What changed in this filing

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Item 1. Financial Statements

2023-05-09 compared with 2023-02-07 · 229 added, 110 removed, 962 unchanged (26% of the section changed)

3 unchanged sentences

Condensed Consolidated Statements of Financial Condition

(Dollars in thousands, except per share data) December 31, 2022 September 30, 2022

(Dollars in thousands, except per share data) March 31, 2023 September 30, 2022

ASSETS (Unaudited) (Audited)

15 unchanged sentences

Deposits $ 5,902,696 $ 5,866,037

Short-term borrowings 43,000 —

Long-term borrowings 34,543 36,028

2 unchanged sentences

STOCKHOLDERS’ EQUITY

Preferred stock, 3,000,000 shares authorized, no shares issued, none outstanding at December 31, 2022 and September 30, 2022, respectively

Preferred stock, 3,000,000 shares authorized, no shares issued, none outstanding at March 31, 2023 and September 30, 2022, respectively

Common stock, $ 0.01 par value;

90,000,000 shares authorized, 28,358,583 and 28,878,177 shares issued, 28,211,239 and 28,788,124 shares outstanding at December 31, 2022 and September 30, 2022, respectively

90,000,000 shares authorized, 27,205,406 and 28,878,177 shares issued, 27,055,727 and 28,788,124 shares outstanding at March 31, 2023 and September 30, 2022, respectively

Common stock, Nonvoting, $ 0.01 par value;

3,000,000 shares authorized, no shares issued, none outstanding at December 31, 2022 and September 30, 2022, respectively

3,000,000 shares authorized, no shares issued, none outstanding at March 31, 2023 and September 30, 2022, respectively

Additional paid-in capital 623,250 617,403

1 unchanged sentence

Accumulated other comprehensive loss ( 187,829 ) ( 213,080 )

Treasury stock, at cost, 147,344 and 90,053 common shares at December 31, 2022 and September 30, 2022, respectively

Treasury stock, at cost, 149,679 and 90,053 common shares at March 31, 2023 and September 30, 2022, respectively

( 6,943 ) ( 4,835 )

7 unchanged sentences

Condensed Consolidated Statements of Operations (Unaudited)

Three Months Ended December 31,

Three Months Ended March 31, Six Months Ended March 31,

(Dollars in thousands, except per share data) 2023 2022 2023 2022

7 unchanged sentences

FHLB advances and other borrowings 1,186 1,212 2,047 2,349

3,282 1,377 4,285 2,655

Net interest income 101,405 83,800 185,462 155,413

35 unchanged sentences

Condensed Consolidated Statements of Comprehensive Income (Unaudited)

Three Months Ended December 31,

Three Months Ended March 31, Six Months Ended March 31,

(Dollars in thousands) 2023 2022 2023 2022

7 unchanged sentences

Total other comprehensive income (loss) 13,861 ( 70,098 ) 25,251 ( 76,973 )

Total comprehensive income 39,812 54,431

Total comprehensive income (loss) attributable to noncontrolling interest 580 ( 18 )

Comprehensive income attributable to parent $ 39,232 $ 54,449

Total comprehensive income (loss) 69,229 ( 19,996 ) 109,041 34,435

Total comprehensive income attributable to noncontrolling interest 597 851 1,177 833

Comprehensive income (loss) attributable to parent $ 68,632 $ ( 20,847 ) $ 107,864 $ 33,602

See Notes to Condensed Consolidated Financial Statements.

3 unchanged sentences

(Dollars in thousands, except per share data) Pathward Financial, Inc.

Three Months Ended December 31, 2022 Common

Three Months Ended March 31, 2023 Common

Stock Additional

7 unchanged sentences

Stockholders’

Balance, December 31, 2022 $ 282 $ 620,681 $ 246,891 $ ( 201,690 ) $ ( 6,824 ) $ 659,340 $ ( 207 ) $ 659,133

Cash dividends declared on common stock ($ 0.05 per share)

— — ( 1,386 ) — — ( 1,386 ) — ( 1,386 )

Repurchases of common stock ( 11 ) 11 ( 55,230 ) — ( 119 ) ( 55,349 ) — ( 55,349 )

Stock compensation — 2,558 — — — 2,558 — 2,558

Total other comprehensive income — — — 13,861 — 13,861 — 13,861

Net income — — 54,771 — — 54,771 597 55,368

Net investment by (distribution to) noncontrolling interests — — — — — — ( 941 ) ( 941 )

Balance, March 31, 2023

$ 271 $ 623,250 $ 245,046 $ ( 187,829 ) $ ( 6,943 ) $ 673,795 $ ( 551 ) $ 673,244

Three Months Ended March 31, 2022

Balance, December 31, 2021 $ 301 $ 610,816 $ 217,991 $ 724 $ ( 4,318 ) $ 825,514 $ 642 $ 826,156

Cash dividends declared on common stock ($ 0.05 per share)

— — ( 1,482 ) — — ( 1,482 ) — ( 1,482 )

Repurchases of common stock ( 7 ) 7 ( 42,000 ) — ( 195 ) ( 42,195 ) — ( 42,195 )

Stock compensation — 2,094 — — — 2,094 — 2,094

Total other comprehensive (loss) — — — ( 70,098 ) — ( 70,098 ) — ( 70,098 )

Net income — — 49,251 — — 49,251 851 50,102

Net investment by (distribution to) noncontrolling interests — — — — — — ( 1,171 ) ( 1,171 )

Balance, March 31, 2022

$ 294 $ 612,917 $ 223,760 $ ( 69,374 ) $ ( 4,513 ) $ 763,084 $ 322 $ 763,406

(Dollars in thousands, except per share data) Pathward Financial, Inc.

