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Item 2. Management’s Discussion and Analysis

2023-02-07 compared with 2022-08-09 · 122 added, 223 removed, 237 unchanged (59% of the section changed)

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PATHWARD FINANCIAL, INC.

TM ("Pathward" or the "Company" or "us") and its wholly-owned subsidiary, Pathward TM , National Association ("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, National Association, which are made in good faith by the Company pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995.

TM ("Pathward Financial" or the "Company" or "us") and its wholly-owned subsidiary, Pathward TM , 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, National Association, 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,” or the negative of those terms, or other words of similar meaning or similar expressions.

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Such statements address, among others, the following subjects:

future operating results;

our ability to remediate the material weakness in our internal controls over financial reporting and otherwise maintain effective internal controls over financial reporting;

the expected impact of the ongoing COVID-19 pandemic and related governmental actions on our business, industry, and the capital markets;

future operating results including our performance expectations;

the impact of measures expected to increase efficiencies or reduce expenses;

customer retention;

expectations regarding the Company's and the Bank's ability to meet minimum capital ratios and capital conservation buffers;

loan and other product demand;

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the level of net charge-offs and the adequacy of the allowance for credit losses;

and management and other employees.

and the Company's employees.

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:

successfully transitioning and maintaining our executive management team;

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 the ongoing COVID-19 pandemic and any governmental or societal responses thereto, or other unusual and infrequently occurring events, including the impact on financial markets from geopolitical conflicts such as the military conflict between Russia and Ukraine;

successfully completing our announced rebranding and our ability to achieve brand recognition equal to or greater than we currently enjoy;

our ability to achieve brand recognition for Pathward equal to or greater than we have enjoyed for MetaBank;

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;

changes in tax laws;

the strength of the United States' economy, and the local economies in which the Company operates;

changes in trade, monetary, and fiscal policies and laws, including actual changes in interest rates and the Fed funds rate;

inflation, market, and monetary fluctuations;

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 tax refund advance business;

the risk of reduced volume of refund advance loans as a result of reduced customer demand for or usage of Pathward’s strategic partners’ refund advance products;

Pathward'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 Pathward’s strategic partners’ refund advance products;

our relationship with, and any actions which may be initiated by, our regulators;

changes in financial services laws and regulations, including laws and regulations relating to the tax refund industry and the insurance premium finance industry and recent and potential changes in response to the ongoing COVID-19 pandemic;

technological changes, including, but not limited to, the security of our electronic systems and information;

changes in financial services laws and regulations, including laws and regulations relating to the tax refund industry and the insurance premium finance industry;

technological changes, including, but not limited to, the protection of our electronic systems and information;

the impact of acquisitions and divestitures;

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the growth of the Company’s business, as well as expenses related thereto;

continued maintenance by Pathward, National Association of its status as a well-capitalized institution;

continued maintenance by Pathward of its status as a well-capitalized institution;

changes in consumer spending and saving habits;

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All subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in its 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 for the Company’s fiscal year ended September 30, 2021, and in other filings made with the SEC.

Additional discussions of factors affecting the Company’s business and prospects are reflected under the caption “Risk Factors” of the Company’s Annual Report on Form 10-K for the Company’s fiscal year ended September 30, 2022, and in the Company's other filings made with the SEC.

The Company expressly disclaims any intent or obligation to update 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.

The Company, a registered bank holding company, is a Delaware corporation, the principal assets of which are all the issued and outstanding shares of the Bank, a national bank.

Unless the context otherwise requires, references herein to the Company include Pathward and the Bank, and all direct or indirect subsidiaries of Pathward on a consolidated basis.

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 June 30, 2022, compared to September 30, 2021, and the consolidated results of operations for the three and nine months ended June 30, 2022 and 2021.

This discussion should be read in conjunction with the Company’s consolidated financial statements, and notes thereto, for the year ended September 30, 2021 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 for the fiscal year ended September 30, 2021.

The following discussion focuses on the consolidated financial condition of the Company at December 31, 2022, compared to September 30, 2022, and the consolidated results of operations for the three months ended December 31, 2022 and 2021.

This discussion should be read in conjunction with the Company’s consolidated financial statements, and notes thereto, for the fiscal year ended September 30, 2022 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 for the fiscal year ended September 30, 2022.

EXECUTIVE SUMMARY

Business Development Highlights for the 2022 Fiscal Third Quarter

• On July 13, 2022, the Company announced it changed its name to Pathward Financial, Inc.™, and its bank subsidiary, MetaBank®, N.A., changed its name to Pathward™, N.A.

("Pathward" or the "Bank").

Certain changes were made immediately, with a full transition to Pathward expected by the end of this calendar year, including the launch of a new brand identity and website.

The Company recognized $3.4 million of pre-tax expenses related to rebranding efforts during the third quarter of fiscal 2022.

The Company continues to estimate total rebranding expenses will range between $15 million to $20 million.

• As part of the Company's priority to work with partners that use a broader suite of the capabilities and multi-product solutions that it provides, the Company will not be renewing its agreements with Liberty Tax and Jackson Hewitt.

This change is expected to boost operational efficiencies over time.

Taxpayer advance volumes are expected to be reduced by approximately 30% next year.

No significant impact is anticipated to refund transfer volumes.

During the quarter, the Company recognized $1.2 million of pre-tax one-time partner termination related expenses.

Financial Highlights for the 2022 Fiscal Third Quarter

• Total revenue for the third quarter was $126.1 million, a decrease of $4.8 million, or 4%, compared to the same quarter in fiscal 2021, primarily driven by a decrease in noninterest income, partially offset by an increase in interest income.

