||||||
| Commercial finance | 3,642,820 | 147,665 | 8.13 | % | 3,710,571 | 148,580 | 8.01 | % | |||||||||||||||
| Consumer finance | 305,868 | 42,317 | 27.75 | % | 357,228 | 40,048 | 22.42 | % | |||||||||||||||
| Tax services | 294,147 | 12,045 | 8.21 | % | 259,338 | 9,003 | 6.94 | % | |||||||||||||||
| Warehouse finance | 621,094 | 29,577 | 9.55 | % | 394,747 | 19,306 | 9.78 | % | |||||||||||||||
| Total loans and leases | 4,863,929 | 231,604 | 9.55 | % | 4,721,884 | 216,937 | 9.19 | % | |||||||||||||||
| Total interest-earning assets | 7,243,380 | $ | 270,360 | 7.50 | % | 7,335,619 | $ | 261,883 | 7.15 | % | |||||||||||||
| Noninterest-earning assets | 620,823 | 544,708 | |||||||||||||||||||||
| Total assets | $ | 7,864,203 | $ | 7,880,327 | |||||||||||||||||||
| Interest-bearing liabilities: | |||||||||||||||||||||||
| Interest-bearing checking | $ | 1,564 | $ | — | 4.30 | % | $ | 346 | $ | 1 | 0.33 | % | |||||||||||
| Savings | 49,252 | 6 | 0.03 | % | 57,334 | 11 | 0.04 | % | |||||||||||||||
| Money markets | 179,850 | 655 | 0.73 | % | 186,681 | 1,173 | 1.26 | % | |||||||||||||||
| Time deposits | 4,210 | 6 | 0.25 | % | 5,273 | 7 | 0.27 | % | |||||||||||||||
| Wholesale deposits | 186,526 | 4,194 | 4.51 | % | 324,909 | 9,019 | 5.55 | % | |||||||||||||||
| Total interest-bearing deposits (a) | 421,402 | 4,861 | 2.31 | % | 574,543 | 10,211 | 3.55 | % | |||||||||||||||
| Overnight fed funds purchased | 110,165 | 2,674 | 4.87 | % | 98,421 | 2,763 | 5.61 | % | |||||||||||||||
| Subordinated debentures | 19,715 | 710 | 7.22 | % | 19,613 | 711 | 7.25 | % | |||||||||||||||
| Other borrowings | 13,661 | 587 | 8.62 | % | 14,040 | 637 | 9.07 | % | |||||||||||||||
| Total borrowings | 143,541 | 3,971 | 5.55 | % | 132,074 | 4,111 | 6.23 | % | |||||||||||||||
| Total interest-bearing liabilities | 564,943 | 8,832 | 3.14 | % | 706,617 | 14,322 | 4.05 | % | |||||||||||||||
| Noninterest-bearing deposits (b) | 6,203,825 | — | — | % | 6,287,220 | — | — | % | |||||||||||||||
| Total deposits and interest-bearing liabilities | 6,768,768 | $ | 8,832 | 0.26 | % | 6,993,837 | $ | 14,322 | 0.41 | % | |||||||||||||
| Other noninterest-bearing liabilities | 315,189 | 217,102 | |||||||||||||||||||||
| Total liabilities | 7,083,957 | 7,210,939 | |||||||||||||||||||||
| Shareholders' equity | 780,246 | 669,388 | |||||||||||||||||||||
| Total liabilities and shareholders' equity | $ | 7,864,203 | $ | 7,880,327 | |||||||||||||||||||
| Net interest income and net interest rate spread including noninterest-bearing deposits | $ | 261,528 | 7.24 | % | $ | 247,561 | 6.74 | % | |||||||||||||||
| Net interest margin | 7.24 | % | 6.75 | % | |||||||||||||||||||
| Tax-equivalent effect | 0.01 | % | 0.01 | % | |||||||||||||||||||
Net interest margin, tax-equivalent(2) | 7.25 | % | 6.76 | % | |||||||||||||||||||
| Total cost of deposits (a+b) | 6,625,227 | 4,861 | 0.15 | % | 6,861,763 | 10,211 | 0.30 | % | |||||||||||||||
(1) Tax rate used to arrive at the TEY for the six months ended March 31, 2025 and 2024 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.
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General
The Company recorded net income of $75.0 million, or $3.14 per diluted share, for the three months ended March 31, 2025, compared to net income of $69.9 million, or $2.74 per diluted share, for the three months ended March 31, 2024.
The Company recorded net income of $104.9 million, or $4.35 per diluted share, for the six months ended March 31, 2025, compared to net income of $104.8 million, or $4.07 per diluted share, for the six months ended March 31, 2024.
Net Interest Income
Net interest income for the second quarter of fiscal 2025 was $136.3 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, along with a reduction in funding costs.
For the six months ended March 31, 2025, net interest income was $261.5 million, an increase of 6%, from $247.6 million compared to the same period in the prior fiscal year.