Six Months Ended March 31, 2023 Common

Stock Additional

Capital Retained

Earnings Accumulated

Comprehensive

Income (Loss) Treasury

Stock Total Pathward Financial

Stockholders’

Equity Noncontrolling interest Total

Stockholders’

Balance, September 30, 2022

8 unchanged sentences

Net investment by (distribution to) noncontrolling interests — — — — — — ( 1,698 ) ( 1,698 )

Balance, December 31, 2022

Balance, March 31, 2023

$ 271 $ 623,250 $ 245,046 $ ( 187,829 ) $ ( 6,943 ) $ 673,795 $ ( 551 ) $ 673,244

Three Months Ended December 31, 2021

Six Months Ended March 31, 2022

Balance, September 30, 2021

8 unchanged sentences

Net investment by (distribution to) noncontrolling interests — — — — — — ( 1,666 ) ( 1,666 )

Balance, December 31, 2021

Balance, March 31, 2022

$ 294 $ 612,917 $ 223,760 $ ( 69,374 ) $ ( 4,513 ) $ 763,084 $ 322 $ 763,406

3 unchanged sentences

Condensed Consolidated Statements of Cash Flows (Unaudited)

Three Months Ended December 31,

Six Months Ended March 31,

(Dollars in thousands) 2023 2022

8 unchanged sentences

Net change in loans held for sale 652 8,834

Net realized (gain) on securities held to maturity, net — ( 137 )

Net realized (gain) loss on loans held for sale ( 110 ) 4,065

2 unchanged sentences

Net realized (gain) on trademarks ( 10,000 ) ( 50,000 )

Net realized (gain) loss on other assets ( 82 ) ( 397 )

Impairment on rental equipment 24 —

7 unchanged sentences

Proceeds from maturities of and principal collected on securities available for sale 89,162 184,107

Proceeds from sales of securities held to maturity — 200

Proceeds from maturities of and principal collected on securities held to maturity 2,822 8,937

11 unchanged sentences

Proceeds from sale of trademarks 10,000 50,000

Proceeds from sale of other assets — 460

Net cash provided by (used in) investing activities ( 131,072 ) ( 532,838 )

1 unchanged sentence

Net change in deposits 36,659 314,915

Net change in short-term borrowings 43,000 —

Principal payments on capital lease obligations — ( 74 )

Principal payments on other liabilities — ( 1,463 )

Proceeds from other liabilities ( 1,026 ) —

Payment of debt issuance costs ( 511 ) —

9 unchanged sentences

Cash and cash equivalents at end of fiscal period $ 432,598 $ 237,680

Three Months Ended December 31,

Six Months Ended March 31,

(Dollars in thousands) 2023 2022

17 unchanged sentences

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 months ended December 31, 2022 are not necessarily indicative of the results expected for the fiscal year ending September 30, 2023.

Certain prior year amounts have been reclassified to conform to the current year financial statement presentation.

The results of the three and six months ended March 31, 2023 are not necessarily indicative of the results expected for the fiscal year ending September 30, 2023.

Certain prior fiscal year amounts have been reclassified to conform to the current year financial statement presentation.

These changes and reclassifications did not impact previously reported net income or comprehensive income.

7 unchanged sentences

Subject to the terms and conditions set forth in the Agreement, the Company had one year from the Agreement execution date to phase out and cease all use of the Meta tradenames.

The Company received $ 50.0 million upon execution and delivery of the Agreement, at which time the Meta tradenames were assigned to the Assignee.

The remaining $ 10.0 million was released to the Company upon completion of phase out activities and recognized as noninterest income during the three months ended December 31, 2022.

The Company recognized $ 3.7 million and zero of noninterest expense related to rebranding efforts during the three months ended December 31, 2022 and 2021, respectively.

The Company received $ 50.0 million upon execution and delivery of the Agreement and was reflected in noninterest income for the fiscal year ended September 30, 2022.

The remaining $ 10.0 million was received by the Company upon completion of phase out activities during the quarter ended December 31, 2022.

There have been no additional rebrand activities since completion of these activities.

The amortized cost, gross unrealized gains and losses and estimated fair values of available for sale ("AFS") and held to maturity ("HTM") debt securities are presented below.

1 unchanged sentence

Debt Securities AFS

At December 31, 2022

At March 31, 2023

Corporate securities $ 25,000 $ — $ ( 6,250 ) $ 18,750

14 unchanged sentences

Debt Securities HTM

At December 31, 2022

At March 31, 2023

Non-bank qualified obligations of states and political subdivisions $ 36,407 $ — $ ( 3,474 ) $ 32,933

12 unchanged sentences

Debt Securities AFS

At December 31, 2022

At March 31, 2023

Corporate securities $ — $ — $ 18,750 $ ( 6,250 ) $ 18,750 $ ( 6,250 )

14 unchanged sentences

Debt Securities HTM

At December 31, 2022

At March 31, 2023

Non-bank qualified obligations of states and political subdivisions $ — $ — $ 32,934 $ ( 3,474 ) $ 32,934 $ ( 3,474 )

5 unchanged sentences

Total debt securities HTM $ 6,252 $ ( 621 ) $ 31,919 $ ( 2890 ) $ 38,171 $ ( 3,511 )

At December 31, 2022, there were 194 securities AFS in an unrealized loss position.