• Net interest income for the third quarter was $72.2 million, an increase of $3.7 million compared to $68.5 million in the third quarter last year.

• Net interest margin ("NIM") increased to 4.76% for the third quarter from 3.75% during the same period of last year.

Business Highlights for the 2023 Fiscal First Quarter

• During the first quarter of fiscal year 2023, the Company recognized the remaining $10.0 million as part of the agreement with Beige Key, LLC to cease all use of the Meta name and trademarks.

The $10.0 million was recognized as noninterest income as a gain on sale of trademarks.

As part of the corporate rebrand, the Company recognized $3.7 million of pre-tax expenses related to rebranding efforts during the first quarter of fiscal 2023.

Since the first quarter of fiscal year 2022 through the first quarter of fiscal year 2023, the Company has recognized $16.9 million in expenses related to rebranding efforts.

The Company does not anticipate any further material expenses related to rebranding efforts.

Financial Highlights for the 2023 Fiscal First Quarter

• Total revenue for the first quarter was $149.8 million, a decrease of $8.4 million, or 5%, compared to the same quarter in fiscal 2022, primarily driven by the $50.0 million gain on sale of trademarks recognized during the prior year period, partially offset by an increase in interest income and the $10.0 million gain on sale of trademarks recognized during the first quarter of fiscal year 2023 .

• Net interest margin ("NIM") increased 103 basis points to 5.62% for the first quarter from 4.59% during the same period of last year.

The prior year period was impacted by excess cash associated with the Company's participation in the U.S.

Treasury Department's Economic Impact Program ("EIP").

• Total gross loans and leases at June 30, 2022 increased $188.3 million, to $3.68 billion, or 5%, compared to June 30, 2021 and decreased $42.6 million, or 1%, when compared to March 31, 2022.

The increase compared to the prior year quarter was driven by growth across our commercial finance portfolio, partially offset by the sale of all remaining community banking loans during the fiscal 2022 first quarter.

The primary driver for the decrease on a linked quarter basis was the seasonal decline in tax services loans.

• The Company originated $4.4 million in a ggregate principal of renewable energy loan financing for the third quarter of fiscal 2022, resulting in $1.0 million in total net investment tax credits.

During the third quarter of fiscal 2021.

the Company originated $13.5 million in aggregate principle of renewable energy loan financing resulting in $3.4 million in total net investment tax credits.

• On May 15, 2022, the Company retired the outstanding $75.0 million subordinated debt, which was due August 15, 2026.

As a result of the retirement, the company will save more than $4 million of interest expense per year.

• The Company resumed share repurchases on July 1, 2022, and through August 2, 2022, the Company repurchased 305,700 shares of common stock at an average share price of $40.74.

There are 4,562,477 shares available for repurchase under the common stock share repurchase program announced during the fourth quarter of fiscal year 2021.

Tax Season Recap

During the third quarter of fiscal 2022, total tax services product revenue was $10.3 million, compared to $13.6 million in the prior year quarter.

Total tax services product income, net of losses and direct product expenses, increase d 9% to $43.5 million from $40.0 m illion, when comparing the first nine months of fiscal 2022 to the same period of the prior fiscal year.

While taxpayer advances came in below the Company's expectations, overall refund transfer revenues grew 9% year-over-year.

Looking ahead to next year, the Company continues to expect strong refund transfer volumes and greater efficiency in its tax line of business as a result of the non-renewal of the Company's two aforementioned tax partner relationships.

Treasury Department's Economic Impact Program.

• Total gross loans and leases at December 31, 2022 decreased $174.5 million, or 5%, to $3.51 billion compared to December 31, 2021 and decreased $26.6 million , or 1%, when compared to September 30, 2022.

The decrease compared to the prior year quarter was primarily due to a reduction in warehouse finance loans and the sale of the $81.5 million student loan portfolio during the fiscal 2022 fourth quarter, partially offset by growth in the commercial finance portfolio.

The primary driver for the decrease on a linked quarter basis was the reduction in warehouse finance loans.

• During the fiscal 2023 first quarter, the Company repurchased 653,994 shares of common stock at an average share price of $38.10.

FINANCIAL CONDITION

At June 30, 2022, the Company’s total assets increased by $37.5 million to $6.73 billion compared to September 30, 2021, primarily due to an increase of $91.6 million in securities available for sale and an increase of $79.0 million in total loans and leases, partially offset by a decrease in cash and cash equivalents of $156.8 million.

Total cash and cash equivalents was $157.3 million at June 30, 2022, decreasing from $314.0 million at September 30, 2021, primarily resulting from a decrease in excess cash associated with the Company's participation in the EIP in the prior year.

Otherwise, the Company maintains its cash investments primarily in interest-bearing overnight deposits with the FHLB of Des Moines and the FRB.

At June 30, 2022, the Company did not have any federal funds sold.

The total investment portfolio increased $78.8 million, or 4%, to $2.00 billion at June 30, 2022, compared to $1.92 billion at September 30, 2021, as purchases exceeded maturities and principal pay downs.

At December 31, 2022, the Company’s total assets decreased by $88.2 million to $6.66 billion compared to September 30, 2022, primarily due to decreases of $35.1 million in securities available for sale, $26.6 million in total loans and leases, and $18.9 million in cash and cash equivalents.

Total cash and cash equivalents was $369.2 million at December 31, 2022, decreasing from $388.0 million at September 30, 2022.

The Company maintains its cash investments primarily in interest-bearing overnight deposits with the FHLB of Des Moines and the FRB.