The Company’s average interest-earning assets for the second quarter of fiscal 2025 increased by $122.2 million to $7.76 billion compared to the same quarter in fiscal 2024, due to increases in average outstanding balances of interest earning cash and total loan and lease balances, partially offset by a decrease in total investment securities. The second quarter average outstanding balance of loans and leases increased $182.1 million compared to the same quarter of the prior fiscal year, primarily due to increases in the warehouse finance and tax services portfolios, partially offset by decreases in the consumer finance and commercial finance loan portfolios. 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 during the first quarter of fiscal year 2025.
Fiscal 2025 second quarter NIM increased to 7.12% from 6.77% in the second fiscal quarter of 2024. The overall reported tax-equivalent yield (“TEY”) on average interest-earning assets increased 20 basis points to 7.43% compared to the prior year quarter, driven by an improved earning asset mix. The yield on the loan and lease portfolio was 9.54% compared to 9.27% for the comparable period last year and the TEY on the securities portfolio was 3.11% compared to 3.20% over that same period.
For the six months ended March 31, 2025, NIM was 7.24%, an increase of 49 basis points from 6.75% compared to the same period in the prior fiscal year.
The Company's cost of funds for all deposits and borrowings averaged 0.32% during the fiscal 2025 second quarter, as compared to 0.47% during the prior year quarter. The Company's overall cost of deposits was 0.23% in the fiscal second quarter of 2025, as compared to 0.38% during the prior year quarter.
Provision for Credit Loss
The Company recognized a provision for credit losses of $35.3 million for the quarter ended March 31, 2025, compared to $29.7 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 $2.8 million, the consumer finance portfolio of $1.6 million, and the seasonal tax services portfolio of $1.0 million. The Company recognized net charge-offs of $6.4 million for the quarter ended March 31, 2025, compared to net charge-offs of $9.4 million for the quarter ended March 31, 2024. Net charge-offs attributable to the commercial finance portfolio and the consumer finance portfolio for the quarter ended March 31, 2025 were $6.9 million and $6.3 million, respectively, while recoveries of $6.8 million were recognized in the tax services portfolio. Net charge-offs attributable to the commercial finance portfolio and the consumer finance portfolio for the same quarter of the prior year were $4.7 million and $10.5 million, respectively, while recoveries of $5.8 million were recognized in the tax services portfolio.
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The Company recognized a provision for credit losses of $53.9 million for the six months ended March 31, 2025, compared to $37.5 million for the comparable period in the prior fiscal year. The increase was primarily due to increases in provision for credit losses in all loan portfolios. The Company recognized net charge-offs of $22.6 million for the six months ended March 31, 2025, compared to net charge-offs of $22.6 million for the six months ended March 31, 2024. Net charge-offs attributable to the commercial finance portfolio and the consumer finance portfolio for the six months ended March 31, 2025 were $14.9 million and $14.0 million, respectively. Net recoveries of $6.3 million were recognized in the tax services portfolio for the six months ended March 31, 2025. Net charge-offs attributable to the commercial finance portfolio and the consumer finance portfolio were $9.3 million and $18.3 million, respectively, for the same six months of the prior year, while net recoveries of $4.9 million were recognized in the tax services portfolio.
Noninterest Income
Fiscal 2025 second quarter noninterest income increased 7% to $138.5 million, compared to $128.9 million for the same period of the prior year. The increase in noninterest income when comparing the current period to the same period of the prior year was primarily driven by secondary market revenue, refund advance and other tax product income, and refund transfer product fees, partially offset by a loss on sale of investment securities, a reduction in card and deposit fees, and a loss on sale of divestiture related to closing business activities from the insurance premium finance business sale that occurred during the first quarter of the fiscal year. The increase in the secondary market revenue was primarily driven by the gain from the sale of the transportation portfolio within working capital.
The period-over-period decrease in card and deposit fee income was primarily related to lower quarterly average deposit balances held at partner banks along with lower servicing fee income due to a reduction in rates following reductions in the EFFR. Servicing fee income on custodial deposits totaled $6.5 million during the 2025 fiscal second quarter, compared to $10.4 million for the same period of the prior year. For the fiscal quarter ended December 31, 2024, servicing fee income on custodial deposits totaled $4.5 million.
Noninterest income for the six months ended March 31, 2025 increased to $195.9 million from $181.7 million for the same period of the prior year.
Noninterest Expense
Noninterest expense increased 5% to $148.2 million for the fiscal 2025 second quarter, from $140.7 million for the same quarter last year. The increase was primarily attributable to increases in operating lease equipment depreciation expense, other expense, refund transfer product expense, card processing expense, and occupancy and equipment expense. This increase was partially offset primarily by reductions in compensation and benefits expense, refund advance product expense, and impairment expense. Occupancy and equipment expense was impacted by continued investment in our technology infrastructure. The Company expects to continue investments in technology as well as risk and compliance over the balance of fiscal 2025.
Card processing expense is primarily driven by 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 62% of the deposit portfolio was subject to these rate-related processing expenses during the fiscal 2025 second quarter. For the fiscal quarter ended March 31, 2025, contractual, rate-related processing expenses were $28.4 million, as compared to $25.6 million for the fiscal quarter ended December 31, 2024 and $30.1 million for the fiscal quarter ended March 31, 2024.