All of the mortgage-backed securities ("MBS") in an unrealized loss position at December 31, 2022 were government guaranteed.

At March 31, 2023, there were 192 securities AFS in an unrealized loss position.

All of the mortgage-backed securities ("MBS") in an unrealized loss position at March 31, 2023 were government guaranteed.

Management assessed each investment security with unrealized losses for credit loss and determined substantially all unrealized losses on these securities were due to credit spreads and 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 December 31, 2022, there was no allowance for credit losses ("ACL") for debt securities AFS.

At March 31, 2023, there was no allowance for credit losses ("ACL") for debt securities AFS.

The amortized cost and fair value of debt securities by contractual maturity are shown below.

4 unchanged sentences

However, certain prepayment penalties may apply.

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

(Dollars in thousands) At March 31, 2023 At September 30, 2022

Securities AFS at Fair Value Amortized Cost Fair

13 unchanged sentences

Equity Securities

The Company held $ 3.4 million at December 31, 2022 and $ 2.9 million at September 30, 2022 in marketable equity securities.

The Company recognized zero and $ 2.3 million in unrealized loss on marketable equity securities during the three months ended December 31, 2022 and 2021, respectively, which is attributable to an investee becoming publicly traded during fiscal year 2021.

All other marketable equity securities and related activity were insignificant for the three months ended December 31, 2022 and 2021.

No such securities were sold during the three months ended December 31, 2022.

Non-marketable equity securities with a readily determinable fair value totaled $ 7.8 million at December 31, 2022 and $ 7.2 million at September 30, 2022.

The Company recognized $ 0.1 million in unrealized gains and $ 0.3 million in unrealized losses during the three months ended December 31, 2022 and 2021, respectively.

No such securities were sold during the three months ended December 31, 2022.

Non-marketable equity securities without readily determinable fair value totaled $ 18.2 million at December 31, 2022 and $ 18.2 million at September 30, 2022.

No such securities were sold during the three months ended December 31, 2022 .

The Company held $ 3.5 million at March 31, 2023 and $ 2.9 million at September 30, 2022 in marketable equity securities.

The Company recognized none and $ 3.8 million in unrealized losses on marketable equity securities during the six months ended March 31, 2023 and 2022, respectively, which is attributable to an investee becoming publicly traded during fiscal year 2021.

All other marketable equity securities and related activity were insignificant for the six months ended March 31, 2023 and 2022.

No such securities were sold during the six months ended March 31, 2023.

Non-marketable equity securities with a readily determinable fair value totaled $ 7.7 million at March 31, 2023 and $ 7.2 million at September 30, 2022.

The Company recognized $ 0.1 million in unrealized losses and $ 0.3 million in unrealized gains during the six months ended March 31, 2023 and 2022, respectively.

No such securities were sold during the six months ended March 31, 2023.

Non-marketable equity securities without readily determinable fair value totaled $ 17.7 million at March 31, 2023 and $ 18.2 million at September 30, 2022.

No such securities were sold during the six months ended March 31, 2023 .

Federal Reserve Bank ("FRB") Stock

1 unchanged sentence

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 million at December 31, 2022 and September 30, 2022.

FRB of Minneapolis stock held by the Bank totaled $ 19.7 million at March 31, 2023 and September 30, 2022.

These equity securities are 'restricted' in that they can only be owned by member banks.

5 unchanged sentences

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 $ 9.1 million at December 31, 2022 and at September 30, 2022.

The carrying value of the stock held at the FHLB was $ 9.7 million and $ 9.1 million at March 31, 2023 and at September 30, 2022, 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.

3 unchanged sentences

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 three months ended December 31, 2022 and 2021, respectively.

The Company recognized $ 0.5 million and no impairment for such investments for the six months ended March 31, 2023 and 2022, respectively.

LOANS AND LEASES, NET

Loans and leases consist of the following:

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

(Dollars in thousands) March 31, 2023 September 30, 2022

Term lending $ 1,235,453 $ 1,090,289

16 unchanged sentences

Total loans and leases, net $ 3,641,312 $ 3,490,358

During the three months ended December 31, 2022 and 2021, the Company originated $ 398.8 million and $ 385.6 million of consumer finance and SBA/USDA as held for sale, respectively.

The Company sold held for sale loans resulting in proceeds of $ 402.9 million and gain on sale of $ 0.1 million during the three months ended December 31, 2022.

The Company sold held for sale loans resulting in proceeds of $ 562.7 million and loss on sale of $ 4.4 million during the three months ended December 31, 2021.

During the six months ended March 31, 2023 and 2022, the Company originated $ 608.6 million and $ 555.4 million of consumer finance and SBA/USDA as held for sale, respectively.

The Company sold held for sale loans resulting in proceeds of $ 604.4 million and gain on sale of $ 0.1 million during the six months ended March 31, 2023.

The Company sold held for sale loans resulting in proceeds of $ 723.9 million and loss on sale of $ 4.1 million during the six months ended March 31, 2022.

Loans purchased and sold by portfolio segment, including participation interests, were as follows:

Three Months Ended December 31,

Three Months Ended March 31, Six Months Ended March 31,

(Dollars in thousands) 2023 2022 2023 2022

9 unchanged sentences

Loans held for investment:

Commercial finance — 15,549 — 15,549

Community banking — — — 30,235

2 unchanged sentences

The net investment in direct financing and sales-type leases was comprised of the following:

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

(Dollars in thousands) March 31, 2023 September 30, 2022

Carrying amount $ 173,621 $ 216,880

3 unchanged sentences

Total net investment in direct financing and sales-type leases $ 170,847 $ 210,987

Undiscounted future minimum lease payments receivable for direct financing and sales-type leases, and a reconciliation to the carrying amount recorded at December 31, 2022 were as follows:

Undiscounted future minimum lease payments receivable for direct financing and sales-type leases, and a reconciliation to the carrying amount recorded at March 31, 2023 were as follows:

(Dollars in thousands)

4 unchanged sentences

Total carrying amount of direct financing and sales-type leases $ 173,621

The Company did not record any contingent rental income from direct financing and sales-type leases in the three months ended December 31, 2022.

The Company did not record any contingent rental income from direct financing and sales-type leases in the six months ended March 31, 2023.

The COVID-19 pandemic began impacting the U.S.

and global economies in the first calendar quarter of 2020, with significant deterioration of macroeconomic conditions and markets into 2021.

Although macroeconomic conditions and markets have improved since the beginning of 2021, other factors have been affecting the economic environment in 2022 including geopolitical conflict, supply chain disruptions, inflation, and rising interest rates.

Although macroeconomic conditions and markets have improved since the beginning of 2021, other factors have been affecting the economic environment in 2022 and 2023 including geopolitical conflict, supply chain disruptions, inflation, rising interest rates, and recent bank failures brought on by, among other things, rising interest rates, deposit outflows and liquidity crises.

While the ultimate impact of the pandemic and these other factors on the Company's loan and lease portfolio remains difficult to predict, 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 COVID-19 and other factors impacting the economy and will refine its estimate as developments occur and more information becomes available.

Activity in the allowance for credit losses and balances of loans and leases by portfolio segment was as follows:

Three Months Ended December 31, 2022

Three Months Ended March 31, 2023

(Dollars in thousands) Beginning Balance Provision (Reversal) Charge-offs Recoveries Ending Balance

18 unchanged sentences

(1) Reserve for unfunded commitments is recognized within other liabilities on the Condensed Consolidated Statements of Financial Condition.

Three Months Ended December 31, 2021

Three Months Ended March 31, 2022

(Dollars in thousands) Beginning Balance Provision (Reversal) (2)

Charge-offs Recoveries Ending Balance

Allowance for credit losses:

Term lending $ 26,722 $ 1,954 $ ( 1,822 ) $ 714 $ 27,568

Asset based lending 2,758 ( 175 ) — — 2,583

Factoring 15,242 823 ( 9,590 ) 51 6,526

Lease financing 6,857 ( 395 ) ( 95 ) 104 6,471

Insurance premium finance 1,044 59 ( 106 ) 60 1,057

SBA/USDA 2,996 ( 53 ) — — 2,943

Other commercial finance 1,349 ( 152 ) — — 1,197

Commercial finance 56,968 2,061 ( 11,613 ) 929 48,345

Consumer credit products 1,627 ( 6 ) — — 1,621

Other consumer finance 6,960 1,157 ( 802 ) 73 7,388

Consumer finance 8,587 1,151 ( 802 ) 73 9,009

Tax services 1,601 28,972 — 184 30,757

Warehouse finance 467 ( 26 ) — — 441

Community banking — ( 2 ) — 2 —

Total loans and leases 67,623 32,156 ( 12,415 ) 1,188 88,552

Unfunded commitments (1)

405 146 — — 551

Total $ 68,028 $ 32,302 $ ( 12,415 ) $ 1,188 $ 89,103

(1) Reserve for unfunded commitments is recognized within other liabilities on the Condensed Consolidated Statements of Financial Condition.

(2) As a result of the adoption of CECL, effective October 1, 2020, the provision for credit losses includes the provision for unfunded commitments that was previously included within other noninterest expense.

Six Months Ended March 31, 2023

(Dollars in thousands) Beginning Balance Provision (Reversal) Charge-offs Recoveries Ending Balance

13 unchanged sentences

Warehouse finance 327 50 — — 377

Total loans and leases 45,947 46,549 ( 11,064 ) 2,872 84,304

Unfunded commitments (1)

366 ( 10 ) — — 356

Total $ 46,313 $ 46,539 $ ( 11,064 ) $ 2,872 $ 84,660

(1) Reserve for unfunded commitments is recognized within other liabilities on the Condensed Consolidated Statements of Financial Condition.

Six Months Ended March 31, 2022

(Dollars in thousands) Beginning Balance Provision (Reversal) Charge-offs Recoveries Ending Balance

Allowance for credit losses:

Term lending $ 29,351 $ 1,095 $ ( 3,906 ) $ 1,028 $ 27,568

Asset based lending 1,726 736 ( 16 ) 137 2,583

Factoring 3,997 13,324 ( 10,864 ) 69 6,526

Lease financing 7,629 ( 1,217 ) ( 112 ) 171 6,471

Insurance premium finance 1,394 ( 211 ) ( 283 ) 157 1,057

SBA/USDA 2,978 180 ( 217 ) 2 2,943

Other commercial finance 1,168 29 — — 1,197

Commercial finance 48,243 13,936 ( 15,398 ) 1,564 48,345

Consumer credit products 1,242 379 — — 1,621

Other consumer finance 6,112 2,718 ( 1,622 ) 180 7,388

Consumer finance 7,354 3,097 ( 1,622 ) 180 9,009

Tax services 2 28,259 ( 254 ) 2,750 30,757

Warehouse finance 420 21 — — 441

Community banking 12,262 ( 12,686 ) — 424 —

5 unchanged sentences

Information on loans and leases that are deemed to be collateral dependent and are evaluated individually for the ACL was as follows:

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

(Dollars in thousands) At March 31, 2023 At September 30, 2022

Term lending $ 2,809 $ 2,885

Asset based lending 10,363 —

Factoring — 550

6 unchanged sentences

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 $ 153.0 million and $ 120.7 million at December 31, 2022 and at September 30, 2022, respectively.

The balance of these pass rated cash collateral loans totaled $ 70.8 million and $ 120.7 million at March 31, 2023 and at September 30, 2022, 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 Office of the Comptroller of the Currency (the “OCC”), to be of lesser quality as “substandard,” “doubtful” or “loss.” The loan classification and risk rating definitions are as follows:

22 unchanged sentences

Due to the unique risks associated with these portfolios, the Company monitors other credit quality indicators in their evaluation of the appropriateness of the allowance for credit losses on these portfolios, and as such, these loans are not included in the asset classification table below.

The outstanding balances of consumer finance loans and tax services loans were $ 186.9 million and $ 30.4 million at December 31, 2022, respectively, and $ 169.7 million and $ 9.1 million at September 30, 2022, respectively.

The outstanding balances of consumer finance loans and tax services loans were $ 148.6 million and $ 61.6 million at March 31, 2023, respectively, and $ 169.7 million and $ 9.1 million at September 30, 2022, respectively.

The amortized cost basis of loans and leases by asset classification and year of origination was as follows:

1 unchanged sentence

(Dollars in thousands) Term Loans and Leases by Origination Year Revolving Loans and Leases Total

At December 31, 2022 2023 2022 2021 2020 2019 Prior

At March 31, 2023 2023 2022 2021 2020 2019 Prior

Pass $ 327,992 $ 255,383 $ 139,016 $ 94,309 $ 23,151 $ 104,467 $ — $ 944,318

9 unchanged sentences

Substandard — — — — — — 24,828 24,828

Doubtful — — — — — — 659 659

Total — — — — — — 377,965 377,965

94 unchanged sentences

(Dollars in thousands) Accruing and Nonaccruing Loans and Leases Nonperforming Loans and Leases

At December 31, 2022 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

At March 31, 2023 30-59 Days Past Due 60-89 Days Past Due > 89 Days Past Due Total Past Due Current Total Loans and Leases Receivable > 89 Days Past Due and Accruing Nonaccrual Balance Total

Loans held for sale $ — $ — $ — $ — $ 24,780 $ 24,780 $ — $ — $ —

35 unchanged sentences

(Dollars in thousands) Term Loans and Leases by Origination Year Revolving Loans and Leases Total Nonaccrual with No ACL

At December 31, 2022 2023 2022 2021 2020 2019 Prior

At March 31, 2023 2023 2022 2021 2020 2019 Prior

Term lending $ 103 $ 5,123 $ 2,507 $ 2,351 $ 739 $ 68 $ — $ 10,891 $ 2,370

18 unchanged sentences

(Dollars in thousands) Term Loans and Leases by Origination Year Revolving Loans and Leases Total

At December 31, 2022 2023 2022 2021 2020 2019 Prior

At March 31, 2023 2023 2022 2021 2020 2019 Prior

Term lending $ 1,346 $ 35 $ 132 $ 211 $ 40 $ 188 $ — $ 1,952

1 unchanged sentence

Insurance premium finance — 1,849 10 8 4 — — 1,871

Other commercial finance — — — — — 94 — 94

Commercial finance 1,436 2,352 1,095 417 74 350 — 5,724

18 unchanged sentences

The following table provides the average recorded investment in nonaccrual loans and leases:

Three Months Ended December 31,

Three Months Ended March 31, Six Months Ended March 31,

(Dollars in thousands) 2023 2022 2022 2021

6 unchanged sentences

Total loans and leases $ 20,579 $ 30,956 $ 19,699 $ 32,193

The recognized interest income on the Company's nonaccrual loans and leases for the three months ended December 31, 2022 and 2021 was not significant.

The recognized interest income on the Company's nonaccrual loans and leases for the three and six months ended March 31, 2023 and 2022 was not significant.

The Company’s troubled debt restructurings ("TDRs") typically involve forgiving a portion of interest or principal on existing loans, making loans at a rate materially less than current market rates, or extending the term of the loan.

No loans were modified in a TDR during the three months ended December 31, 2022.

There were $ 10.1 million of commercial finance loans and $ 0.1 million of consumer finance loans that were modified in a TDR during the three months ended December 31, 2021, all of which were modified to extend the term of the loan.

During the three months ended December 31, 2022, the Company had $ 0.1 million of commercial finance loans that were modified in a TDR within the previous 12 months and for which there was a payment default.

During the three months ended December 31, 2021, the Company had $ 2.3 million of commercial finance loans and $ 0.5 million of consumer finance loans that were modified in a TDR within the previous 12 months and for which there was a payment default.

TDR net charge-offs and the impact of TDRs on the Company's allowance for credit losses were insignificant during the three months ended December 31, 2022 and December 31, 2021.

No loans were modified in a TDR during the three months ended March 31, 2023.

There were $ 0.2 million of commercial finance loans and $ 0.2 million of consumer finance loans that were modified in a TDR during the three months ended March 31, 2022, all of which were modified to extend the term of the loan.

During the six months ended March 31, 2023, there were no loans that were modified in a TDR.

There were $ 10.3 million of commercial finance loans and $ 0.2 million of consumer finance loans that were modified in a TDR during the six months ended March 31, 2022, all of which were modified to extend the term of the loan.

During the three months ended March 31, 2023, there was an immaterial amount of commercial finance loans that were modified in a TDR within the previous 12 months and for which there was a payment default.

During the three months ended March 31, 2022, the Company had $ 0.3 million of commercial finance loans and $ 0.3 million of consumer finance loans that were modified in a TDR with the previous 12 months and for which there was a payment default.

During the six months ended March 31, 2023, the Company had $ 0.1 million of commercial finance loans that were modified in a TDR within the previous 12 months and for which there was a payment default.

During the six months ended March 31, 2022, the Company had $ 2.6 million of commercial finance loans and $ 0.8 million of consumer finance loans that were modified in a TDR within the previous 12 months and for which there was a payment default.

TDR net charge-offs and the impact of TDRs on the Company's allowance for credit losses were insignificant during the six months ended March 31, 2023 and March 31, 2022.

EARNINGS PER COMMON SHARE ("EPS")

8 unchanged sentences

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 December 31,

Three Months Ended March 31, Six Months Ended March 31,

(Dollars in thousands, except per share data) 2023 2022 2023 2022

17 unchanged sentences

(1) Represents the effect of the assumed exercise of stock options and vesting of performance share units 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 December 31, 2022 and 2021, respectively, were 411,794 and 477,488 weighted average shares of nonvested restricted stock because their inclusion would be anti-dilutive.

(2) Excluded from the computation of diluted earnings per share for the three months ended March 31, 2023 and 2022, respectively, were 422,461 and 491,621 weighted average shares 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, 2023 and 2022, respectively, were 417,012 and 484,457 weighted average shares of nonvested restricted stock because their inclusion would be anti-dilutive.

RENTAL EQUIPMENT, NET

Rental equipment consists of the following:

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

(Dollars in thousands) March 31, 2023 September 30, 2022

Computers and IT networking equipment $ 20,589 $ 21,669

6 unchanged sentences

Net book value $ 210,844 $ 204,371

Future minimum lease payments expected to be received for operating leases at December 31, 2022 were as follows:

During the quarter, certain solar panels and equipment assets had a change in depreciable life that resulted in additional depreciation expense of $ 4.8 million occurring during the three-month period ended March 31, 2023.

The assets impacted are now carried at their residual value and will not be subject to depreciation going forward.

Future minimum lease payments expected to be received for operating leases at March 31, 2023 were as follows:

(Dollars in thousands)

3 unchanged sentences

GOODWILL AND INTANGIBLE ASSETS

The Company held a total of $ 309.5 million of goodwill at December 31, 2022.

The Company held a total of $ 309.5 million of goodwill at March 31, 2023.

The recorded goodwill is a result of multiple business combinations that occurred from 2015 to 2018.

There have been no changes to the carrying amount of goodwill during the three months ended December 31, 2022.

There have been no changes to the carrying amount of goodwill during the six months ended March 31, 2023.

The changes in the carrying amount of the Company’s intangible assets were as follows:

5 unchanged sentences

Amortization during the period ( 609 ) — ( 1,819 ) ( 265 ) ( 2,693 )

At December 31, 2022 $ 8,254 $ — $ 11,619 $ 4,560 $ 24,433

At March 31, 2023 $ 7,996 $ — $ 10,576 $ 4,426 $ 22,998

Gross carrying amount $ 14,624 $ 2,481 $ 82,088 $ 9,940 $ 109,133

1 unchanged sentence

Accumulated impairment — ( 10,918 ) ( 218 ) ( 11,136 )

At December 31, 2022 $ 8,254 $ — $ 11,619 $ 4,560 $ 24,433

At March 31, 2023 $ 7,996 $ — $ 10,576 $ 4,426 $ 22,998

At September 30, 2021 $ 9,823 $ 40 $ 17,868 $ 5,417 $ 33,148

1 unchanged sentence

Amortization during the period ( 526 ) ( 40 ) ( 2,829 ) ( 262 ) ( 3,657 )

At December 31, 2021 $ 9,560 $ 1 $ 16,814 $ 5,286 $ 31,661

Write-offs during the period — — — ( 202 ) ( 202 )

At March 31, 2022 $ 9,297 $ — $ 15,039 $ 4,954 $ 29,290

Gross carrying amount $ 14,624 $ 2,481 $ 82,088 $ 9,940 $ 109,133

1 unchanged sentence

Accumulated impairment — — ( 10,248 ) ( 218 ) ( 10,466 )

At December 31, 2021 $ 9,560 $ 1 $ 16,814 $ 5,286 $ 31,661

At March 31, 2022 $ 9,297 $ — $ 15,039 $ 4,954 $ 29,290

(1) Book amortization period of 5 - 15 years.

5 unchanged sentences

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 nine months of fiscal 2023 and subsequent fiscal years at December 31, 2022 was as follows:

Estimated amortization expense of intangible assets in the remaining six months of fiscal 2023 and subsequent fiscal years at March 31, 2023 was as follows:

(Dollars in thousands)

2 unchanged sentences

Total anticipated intangible amortization $ 22,998

There were no impairments to intangible assets during the three months ended December 31, 2022 and 2021.

There were no impairments to intangible assets during the six months ended March 31, 2023 and 2022.

Intangible impairment expense is recorded within the impairment expense line of the Condensed Consolidated Statements of Operations.

OPERATING LEASE RIGHT-OF-USE ASSETS AND LIABILITIES

Operating lease ROU assets, included in other assets , were $ 29.3 million and $ 32.7 million at December 31, 2022 and 2021, respectively.

Operating lease liabilities, included in accrued expenses and other liabilities , were $ 31.2 million and $ 34.5 million at December 31, 2022 and 2021, respectively.

Undiscounted future minimum operating lease payments and a reconciliation to the amount recorded as operating lease liabilities at December 31, 2022 were as follows:

Operating lease ROU assets, included in other assets , were $ 28.5 million and $ 31.8 million at March 31, 2023 and 2022, respectively.

Operating lease liabilities, included in accrued expenses and other liabilities , were $ 30.4 million and $ 33.6 million at March 31, 2023 and 2022, respectively.

Undiscounted future minimum operating lease payments and a reconciliation to the amount recorded as operating lease liabilities at March 31, 2023 were as follows:

(Dollars in thousands)

4 unchanged sentences

Total operating lease liabilities $ 30,433

The weighted-average discount rate and remaining lease term for operating leases at December 31, 2022 were as follows:

The weighted-average discount rate and remaining lease term for operating leases at March 31, 2023 were as follows:

Weighted-average discount rate 2.36 %

1 unchanged sentence

The components of total lease costs for operating leases were as follows:

Three Months Ended December 31,

Three Months Ended March 31, Six Months Ended March 31,

(Dollars in thousands) 2023 2022 2023 2022

7 unchanged sentences

This authorization is effective from September 3, 2021 through September 30, 2024.

During the three months ended December 31, 2022, and 2021, the Company repurchased 653,994 and 1,711,501 shares, respectively, as part of the share repurchase programs.

During the six months ended March 31, 2023, and 2022, the Company repurchased 1,826,694 and 2,447,699 shares, respectively, as part of the share repurchase programs.

Under the repurchase programs, repurchased shares were retired and designated as authorized but unissued shares.

1 unchanged sentence

When the repurchase price is greater than the original issue proceeds, the excess is charged to retained earnings.

As of December 31, 2022, 3,640,983 shares of common stock remained available for repurchase.

For the three months ended December 31, 2022, and 2021, the Company also repurchased 57,291 and 61,172 shares, or $ 2.0 million and $ 3.4 million of common stock, respectively, in settlement of employee tax withholding obligations due upon the vesting of restricted stock.

As of March 31, 2023, 2,468,283 shares of common stock remained available for repurchase.

For the six months ended March 31, 2023, and 2022, the Company also repurchased 59,626 and 64,536 shares, or $ 2.1 million and $ 3.7 million of common stock, respectively, in settlement of employee tax withholding obligations due upon the vesting of restricted stock.

Retirement of Treasury Stock

1 unchanged sentence

When the repurchase price is greater than the original issue proceeds, the excess is charged to retained earnings.

The Company retired zero shares of common stock held in treasury during the three months ended December 31, 2022 and 2021, respectively.

The Company retired zero shares of common stock held in treasury during the six months ended March 31, 2023 and 2022, respectively.

STOCK COMPENSATION

5 unchanged sentences

The Company has elected, with the adoption of ASU 2016-09, to record forfeitures as they occur.

The following tables show the activity of nonvested (restricted) shares and PSUs granted, vested, or forfeited under the 2002 Omnibus Incentive Plan for the three months ended December 31, 2022.

There were no options granted, exercised, or forfeited under this plan during the three months ended December 31, 2022.

The following tables show the activity of nonvested (restricted) shares and PSUs granted, vested, or forfeited under the 2002 Omnibus Incentive Plan for the six months ended March 31, 2023.

There were no options granted, exercised, or forfeited under this plan during the six months ended March 31, 2023.

(Dollars in thousands, except per share data) Number of Shares Weighted Average Fair Value at Grant

4 unchanged sentences

Forfeited or expired ( 6,958 ) 42.55

Nonvested shares outstanding, December 31, 2022

Nonvested shares outstanding, March 31, 2023

418,831 $ 37.31

2 unchanged sentences

Forfeited or expired — —

Performance share units outstanding, December 31, 2022

Performance share units outstanding, March 31, 2023

155,804 $ 41.20

(1) The number of PSUs granted reflects the target number of PSUs able to be earned under a given award.

At December 31, 2022, stock-based compensation expense not yet recognized in income totaled $ 10.9 million, which is expected to be recognized over a weighted average remaining period of 1.73 years.

The Company recorded an income tax expense of $ 6.6 million for the three months ended December 31, 2022, resulting in an effective tax rate of 18.79 %, compared to an income tax expense of $ 14.3 million, or an effective tax rate of 18.89 %, for the three months ended December 31, 2021.

At March 31, 2023, stock-based compensation expense not yet recognized in income totaled $ 10.2 million, which is expected to be recognized over a weighted average remaining period of 1.53 years.

The Company recorded an income tax expense of $ 15.8 million for the six months ended March 31, 2023, resulting in an effective tax rate of 15.83 %, compared to an income tax expense of $ 22.3 million, or an effective tax rate of 16.66 %, for the six months ended March 31, 2022.

The Company’s effective tax rate was lower than the U.S.

statutory rate of 21% primarily because of the anticipated effect of investment tax credits during fiscal year 2023.

The Company's effective tax rate in the future will depend in part on actual investment tax credits generated from qualified solar energy property.

The Company's effective tax rate in the future will depend in part on actual investment tax credits generated from qualified renewable energy property.

The table below compares the income tax expense components for the periods presented.

Three Months Ended December 31,

Six Months Ended March 31,

(Dollars in thousands) 2023 2022

4 unchanged sentences

Tax credit investments, net - federal ( 7,916 ) ( 5,978 )

Research tax credit ( 805 ) ( 355 )

IRC 162(m) nondeductible compensation 576 505

8 unchanged sentences

(Dollars in thousands) Consumer Commercial Corporate Services/Other Consolidated Company

Three Months Ended December 31, 2022 2021 2022 2021 2022 2021 2022 2021

Three Months Ended March 31, 2023 2022 2023 2022 2023 2022 2023 2022

Net interest income (1)

9 unchanged sentences

— — — — 82 260 82 260

Gain (loss) on sale of other (1)

— — ( 748 ) 1,229 — ( 603 ) ( 748 ) 626

Other income (1)

1,748 1,387 1,935 2,839 794 ( 345 ) 4,477 3,881

Total noninterest income 111,776 94,761 14,176 15,537 1,086 ( 532 ) 127,038 109,766

Revenue $ 153,194 $ 124,917 $ 60,934 $ 60,416 $ 14,315 $ 8,233 $ 228,443 $ 193,566

Six Months Ended March 31,

Net interest income (1)

$ 75,690 $ 56,427 $ 89,082 $ 89,805 $ 20,690 $ 9,181 $ 185,462 $ 155,413

Noninterest income:

Refund transfer product fees 30,882 28,384 — — — — 30,882 28,384

Refund advance fee income (1)

38,612 40,532 — — — — 38,612 40,532

Card and deposit fees 79,280 51,402 513 475 12 12 79,805 51,889

Rental income (1)

— — 25,252 22,302 396 150 25,648 22,452

Gain (loss) on sale of securities (1)

— — — — 82 397 82 397

Gain on sale of trademarks — — — — 10,000 50,000 10,000 50,000

51 unchanged sentences

(Dollars in thousands) Consumer Commercial Corporate Services/Other Total

Three Months Ended December 31, 2022 2021 2022 2021 2022 2021 2022 2021

Three Months Ended March 31, 2023 2022 2023 2022 2023 2022 2023 2022

Net interest income $ 41,418 $ 30,156 $ 46,758 $ 44,879 $ 13,229 $ 8,765 $ 101,405 $ 83,800

Provision for credit losses 31,654 29,685 5,012 2,205 97 412 36,763 32,302

Noninterest income (loss) 111,776 94,761 14,176 15,537 1,086 ( 532 ) 127,038 109,766

Noninterest expense 49,910 29,892 38,846 31,457 38,380 41,811 127,136 103,160

Income (loss) before income tax expense 71,630 65,340 17,076 26,754 ( 24,162 ) ( 33,990 ) 64,544 58,104

Total assets 361,528 456,335 3,581,677 3,355,196 2,925,051 3,075,708 6,868,256 6,887,239

Total goodwill 87,145 87,145 222,360 222,360 — — 309,505 309,505

Total deposits 5,744,278 5,693,063 9,313 6,882 149,105 129,941 5,902,696 5,829,886

Six Months Ended March 31,

Net interest income $ 75,690 $ 56,427 $ 89,082 $ 89,805 $ 20,690 $ 9,181 $ 185,462 $ 155,413

Provision (reversal of) for credit losses 34,894 30,946 11,595 13,797 50 ( 12,255 ) 46,539 32,488

21 unchanged sentences

The following tables summarize the fair values of debt securities available for sale and equity securities as they are measured at fair value on a recurring basis.

At December 31, 2022

At March 31, 2023

(Dollars in thousands) Total Level 1 Level 2 Level 3

11 unchanged sentences

$ 7,749 $ — $ — $ —

(1) Equity securities at fair value are included within other assets on the Condensed Consolidated Statements of Financial Condition at December 31, 2022.

(1) Equity securities at fair value are included within other assets on the Condensed Consolidated Statements of Financial Condition at March 31, 2023.

(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.

21 unchanged sentences

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 non-recurring basis:

At December 31, 2022

At March 31, 2023

(Dollars in thousands) Total Level 1 Level 2 Level 3

2 unchanged sentences

Total loans and leases, net individually evaluated for credit loss 625 — — 625

Foreclosed assets, net — — — —

Total $ 625 $ — $ — $ 625

8 unchanged sentences

(Dollars in thousands) Fair Value at

December 31, 2022

March 31, 2023

Fair Value at

5 unchanged sentences

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 December 31, 2022 and September 30, 2022 based on relevant market information and information about financial instruments.

These fair value estimates were made at March 31, 2023 and September 30, 2022 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.

3 unchanged sentences

The following tables present the carrying amount and estimated fair value of the financial instruments held by the Company:

At December 31, 2022

At March 31, 2023

(Dollars in thousands) Carrying

15 unchanged sentences

Deposits 5,902,696 5,902,526 5,896,367 6,159 —

Overnight federal funds purchased 43,000 43,000 43,000 — —

Other short- and long-term borrowings 34,543 32,961 — 32,961 —

Accrued interest payable 204 204 204 — —

(1) Equity securities at fair value are included within other assets on the Condensed Consolidated Statements of Financial Condition at December 31, 2022.

(1) Equity securities at fair value are included within other assets on the Condensed Consolidated Statements of Financial Condition at March 31, 2023.

(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.

22 unchanged sentences

SUBSEQUENT EVENTS

Management has evaluated subsequent events that occurred after December 31, 2022.

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 December 31, 2022.

Management has evaluated subsequent events that occurred after March 31, 2023.

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 1. Financial Statements