At December 31, 2022, the Company did not have any federal funds sold.

The Company's investment security balances decreased $36.2 million, or 2%, to $1.89 billion at December 31, 2022, compared to $1.92 billion at September 30, 2022, due to maturities and principal pay downs.

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.

All MBS held by the Company at June 30, 2022 were issued by a U.S.

Government agency or instrumentality.

During the nine months ended June 30, 2022, the Company purchased $689.5 million of investment securities.

Loans held for sale at June 30, 2022 totaled $67.6 million, increasing from $56.2 million at September 30, 2021.

This increase was primarily driven by the balance of SBA/USDA loans held for sale as of June 30, 2022 as compared to September 30, 2021.

The Company’s total loans and leases increased $75.7 million, or 2%, to $3.68 billion at June 30, 2022, from $3.61 billion at September 30, 2021.

The increase was primarily driven by growth in the commercial finance, warehouse finance, and consumer finance portfolios, partially offset by the sales of all remaining community banking loans.

During the three months ended December 31, 2022, the Company made no purchases of investment securities.

Loans held for sale at December 31, 2022 totaled $17.1 million, decreasing from $21.1 million at September 30, 2022.

This decrease was driven by a reduction in consumer credit products held for sale at December 31, 2022 compared to September 30, 2022.

Total gross loans and leases totaled $3.51 billion at December 31, 2022, as compared to $3.54 billion at September 30, 2022.

The primary driver for the decrease on a linked quarter basis was a reduction in warehouse finance loans and commercial finance loans, partially offset by an increase in the consumer finance portfolio and the seasonal increase in tax services loans.

See Note 5 to the “Notes to Condensed Consolidated Financial Statements” of this Quarterly Report on Form 10-Q.

Commercial finance loans increased $222.4 million, tax services loans increased $31.2 million, warehouse finance increased $14.8 million, and consumer finance increased $6.4 million at June 30, 2022 compared to September 30, 2021.

The increase in commercial finance loan balances was largely driven by the asset-based lending, term lending, and insurance premium finance categories.

The seasonality of the Company's tax services business led to the increase in tax services loans at June 30, 2022 compared to September 30, 2021.

Community banking loans decreased $199.1 million, or 100%, at June 30, 2022 compared to September 30, 2021, as all remaining community banking loans were sold during the fiscal 2022 first quarter.

Commercial finance loans, which comprised 86% of the Company's gross loan and lease portfolio, totaled $3.01 billion at December 31, 2022 , reflecting a reduction of $16.8 million, or 1%, from September 30, 2022.

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 Federal Reserve Bank.

The FHLB requires a level of stock investment based on a pre-determined formula.

The Company’s investment in these stocks increased $0.4 million, or 1% to $28.8 million at June 30, 2022 from $28.4 million at September 30, 2021, resulting from the purchase of FHLB membership stock.

Total end-of-period deposits increased 4% to $5.71 billion at June 30, 2022, compared to September 30, 2021, primarily driven by an increase in noninterest-bearing deposits of $502.1 million partially offset by a decrease in interest-bearing checking of $254.4 million and a decrease in wholesale deposits of $72.7 million.

As of June 30, 2022, the Company placed $1.22 billion of customer deposits at other banks in its capacity as custodian, as compared to $1.85 billion at March 31, 2022 and $1.27 billion at June 30, 2021.

In placing those excess deposits at other banks, the Company can earn record keeping service fee income that has a contractual rate index that is consistent with the federal funds effective rate ("EFFR"), which is recognized as part of payments card and deposit fee income.

The Company's total borrowings decreased $76.2 million, or 82%, from $92.8 million at September 30, 2021 to $16.6 million at June 30, 2022.

During the third quarter of fiscal 2022, the Company retired the outstanding $75.0 million subordinated debt, which was due August 15, 2026.

At June 30, 2022, the Company’s stockholders’ equity totaled $724.8 million, a decrease of $147.1 million, from $871.9 million at September 30, 2021.

The decrease was primarily attributable to a reduction in accumulated other comprehensive income ("AOCI") and a reduction in retained earnings related to activity from the Company's share repurchase programs.

The Company and Bank remained above the federal regulatory minimum capital requirements at June 30, 2022, continued to be classified as well-capitalized, and in good standing with the regulatory agencies.

The Company’s investment in these stocks was $28.8 million at December 31, 2022 and at September 30, 2022, as purchases were offset by redemptions of FHLB membership stock during the three months ended December 31, 2022.

Total end-of-period deposits decreased 1% to $5.79 billion at December 31, 2022, compared to September 30, 2022, primarily driven by a decrease in noninterest-bearing deposits of $68.0 million.

The Company's total borrowings decreased $1.1 million, or 3%, from $36.0 million at September 30, 2022 to $35.0 million at December 31, 2022.

At December 31, 2022, the Company’s stockholders’ equity totaled $659.1 million, an increase of $14.0 million, from $645.1 million at September 30, 2022.

The increase was primarily attributable to a change in accumulated other comprehensive income ("AOCI").

The Company and Bank remained above the federal regulatory minimum capital requirements at December 31, 2022, and continued to be classified as well-capitalized, and in good standing with the regulatory agencies.

See “Liquidity and Capital Resources” for further information.

Payments Noninterest-bearing Checking Deposits

The Company may hold negative balances associated with cardholder programs in the payments division that are included within noninterest-bearing deposits on the Company's Condensed Consolidated Statements of Financial Condition.

Noninterest-bearing Checking Deposits.

The Company may hold negative balances associated with cardholder programs in the BaaS 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:

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– Discount fundings:

The Company funds cards in an amount that is estimated to be less than final breakage values on card programs.