Noninterest expense for the six months ended March 31, 2025 increased to $276.0 million from $261.8 million for the same period of the prior year.
Income Tax Expense
The Company recorded income tax expense of $16.2 million, representing an effective tax rate of 17.7%, for the fiscal 2025 second quarter, compared to an income tax expense of $16.9 million, representing an effective tax rate of 19.4%, for the second quarter last fiscal year. The current quarter decrease in income tax expense compared to the prior year quarter was primarily due to an investment tax credit.
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The Company originated $1.9 million in renewable energy leases during the fiscal 2025 second quarter, resulting in $0.5 million in total net investment tax credits. During the second quarter of fiscal 2024, the Company originated $25.9 million in renewable energy leases resulting in $7.0 million in total net investment tax credits. For the six months ended March 31, 2025, the Company originated $11.2 million in renewable energy leases, compared to $38.1 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.
Asset Quality
Generally, when a loan or lease becomes delinquent 90 days or more or when the collection of principal or interest becomes doubtful, the Company will place the loan or lease on a nonaccrual status and, as a result, previously accrued interest income on the loan or lease is reversed against current income. The loan or lease will generally remain on a non-accrual status until six months of good payment history has been established or management believes the financial status of the borrower has been significantly restored. Certain relationships in the table below are over 90 days past due and still accruing. The Company considers these relationships as being in the process of collection. Insurance premium finance loans, consumer finance and tax services loans are generally not placed on nonaccrual status, but are instead written off when the collection of principal and interest become doubtful.
Loans and leases, or portions thereof, are generally charged-off when collection of principal becomes doubtful. Typically, this is associated with a delay or shortfall in payments of 120 days or more for consumer credit products and leases and 90 days or more for commercial finance loans. Action is taken to charge off ERO loans if such loans have not been collected by the end of June and refund advance loans if such loans have not been collected by the end of the calendar year. The Company individually evaluates loans and leases that do not share similar risk characteristics with other financial assets, which generally means loans and leases identified as modifications or loans and leases on nonaccrual status.
The Company believes that the level of allowance for credit losses at March 31, 2025 was appropriate and reflected probable losses related to these loans and leases; however, there can be no assurance that all loans and leases will be fully collectible or that the present level of the allowance will be adequate in the future. See the section below titled “Allowance for Credit Losses” for further information.
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The table below sets forth the amounts and categories of the Company's nonperforming assets.
| (Dollars in thousands) | March 31, 2025 | September 30, 2024 | |||||||||
| Nonperforming Loans and Leases | |||||||||||
| Nonaccruing loans and leases: | |||||||||||
| Commercial finance | $ | 36,049 | $ | 26,412 | |||||||
| Total nonaccruing loans and leases | 36,049 | 26,412 | |||||||||
| Accruing loans and leases delinquent 90 days or more: | |||||||||||
| Loans held for sale | — | 1,050 | |||||||||
| Commercial finance | 1,359 | 2,314 | |||||||||
| Consumer finance | 2,398 | 3,053 | |||||||||
Tax services(1) | — | 8,733 | |||||||||
| Total accruing loans and leases delinquent 90 days or more | 3,757 | 15,150 | |||||||||
| Total nonperforming loans and leases | 39,806 | 41,562 | |||||||||
| Other Assets | |||||||||||
| Nonperforming operating leases | 1,812 | 1,471 | |||||||||
| Total other assets | 1,812 | 1,471 | |||||||||
| Total nonperforming assets | $ | 41,618 | $ | 43,033 | |||||||
| Total as a percentage of total assets | 0.59 | % | 0.57 | % | |||||||
(1) Certain tax services loans do not bear interest. | |||||||||||
The Company's nonperforming assets at March 31, 2025 were $41.6 million, representing 0.59% of total assets, compared to $43.0 million, or 0.57% of total assets at September 30, 2024. The decrease in the nonperforming assets as a percentage of total assets at March 31, 2025 compared to September 30, 2024, was primarily driven by a decrease in nonperforming loans in the seasonal tax services portfolio, partially offset by an increase in nonperforming loans in the commercial finance portfolio.
The Company's nonperforming loans and leases at March 31, 2025 were $39.8 million, representing 0.88% of total gross loans and leases, compared to $41.6 million, or 0.87% of total gross loans and leases at September 30, 2024.
Classified Assets. Federal regulations provide for the classification of certain loans, leases, and other assets such as debt and equity securities considered by the Bank's primary regulator, the OCC, to be of lesser quality as “substandard,” “doubtful” or “loss,” with each such classification dependent on the facts and circumstances surrounding the assets in question. An asset is considered “substandard” if it is inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. “Substandard” assets include those characterized by the “distinct possibility” that the Bank will sustain “some loss” if the deficiencies are not corrected. Assets classified as “doubtful” have all of the weaknesses inherent in those classified “substandard,” with the added characteristic that the weaknesses present make “collection or liquidation in full,” on the basis of currently existing facts, conditions and values, “highly questionable and improbable.” Assets classified as “loss” are those considered “uncollectible” and of such minimal value that their continuance as assets without the establishment of a specific loss reserve is not warranted.