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 one partner.

The majority of these discount fundings relate to a small number of partners, and analyzed on an ongoing basis.

– Demand Deposit Account ("DDA") overdrafts:

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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 payments division:

(Dollars in thousands) June 30, 2022 September 30, 2021

The following table summarizes the Company's negative deposit balances within the BaaS business line:

(Dollars in thousands) December 31, 2022 September 30, 2022

Noninterest-bearing deposits $ 5,903,642 $ 5,916,142

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Noninterest-bearing checking, net $ 5,579,126 $ 5,647,102

Custodial Deposit Transference

Custodial Off-Balance Sheet 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”).

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In return for record keeping services at Program Banks, the Bank receives a servicing fee (“Servicing Fee”).

In prior periods, the Servicing Fee was not significant.

As of July 31, 2022, the Servicing Fee has been typically reflective of the EFFR upon a renegotiation of the contracts with Program Banks.

For the three months ended December 31, 2022, the Company recognized $12.9 million in servicing fee income as compared to an insignificant amount for the three months ended December 31, 2021.

The Servicing Fee has been typically reflective of the EFFR upon a renegotiation of the contracts with Program Banks.

As of December 31, 2022, the Company managed $2.23 billion of customer deposits at other banks in its capacity as custodian.

The balance of these deposits increased $915.9 million as of December 31, 2022 as compared to $1.31 billion at September 30, 2022 primarily due to seasonal activity.

These deposits provide the Company with excess deposits that can earn record keeping service fee income, typically reflective of the EFFR.

Approximately 43% of the deposit portfolio as of December 31, 2022 are subject to variable card processing expenses that are derived from the terms of contractual agreements with certain BaaS partners.

These agreements are tied to a rate index, typically the EFFR.

RESULTS OF OPERATIONS

The Company recorded net income of $22.4 million, or $0.76 per diluted share, for the three months ended June 30, 2022, compared to net income of $38.7 million, or $1.21 per diluted share, for the three months ended June 30, 2021.

Total revenue for the fiscal 2022 third quarter was $126.1 million, compared to $130.9 million for the same quarter in fiscal 2021.

The decrease in net income was primarily driven by an increase in noninterest expense, a decrease in noninterest income, and an increase in income tax expense, partially offset by an increase in net interest income.

The Company recorded net income of $133.0 million, or $4.44 per diluted share, for the nine months ended June 30, 2022, compared to $125.8 million, or $3.87 per diluted share, for the same period in the prior year.

Total revenue for the nine months ended June 30, 2022 was $477.9 million, compared to $429.7 million for the same period of the prior year.

The increase in net income was primarily driven by an increase in net interest income and noninterest income, partially offset by increases in both noninterest expense and income tax expense.

The Company recorded net income of $27.8 million, or $0.98 per diluted share, for the three months ended December 31, 2022, compared to net income of $61.3 million, or $2.00 per diluted share, for the three months ended December 31, 2021.

Total revenue for the fiscal 2023 first quarter was $149.8 million, a decrease of $8.4 million, or 5%, compared to the same quarter in fiscal 2022, primarily driven by the $50.0 million gain on sale of trademarks recognized during the prior year period, partially offset by an increase in interest income and the $10.0 million gain on sale of trademarks recognized during the three months ended December 31, 2022 .

Net Interest Income

Net interest income for the fiscal 2022 third quarter was $72.2 million, an increase of 5%, from the same quarter in fiscal 2021.

The increase was mainly attributable to investment interest income, an improved earning asset mix, and increased loan balances.

For the nine months ended June 30, 2022, net interest income was $227.6 million, an increase of 9%, from $208.3 million compared to the same period in the prior year.

The third quarter average outstanding balance of loans and leases increased $128.9 million compared to the same quarter of the prior year, primarily due to increases in core loan and lease portfolios, partially offset by the sale of the remaining community bank portfolio.

The Company’s average interest-earning assets for the third quarter decreased by $1.23 billion to $6.08 billion compared with the same quarter in fiscal 2021, primarily due to a reduction in cash balances as a result of high cash levels during the prior year period related to the Company's participation in government stimulus programs.

The decrease in interest-earnings assets was partially offset by growth in total investments and total loans and leases.

Fiscal 2022 third quarter NIM increased to 4.76% from 3.75% in the third quarter of last year.

The overall reported tax equivalent yield (“TEY”) on average earning assets increased by 104 basis points to 4.89% compared to the prior year quarter, primarily driven by a decrease in lower-yielding cash balances.

Growth in loan and lease and investment securities balances also contributed to the year-over-year TEY increase.

Net interest income for the fiscal 2023 first quarter was $84.1 million, an increase of 17%, from the same quarter in fiscal 2022.

The increase was mainly attributable to increased yields and an improved earning asset mix.

The first quarter average outstanding balance of loans and leases decreased $182.1 million compared to the same quarter of the prior year, primarily due to a reduction in warehouse finance loans and the sales of the remaining community bank and student loan portfolios, partially offset by an increase in the commercial finance loans.

The Company’s average interest-earning assets for the first fiscal quarter decreased by $249.2 million to $5.93 billion compared with the same quarter in fiscal 2022, primarily due to a reduction in cash balances as a result of high cash levels during the prior year period related to the Company's participation in government stimulus programs.

The decrease in interest-earnings assets was partially offset by growth in total investments and commercial finance loans and leases.

Fiscal 2023 first quarter NIM increased to 5.62% from 4.59% in the first fiscal quarter of last year.

The overall reported tax equivalent yield (“TEY”) on average earning assets increased by 101 basis points to 5.70% compared to the prior year quarter, primarily driven by an increase in loan and lease and investment securities yields, along with a decrease in lower-yielding cash balances.

The yield on the loan and lease portfolio was 7.70% compared to 6.96% for the comparable period last year and the TEY on the securities portfolio was 2.76% compared to 1.58% for that same period.

The commercial finance portfolio volumes and yields are impacted by market conditions, competitive landscape, product demand, spread between short- and long-term interest rates, and structures, which include floor interest rates and varied loan maturity terms.

At June 30, 2022, $93.7 million of the portfolio had structures where the interest rate charged was at a floor level as compared to $370.0 million as of March 31, 2022 and $268.6 million as of June 30, 2021.

Once the interest rate on a loan goes above the floor level, yields on those loans will begin to increase.

For the nine months ended June 30, 2022, NIM was 4.72%, an increase of 104 basis points from 3.68% compared to the same period in the prior year.

NIM, tax-equivalent for the nine months ended June 30, 2022 increased to 4.73% from 3.70% in the same period of the prior year.

The Company's cost of funds for all deposits and borrowings averaged 0.12% during the fiscal 2022 third quarter, as compared to 0.09% during the prior year quarter.

The increase in cost of funds was primarily related to accelerated interest expense of $0.9 million during the fiscal 2022 third quarter associated with the retirement of the subordinated debt.

The Company's overall cost of deposits was 0.01% in the fiscal 2022 third quarter, the same as the prior year quarter.

The Company's cost of funds for all deposits and borrowings averaged 0.07% during the fiscal 2023 first quarter, as compared to 0.08% during the prior year quarter.

The Company's overall cost of deposits was 0.01% in the fiscal 2023 first quarter, the same as the prior year quarter.

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 table below are calculated on a daily average balance.

Tax-equivalent adjustments have been made in yield on interest-bearing assets and net interest margin.

Nonaccruing loans and leases have been included in the table as loans carrying a zero yield.

Three Months Ended June 30,

Three Months Ended December 31,

(Dollars in thousands) Average

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Total loans and leases (3)

Total interest-earning assets 6,082,329 $ 73,906 4.89 % 7,316,820 $ 69,983 3.85 %

Noninterest-earning assets 695,468 841,738

Total assets $ 6,777,797 $ 8,158,558

Interest-bearing liabilities:

Interest-bearing checking (2)

3,524,924 68,396 7.70 % 3,706,975 65,035 6.96 %

Savings 82,989 7 0.03 % 107,803 5 0.02 %

Money markets 101,943 53 0.21 % 58,517 66 0.45 %

Time deposits 8,709 9 0.40 % 11,877 27 0.91 %

Wholesale deposits 8,554 25 1.19 % 86,295 90 0.42 %

Total interest-bearing deposits 202,487 94 0.19 % 601,068 188 0.13 %

Overnight fed funds purchased 19,353 72 1.50 % 11 — 0.25 %

Subordinated debentures 36,480 1,444 15.87 % 73,907 1,148 6.23 %

Other borrowings 17,056 145 3.40 % 20,657 172 3.35 %

Total borrowings 72,889 1,661 9.14 % 94,575 1,320 5.60 %

Total interest-bearing liabilities 275,376 1,755 2.56 % 695,643 1,508 0.87 %

Noninterest-bearing deposits 5,538,585 — — % 6,380,371 — — %

Total deposits and interest-bearing liabilities 5,813,961 $ 1,755 0.12 % 7,076,014 $ 1,508 0.09 %

Other noninterest-bearing liabilities 213,293 225,862

Total liabilities 6,027,254 7,301,876

Shareholders' equity 750,543 856,682

Total liabilities and shareholders' equity $ 6,777,797 $ 8,158,558

Net interest income and net interest rate spread including noninterest-bearing deposits $ 72,151 4.77 % $ 68,475 3.76 %

Net interest margin 4.76 % 3.75 %

Tax-equivalent effect 0.01 % 0.02 %

Net interest margin, tax-equivalent (3)

4.77 % 3.77 %

(1) Tax rate used to arrive at the TEY for the three months ended June 30, 2022 and 2021 was 21%.

(2) At June 30, 2021, $336.2 million of the total balance were interest-bearing deposits where interest expense was paid by a third party and not by the Company.

On October 1, 2021, the Company reclassified the balances related to that program to noninterest bearing checking due to the product moving to noninterest bearing.

(3) 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.

Nine Months Ended June 30,

(Dollars in thousands) Average

Balance Interest

Interest-earning assets:

Cash and fed funds sold $ 570,806 $ 2,067 0.48 % $ 2,279,550 $ 2,461 0.14 %

Mortgage-backed securities 1,194,869 16,690 1.87 % 620,919 8,176 1.76 %

Tax exempt investment securities 190,076 2,575 2.29 % 298,276 3,232 1.83 %

Asset-backed securities 323,080 3,045 1.26 % 384,397 4,141 1.44 %

Other investment securities 269,561 4,482 2.22 % 232,852 3,373 1.94 %

Total investments 1,977,586 26,792 1.86 % 1,536,444 18,922 1.72 %

Commercial finance 2,858,837 148,678 6.95 % 2,501,911 140,570 7.51 %

Consumer finance 315,933 18,970 8.03 % 245,627 15,632 8.51 %

Tax services 228,181 13,126 7.69 % 274,706 7,156 3.48 %

Warehouse finance 448,358 20,816 6.21 % 310,593 14,930 6.43 %

Community banking 46,471 1,525 4.39 % 409,869 14,127 4.61 %

Total loans and leases 3,897,780 203,115 6.97 % 3,742,706 192,415 6.87 %

Total interest-earning assets 5,934,431 $ 85,060 5.70 % 6,183,646 $ 72,891 4.69 %

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Interest-bearing checking $ 447 $ — 0.33 % $ 389 $ — 0.32 %

$ 324 $ 1 0.32 % $ 258,020 $ 1 — %

Savings 62,607 6 0.04 % 80,765 5 0.03 %

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5.64 % 4.61 %

(1) Tax rate used to arrive at the TEY for the nine months ended June 30, 2022 and 2021 was 21%.