General allowances represent loss allowances which have been established to recognize the inherent risk associated with lending activities, but which, unlike specific allowances, have not been allocated to particular problem assets. When assets are classified as “loss,” the Bank is required either to establish a specific allowance for losses equal to 100% of that portion of the asset so classified or to charge off such amount. The Bank’s determinations as to the classification of its assets and the amount of its valuation allowances are subject to review by its regulatory authorities, which may order the establishment of additional general or specific loss allowances.
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On the basis of management’s review of its loans, leases, and other assets, at March 31, 2025, the Company had classified loans and leases of $202.9 million as substandard, $5.0 million as doubtful and none as loss. At September 30, 2024, the Company classified loans and leases of $180.9 million as substandard, $10.3 million as doubtful and none as loss.
Allowance for Credit Losses. The ACL represents management’s estimate of current credit losses expected to be incurred by the loan and lease portfolio over the life of each financial asset as of the balance sheet date. The Company individually evaluates loans and leases that do not share similar risk characteristics with other financial assets, which generally means loans and leases identified as modifications or loans and leases on nonaccrual status. All other loans and leases are evaluated collectively for credit loss. A reserve for unfunded credit commitments such as letters of credit and binding unfunded loan commitments is recorded in other liabilities on the Condensed Consolidated Statements of Financial Condition.
Individually evaluated loans and leases are a key component of the ACL. Generally, the Company measures credit loss on individually evaluated loans based on the fair value of the collateral less estimated selling costs, as the Company considers these financial assets to be collateral dependent. If an individually evaluated loan or lease is not collateral dependent, credit loss is measured at the present value of expected future cash flows discounted at the loan or lease initial effective interest rate.
The Company's ACL totaled $102.9 million at March 31, 2025, an increase compared to $71.8 million at September 30, 2024. The increase in the ACL at March 31, 2025, when compared to September 30, 2024, was primarily due to a $33.8 million increase in the allowance related to the seasonal tax services portfolio and a $1.0 million increase related to the consumer finance portfolio, partially offset by a $3.7 million decrease in the allowance related to the commercial finance portfolio.
The following table presents the Company's ACL as a percentage of its total loans and leases.
| As of the Period Ended | |||||||||||||||||
| March 31, 2025 | December 31, 2024 | September 30, 2024 | June 30, 2024 | March 31, 2024 | |||||||||||||
| Commercial finance | 1.10 | % | 1.18 | % | 1.29 | % | 1.17 | % | 1.21 | % | |||||||
| Consumer finance | 12.04 | % | 10.84 | % | 11.52 | % | 12.85 | % | 13.14 | % | |||||||
| Tax services | 60.35 | % | 1.75 | % | 0.02 | % | 66.35 | % | 37.31 | % | |||||||
| Warehouse finance | 0.10 | % | 0.10 | % | 0.10 | % | 0.10 | % | 0.10 | % | |||||||
| Total loans and leases | 2.30 | % | 1.63 | % | 1.76 | % | 2.32 | % | 2.53 | % | |||||||
| Total loans and leases excluding tax services | 1.57 | % | 1.63 | % | 1.77 | % | 1.71 | % | 1.85 | % | |||||||
The Company's ACL as a percentage of total loans and leases increased to 2.30% at March 31, 2025 from 1.76% at September 30, 2024. The increase in the total loans and leases coverage ratio was primarily driven by seasonality in both the tax services portfolio and consumer finance portfolio. When comparing the current quarter to the same quarter of the prior year, the increase in the tax services coverage ratio was due to higher repayments during the current quarter which decreased the outstanding loan balance within the portfolio.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The Company’s financial statements are prepared in accordance with GAAP. The financial information contained within these financial statements is, to a significant extent, based on approximate measures of the financial effects of transactions and events that have already occurred. Management has identified its critical accounting policies, which are those policies that, in management's view, are most important in the portrayal of our financial condition and results of operations. These policies involve complex and subjective decisions and assessments. Some of these estimates may be uncertain at the time they are made, could change from period to period, and could have a material impact on the financial statements. A discussion of the Company’s critical accounting policies and estimates can be found in the Company's Form 10-K/A for the year ended September 30, 2024. There were no significant changes to these critical accounting policies and estimates during the first six months of fiscal 2025.
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LIQUIDITY AND CAPITAL RESOURCES
The Company’s primary sources of funds are deposits, derived principally through its Partner Solutions business line, borrowings, principal and interest payments on loans and leases and mortgage-backed securities, and maturing investment securities. In addition, the Company utilizes wholesale deposit sources to provide temporary funding when necessary or when favorable terms are available. While scheduled loan repayments and maturing investments are relatively predictable, deposit flows and early loan repayments are influenced by the level of interest rates, general economic conditions and competition. The Company uses its capital resources principally to meet ongoing commitments to fund maturing certificates of deposit and loan commitments, to maintain liquidity, and to meet operating expenses.
At March 31, 2025, the Company had unfunded loan and lease commitments of $1.24 billion. Management believes that loan repayment and other sources of funds will be adequate to meet its foreseeable short- and long-term liquidity needs. The liquidity sources as of March 31, 2025 include $254.2 million in cash and cash equivalents and $1.12 billion in off-balance sheet custodial deposits. When factoring in additional resources, such as the Federal Home Loan Bank, the Federal Reserve Discount Window and other unsecured funding and wholesale options, the Company has over $3.89 billion in total available liquidity as of March 31, 2025. Due to the characteristics of the Company's deposit portfolio, uninsured deposits remained less than 15% of total deposits during the fiscal 2025 second quarter and below the Company's available liquidity.
The Company and the Bank are required to comply with the regulatory capital rules administered by federal banking agencies (the "Capital Rules"). Under the Capital Rules and the regulatory framework for prompt corrective action, the Company and Bank must meet specific capital guidelines that involve quantitative measures of the Company’s and Bank’s assets, liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices. The Company’s and Bank’s capital amounts and classifications are also subject to qualitative judgments by regulators about components, risk weightings, and other factors.
The Capital Rules require the Company and the Bank to maintain minimum ratios (set forth in the table below) of total risk-based capital and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined), and a leverage ratio consisting of Tier 1 capital (as defined) to average assets (as defined). At March 31, 2025, the Company and the Bank exceeded federal regulatory minimum capital requirements to be classified as well-capitalized under the prompt corrective action requirements. The Company and the Bank took the AOCI opt-out election; under the rule, non-advanced approach banking organizations were given a one-time option to exclude certain AOCI components.
The table below includes 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 analyses and has included this non-GAAP financial information, and corresponding reconciliation to total equity.
| Company | Bank | Minimum to be Adequately Capitalized Under Prompt Corrective Action Provisions | Minimum to be Well Capitalized Under Prompt Corrective Action Provisions | |||||||||||
| March 31, 2025 | ||||||||||||||
| Tier 1 leverage capital ratio | 8.32 | % | 8.52 | % | 4.00 | % | 5.00 | % | ||||||
| Common equity Tier 1 capital ratio | 13.64 | 14.25 | 4.50 | 6.50 | ||||||||||
| Tier 1 capital ratio | 13.91 | 14.25 | 6.00 | 8.00 | ||||||||||
| Total capital ratio | 15.57 | 15.51 | 8.00 | 10.00 | ||||||||||
| September 30, 2024 | ||||||||||||||
| Tier 1 leverage capital ratio | 9.05 | % | 9.22 | % | 4.00 | % | 5.00 | % | ||||||
| Common equity Tier 1 capital ratio | 12.26 | 12.78 | 4.50 | 6.50 | ||||||||||
| Tier 1 capital ratio | 12.52 | 12.78 | 6.00 | 8.00 | ||||||||||
| Total capital ratio | 14.14 | 14.03 | 8.00 | 10.00 | ||||||||||
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The following table provides a reconciliation of the amounts included in the table above for the Company.
Standardized Approach(1) | |||||||||||
| (Dollars in thousands) | March 31, 2025 | September 30, 2024 | |||||||||
| Total stockholders' equity | $ | 814,047 | $ | 822,189 | |||||||
| Adjustments: | |||||||||||
| LESS: Goodwill, net of associated deferred tax liabilities | 285,865 | 296,105 | |||||||||
| LESS: Certain other intangible assets | 16,364 | 18,018 | |||||||||
| LESS: Net deferred tax assets from operating loss and tax credit carry-forwards | 5,788 | 15,624 | |||||||||
| LESS: Net unrealized (losses) on available for sale securities | (163,206) | (152,328) | |||||||||
| LESS: Noncontrolling interest | (658) | (277) | |||||||||
| ADD: Adoption of Accounting Standards Update 2016-13 | 1,788 | 3,576 | |||||||||
Common Equity Tier 1(1) | 671,682 | 648,623 | |||||||||
| Long-term borrowings and other instruments qualifying as Tier 1 | 13,661 | 13,661 | |||||||||
| Tier 1 minority interest not included in common equity Tier 1 capital | (381) | (150) | |||||||||
| Total Tier 1 capital | 684,962 | 662,134 | |||||||||
| Allowance for credit losses | 62,042 | 66,140 | |||||||||
| Subordinated debentures, net of issuance costs | 19,744 | 19,693 | |||||||||
| Total capital | $ | 766,748 | $ | 747,967 | |||||||
| (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 common equity tier 1 capital ratio; those changes were fully phased in through the end of 2021. | |||||||||||
The Company and the Bank have been required to maintain a capital conservation buffer above the minimum risk-based capital requirements in order to avoid certain limitations on capital distributions, stock repurchases and discretionary bonus payments to executive officers. The capital conservation buffer is exclusively composed of Common Equity Tier 1 capital, and it applies to each of the three risk-based capital ratios but not the leverage ratio. The required Common Equity Tier 1 risk-based, Tier 1 risk-based and total risk-based capital ratios with the buffer are currently 7.0%, 8.5% and 10.5%, respectively.
Based on current and expected continued profitability and subject to continued access to capital markets, we believe that the Company and the Bank will continue to meet the capital conservation buffer of 2.5% in addition to required minimum capital ratios.
CONTRACTUAL OBLIGATIONS
See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations-Contractual Obligations" in the Company’s Form 10-K/A for its fiscal year ended September 30, 2024 for a summary of our contractual obligations as of September 30, 2024. There were no material changes outside the ordinary course of our business in contractual obligations from September 30, 2024 through March 31, 2025.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
The Company derives a portion of its income from the excess of interest collected over interest paid. The rates of interest the Company earns on assets and pays on liabilities generally are established contractually for a period of time. Market interest rates change over time. Accordingly, the Company’s results of operations, like those of most financial institutions, are impacted by changes in interest rates and the interest rate sensitivity of its assets and liabilities.
The Company monitors and measures its exposure to changes in interest rates in order to comply with applicable government regulations and risk policies established by the Board of Directors, and in order to preserve stockholder value. In monitoring interest rate risk, the Company analyzes assets and liabilities based on characteristics including size, coupon rate, repricing frequency, maturity date, likelihood of prepayment, and deposit behaviors.
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The Company’s primary objective for its investment portfolio is to provide a source of liquidity for the Company. In addition, the investment portfolio may be used in the management of the Company’s interest rate risk profile. The investment policy generally calls for funds to be invested among various categories of security types and maturities based upon the Company’s need for liquidity, desire to achieve a proper balance between minimizing risk while maximizing yield, the need to provide collateral for borrowings, and the need to fulfill the Company’s asset/liability management goals.
The Company believes that its portfolio of longer duration deposits generated from its Partner Solutions business line provides a stable and profitable funding vehicle. A portion of the Company’s deposit balances are subject to variable card processing expenses, derived from contractual agreements with certain Partner Solutions partners tied to a rate index, typically the EFFR. These costs reprice immediately upon a change in the applicable rate index.
The Bank, acting as custodian of cardholder funds, places a portion of such cardholder funds at one or more third-party banks insured by the FDIC (each, a “Program Bank”). These custodial deposits earn recordkeeping service fee income, typically reflective of the EFFR.
The Board of Directors and relevant government regulations establish limits on the level of acceptable interest rate risk at the Company, to which management adheres. There can be no assurance, however, that, in the event of an adverse change in interest rates, the Company’s efforts to limit interest rate risk will be successful.
Interest Rate Risk (“IRR”)
Overview. The Company actively manages interest rate risk, as changes in market interest rates can have a significant impact on reported earnings. The Company's IRR analysis is designed to compare income and economic valuation simulations in market scenarios designed to alter the direction, magnitude and speed of interest rate changes, as well as the slope of the yield curve. This analysis may not represent all impacts driven by changes in the interest rate environment, such as certain other card fee income and expense line items tied to card processing expense derived from contractual agreements with certain Partner Solutions partners and servicing fees the Company recognizes from custodial off-balance sheet deposits. The Company does not currently engage in trading activities to control IRR although it may do so in the future, if deemed necessary, to help manage IRR.
Earnings at risk and economic value analysis. As a continuing part of its financial strategy, the Bank considers methods of managing an asset/liability mismatch consistent with maintaining acceptable levels of net interest income. In order to monitor IRR, the Company has created an Asset/Liability Committee whose principal responsibilities are to assess the Bank’s asset/liability mix and implement strategies that will enhance income while managing the Bank’s vulnerability to changes in interest rates.
The Company uses two approaches to model IRR: Earnings at Risk (“EAR analysis”) and Economic Value of Equity (“EVE analysis”). Under EAR analysis, net interest income is calculated for each interest rate scenario and compared to the net interest income forecast in the base case over a one-year minimum time horizon. The results are affected by projected rates, prepayments, caps and floors. Management exercises its best judgment in making assumptions regarding events that management can influence, such as non-contractual deposit re-pricing, as well as events outside of management's control, such as customer behavior on loan and deposit activity and the effect that competition has on both lending and deposit pricing. These assumptions are subjective and, as a result, net interest income simulation results will differ from actual results due to the timing, magnitude, and frequency of interest rate changes, changes in market conditions, customer behavior and management strategies, among other factors. The Company performs various sensitivity analyses on assumptions of deposit attrition, loan prepayments, and asset re-pricing, as well as market-implied forward rates and various likely and extreme interest rate scenarios, including rapid and gradual interest rate ramps, rate shocks and yield curve twists.
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The EAR analysis used in the following table reflects the required analysis used no less than quarterly by management. It models basis point parallel shifts in market interest rates over the next one-year period. The following table shows the results of the scenarios as of March 31, 2025 and September 30, 2024:
| Net Sensitive Earnings at Risk | |||||||||||||||||||||||
| Change in Interest Income/Expense for a given change in interest rates | |||||||||||||||||||||||
| Over/(Under) Base Case Parallel Shift | |||||||||||||||||||||||
| (Dollars in Thousands) | Book Value | -200 | -100 | Base | +100 | +200 | |||||||||||||||||
| Balances as of March 31, 2025 | |||||||||||||||||||||||
| Total interest income | 6,202,225 | 385,114 | 405,845 | 433,660 | 462,675 | 490,364 | |||||||||||||||||
| Total interest expense | 265,157 | 557 | 575 | 1,221 | 2,885 | 4,550 | |||||||||||||||||
| Net interest income | 384,557 | 405,270 | 432,439 | 459,790 | 485,814 | ||||||||||||||||||
| Percentage change from base | -11.1 | % | -6.3 | % | — | % | 6.3 | % | 12.3 | % | |||||||||||||
| Balances as of September 30, 2024 | |||||||||||||||||||||||
| Total interest income | 6,676,417 | 411,926 | 440,588 | 470,620 | 499,529 | 527,533 | |||||||||||||||||
| Total interest expense | 634,988 | 12,614 | 16,686 | 22,053 | 27,715 | 33,184 | |||||||||||||||||
| Net interest income | 399,312 | 423,902 | 448,567 | 471,814 | 494,349 | ||||||||||||||||||
| Percentage change from base | -11.0 | % | -5.5 | % | — | % | 5.2 | % | 10.2 | % | |||||||||||||
The EAR analysis reported at March 31, 2025, shows that changes in market interest rates have a larger impact on total interest income than total interest expense. IRR is a snapshot in time. The Company’s business and deposits are predictably cyclical on a weekly, monthly and yearly basis. The Company’s static IRR results could vary depending on which day of the week the month ends, primarily related to payroll processing and timing of when certain programs are prefunded and when the funds are received.
Under EVE analysis, the economic value of financial assets, liabilities and off-balance sheet instruments is derived under each rate scenario. The economic value of equity is calculated as the difference between the estimated market value of assets and liabilities, net of the impact of off-balance sheet instruments.
The EVE analysis used in the following table reflects the required analysis used no less than quarterly by management. It models immediate basis point parallel shifts in market interest rates. The following table shows the results of the scenario as of March 31, 2025 and September 30, 2024:
| Economic Value Sensitivity | ||||||||||||||
| Standard (Parallel Shift) | ||||||||||||||
| Economic Value of Equity at Risk % | ||||||||||||||
| -200 | -100 | +100 | +200 | |||||||||||
| Balances as of March 31, 2025 | ||||||||||||||
| Percentage change from base | -5.1 | % | -2.0 | % | 1.1 | % | 1.6 | % | ||||||
| Balances as of September 30, 2024 | ||||||||||||||
| Percentage change from base | -10.0 | % | -3.9 | % | 2.6 | % | 4.2 | % | ||||||
The EVE at risk reported at March 31, 2025 shows that the economic value of equity position is expected to benefit from rising interest rates due to the large amount of noninterest-bearing funding.
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Item 4. Controls and Procedures.
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
Management, under the direction of its Chief Executive Officer and Chief Financial Officer, is responsible for maintaining disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "1934 Act")) that are designed to ensure that information required to be disclosed in reports filed or submitted under the 1934 Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and that such information is accumulated and communicated to management, including the Company's Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures.
In connection with the preparation of this Quarterly Report on Form 10-Q, management evaluated the Company's disclosure controls and procedures. The evaluation was performed under the direction of the Company's Chief Executive Officer and Chief Financial Officer to determine the effectiveness, as of March 31, 2025, of the design and operation of the Company's disclosure controls and procedures. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of March 31, 2025, the Company’s disclosure controls and procedures were not designed effectively to ensure timely alerting of material information relating to the Company required to be included in the Company's periodic SEC filings. This conclusion was reached as a result of the material weakness in internal control over financial reporting described in Item 9A of Amendment No. 1 to the Annual Report on Form 10-K/A for the year ended September 30, 2024 filed with the SEC on August 29, 2025.
Notwithstanding the conclusion by our management, including our Chief Executive Officer and Chief Financial Officer, that our disclosure controls and procedures were not effective as of March 31, 2025, and notwithstanding the material weakness in our internal control over financial reporting, management, including our Chief Executive Officer and Chief Financial Officer, believes that the consolidated financial statements included in this Form 10-Q fairly present, in all material respects, the Company’s consolidated financial position, results of operations, and cash flows as of and for the periods presented, in accordance with U.S. GAAP.
REMEDIATION PLAN AND STATUS
The material weakness cannot be considered remediated until applicable controls have been designed, implemented, have operated for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively. Although we have not remediated these control deficiencies as of March 31, 2025, management, under the oversight of the Audit Committee, has made and continues to make progress towards remediation.
As part of our commitment to strengthening our internal control over financial reporting, management has taken certain measures including the following to remediate the material weakness:
•The Company engaged a third-party technical accounting consultant to assist with the identification, assessment and accounting and financial reporting impacts for certain consumer lending program agreements in the Consumer Solutions business; and
•Designed and is in process of implementing a control enhancement over the periodic review and validation of accounting policies and accounting treatment for certain consumer lending program agreements in the Consumer Solutions business to ensure both the initial and continuing compliance with relevant U.S. GAAP, including determining if engagement of a third-party technical accounting consultant is necessary.
We believe that the actions outlined above will remediate the material weakness once a sufficient period of time has passed for management to conclude, through testing, that these controls are operating effectively. We will continue to assess the effectiveness of our internal control over financial reporting and have taken steps to remediate the material weakness as expeditiously as possible.
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CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
Other than described above, there have not been any changes in the Company’s internal controls over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the 1934 Act) during the second fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
There are no material pending legal proceedings to which we are a party or to which any of our properties are subject. There are no material proceedings known to us to be contemplated by any governmental authority. We are involved in a variety of litigation matters in the ordinary course of our business and anticipate that we will become involved in new litigation matters in the future.
Item 1A. Risk Factors.
A description of our risk factors can be found in "Item 1A. Risk Factors" included in our Annual Report on Form 10-K/A for the fiscal year ended September 30, 2024. There were no material changes to those risk factors during the six months ended March 31, 2025.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
(a) None.
(b) None.
(c) Issuer Purchases of Equity Securities.
The Company's Board of Directors authorized a 7,000,000 share repurchase program that was publicly announced on August 25, 2023 and is scheduled to expire September 30, 2028. The table below sets forth information regarding repurchases of our common stock during the fiscal 2025 second quarter.
| Period | Total Number of Shares Purchased(1) | Average Price Paid per Share(1)(2) | Total Number of Shares Purchased As Part of Publicly Announced Plans or Programs | Maximum Number Of Shares that may yet be Purchased Under the Plans or Programs | ||||||||||
| January 1 to 31 | 305,900 | $ | 76.80 | 305,900 | 5,992,240 | |||||||||
| February 1 to 28 | 269,904 | 79.59 | 269,904 | 5,722,336 | ||||||||||
| March 1 to 31 | — | — | — | 5,722,336 | ||||||||||
| Total | 575,804 | 575,804 | ||||||||||||
(1) All shares not purchased as part of the Company's publicly announced repurchase program were acquired in satisfaction of the tax withholding obligations of holders of restricted stock unit awards, which vested during the quarter.
(2) The average price paid per share is calculated on a trade date basis for all open market transactions and excludes commissions and other transaction expenses.
Item 3. Defaults Upon Senior Securities.
Not applicable.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
Adoption or Termination of Trading Arrangements by Directors and Executive Officers
During the fiscal quarter ended March 31, 2025, none of our directors or officers (as defined in Rule 16a-1(f) of the 1934 Act) informed us of the adoption termination
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Item 6. Exhibits.
| Exhibit Number | Description | ||||
31.1 | Section 302 certification of Chief Executive Officer. | ||||
31.2 | Section 302 certification of Chief Financial Officer. | ||||
32.1 | Section 906 certification of Chief Executive Officer. | ||||
32.2 | Section 906 certification of Chief Financial Officer. | ||||
| 101 | The following financial information from the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2025 formatted in Inline Extensible Business Reporting Language (iXBRL) includes: (i) Cover Page, (ii) Condensed Consolidated Statements of Financial Condition, (iii) Condensed Consolidated Statements of Operations, (iv) Condensed Consolidated Statements of Comprehensive Income, (v) Condensed Consolidated Statements of Changes in Stockholders' Equity, (vi) Condensed Consolidated Statements of Cash Flows, and (vii) Notes to Condensed Consolidated Financial Statements, tagged in summary and in detail. | ||||
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). | ||||
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PATHWARD FINANCIAL, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
PATHWARD FINANCIAL, INC. | ||||||||
Date: September 10, 2025 | By: | /s/ Brett L. Pharr | ||||||
Brett L. Pharr, | ||||||||
Chief Executive Officer and Director | ||||||||
Date: September 10, 2025 | By: | /s/ Gregory A. Sigrist | ||||||
Gregory A. Sigrist, | ||||||||
Executive Vice President and Chief Financial Officer | ||||||||
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FAQ
What were Pathward Financial (CASH) total revenues and year-over-year change in Q2 2025?
Total revenue for the second quarter was $274.8 million, an increase of 7% compared to the same quarter in fiscal 2024.
How did Net Interest Margin (NIM) perform for Pathward (CASH) in the quarter ended March 31, 2025?
NIM increased to 7.12%, up 35 basis points from 6.77% in the comparable prior-year quarter.
What credit reserve changes did Pathward (CASH) report at March 31, 2025?
The allowance for credit losses rose to $102.9 million from $71.8 million at September 30, 2024; quarterly provision was $35.3 million.
Did Pathward (CASH) report any material control issues in this filing?
Yes. Management concluded disclosure controls and procedures were not designed effectively as of March 31, 2025 due to a material weakness and disclosed a remediation plan.
What liquidity and balance sheet actions did Pathward (CASH) take in the six months ended March 31, 2025?
Cash and cash equivalents increased to $254.2 million; the company sold debt securities AFS totaling $217.9 million and sold held-for-sale loans producing proceeds of $1.15 billion.
Pathward Financial
NASDAQ:CASH
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Aug 11, 2025
[NT 10-Q] Pathward Financial, Inc. SEC Filing
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1.75B
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95.96%
5.71%
Banks - Regional
National Commercial Banks
United States
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