(2) At June 30, 2021, $218.5 million of the total balance were interest-bearing deposits where interest expense was paid by a third party and not by the Company.

On October 1, 2021, the Company reclassified the balances related to that program to noninterest bearing checking due to the product moving to noninterest bearing.

(1) Tax rate used to arrive at the TEY for the three months ended December 31, 2022 and 2021 was 21%.

(2) Net interest margin expressed on a fully-taxable-equivalent basis ("net interest margin, tax-equivalent") is a non-GAAP financial measure.

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(3) Included in the yield computation are net loan fees of $6.5 million and $8.2 million for the three months ended December 31, 2022 and 2021, respectively.

Provision for Credit Losses

The Company recognized a reversal of provision for credit losses of $1.3 million for the quarter ended June 30, 2022, compared to a provision for credit losses of $4.6 million for the same quarter last year.

The Company recognized a provision for credit losses of $31.2 million for the nine months ended June 30, 2022, and $41.0 million for the comparable period in the prior fiscal year.

Net charge-offs were $12.2 million for the quarter ended June 30, 2022, compared to $12.3 million for the quarter ended June 30, 2021.

Net charge-offs attributable to the tax services, consumer finance, and commercial finance portfolios for the quarter were $8.0 million, $2.3 million, and $1.9 million, respectively.

The Company recognized a provision for credit losses of $9.8 million for the quarter ended December 31, 2022, compared to $0.2 million of provision for credit losses expense for the comparable period in the prior fiscal year.

T he increase in provision for credit losses during the current quarter compared to the prior year period was primarily driven by the release of provision for credit losses related to the community bank portfolio during the prior year period.

Net charge-offs were $3.2 million for the quarter ended December 31, 2022, compared to $1.1 million for the quarter ended December 31, 2021.

Net charge-offs attributable to the commercial finance, tax services, and consumer finance portfolios for the current quarter were $2.0 million, $1.0 million, and $0.2 million, respectively.

Noninterest Income

Fiscal 2022 third quarter noninterest income decreased to $54.0 million from $62.5 million for the same period of the prior year.

The decrease was driven by a reduction in gain on sale of loan and leases by $4.8 million , a decrease in payments fee income of $4.5 million, and a decrease in tax services product fee income of $2.7 million.

These decreases were partially offset by an increase in rental income of $2.1 million and an increase in other income of $1.3 million.

The prior year’s quarter benefited from greater card fee income associated with stimulus activity as well as a delayed tax season.

Furthermore, the company recorded fewer gains on loan sales in the current fiscal year as the SBA and USDA sale volumes have been impacted by supply chain constraints within the solar construction market .

Noninterest income for the nine months ended June 30, 2022 increased to $250.4 million from $221.4 million for the same period of the prior year, primarily driven by the gain on sale of Meta names and trademarks during the first quarter of fiscal 2022.

Fiscal 2023 first quarter noninterest income decreased to $65.8 million from $86.6 million for the same period of the prior year.

The decrease was primarily attributable to the gain on sale of trademarks as the Company recognized a $10.0 million gain during the current quarter as compared to a $50.0 million gain during the same period of the prior year.

The period over period decrease was partially offset by increases in card and deposit fee income, gain on sale of other, other income, and rental income.

The increase in card and deposit fee income was primarily from servicing fee income on off-balance sheet deposits, which totaled $12.9 million during the fiscal 2023 first quarter , as compared to an insignificant amount for the fiscal quarter ended December 31, 2021 .

Noninterest Expense

Noninterest expense increased 19% to $96.7 million for the fiscal 2022 third quarter, from $81.5 million for the same quarter last year.

The increase in expense was primarily driven by an increase in compensation expense, legal and consulting expense, card processing, occupancy and equipment expense, and operating lease equipment depreciation.

These increases were partially offset by a decrease in other expense.

Compensation expense for the third quarter of fiscal 2022 inclu des $3.1 million o f separation-related expenses stemming from expense reduction initiative s.

In addition, the Company recognized $3.4 million in rebranding expenses and $1.2 million in expenses related to the non-renewal of the aforementioned tax partner agreements.

Certain card processing expenses are derived from the terms of contractual agreements with some BaaS partners.

The amount of expense paid under those agreements is based on an agreed upon rate index which varies depending on the deposit levels, floor rates, market conditions, and other performance conditions.

Generally this rate index averages between 50% to 85% of the EFFR.

Approximately 42% of the deposit portfolio may be subject to these higher card processing expenses.

For the fiscal quarter ended June 30, 2022, card processing expenses related to these structured agreements were $2.2 million, as compared to $0.2 million for the fiscal quarter ended March 31, 2022 and $0.1 million for the fiscal quarter ended June 30, 2021.

Noninterest expense for the nine months ended June 30, 2022 increased to $282.2 million from $250.1 million for the same period of the prior year.

Noninterest expense increased 27% to $105.1 million for the fiscal 2023 first quarter, from $82.4 million for the same quarter last year.

The increase was primarily attributable to increases in card processing expense, compensation expense, legal and consulting expense, and operating lease equipment depreciation.

The card processing expense increase was due to structured agreements with BaaS partners.

The amount of expense paid under those agreements is based on an agreed upon rate index that varies depending on the deposit levels, floor rates, market conditions, and other performance conditions.

Generally, this rate index averages between 50% to 85% of the EFFR and reprices immediately upon a change in the EFFR.

Approximately 43% of the deposit portfolio was subject to these higher card processing expenses.

For the fiscal quarter ended December 31, 2022, card processing expenses related to these structured agreements were $14.0 million, as compared to $0.1 million for the fiscal quarter ended December 31, 2021.

Income Tax Expense

The Company recorded an income tax expense of $7.0 million, representing an effective tax rate of 22.6%, for the fiscal 2022 third quarter, compared to $4.9 million, representing an effective tax rate of 11.0%, for the third quarter last year.

The current quarter increase in income tax expense was primarily due to a reduction in renewable energy investment tax credit lending volume compared to the prior year period.

The Company originated $4.4 million in solar leases during the fiscal 2022 third quarter, compared to $13.5 million in last year's third quarter.

The Company recorded an income tax expense of $6.6 million, representing an effective tax rate of 18.8%, for the fiscal 2023 first quarter, compared to income tax expense of $14.3 million, representing an effective tax rate of 18.9%, for the first quarter last year.

The current quarter decrease in income tax expense was primarily due to decreased earnings.

The Company originated $11.4 million in solar leases during the fiscal 2023 first quarter, resulting in $3.1 million in total net investment tax credits.

During the first quarter of fiscal 2022, the Company originated $21.2 million in solar leases resulting in $5.7 million in total net investment tax credits.

Investment tax credits related to solar leases are recognized ratably based on income throughout each fiscal year.

For the nine months ended June 30, 2022, the Company originated $26.9 million in solar leases, compared to $72.0 million for the comparable prior year period.

The timing and impact of future solar tax credits are expected to vary from period to period, and the Company intends to undertake only those tax credit opportunities that meet the Company's underwriting and return criteria.

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Generally, this is associated with a delay or shortfall in payments of greater than 210 days for insurance premium finance, 180 days for tax and other specialty lending loans, 120 days for consumer credit products and 90 days for other loans.

Action is taken to charge off ERO loans if such loans have not been collected by the end of June and taxpayer advance loans if such loans have not been collected by the end of the calendar year.

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.

Nonaccrual loans and troubled debt restructurings are generally considered impaired.

The Company believes that the level of allowance for credit losses at June 30, 2022 was appropriate and reflected probable losses related to these loans and leases;

The Company believes that the level of allowance for credit losses at December 31, 2022 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.

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The table below sets forth the amounts and categories of the Company's nonperforming assets.

(Dollars in thousands) June 30, 2022 September 30, 2021

(Dollars in thousands) December 31, 2022 September 30, 2022

Nonperforming Loans and Leases

1 unchanged sentence

Commercial finance $ 25,077 $ 13,375

Community banking — 14,915

Total nonaccruing loans and leases 25,077 13,375

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(1) Certain tax services loans do not bear interest.

At June 30, 2022, nonperforming loans and leases totaled $26.6 million, representing 0.71% of total loans and leases, compared to $55.9 million, or 1.16% of total loans and leases at September 30, 2021.

The Company's nonperforming loans and leases at December 31, 2022 were $40.9 million, representing 1.16% of total gross loans and leases, compared to $29.2 million, or 0.82% of total gross loans and leases at September 30, 2022.

The increase in the nonperforming assets as a percentage of total assets at December 31, 2022 compared to September 30, 2022, was driven by an increase in nonperforming loans in the commercial finance portfolio, primarily due to one lending relationship that moved to nonperforming during the period.

The increase was partially offset by a decrease in nonperforming tax services loans due to seasonal timing.

Classified Assets .

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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.

On the basis of management’s review of its loans, leases, and other assets, at June 30, 2022, the Company had classified loans and leases of $172.7 million as substandard, $4.9 million as doubtful and none as loss.

On the basis of management’s review of its loans, leases, and other assets, at December 31, 2022, the Company had classified loans and leases of $199.4 million as substandard, $3.9 million as doubtful and none as loss.

At September 30, 2022, the Company classified loans and leases of $203.7 million as substandard, $4.0 million as doubtful and none as loss.

Allowance for Credit Losses .

Effective October 1, 2020, the Company adopted ASU 2016-13, Financial Instruments – Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments, and subsequent related ASUs (collectively “Topic 326”), which measures credit loss for most financial assets, including trade and other receivables, debt securities held to maturity, loans, net investments in leases, purchased financial assets with credit deterioration, and off-balance sheet credit exposures.

ASU 2016-13 requires the use of a current expected credit losses ("CECL") methodology to determine the allowance for credit losses ("ACL") for loans and debt securities held to maturity.

CECL requires loss estimates for the remaining estimated life of the assets to be measured using historical loss data, adjustments for current conditions, and adjustments for reasonable and supportable forecasts of future economic conditions.

The ACL represents management’s estimate of expected credit losses 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 for credit loss, generally this means loans and leases identified as troubled debt restructurings or loans and leases on nonaccrual status.

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 troubled debt restructurings or loans and leases on nonaccrual status.

All other loans and leases are evaluated collectively for credit loss.

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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 $75.2 million at June 30, 2022, an increase compared to $68.3 million at September 30, 2021.

The increase in the ACL at June 30, 2022 was driven primarily by the seasonal allowance build in the tax services loan portfolio.

This increase was partially offset by the disposition of the community bank portfolio along with decreases in the commercial and consumer finance loan portfolios.

The Company's ACL totaled $52.6 million at December 31, 2022, an increase compared to $45.9 million at September 30, 2022.

The increase in the ACL at December 31, 2022, when compared to September 30, 2022, was primarily due to a $4.7 million increase in the commercial finance portfolio, a $1.4 million increase in the consumer finance portfolio and a $0.6 million increase in the seasonal tax services loan portfolio.

The following table presents the Company's ACL as a percentage of its total loans and leases.

As of the Period Ended

June 30, 2022 March 31, 2022 December 31, 2021 September 30, 2021 June 30, 2021

December 31, 2022 September 30, 2022 June 30, 2022 March 31, 2022 December 31, 2021

Commercial finance 1.62 % 1.46 % 1.56 % 1.66 % 2.04 %

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Warehouse finance 0.10 % 0.10 % 0.10 % 0.10 % 0.10 %

Community banking — % — % — % 6.16 % 4.36 %

Total loans and leases 1.50 % 1.30 % 2.04 % 2.38 % 1.84 %

Total loans and leases excluding tax services 1.50 % 1.30 % 1.44 % 1.59 % 1.84 %

Management closely monitors economic developments and considers these factors when assessing the appropriateness of its ACL.

The Company's ACL as a percentage of total loans and leases decreased to 2.04% at June 30, 2022 from 2.38% at March 31, 2022 and increased from 1.89% at September 30, 2021.

The decrease in the total loans and leases coverage ratio was primarily driven by a decrease in the seasonal tax services loan portfolio, along with a decrease in the coverage ratio for both the commercial and consumer finance portfolios.

The Company's ACL as a percentage of total loans and leases increased to 1.50% at December 31, 2022 from 1.30% at September 30, 2022.

The increase in the total loans and leases coverage ratio was primarily driven by the commercial and consumer finance portfolios.

The increase in the commercial finance coverage ratio was primarily due to a specific reserve on an individually evaluated loan relationship while the increase in consumer finance was related to seasonal activity.

The Company expects to continue to diligently monitor the ACL and adjust as necessary in future periods to maintain an appropriate and supportable level.

Management believes that, based on a detailed review of the loan and lease portfolio, historic loan and lease losses, current economic conditions, the size of the loan and lease portfolio and other factors, the level of the ACL at June 30, 2022 reflected an appropriate allowance against expected credit losses from the lending portfolio.

Although the Company maintains its ACL at a level it considers to be appropriate, investors and others are cautioned that there can be no assurance that future losses will not exceed estimated amounts, or that additional provisions for credit losses will not be required in future periods.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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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, and include those for the ACL, goodwill and identifiable intangible assets.

These policies involve complex and subjective decisions and assessments.

1 unchanged sentence

A discussion of the Company’s critical accounting policies and estimates can be found in the Company's Annual Report on Form 10-K for the year ended September 30, 2022.

There were no significant changes to these critical accounting policies and estimates during the first nine months of fiscal 2022.

There were no significant changes to these critical accounting policies and estimates during the first three months of fiscal 2023.

LIQUIDITY AND CAPITAL RESOURCES

The Company’s primary sources of funds are deposits, derived principally through its payments division, borrowings, principal and interest payments on loans and leases and mortgage-backed securities, and maturing investment securities.

The Company’s primary sources of funds are deposits, derived principally through its BaaS 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 deposits and loan commitments, to maintain liquidity, and to meet operating expenses.

At June 30, 2022, the Company had unfunded loan and lease commitments of $1.28 billion.

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 December 31, 2022, 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.

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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 June 30, 2022, both the Company and the Bank exceeded federal regulatory minimum capital requirements to be classified as well-capitalized under the prompt corrective action requirements.

At December 31, 2022, both 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;

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The securities portfolio is made up of nearly all amortizing securities that should provide consistent cash flow and is not expected to require sales to realize the losses to fund future loan growth.

At June 30, 2022 Company Bank Minimum

At December 31, 2022 Company Bank Minimum

to be Adequately Capitalized Under Prompt Corrective Action Provisions Minimum to be Well Capitalized Under Prompt Corrective Action Provisions

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(Dollars in thousands) Standardized Approach (1)

June 30, 2022

December 31, 2022

Total stockholders' equity $ 659,133

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Each of tangible common equity and tangible common equity excluding AOCI is a non-GAAP financial measure that is commonly used within the banking industry.

(Dollars in thousands) At June 30, 2022

(Dollars in thousands) At December 31, 2022

Total stockholders' equity $ 659,133

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Management's Discussion and Analysis of Financial Condition and Results of Operations-Contractual Obligations " in the Company’s Annual Report on Form 10-K for its fiscal year ended September 30, 2022 for a summary of our contractual obligations as of September 30, 2022.

There were no material changes outside the ordinary course of our business in contractual obligations from September 30, 2021 through June 30, 2022.

OFF-BALANCE SHEET FINANCING ARRANGEMENTS

Commitments and Contingencies in "Item 8.

Financial Statements and Supplementary Data" in the Company's Annual Report on Form 10-K for its fiscal year ended September 30, 2021 for discussion of the Company’s off-balance sheet financing arrangements as of September 30, 2021.

There were no material changes from September 30, 2021 through June 30, 2022.

There were no material changes outside the ordinary course of our business in contractual obligations from September 30, 2022 through December 31, 2022.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis