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Item 8. Financial Statements and Supplementary Data

2023-11-21 compared with 2022-11-22 · 238 added, 303 removed, 1638 unchanged (25% of the section changed)

12 unchanged sentences

Opinion on the Financial Statements

We have audited the accompanying consolidated statements of financial condition of Pathward Financial, Inc.(formerly known as Meta Financial Group, Inc.) and Subsidiaries (the "Company") as of September 30, 2022 and 2021, the related consolidated statements of operations, comprehensive income (loss), changes in stockholders’ equity, and cash flows for each of the years in the three-year period ended September 30, 2022, and the related notes (collectively referred to as the "financial statements").

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of September 30, 2022 and 2021, and the results of its operations and its cash flows for each of the years in the three- year period ended September 30, 2022, in conformity with accounting principles generally accepted in the United States of America.

We have audited the accompanying consolidated statements of financial condition of Pathward Financial, Inc.

and Subsidiaries (the "Company") as of September 30, 2023 and 2022, the related consolidated statements of operations, comprehensive income (loss), changes in stockholders’ equity, and cash flows for each of the three years in the period ended September 30, 2023, and the related notes (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of September 30, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended September 30, 2023, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of September 30, 2023, based on criteria established in Internal Control – Integrated Framework:

(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated November 22, 2022 expressed an adverse opinion.

(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated November 21, 2023 expressed an unqualified opinion.

Change in Accounting Principle

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For most of its loan segments, the Company utilized a cohort model which computes the historical life-of-loan loss rate for each identified loan segment (also referred to as the “quantitative loss rates”).

The quantitative loss rates are then adjusted, as deemed necessary, based on current economic forecasts over a twelve-month reasonable and supportable forecast period as well as for measurement date credit characteristics including problem loan and delinquency trends, portfolio growth and other factors (also referred to as the “qualitative adjustments”).

We have identified auditing the qualitative adjustments as a critical audit matter as management’s determination of the qualitative adjustments used in the ACL is subjective and involves significant management judgements;

The quantitative loss rates are then adjusted, as deemed necessary, based on current economic forecasts over a twelve to twenty-four month reasonable and supportable forecast period as well as for measurement date credit characteristics including problem loan and delinquency trends, portfolio growth and other factors (also referred to as the “qualitative adjustments”).

and our audit procedures related to the qualitative adjustments involved a high degree of auditor judgment and required significant audit effort, including the need to involve more experienced audit personnel.

34 unchanged sentences

Deposits $ 6,589,182 $ 5,866,037

Short-term borrowings 13,000 —

Long-term borrowings 33,873 36,028

9 unchanged sentences

Retained earnings 278,655 245,394

Accumulated other comprehensive income (loss) ( 213,080 ) 7,599

Accumulated other comprehensive loss ( 255,443 ) ( 213,080 )

Treasury stock, at cost, 41,980 and 90,053 common shares at September 30, 2023 and 2022, respectively

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Refund advance fee income 37,433 40,557 47,639

Payments card and deposit fees 104,684 107,182 87,379

Other bank and deposit fees 1,049 939 1,310

Card and deposit fees 150,746 105,733 108,121

Rental income 54,190 46,558 39,416

Gain (loss) on sale of securities 91 ( 1,287 ) 6

Gain on divestitures — — 19,275

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

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Other comprehensive income (loss):

Change in net unrealized gain (loss) on debt securities ( 293,952 ) ( 13,896 ) 15,164

Net loss (gain) realized on investment securities 1,287 ( 6 ) ( 51 )

Change in net unrealized (loss) on debt securities ( 56,164 ) ( 293,952 ) ( 13,896 )

Net (gain) loss realized on investment securities ( 91 ) 1,287 ( 6 )

( 56,255 ) ( 292,665 ) ( 13,902 )

1 unchanged sentence

Deferred income tax effect ( 13,561 ) ( 73,722 ) ( 3,483 )

Total other comprehensive income (loss) ( 220,679 ) ( 9,943 ) 11,203

Total other comprehensive (loss) ( 42,363 ) ( 220,679 ) ( 9,943 )

Total comprehensive income (loss) 123,444 ( 61,325 ) 135,802

5 unchanged sentences

Consolidated Statements of Changes in Stockholders' Equity

Pathward Financial, Inc.

(Dollars in thousands, except per share data) Common

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Income (Loss) Treasury

Stock Total Pathward Financial

Stock Total Pathward Financial, Inc.

Stockholders’

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Balance, September 30, 2020 $ 344 $ 594,569 $ 234,927 $ 17,542 $ ( 3,677 ) $ 843,705 $ 3,603 $ 847,308

Adoption of Accounting Standards Update 2016-13, net of income taxes — — ( 8,351 ) — — ( 8,351 ) ( 2,452 ) ( 10,803 )

Cash dividends declared on common stock ($ 0.20 per share)

— — ( 6,400 ) — — ( 6,400 ) — ( 6,400 )

Issuance of common stock due to exercise of stock options 1 265 — — — 266 — 266

Issuance of common stock due to restricted stock 2 — — — — 2 — 2

Issuance of common stock due to ESOP 2 3,034 — — — 3,036 — 3,036

Repurchases of common stock ( 29 ) 29 ( 96,999 ) — ( 2,879 ) ( 99,878 ) — ( 99,878 )

Retirement of treasury stock — — ( 5,696 ) — 5,696 — — —

Stock compensation — 6,852 — — — 6,852 — 6,852

Total other comprehensive income — — — 11,203 — 11,203 — 11,203

Total other comprehensive loss — — — ( 9,943 ) — ( 9,943 ) — ( 9,943 )

Net income — — 141,708 — — 141,708 4,037 145,745

Net investment by (distribution to) noncontrolling interests — — — — — — ( 5,068 ) ( 5,068 )

Net distribution to noncontrolling interests — — — — — — ( 4,033 ) ( 4,033 )

Balance, September 30, 2021 $ 317 $ 604,484 $ 259,189 $ 7,599 $ ( 860 ) $ 870,729 $ 1,155 $ 871,884

Adoption of Accounting Standards Update 2016-13, net of income taxes — — ( 8,351 ) — — ( 8,351 ) ( 2,452 ) ( 10,803 )

Cash dividends declared on common stock ($ 0.20 per share)

2 unchanged sentences

Repurchases of common stock ( 30 ) 30 ( 164,260 ) — ( 3,975 ) ( 168,235 ) — ( 168,235 )

Retirement of treasury stock — — ( 5,696 ) — 5,696 — — —

Stock compensation — 10,004 — — — 10,004 — 10,004

1 unchanged sentence

Net income — — 156,386 — — 156,386 2,968 159,354

Net investment by (distribution to) noncontrolling interests — — — — — — ( 4,033 ) ( 4,033 )

Net distribution to noncontrolling interests — — — — — — ( 4,153 ) ( 4,153 )

Balance, September 30, 2022 $ 288 $ 617,403 $ 245,394 $ ( 213,080 ) $ ( 4,835 ) $ 645,170 $ ( 30 ) $ 645,140

2 unchanged sentences

— — ( 5,426 ) — — ( 5,426 ) — ( 5,426 )

Issuance of common stock due to ESOP 1 2,885 — — — 2,886 — 2,886

Issuance of common stock due to restricted stock 1 — — — — 1 — 1

Repurchases of common stock ( 27 ) 27 ( 117,985 ) — ( 2,452 ) ( 120,437 ) — ( 120,437 )

Retirement of treasury stock — — ( 6,943 ) — 6,943 — — —

Stock compensation — 11,070 — — — 11,070 — 11,070

Total other comprehensive income (loss) — — — ( 220,679 ) — ( 220,679 ) — ( 220,679 )

Total other comprehensive loss — — — ( 42,363 ) — ( 42,363 ) — ( 42,363 )

Net income — — 163,615 — — 163,615 2,192 165,807

Net investment by (distribution to) noncontrolling interests — — — — — — ( 4,153 ) ( 4,153 )

Net distribution to noncontrolling interests — — — — — — ( 3,167 ) ( 3,167 )

Balance, September 30, 2023 $ 262 $ 628,500 $ 278,655 $ ( 255,443 ) $ ( 344 ) $ 651,630 $ ( 1,005 ) $ 650,625

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Provision for credit losses 57,354 28,538 49,766

Provision (reversal of) for deferred taxes 17,587 ( 1,639 ) ( 2,347 )

Provision for deferred taxes ( 175 ) 17,587 ( 1,639 )

Originations of loans held for sale ( 1,208,684 ) ( 985,330 ) ( 601,481 )

2 unchanged sentences

Fair value adjustment of foreclosed real estate — 301 591

Net realized (gain) on securities available for sale, net ( 154 ) ( 6 ) ( 51 )

Net realized (gain) on securities available for sale — ( 154 ) ( 6 )

Net realized (gain) loss on loans held for sale ( 268 ) 3,694 ( 8,610 )

2 unchanged sentences

Net realized (gain) on foreclosed real estate and repossessed assets — — ( 4 )

Net realized (gain) on divestitures — — ( 19,275 )

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

Net realized (gain) loss on other assets 1,441 28 361

Net realized (gain) on other assets ( 91 ) 1,441 28

Change in bank-owned life insurance value ( 1,497 ) ( 2,434 ) ( 2,434 )

1 unchanged sentence

Impairment of intangibles — 670 —

Impairment on assets held for sale — — 242

Net change in accrued interest receivable ( 5,303 ) ( 1,725 ) 374

Net change in other assets 17,134 ( 32,936 ) 825

Net change in deposits held for sale — — 1,535

Net change in accrued expenses and other liabilities 48,658 ( 10,640 ) 43,920

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Proceeds from sales of foreclosed real estate and repossessed assets 1 1,824 8,952

Proceeds from divestitures — — 3,498

Proceeds from death benefit of bank-owned life insurance 1,040 — —

Proceeds from sale of trademarks 10,000 50,000 —

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Proceeds from other liabilities — — 80

Payment of debt issuance costs ( 511 ) — —

Dividends paid on common stock ( 5,426 ) ( 5,921 ) ( 6,400 )

Issuance of common stock due to exercise of stock options — — 266

Issuance of common stock due to restricted stock 1 1 —

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Rental equipment to foreclosed real estate and repossessed assets — — 1,650

Other assets to held for sale — — 7,858

Deposits to held for sale — — 288,975

Recognition of operating lease ROU assets, net of measurements — 117 12,954

Retirement of treasury stock 6,943 — —

See Notes to Consolidated Financial Statements.

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("Pathward Financial" or the “Company” or "us"), a registered bank holding company located in Sioux Falls, South Dakota, and its wholly-owned subsidiaries.

The Company's subsidiaries include Pathward TM , National Association ("Pathward, N.A." or "Pathward" or "the “Bank”), a national bank whose primary federal regulator is the Office of the Comptroller of the Currency (the "OCC"), and Pathward Venture Capital, LLC, a wholly-owned service corporation subsidiary of Pathward, N.A.

The Company's subsidiaries include Pathward ® , National Association ("Pathward ® , N.A." or "Pathward" or the “Bank”), a national bank whose primary federal regulator is the Office of the Comptroller of the Currency (the "OCC"), and Pathward Venture Capital, LLC, a wholly-owned service corporation subsidiary of Pathward, N.A.

which invests in companies in the financial services industry.

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The Trust and Crestmark Capital Trust I are not included in the Consolidated Financial Statements of the Company.

In addition, the Company evaluates its relationships with other entities to identify whether they are variable interest entities ("VIEs") and to assess whether it is the primary beneficiary of such entities.

If the determination is made that the Company is the primary beneficiary, then that entity is included in the Consolidated Financial Statements.

Variable Interest Entities

VIEs are defined by contractual ownership or other interests that change with fluctuations in the VIE's net asset value.

In addition, the Company is a variable interest holder in certain entities in which the equity holders do not have the characteristics of a controlling financial interest or where the entity does not have enough equity at risk to finance its activities without additional subordinated financial support (referred to as variable interest entities or "VIEs").

The Company's variable interest arises from contractual ownership or other monetary interests that change with fluctuations in the VIE's net asset value.

The primary beneficiary is the entity which has both:

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Further, the Company assesses whether or not the Company is the primary beneficiary of a VIE on an ongoing basis.

Crestmark Capital Trust I qualifies as a VIE for which the Company is not the primary beneficiary.

Consequently, the accounts of that entity are not consolidated in the Company’s Financial Statements.

As a result of the Crestmark Acquisition, the Company acquired existing membership interests of five joint venture limited liability companies (the "LLCs").

The Company holds 80 % of the membership interests in each of the five LLC entities, which offer commercial lending and other financing arrangements.

If the determination is made that the Company is the primary beneficiary, then that entity is included in the Consolidated Financial Statements.

Noncontrolling interests represent the portion of net income and equity attributable to third-party owners of consolidated subsidiaries that are not wholly-owned by Pathward Financial.

All of the Company's noncontrolling interests relate to the Company's Commercial Finance business line.

Variable Interest Entities

As a result of the Crestmark Acquisition, the Company acquired existing membership interests of certain joint venture limited liability companies (the "LLCs").

The Company holds 80 % of the membership interests in each of the LLC entities, which offer commercial lending and other financing arrangements.

In connection with these LLCs, the Company exclusively provides funding for each entity's activities.

The Company determined it is the primary beneficiary of all five LLCs as it has the managing power under the terms of each of the LLC operating agreements.

Results of the five LLCs are reflected in the Company's September 30, 2022 Consolidated Financial Statements and are summarized below.

The Company determined it is the primary beneficiary of all LLCs as it has the managing power under the terms of each of the LLC operating agreements.

Results of the LLCs are reflected in the Company's September 30, 2023 Consolidated Financial Statements and are summarized below.

The assets recognized as a result of consolidating the LLCs are the property of the LLCs and are not available for any other purpose.

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• Capital Equipment Solutions, LLC (“CES”) - CES engages in the business of providing equipment financing term loans.

• CM Help, LLC - CM Help provides flexible patient loan programs to hospitals and patient clients of hospitals as a financing alternative for the self-pay and co-pay portions of patients’ hospital expenses.

• CM Help, LLC - CM Help provides flexible patient loan programs to hospitals and patient customers of hospitals as a financing alternative for the self-pay and co-pay portions of patients’ hospital expenses.

• CM Southgate II, LLC - CM Southgate II engages in the business of acquiring fleet leases and semi-trailer/tractor loans and leases.

• CM Sterling, LLC - CM Sterling engages in asset based lending and factoring.

• CM TFS, LLC - CM TFS engages in the business of acquiring equipment financing term loans and leases.

In the normal course of business, the Company enters into off-balance sheet transactions with special purpose entities ("SPEs"), which can be structured as corporations, trusts, limited liability companies, or partnerships and are established for a limited purpose.

Currently, the Company utilizes a SPE facility for certain term lending products within the Company's Commercial Finance business line.

The Company participated in the structuring of the SPE, has a minority ownership interest in the SPE, and acts as servicer for the SPE in exchange for a servicing fee.

Pathward is not the primary beneficiary of the SPE as our risk of loss or right to benefits from the SPE are not significant.

As of September 30, 2023, there are $ 13.7 million commercial term loans held at the SPE, and the Company’s equity investment in the SPE is $ 1.2 million.

The Company’s maximum exposure to loss from the SPE is limited to its equity investment.

As of September 30, 2023, there are no commercial term loans classified as held for sale related to this SPE.

NATURE OF BUSINESS AND INDUSTRY SEGMENT INFORMATION

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For purposes of reporting cash flows, cash and cash equivalents is defined to include the Company’s cash on hand and due from financial institutions and short-term interest-bearing deposits in other financial institutions.

The Company reports cash flows net for customer loan transactions, securities purchased under agreement to resell, federal funds purchased, deposit transactions, securities sold under agreements to repurchase, and Federal Home Loan Bank ("FHLB") advances with terms less than 90 days.

The Bank is required to maintain reserve balances in cash or on deposit with the FRB, based on a percentage of deposits.

The total of those reserve balances was zero at September 30, 2022, and zero at September 30, 2021.

The FRB requires all depository institutions to maintain reserves at specified levels against their transaction accounts, primarily checking accounts.

In response to the COVID-19 pandemic, the FRB reduced reserve requirement ratios to zero percent effective on March 26, 2020, to support lending to households and businesses.

At September 30, 2023, the Bank was not required to maintain any reserve balances.

The Company at times maintains balances in excess of insured limits at various financial institutions including the FHLB, the FRB and other private institutions.

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The Company’s ownership of such investments typically ranges from 5 % - 25 % of the investee.

The Company recognized net earnings from these investments in the amount of $ 12,863 within noninterest income for the fiscal year ended September 30, 2022.

The Company recognized nominal net earnings from these investments within noninterest income for the fiscal year ended September 30, 2023.

The Company elected to classify distributions received from equity method investments using the cumulative earnings approach on the Consolidated Statements of Cash Flows.

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• Measurement Alternative - The Company held equity investments measured using the measurement alternative of $ 12.1 million as of September 30, 2023 and $ 15.3 million at September 30, 2022 within other assets on the Company’s Consolidated Financial Statements.

The Company recognized a fair value decrease of $ 1.0 million and an increase of $ 8.0 million during the fiscal years ended September 30, 2022 and 2021, respectively.

The Company recognized impairment losses of zero and $ 2.6 million on such investments during the fiscal years ended September 30, 2022 and 2021, respectively.

Equity investments measured using the measurement alternative are subject to fair value adjustments when observable price changes in orderly transactions for the identical or similar investment of the same issuer occur.

The Company did not recognize any fair value adjustments in the fiscal year ended September 30, 2023, and recognized a decrease in fair value of $ 1.0 million in the fiscal year ended September 30, 2022.

Additionally, the Company recognized impairment loss of $ 3.3 million and zero of such investments during the fiscal years ended September 30, 2023 and 2022, respectively.

LOANS HELD FOR SALE ("LHFS")

LHFS include commercial loans originated under the guidelines of the SBA or USDA and consumer loans.

Loans are designated as LHFS based on management's intent to sell loans, or portions of loans, in established secondary markets or to participating third-party financial institutions.

LHFS are held at the lower of cost or fair value.

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Interest income is calculated based on the note rate of the loan and is recorded as interest income.

For loans transferred to LHFS due to change in intent of holding the loans to maturity or for the foreseeable future, such loans are transferred at lower of cost or fair value.

The Company occasionally transfers loans between held for sale and held for investment classifications based on its intent and ability to hold or sell loans.

Management's intent to sell may be impacted by secondary market conditions, loan credit quality, or other factors.

The following table summarizes the activity pertaining to loans held for sale:

Fiscal Year Ended September 30,

(Dollars in thousands) Consumer Commercial Consumer Commercial

Beginning of year balance $ 21,071 $ — $ 23,111 $ 33,083

Originations 1,206,201 2,483 856,819 128,511

Proceeds from sales ( 1,123,271 ) ( 16,610 ) ( 855,291 ) ( 50,848 )

Gain (loss) on sales — 268 — 5,813

Principal collections, net of deferred fees and costs ( 26,222 ) 280 ( 4,062 ) ( 625 )

Non-cash transfers, net — 13,579 494 ( 115,934 )

End of year balance $ 77,779 $ — $ 21,071 $ —

LOANS AND LEASES

Loans Receivable

Loans receivable that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off are reported at their outstanding principal balances net of any unearned income, cumulative charge-offs, unamortized deferred fees and costs on originated loans, and unamortized premiums or discounts on purchased loans.

Loans receivable that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off are classified as held for investment and are generally reported at their outstanding principal balances net of any unearned income, cumulative charge-offs, unamortized deferred fees and costs on originated loans, and unamortized premiums or discounts on purchased loans (amortized cost).

Interest income on loans is accrued over the term of the loans based upon the amount of principal outstanding except when serious doubt exists as to the collectability of a loan, in which case the accrual of interest is discontinued.

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If the carrying amount is not fully recoverable, an impairment loss is recognized to reduce the carrying amount to fair value, where fair value is based on the condition of the rental equipment and the projected net cash flows from rental and sale adjusted for current market conditions.

No impairment expense was recognized for fiscal years ended September 30, 2022, 2021, and 2020.

A nominal impairment expense from rental equipment was recognized for the fiscal year ended September 30, 2023, and no impairment expense was recognized for fiscal years ended September 30, 2022 and 2021.

Loan Servicing and Transfers of Financial Assets

The Company, from time to time, sells loan participations, generally without recourse.

The Company sells loan participations, generally without recourse, in both the commercial and consumer segments.

The Company also sells commercial SBA and USDA loans to third parties, generally without recourse.

Sold loans are not included in the Consolidated Financial Statements.

The Bank generally retains the right to service the sold loans for a fee and records a servicing asset, which is included within other assets on the Consolidated Statements of Financial Condition.

The Bank generally retains the right to service the sold loans for a fee.

If the fee is determined commensurate and customary with market terms, no servicing asset or liability is recorded.

Any fee that is above or below market terms results in a servicing asset or liability and is included within Other Assets on the Consolidated Statements of Financial Condition.

At September 30, 2023 and 2022, the Bank was servicing loans for others with aggregate unpaid principal balances of $ 332.5 million and $ 336.6 million, respectively.

The service fees and ancillary income related to these loans were immaterial.

Transfers of financial assets are accounted for as sales when control over the assets has been surrendered.

Control over transferred assets is deemed to be surrendered when (1) the assets have been legally isolated from the Company, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and (3) the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity.

Transfers of loans, portions of loans meeting the definition of a participating interest, and other financial assets are accounted for as sales on the transaction settlement date when control has been surrendered.

Control over transferred assets is deemed to be surrendered when (1) the assets have been legally isolated from the Company, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of such right) to pledge or exchange the transferred assets, and (3) the Company does not maintain effective control over the transferred assets through a repurchase agreement or other means.

Upon sale, the loans or other financial assets are derecognized from the Company’s Consolidated Statements of Financial Condition.

If the transfer does not satisfy the aforementioned control criteria, the transaction is recorded as a secured borrowing with the loans or other financial assets remaining on the Company’s Consolidated Statements of Financial Condition and proceeds recognized as a liability.

ALLOWANCE FOR CREDIT LOSSES

The ACL represents management’s estimate of current credit losses expected to be incurred by the loan and lease portfolio over the life of each financial asset as of the balance sheet date.

The Company individually evaluates loans and leases that do not share similar risk characteristics with other financial assets, which generally means loans and leases identified as troubled debt restructurings or loans and leases on nonaccrual status.

The Company individually evaluates loans and leases that do not share similar risk characteristics with other financial assets, which generally means loans and leases on nonaccrual status.

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

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The cohort loss rate is a life of loan loss rate that immediately reverts to historical loss information for the remaining maturity of the financial asset.

Management has elected to use a twelve-month reasonable and supportable forecast for forward-looking information.

Management has elected to use a twelve to twenty-four month reasonable and supportable forecast for forward-looking information.

Factors utilized in the determination of the allowance include historical loss experience, current economic forecasts and measurement date credit characteristics such as product type, delinquency, and industry.

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The collective evaluation of expected credit losses for certain consumer lending portfolios utilize different methodologies when estimating expected credit losses.

Factors utilized in the determination of the allowance include historical loss experience, current economic forecasts, and measurement date credit characteristics including delinquency.

The determination of the allowance is governed by structured tiers that dictate how cash collections are applied to losses to assess if there are sufficient available funds to cover expected credit losses.

The amount of ACL depends significantly on management’s estimates or key factors and assumptions affecting valuation, appraisals of collateral, evaluations of performance and status, the amounts and timing of future cash flows expected to be received, forecasts of future economic conditions and reversion periods.

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Consumer Finance

The Company's BaaS business line offers its consumer credit products and Emerald Advance products through its credit solution.

The Bank designs its credit program relationships with certain desired outcomes.

Three high priority outcomes are liquidity, credit protection, and risk retention.

The Company's BaaS business line offers a variety of installment and revolving consumer lending products through its credit solutions.

The Bank designs its credit program relationships with certain desired outcomes, including liquidity, credit protection, and risk retention by the program partner.

The Bank believes the benefits of these outcomes not only support its goals but the goals of the credit program partner as well.

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In the event of default, the Bank has no recourse against the tax consumer.

The Bank will charge off the balance of a refund advance loan if there is a balance at the end of the calendar year, or when collection of principal becomes doubtful.

When collection of principal becomes doubtful, the Bank will charge off the balance of a refund advance loan on September 30.

Any remaining balances are charged off at the end of the calendar year.

The Bank may record recoveries of previously charged off loans if collected in subsequent tax years.

The Bank offers short-term electronic return originator ("ERO") advance loans on a nationwide basis.

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These facilities are primarily collateralized by consumer receivables, with the Bank holding a senior collateral position enhanced by a subordinate party structure.

EARNINGS PER COMMON SHARE (“EPS”)

Basic earnings per share is computed by dividing income available to common stockholders after the allocation of dividends and undistributed earnings to the participating securities by the weighted average number of common shares outstanding for the period.

Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised, and is computed after giving consideration to the weighted average dilutive effect of the Company’s stock options and after the allocation of earnings to the participating securities.

Earnings per Common Share for further information.

PREMISES, FURNITURE, AND EQUIPMENT

1 unchanged sentence

Buildings, furniture, fixtures, leasehold improvements, internal-use software and equipment are carried at cost, less accumulated depreciation and amortization.

The Company primarily uses the straight-line method of depreciation over the estimated useful lives of the assets, which is 39 years for buildings, three years years for internal-use software, and range from two years to 15 years for leasehold improvements, and for furniture, fixtures and equipment.

The Company primarily uses the straight-line method of depreciation and amortization over the estimated useful lives of the assets, which is 39 years for buildings, three years for internal-use software, and range from two years to 15 years for leasehold improvements and for furniture, fixtures and equipment.

Assets are reviewed for impairment when events indicate the carrying amount may not be recoverable.

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Goodwill and Intangible Assets for further information.

EMPLOYEE PROFIT SHARING PLAN

The Company has a profit sharing plan covering substantially all full-time employees.

Profit sharing expense included in compensation and benefits, for the fiscal years ended September 30, 2022, 2021 and 2020 was $ 0.1 million, $ 3.1 million and $ 3.1 million, respectively.

As of October 1, 2021, the Company modified its profit sharing plan to incorporate a Qualified Automatic Contribution Arrangement safe harbor provision, whereby employee contributions are matched at 100 % of the first 6 % of eligible compensation contributed.

STOCK COMPENSATION

Compensation expense for share-based awards is recorded over the vesting period at the fair value of the award at the time of grant.

The exercise price of options or fair value of non-vested (restricted) shares and performance share units granted under the Company’s incentive plans is equal to the fair market value of the underlying stock at the grant date, adjusted for dividends where applicable.

The fair value of non-vested (restricted) shares and performance share units granted under the Company’s incentive plans is equal to the fair market value of the underlying stock at the grant date, adjusted for dividends where applicable.

The Company has elected to record forfeitures as they occur.

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The reserve for these unfunded commitments is included within Other Liabilities on the Consolidated Statements of Financial Condition.

COMPREHENSIVE INCOME (LOSS)

Comprehensive income (loss) consists of net income and other comprehensive income or loss.

Other comprehensive income or loss includes the change in net unrealized holding gains and losses due to market conditions and other non-credit risk factors on AFS debt securities, net of reclassification adjustments and tax effects.

Accumulated other comprehensive income (loss) is recognized as a separate component of stockholders’ equity.

REVENUE RECOGNITION

4 unchanged sentences

Revenue from Contracts with Customers for additional information.

COMPREHENSIVE INCOME (LOSS)

Comprehensive income (loss) consists of net income and other comprehensive income or loss.

Accumulated other comprehensive income (loss) is recognized as a separate component of stockholders’ equity.

EARNINGS PER COMMON SHARE (“EPS”)

Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised, and is computed after giving consideration to the weighted average dilutive effect upon vesting of restricted stock grants and after the allocation of earnings to the participating securities.

Earnings per Common Share for further information.

RELATED PARTY TRANSACTIONS

1 unchanged sentence

Summary of Significant Accounting Policies .

At September 30, 2022 and 2021, the Company had no loans outstanding with individuals deemed under Regulation O to be directors, executive officers and/or employees of the Company.

At September 30, 2023 and 2022, the Company had no loans or deposits outstanding with individuals deemed under Regulation O to be directors, executive officers and/or employees of the Company.

RECLASSIFICATION AND REVISION OF PRIOR PERIOD BALANCES

Certain prior 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.

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

RECENTLY ADOPTED ACCOUNTING STANDARDS UPDATES ("ASU")

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All became effective for the Company on October 1, 2022.

ASU 2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes.

This ASU simplifies accounting for income taxes by removing specific technical exceptions in ASC 740 related to the incremental approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period, and the recognition for deferred tax liabilities for outside basis differences.

All changes within ASU 2019-12 were applied on a prospective basis and did not have a material impact on the Company's Consolidated Financial Statements.

ASU 2020-08, Codification Improvements to Subtopic 310-20:

Receivables – Nonrefundable Fees and Other Costs.

This ASU clarifies that an entity should amortize any premium, if applicable, to the next call date, which is the first date when a call option at a specified price becomes exercisable.

The Company had previously amortized fees through the next call date and will continue to do so;

accordingly, there is no impact on the Company's Consolidated Financial Statements as a result of adopting this ASU.

ASU 2020-10, Codification Improvements.

This ASU made minor improvements to various Topics that did not have a significant impact on the Company’s accounting policies and practices.

There were no material impacts to the Consolidated Financial Statements as a result of adopting this ASU.

ASU 2021-06, Presentation of Financial Statements (Topic 205), Financial Services – Depository and Lending (Topic 942), and Financial Services – Investment Companies (Topic 946) – Amendments to SEC Paragraphs Pursuant to SEC Final Rule Releases No.

33-10786, Amendments to Financial Disclosures about Acquired and Disposed Business, and No.

33-10835, Updated of Statistical Disclosures for Bank and Savings and Loan Registrants.

This ASU adds new quarterly disclosures and expands certain annual disclosures to quarterly reporting.

The additional disclosure requirements have been included within the Management Discussion & Analysis section.

The following ASUs have been issued and are considered applicable to the Company, but have not yet been adopted as of September 30, 2022.

ASU 2021-05, Leases (Topic 842):

Lessors – Certain Leases with Variable Lease Payments.

The amendments in this ASU require lessors to classify and account for leases with variable lease payments that do not depend on a reference index or rate as an operating lease if certain criteria are met.

This ASU is effective for public companies for fiscal years beginning after December 15, 2021.

The Company’s Equipment Finance division does not generally originate leases with variable lease payments that do not depend on a reference rate or index, so the impact of this ASU is not expected to be material to the consolidated financial statements.

The following ASUs have been issued and are considered applicable to the Company, but have not yet been adopted as of September 30, 2023.

ASU 2022-02, Financial Instruments – Credit Losses (Topic 326):

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The amendments in this ASU eliminate accounting guidance for troubled-debt restructurings (TDRs) by creditors in Subtopic ASC 310-40, Receivables – Troubled Debt Restructurings by Creditors, and enhance disclosure requirements for certain loan refinancings and restructurings when a borrower is experiencing financial difficulty.

This ASU is effective for public companies for fiscal years beginning after December 15, 2022.

Management is currently evaluating the impact of this guidance on the consolidated financial statements.

The ASU also requires current-period gross charge-offs by year of origination to be disclosed for loans and leases within scope of Topic 326.

The adoption of this ASU will be reflected using the prospective approach beginning October 1, 2023 in the Company's Quarterly Report on Form 10-Q for the quarter ending December 31, 2023.

The Company does not expect a material impact on the Consolidated Financial Statements.

SIGNIFICANT EVENTS

On December 7, 2021, the Company executed a Purchase Agreement (the “Agreement”) with Beige Key, LLC (the “Assignee”) for the sale of all of the Company’s worldwide right, title and interest in and to company names and tradenames including Meta and other "Meta" formative names including MetaBank and Meta Financial Group, and the domain names, social media accounts and goodwill associated with the foregoing (collectively, the “Meta” tradenames) in exchange for $ 60.0 million in cash.

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

From the date of the Agreement until the date such phase out is completed (the “Phase Out Period”), Assignee has granted the Company a non-exclusive royalty free license in the United States and Canada to use the Meta tradenames in the manner in which they were used by the Company prior to the Agreement.

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 Company has recognized the $ 50.0 million as noninterest income in the fiscal year ended September 30, 2022.

The remaining $ 10.0 million was paid by the Assignee and is being held in an escrow account by a third-party agent until the agreed upon activities within the Phase Out Period have been completed, at which time the funds will be released to the Company.

The Company’s receipt of the $ 10.0 million payment is contingent upon phase out activities that have not yet been completed and has not been recognized in the Company’s consolidated financial statements for the fiscal year ended September 30, 2022.

On July 13, 2022, the Company announced it changed its name to Pathward Financial, Inc.

TM , and its bank subsidiary MetaBank®, N.A.

changed to Pathward™, N.A.

("Pathward" or the "Bank").

The full transition to Pathward, including a new brand identity and website, is expected to be completed by the end of this calendar year.

The Company recognized $ 13.1 million of noninterest expense related to rebranding efforts in the fiscal year ended September 30, 2022.

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.

Debt Securities AFS

In December 2022, the Company completed its rebranding efforts to Pathward Financial, Inc., including its bank subsidiary to Pathward, N.A.

In December 2021, the Company executed a Purchase Agreement (the “Agreement”) with Beige Key, LLC (the “Assignee”) for the sale of all of the Company’s worldwide right, title and interest in and to company names and tradenames including Meta and other “Meta” formative names including MetaBank and Meta Financial Group, and the domain names, social media accounts and goodwill associated with the foregoing (collectively, the “Meta” tradenames) in exchange for $ 60.0 million in cash.

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

The Company received and recognized the remaining $ 10.0 million as noninterest income upon completion of required phase-out activities, which occurred in December 2022.

The Company incurred $ 3.7 million and $ 13.1 million of noninterest expense in the fiscal years ending September 30, 2023 and 2022, respectively, as a result of rebranding activities.

The amortized cost, gross unrealized gains and losses and estimated fair values of AFS and HTM debt securities are presented below.

(Dollars in thousands) Amortized Cost Gross Unrealized Gains Gross Unrealized (Losses) Fair

Debt Securities AFS

At September 30, 2023

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Debt Securities HTM

(Dollars in thousands) Amortized Cost Gross Unrealized Gains Gross Unrealized (Losses) Fair

At September 30, 2023

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At September 30, 2022

Corporate securities $ — $ — $ 22,187 $ ( 2,813 ) $ 22,187 $ ( 2,813 )

SBA securities 97,767 ( 7,470 ) — — 97,767 ( 7,470 )

Obligations of state and political subdivisions 2,345 ( 125 ) — — 2,345 ( 125 )

Non-bank qualified obligations of states and political subdivisions 195,816 ( 19,743 ) 67,967 ( 7,228 ) 263,783 ( 26,971 )

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Non-bank qualified obligations of states and political subdivisions $ 3,984 $ ( 300 ) $ 31,919 $ ( 2,890 ) $ 35,903 $ ( 3,190 )

Mortgage-backed securities 2,268 ( 321 ) — — 2,268 ( 321 )

Total debt securities HTM $ 6,252 $ ( 621 ) $ 31,919 $ ( 2,890 ) $ 38,171 $ ( 3,511 )

The decline in the fair value of investment securities balances when comparing September 30, 2023 to the prior year was primarily driven by increases in unrealized losses due to the rise in interest rates throughout the fiscal year.

At September 30, 2023, there were 206 securities AFS in an unrealized loss position.

All of the mortgage-backed securities ("MBS") in an unrealized loss position at September 30, 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.

Management assessed each investment security with unrealized losses for credit loss and determined all unrealized losses on these securities were due to change in interest rates versus credit loss.

As part of that assessment, management evaluated and concluded that it is more-likely-than-not that the Company will not be required and does not intend to sell any of the securities prior to recovery of the amortized cost.

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Total securities AFS, at fair value $ 2,143,333 $ 1,804,228 $ 2,165,719 $ 1,882,869

At September 30,

(Dollars in thousands) 2022 2021

Securities HTM at Fair Value Amortized Cost Fair

Value Amortized Cost Fair

Securities HTM at Fair Value

Due after ten years $ 34,415 $ 29,571 $ 39,093 $ 35,903

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Total securities HTM, at cost $ 36,591 $ 31,425 $ 41,682 $ 38,171

Activity related to the sale of securities available for sale is summarized below.

Activity related to the sale of securities is summarized below.

Fiscal Year Ended September 30,

(Dollars in thousands) 2023 2022 2021

Available For Sale

Securities AFS

Proceeds from sales $ — $ 265,951 $ 50,468

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No securities were pledged as collateral for individual, trust and estate deposits at September 30, 2023 and 2022.

Equity Securities

The Company held $ 2.9 million and $ 12.7 million in marketable equity securities at September 30, 2022 and 2021, respectively.

The Company recognized $ 3.8 million and $ 3.4 million in unrealized loss on marketable equity securities during the fiscal years ended September 30, 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 fiscal years ended September 30, 2022 and 2021.

There was one marketable equity security sold during fiscal year 2022 for a $ 0.3 million gain.

Non-marketable equity securities with a readily determinable fair value totaled $ 7.2 million and $ 4.6 million at September 30, 2022 and 2021, respectively.

The Company recognized $ 1.1 million and $ 0.6 million in unrealized gains during the fiscal years ended September 30, 2022 and 2021, respectively.

No such securities were sold during fiscal year 2022.

Non-marketable equity securities without readily determinable fair value totaled $ 18.2 million and $ 16.0 million at September 30, 2022 and 2021, respectively.

There were four securities sold during the fiscal year ended September 30, 2022 for a $ 1.7 million loss .

The Bank is required by federal law to subscribe to capital stock (divided into shares of $100 each) as a member of the FRB of Minneapolis with an amount equal to six per centum of the paid-up capital stock and surplus.

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

At fiscal year-end 2022 and 2021, the Company pledged securities with fair values of approximately $ 924.2 million and $ 236.1 million against FRB advances, respectively.

Included in interest and dividend income from other investments is $ 1.2 million and $ 1.5 million related to dividend income on FRB stock for the fiscal years ended September 30, 2022 and 2021, respectively.

At fiscal year-end 2023 and 2022, the Company pledged securities with fair values of $ 773.6 million and $ 924.2 million against FRB advances, respectively.

Included in interest and dividend income from other investments is $ 1.2 million, $ 1.2 million, and $ 1.5 million related to dividend income on FRB stock for the fiscal years ended September 30, 2023, 2022, and 2021, respectively.

The Company’s borrowings from the FHLB are secured by specific investment securities.

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The carrying value of the stock held at the FHLB was $ 8.5 million and $ 9.1 million at September 30, 2023 and 2022, respectively.

At fiscal year-end 2022 and 2021, the Company pledged securities with fair values of approximately $ 804.0 million and $ 644.7 million, respectively, to be used against FHLB advances.

In addition, a combination of qualifying residential and other real estate loans of zero and zero were pledged as collateral at September 30, 2022 and 2021, respectively.

At fiscal year-end 2023 and 2022, the Company pledged securities with fair values of approximately $ 996.9 million and $ 804.0 million, respectively, as collateral against FHLB advances.

There was no combination of qualifying residential and other real estate loans pledged as collateral at September 30, 2023 and 2022.

Included in interest and dividend income from other investments is $ 0.5 million, $ 0.3 million and $ 0.2 million related to dividend income on FHLB stock for the fiscal years ended September 30, 2023, 2022 and 2021, respectively.

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Therefore, FRB and FHLB stocks are less liquid than other marketable equity securities, and the fair value approximates cost.

Equity Security Impairment

Equity Securities.

The Company held $ 3.4 million and $ 2.9 million in marketable equity securities at September 30, 2023 and 2022, respectively.

The unrealized gains and losses associated with these securities were insignificant for the fiscal years ended September 30, 2023 and 2022.

No securities were sold during the fiscal year.

Non-marketable equity securities with a readily determinable fair value totaled $ 8.4 million and $ 7.2 million at September 30, 2023 and 2022, respectively.

The Company recognized $ 0.2 million in unrealized losses and $ 1.1 million in unrealized gains during the fiscal years ended September 30, 2023 and 2022, respectively.

No securities were sold during the fiscal year.

Non-marketable equity securities without readily determinable fair value totaled $ 16.2 million and $ 18.2 million at September 30, 2023 and 2022, respectively.

There were two securities sold during the fiscal year for a $ 0.1 million gain .

Equity Securities Impairment.

The Company evaluates impairment for investments held at cost on at least an annual basis based on the ultimate recoverability of the par value.

All other equity investments, including those under the equity method, are reviewed for other-than-temporary impairment on at least a quarterly basis.

The Company recognized zero , $ 2.6 million, and $ 1.3 million in impairment for such investments for the fiscal years ended September 30, 2022, 2021, and 2020, respectively.

The Company recognized $ 3.3 million, zero , and $ 2.6 million in impairment for such investments for the fiscal years ended September 30, 2023, 2022, and 2021, respectively.

LOANS AND LEASES, NET

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Commercial finance 3,723,158 3,023,673

Consumer credit products 144,353 129,251

Other consumer finance 25,306 123,606

Consumer finance 254,416 169,659

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Warehouse finance 376,915 326,850

Community banking — 199,132

Total loans and leases 4,359,681 3,529,280

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Total loans and leases, net $ 4,316,411 $ 3,490,358

During the fiscal years ended September 30, 2022 and 2021, the Company transferred $ 169.0 million and $ 188.6 million, respectively, of Community Banking loans to held for sale.

During the fiscal years ended September 30, 2022, the Company originated $ 985.3 million of other consumer finance and SBA/USDA loans held for sale.

During the fiscal year ended September 30, 2021, the Company originated $ 601.5 million of other consumer finance, SBA/USDA, and consumer credit product loans as held for sale.

The Company sold held for sale loans resulting in proceeds of $ 1.06 billion and gains on sale of $ 3.7 million during the fiscal year ended September 30, 2022.

The Company sold held for sale loans resulting in proceeds of $ 890.3 million and gains on sale of $ 8.6 million during the fiscal year ended September 30, 2021.

In connection with the Company's sale of the Bank's Community Bank division to Central Bank, the Company entered into a servicing agreement with Central Bank for the retained Community Bank loan portfolio that became effective on February 29, 2020 (the "Closing Date").

The Company recognized $ 0.2 million and $ 3.3 million for the fiscal years ended September 30, 2022 and 2021, respectively.

Since the Closing Date, the Company has entered into subsequent loan portfolio sale agreements with Central Bank and other third parties.

The Company sold additional loans from the retained Community Bank portfolio in the amount of $ 192.5 million and $ 308.1 million for the fiscal years ended September 30, 2022 and 2021, respectively.

All loans from the retained Community Bank portfolio have been sold as of December 31, 2021.

During the fiscal years ended September 30, 2023 and 2022, the Company originated $ 1.21 billion and $ 985.3 million of other consumer finance and SBA/USDA loans as held for sale, respectively.

The Company sold held for sale loans resulting in proceeds of $ 1.14 billion and gain on sale of $ 0.3 million during the fiscal year ended September 30, 2023.

The Company sold held for sale loans resulting in proceeds of $ 1.06 billion and gain on sale of $ 3.7 million during the fiscal year ended September 30, 2022.

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

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Loans Purchased

Loans held for investment:

Commercial finance $ 480 $ 3,098

Warehouse finance 214,786 112,255

Community banking — 3,318

Total purchases $ 215,266 $ 115,353

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(Dollars in thousands) 2023 2022

Carrying amount $ 216,880 $ 278,341

Minimum lease payments receivable $ 191,807 $ 216,880

Unguaranteed residual assets 12,709 13,037

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Lease income from operating lease payments 53,551 46,017

Profit recorded on commencement date on sales-type leases — 337

Total leasing and equipment finance noninterest income 57,515 51,999

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The Company did not record any contingent rental income from direct financing and sales-type leases in the fiscal year ended September 30, 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.

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.

Although macroeconomic conditions and markets have improved since the COVID-19 pandemic, other factors have been affecting the economic environment in 2023 including geopolitical conflict, supply chain disruptions, inflation, rising interest rates, and bank failures brought on by, among other things, rising interest rates, deposit outflows and liquidity crises.

While the ultimate impact of these 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 these factors impacting the economy and will refine its estimate as developments occur and more information becomes available.

Activity in the allowance for credit losses was as follows:

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Beginning balance $ 45,947 $ 68,281

Impact of CECL adoption — 12,773

Provision for credit losses 57,448 28,862

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Commercial finance 44,152 18,477 ( 18,894 ) 3,245 46,980

Consumer credit products 1,242 158 — — 1,400

Other consumer finance 6,112 ( 1,607 ) ( 4,787 ) 345 63

Consumer finance 1,463 3,146 ( 2,263 ) — 2,346

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Warehouse finance 327 50 — — 377

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

Total loans and leases 45,947 57,448 ( 59,898 ) 6,208 49,705

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At September 30, 2022

(Dollars in thousands) Beginning Balance Impact of CECL Adoption Provision (Reversal) Charge-offs Recoveries Ending Balance

Allowance for loan and lease losses:

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

Allowance for credit losses:

Term lending $ 29,351 $ 4,850 $ ( 12,629 ) $ 3,049 $ 24,621

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Commercial finance 48,243 14,997 ( 25,422 ) 6,334 44,152

Consumer credit products 845 — 397 — — 1,242

Other consumer finance 2,821 5,998 297 ( 3,324 ) 320 6,112

Consumer finance 7,354 ( 1,449 ) ( 4,787 ) 345 1,463

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Term lending $ 3,516 $ 2,885

Asset-based lending 19,226 —

Factoring 1,133 550

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Commercial finance (1)

Community banking — 14,915

Total $ 25,255 $ 7,421

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Due to the nature of the transactions and significant cash collateral positions, these credits are evaluated individually.

At September 30, 2022, the balance of these pass rated cash collateral loans totaled $ 120.7 million.

In response to the ongoing COVID-19 pandemic, the Company allowed modifications, such as payment deferrals and temporary forbearance, to credit-worthy borrowers who are experiencing temporary hardship due to the effects of COVID-19.

Up to January 1, 2022, when this relief ended, if all payments were less than 30 days past due prior to the onset of the pandemic effects, the loan or lease was not be reported as past due during the deferral or forbearance period.

As of September 30, 2022, the Company had no loans and leases that were in active deferment.

These modifications consisted solely of payment deferrals ranging from 30 days to six months .

These modifications are in line with applicable regulatory guidelines and, therefore, they are not reported as troubled debt restructurings.

The balance of these pass rated cash collateral loans totaled $ 117.0 million and $ 120.7 million at September 30, 2023 and 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 OCC, to be of lesser quality as “substandard,” “doubtful” or “loss.” The loan classification and risk rating definitions are as follows:

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Loans and leases, or portions thereof, are generally charged off when collection of principal becomes doubtful.

Typically, this is associated with a delay or shortfall in payments of 210 days or more for commercial insurance premium finance, 180 days or more for the purchased student loan portfolios, 120 days or more for consumer credit products and leases, and 90 days or more for community banking loans and commercial finance loans.

Action is taken to charge off electronic return originator ("ERO") loans if such loans have not been collected by the end of June and refund advance loans if such loans have not been collected by the end of the calendar year.

Typically, this is associated with a delay or shortfall in payments of 210 days or more for commercial insurance premium finance, 120 days or more for consumer credit products and leases, and 90 days or more for commercial finance loans.

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

Nonaccrual loans and troubled debt restructurings are generally individually evaluated for expected credit losses.

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The Company has various portfolios of consumer finance and tax services loans that present unique risks that are statistically managed.

Due to the unique risks associated with these portfolios, the Company monitors other credit quality indicators in 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.

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

The outstanding balances of consumer finance loans and tax services loans were $ 254.4 million and $ 5.2 million at September 30, 2023, respectively, and $ 169.7 million and $ 9.1 million at September 30, 2022, respectively.

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Substandard — — — — — — 19,501 19,501

Doubtful — — — — — — 501 501

Total — — — — — — 382,371 382,371

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Pass 2,330 18,927 32,737 1,137 10,122 69,927 — 135,180

Watch 1,742 — — — — — — 1,742

Substandard 2,753 450 25,708 — — 258 — 29,169

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Pass — — — — — — 376,915 376,915

Special Mention — — — — — — 32,500 32,500

Total — — — — — — 376,915 376,915

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Pass 5,886 13,607 26,040 20,458 23,098 40,782 — 129,871

Watch — 17,404 3,409 451 — — — 21,264

Substandard — 9,538 — — — 20,000 — 29,538

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Pass — — — — — — 294,350 294,350

Total — — — — — — 419,926 419,926

Community banking

Pass — — 4,159 — 5,683 472 — 10,314

Watch — 10,134 — 10,854 6,133 — — 27,121

Special mention — — — — — — 32,500 32,500

Substandard — 119 49,449 50,626 13,933 6,110 — 120,237

Doubtful — 122 — 5,422 — — — 5,544

Total — — — — — — 326,850 326,850

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Commercial finance 23,434 9,143 20,352 52,929 3,670,229 3,723,158 11,242 37,372 48,614

Consumer credit products 3,209 2,558 2,669 8,436 135,917 144,353 2,669 — 2,669

Other consumer finance 113 51 124 288 25,018 25,306 124 — 124

Consumer finance 2,992 2,425 2,210 7,627 246,789 254,416 2,210 — 2,210

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Commercial finance 24,881 6,208 7,868 38,957 2,984,716 3,023,673 4,142 13,375 17,517

Consumer credit products 713 527 511 1,751 127,500 129,251 511 — 511

Other consumer finance 963 285 725 1,973 121,633 123,606 725 — 725

Consumer finance 3,322 2,609 2,793 8,724 160,935 169,659 2,793 — 2,793

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Warehouse finance — — — — 326,850 326,850 — — —

Community banking — — — — 199,132 199,132 — 14,915 14,915

Total loans and leases held for investment 28,203 8,817 19,534 56,554 3,472,726 3,529,280 15,808 13,375 29,183

Total loans and leases $ 28,203 $ 8,817 $ 19,534 $ 56,554 $ 3,493,797 $ 3,550,351 $ 15,808 $ 13,375 $ 29,183

Nonaccrual loans and leases by year of origination at September 30, 2022 were as follows:

Nonaccrual loans and leases by year of origination were as follows:

Amortized Cost Basis

Term Loans and Leases by Origination Year Revolving Loans and Leases Total Nonaccrual with No ACL

(Dollars in thousands) 2022 2021 2020 2019 2018 Prior

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

At September 30, 2023 2023 2022 2021 2020 2019 Prior

Term lending $ 748 $ 4,942 $ 2,933 $ 2,165 $ 3,134 $ 1,402 $ — $ 15,324 $ —

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Total nonaccrual loans and leases $ 748 $ 5,692 $ 3,379 $ 2,825 $ 3,134 $ 2,214 $ 19,380 $ 37,372 $ 1

Nonaccrual loans and leases by year of origination at September 30, 2021 were as follows:

Amortized Cost Basis

Term Loans and Leases by Origination Year Revolving Loans and Leases Total Nonaccrual with No ACL

(Dollars in thousands) 2021 2020 2019 2018 2017 Prior

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

At September 30, 2022 2022 2021 2020 2019 2018 Prior

Term lending $ 251 $ 1,110 $ 1,964 $ 989 $ 3,096 $ 166 $ — $ 7,576 $ 2,885

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Lease financing 977 310 2,442 13 8 — — 3,750 —

SBA/USDA — — 1,199 — — 252 — 1,451 1,199

Commercial finance 1,228 1,420 5,605 1,002 3,104 418 598 13,375 4,634

Community banking — 242 — 14,673 — — — 14,915 —

Total nonaccrual loans and leases $ 1,228 $ 1,420 $ 5,605 $ 1,002 $ 3,104 $ 418 $ 598 $ 13,375 $ 4,634

Loans and leases that are 90 days or more delinquent and accruing by year of origination at September 30, 2022 were as follows:

Loans and leases that are 90 days or more delinquent and accruing by year of origination were as follows:

Amortized Cost Basis

Term Loans and Leases by Origination Year Revolving Loans and Leases Total

(Dollars in thousands) 2022 2021 2020 2019 2018 Prior

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

At September 30, 2023 2023 2022 2021 2020 2019 Prior

Loans held for sale $ 306 $ — $ — $ — $ — $ — $ — $ 306

Term lending 1,290 1,371 500 233 29 314 — 3,737

Asset based lending — — — — — — 39 39

Lease financing — 490 979 784 1,794 195 — 4,242

Insurance premium finance — 414 114 — 334 1,477 — 2,339

SBA/USDA — — — 833 — — — 833

Other commercial finance — — — — — 91 — 91

Commercial finance 1,290 2,275 1,593 1,850 2,157 2,077 — 11,242

Consumer credit products 2,123 481 42 23 — — — 2,669

Other consumer finance — 124 — — — — — 124

Consumer finance 891 1,045 246 — — — 28 2,210

Tax services 5,082 — — — — — — 5,082

Total loans and leases held for investment 7,263 3,320 1,839 1,850 2,157 2,077 28 18,534

Total 90 days or more delinquent and accruing $ 7,569 $ 3,320 $ 1,839 $ 1,850 $ 2,157 $ 2,077 $ 28 $ 18,840

Loans and leases that are 90 days or more delinquent and accruing by year of origination at September 30, 2021 were as follows:

Amortized Cost Basis

Term Loans and Leases by Origination Year Revolving Loans and Leases Total

(Dollars in thousands) 2021 2020 2019 2018 2017 Prior

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

At September 30, 2022 2022 2021 2020 2019 2018 Prior

Term lending $ 207 $ 720 $ 716 $ 130 $ 70 $ 192 $ — $ 2,035

Asset-based lending — — — — — — 39 39

Lease financing 8 158 98 131 45 — — 440

Insurance premium finance 1,513 110 5 — — — — 1,628

SBA/USDA — 987 — — — — — 987

Commercial finance 1,728 988 819 261 115 192 39 4,142

Consumer credit products 206 77 224 3 — — — 510

Other consumer finance — — — — — 725 — 725

Consumer finance 2,123 605 42 23 — — — 2,793

11 unchanged sentences

Commercial finance 26,463 25,940

Community banking — 16,231

Total loans and leases $ 26,463 $ 25,940

1 unchanged sentence

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.

There were $ 1.1 million loans that were modified in a TDR during the fiscal year ended September 30, 2023.

There were $ 10.5 million of commercial finance loans and $ 0.9 million of consumer finance loans that were modified in a TDR during the fiscal year ended September 30, 2022, all of which were modified to extend the term of the loan.

There were $ 5.9 million of commercial finance loans and $ 0.3 million of consumer finance loans that were modified in a TDR during the fiscal year ended September 30, 2021.

During the fiscal year ended September 30, 2022, the Company had $ 5.2 million of commercial finance loans and $ 1.1 million of consumer finance loans that were modified in a TDR within the previous 12 months and for which there was a payment default.

During the fiscal year ended September 30, 2023, the Company had $ 0.9 million of commercial finance loans that were modified in a TDR within the previous 12 months and for which there was a payment default.

22 unchanged sentences

Effect of dilutive securities (1)

Stock options — — —

Performance share units 92,527 5,176 21,926

30 unchanged sentences

Net book value $ 211,750 $ 204,371

F uture minimum lease payments expected to be received for operating leases at September 30, 2022 were as follows:

Future minimum lease payments expected to be received for operating leases at September 30, 2023 were as follows:

(Dollars in thousands)

5 unchanged sentences

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

The Company did not enter into any business combinations in the fiscal year ended September 30, 2022.

There have been no changes to the carrying amount of goodwill during the fiscal years ended September 30, 2023 and 2022.

3 unchanged sentences

All Others (3)

Intangible Assets

At September 30, 2022 $ 8,605 $ — $ 12,395 $ 4,691 $ 25,691

Acquisitions during the period — — — 1 1

Amortization during the period ( 1,128 ) — ( 3,285 ) ( 558 ) ( 4,971 )

Write-offs during the period — — ( 670 ) ( 203 ) ( 873 )

At September 30, 2023 $ 7,477 $ — $ 9,110 $ 4,133 $ 20,720

6 unchanged sentences

Amortization during the period ( 1,218 ) ( 40 ) ( 4,803 ) ( 524 ) ( 6,585 )

Write-offs during the period — — — ( 23 ) ( 23 )

Write-offs and disposals during the period — — ( 670 ) ( 203 ) ( 873 )

At September 30, 2022 $ 8,605 $ — $ 12,395 $ 4,691 $ 25,691

3 unchanged sentences

At September 30, 2022 $ 8,605 $ — $ 12,395 $ 4,691 $ 25,691

(1) Book amortization period of 5 - 15 years.Amortized using the straight line and accelerated methods.

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

Amortized using the straight line and accelerated methods.

(2) Book amortization period of 10 - 30 years.

Amortized using the accelerated method.

6 unchanged sentences

Total anticipated intangible amortization $ 20,720

There was a $ 0.7 million impairment to intangible assets for the fiscal year ended September 30, 2022 and no impairment for the fiscal year ended September 30, 2021.

There was a no impairment to intangible assets for the fiscal year ended September 30, 2023 and $ 0.7 million impairment for the fiscal year ended September 30, 2022.

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

OPERATING LEASE RIGHT-OF-USE ASSETS AND LIABILITIES

Operating lease ROU assets, included in other assets , were $ 30.1 million and $ 34.4 million at September 30, 2022 and 2021, respectively.

Operating lease right-of-use ("ROU") assets, included in other assets , were $ 26.9 million and $ 30.1 million at September 30, 2023 and 2022, respectively.

Operating lease liabilities, included in accrued expenses and other liabilities , were $ 28.8 million and $ 32.1 million at September 30, 2023 and 2022, respectively.

20 unchanged sentences

(Dollars in thousands)

(1) As of September 30, 2022, the Company had $ 0.1 million of certificates of deposit which were recorded in wholesale deposits on the Consolidated Statements of Financial Condition.

(1) As of September 30, 2023, the Company had no certificates of deposit recorded in wholesale deposits on the Consolidated Statements of Financial Condition.

Under the Dodd-Frank Act, IRA and non-IRA deposit accounts are insured up to $ 250,000 by the DIF under management of the FDIC.

1 unchanged sentence

Short-Term Borrowings

The Company had no short-term borrowing at September 30, 2022 and 2021.

At September 30,

(Dollars in thousands) 2023 2022

Overnight fed funds purchased $ 13,000 $ —

Total $ 13,000 $ —

The Bank has executed blanket pledge agreements whereby the Bank assigns, transfers, and pledges to the FHLB and grants to the FHLB a security interest in real estate and securities collateral.

2 unchanged sentences

At September 30, 2023 and 2022, the Bank pledged securities with fair values of approximately $ 996.9 million and $ 804.0 million, respectively, to be used against FHLB advances as needed.

In addition, no qualifying real estate loans were pledged as collateral at September 30, 2022 and 2021.

In addition, qualifying real estate loans of approximately $ 21.3 million were pledged as collateral at September 30, 2023 compared to none at September 30, 2022.

The Company had no securities sold under agreements to repurchase at September 30, 2023 and 2022.

At September 30, 2022 and 2021, the Company did not have any securities pledged as collateral for securities sold under agreements to repurchase.

Long-Term Borrowings

5 unchanged sentences

Total $ 33,873 $ 36,028

( 1) Includes $ 2.4 million and $ 5.1 million of discounted leases and none and $ 0.1 million of finance lease obligations at September 30, 2022 and 2021, respectively.

(1) Includes $ 0.6 million and $ 2.4 million of discounted leases at September 30, 2023 and 2022, respectively.

Scheduled maturities of the Company's long-term borrowings at September 30, 2023 were as follows for the fiscal years ending:

10 unchanged sentences

Distributions are paid semi-annually.

Cumulative cash distributions are calculated at a variable rate of LIBOR plus 3.75 % ( 7.98 % at September 30, 2022, and 3.93 % at September 30, 2021), not to exceed 12.5 %.

Cumulative cash distributions are calculated at 6-Month CME Term SOFR plus 0.42826 % tenor spread adjustment plus 3.75 % ( 9.65 % at September 30, 2023 and 7.98 % at September 30, 2022), not to exceed 12.5 %.

The Company may, at one or more times, defer interest payments on the capital securities for up to 10 consecutive semi-annual periods, but not beyond July 25, 2031.

6 unchanged sentences

Through the Crestmark Acquisition, the Company acquired $ 3.4 million in floating rate capital securities due to Crestmark Capital Trust I, a 100%-owned nonconsolidated subsidiary of the Company.

The subordinated debentures bear interest at LIBOR plus 3.00 %, have a stated maturity of 30 years and are redeemable by the Company at par, with regulatory approval.

The subordinated debentures bear interest at 3-Month CME Term SOFR plus 0.26161 % tenor spread adjustment plus 3.00 %, have a stated maturity of 30 years and are redeemable by the Company at par, with regulatory approval.

The interest rate is reset quarterly at distribution dates in February, May, August, and November.

9 unchanged sentences

Repurchase of Common Stock.

The Company's Board of Directors authorized the November 20, 2019 share repurchase program to repurchase up to 7,500,000 shares of the Company's outstanding common stock.

This authorization is effective from November 21, 2019 through December 31, 2022.

All remaining shares available for repurchase under this program were repurchased during the fiscal 2022 first quarter.

On September 7, 2021, the Company's Board of Directors announced a share repurchase program to repurchase up to an additional 6,000,000 shares of the Company's outstanding common stock.

The Company's Board of Directors authorized the September 3, 2021 share repurchase program to repurchase up to 6,000,000 shares of the Company's outstanding common stock.

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

On August 25, 2023, the Company's Board of Directors announced a share repurchase program to repurchase up to an additional 7,000,000 shares of the Company's outstanding common stock on or before September 30, 2028.

During the fiscal years ended September 30, 2023 and 2022, the Company repurchased 2,628,541 and 3,020,899 shares, respectively, as part of the share repurchase programs.

7 unchanged sentences

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

The Company retired zero and 203,224 shares of common stock held in treasury during the fiscal years ended September 30, 2022 and 2021, respectively.

The Company retired 149,679 and zero shares of common stock held in treasury during the fiscal years ended September 30, 2023 and 2022, respectively.

STOCK COMPENSATION

The Company maintains the Pathward Financial, Inc.

2002 Omnibus Incentive Plan, as amended and restated (the "2002 Omnibus Incentive Plan"), which, among other things, provides for the awarding of stock options, nonvested (restricted) shares, and performance share units ("PSUs") to certain officers and directors of the Company.

Awards are granted by the Compensation Committee of the Board of Directors based on the performance of the award recipients or other relevant factors.

At grant date, the fair value of options awarded to recipients is estimated using a Black-Scholes valuation model.

The exercise price of stock options equals the fair market value of the underlying stock at the date of grant.

Options are issued for a period of 10 years with 100 % vesting generally occurring either at grant date or over a period of four years .

There were no options granted during the fiscal years ended September 30, 2022, 2021 or 2020.

The intrinsic value of options exercised during the fiscal years ended September 30, 2022, 2021 and 2020 were zero , zero and $ 1.0 million, respectively.

The Company previously maintained the Pathward Financial, Inc.

2002 Omnibus Incentive Plan, as amended and restated (the "Prior Omnibus Incentive Plan").

On September 27, 2023, the Board adopted the Pathward Financial, Inc.

2023 Omnibus Incentive Plan (the "New Omnibus Incentive Plan") contingent on stockholder approval at the Annual Meeting of Stockholders expected to be held on February 27, 2024.

The Prior Omnibus Incentive Plan provided for the awarding of stock options, nonvested (restricted) shares, and performance share units ("PSUs") to certain officers and directors of the Company.

Awards were granted by the Compensation Committee of the Board of Directors based on the performance of the award recipients or other relevant factors.

No awards have been granted under the Prior Omnibus Incentive Plan following November 25, 2022, the date that the Prior Omnibus Incentive Plan expired by its terms.

Shares have previously been granted each year to executives and senior leadership members under the applicable Company incentive plan.

These shares vest at various times ranging from immediately to four years based on circumstances at time of grant.

These shares vest at various times ranging from immediately to three years based on circumstances at time of grant.

The fair value is determined based on the fair market value of the Company’s stock on the grant date.

Director shares are issued to the Company’s directors, and these shares vest immediately.

The total fair value of director’s shares granted during the fiscal years ended September 30, 2022, 2021 and 2020 was $ 0.0 million , $ 1.0 million and $ 0.8 million, respectively.

Under its 2002 Omnibus Incentive Plan, the Company also grants selected executives and other key employees PSU awards.

Director shares are issued to the Company’s directors, and these shares have historically vested one year from the grant date.

The Company also grants selected executives and other key employees PSU awards.

The vesting of these awards is contingent on meeting company-wide performance goals, including but not limited to return on equity, earnings per share, and total shareholder return.

PSUs are generally granted at the market value of the underlying share on the date of grant, adjusted for dividends, as performance share units do not participate in dividends while unearned.

PSUs are generally granted at the market value of the underlying share on the date of grant, adjusted for dividends, as performance share units do not participate in dividends.

The awards contingently vest over a period of three years and have payout levels ranging from a threshold of 50 % to a maximum of 200 %.

Upon vesting, each performance share unit is converted into one share of common stock.

Upon vesting, each performance share unit earned is converted into one share of common stock.

The fair value of the PSUs is determined by the dividend-adjusted fair value on the grant date for those awards subject to a performance condition.

For those PSUs subject to a market condition, a simulation valuation is performed.

In addition to the Company’s 2002 Omnibus Incentive Plan, the Company also maintains the 1995 Stock Option and Incentive Plan.

No new options were, or could have been, awarded under the 1995 plan during the fiscal years ended September 30, 2022, 2021 or 2020.

Furthermore, no options were outstanding during the year.

In addition, during the first and second quarters of fiscal 2017, shares were granted to certain executive officers of the Company in connection with their signing of employment agreements with the Company.

In addition, during the first and second quarters of fiscal year 2017, shares were granted to certain executive officers of the Company in connection with their signing of employment agreements with the Company.

These stock awards vest in equal installments over eight years .

The following tables show the activity of options and share awards (including shares of restricted stock subject to vesting, fully-vested restricted stock, and PSUs) granted, exercised or forfeited under all of the Company’s option and incentive plans during the fiscal year ended September 30, 2022 and 2021.

There was no activity of options during the fiscal years ended September 30, 2022 and 2021 and zero were outstanding or exercisable at September 30, 2022 and 2021.

The following tables show the activity of share awards (including shares of restricted stock subject to vesting, fully-vested restricted stock, and PSUs) granted, exercised or forfeited under all of the Company’s incentive plans during the fiscal years ended September 30, 2023 and 2022.

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

15 unchanged sentences

Compensation expense for share-based awards is recorded over the vesting period at the fair value of the award at the time of the grant.

The exercise price of options or fair value of nonvested (restricted) shares and PSUs granted under the Company’s 2002 Omnibus Incentive Plan is equal to the fair market value of the underlying stock at the grant date, adjusted for dividends where applicable.

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

The exercise price of fair value of nonvested (restricted) shares and PSUs granted under the Company’s incentive plans is equal to the fair market value of the underlying stock at the grant date, adjusted for dividends where applicable.

The Company has elected to record forfeitures as they occur.

The following table shows the effect to income, net of tax benefits, of share-based compensation expense recorded:

14 unchanged sentences

8,810 9,407 8,208

Income tax expense (benefit) $ 27,964 $ 10,701 $ 5,661

Income tax expense $ 16,324 $ 27,964 $ 10,701

The tax effects of the Company's temporary differences that give rise to significant portions of its deferred tax assets and liabilities were:

10 unchanged sentences

Lease liability 7,210 8,074

Net unrealized losses on securities available for sale 71,336 —

Net unrealized loss on securities available for sale 84,908 71,336

Other assets 4,193 2,662

3 unchanged sentences

Intangibles ( 5,862 ) ( 4,099 )

Net unrealized gains on securities available for sale — ( 2,471 )

Leased assets ( 66,877 ) ( 58,592 )

4 unchanged sentences

(1) The general business credits are investment tax credits generated from qualified solar energy property placed in service during the fiscal years ended September 30, 2023 and 2022.

These credits expire on September 30, 2042 and 2041, respectively.

These credits will begin to expire on September 30, 2041.

As of September 30, 2023, the Company had a gross deferred tax asset of $ 2.7 million for separate company state cumulative net operating loss carryforwards, for which $ 2.7 million was reserved.

34 unchanged sentences

CAPITAL REQUIREMENTS AND RESTRICTIONS ON RETAINED EARNINGS

banking organizations, the Company and the Bank are required to comply with the regulatory capital rules adopted by the Federal Reserve and the OCC (the "Capital Rules") that became effective on January 1, 2015, subject to phase-in periods for certain requirements and other provisions of the Capital Rules.

The Company and the Bank are required to comply with the regulatory capital rules administered by federal banking agencies (the "Capital Rules").

Under the Capital Rules and the regulatory framework for prompt corrective action, the Company and Bank must meet specific capital guidelines that involve quantitative measures of the Company’s and Bank’s assets, liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices.

2 unchanged sentences

At September 30, 2023, 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 made the accumulated other comprehensive income (“AOCI”) opt-out election;

The Company and the Bank took the AOCI opt-out election;

under the rule, non-advanced approach banking organizations were given a one-time option to exclude certain AOCI components.

20 unchanged sentences

Net deferred tax assets from operating loss and tax credit carry-forwards 19,679

Net unrealized gains (losses) on available for sale securities ( 211,600 )

Net unrealized (losses) on available for sale securities ( 254,294 )

Noncontrolling interest ( 1,005 )

9 unchanged sentences

Basel III revised the definition of capital, increased minimum capital ratios, and introduced a minimum common equity tier 1 capital ratio.

those changes are being fully phased in through the end of 2021.

The following table provides a reconciliation of tangible common equity and tangible common equity excluding AOCI, each of which is used in calculating tangible book value data, to total stockholders' equity.

24 unchanged sentences

37,433 40,557 — — — — 37,433 40,557

Payment card and deposit fees 104,684 107,182 — — — — 104,684 107,182

Other bank and deposit fees — — 1,020 917 29 22 1,049 939

Card and deposit fees 149,703 104,684 1,018 1,020 25 29 150,746 105,733

Rental income (1)

18 unchanged sentences

therefore, the Company measures progress in completing these services based upon the passage of time.

Revenue from contracts with customers did not generate significant contract assets and liabilities.

Revenue from contracts with customers did not generate significant contract assets and liabilities for the fiscal year ended September 30, 2023.

Refund Transfer Product Fees.

Refund transfer fees are specific to the Tax Services division and reflect product fees offered by the Company through third-party tax preparers and tax preparation software providers where the Company acts as the partnering financial institution.

Refund transfer fees are specific to the BaaS business line and reflect product fees offered by the Company through third-party tax preparers and tax preparation software providers where the Company acts as the partnering financial institution.

A refund transfer allows a taxpayer to pay tax preparation and filing fees directly from their federal or state government tax refund, with the remainder of the refund being disbursed in accordance with the terms and conditions of the taxpayer agreement, which may include satisfaction of other disbursement obligations before going directly to the taxpayer via check, direct deposit, or prepaid card.

Refund transfer fees are recognized by the Company immediately after the taxpayer's refund has been disbursed in accordance with the contract and is based on standalone pricing included within the terms and conditions.

Refund transfer fees are recognized by the Company immediately after the taxpayer's refund has been disbursed in accordance with the contract and are based on standalone pricing included within the terms and conditions.

Certain expenses to tax preparation software providers are netted with refund transfer fee income as the Company is considered the agent in these contractual relationships.

All refund transfer fees are recorded within the Consumer reporting segment.

Card fees relate to Payments and Tax Services divisions and consists of income from prepaid cards and merchant services, including interchange fees from prepaid cards processed through card association networks, merchant services and other card related services.

Card and Deposit Fees.

Card fees relate to the BaaS business line and consists of income from prepaid cards and merchant services, including interchange fees from prepaid cards processed through card association networks, merchant services and other card related services.

Interchange rates are generally set by card association networks based on transaction volume and other factors.

7 unchanged sentences

All card fee income is included in the Consumer reporting segment.

Bank and Deposit Fees.

Bank and deposit fees relate to Payments and Commercial Finance divisions and consist of income from banking and deposit-related services, including account services, overdraft protection, and wire transfers.

Deposit fees relate to the BaaS and Commercial Finance business lines and consist of income from banking and deposit-related services, including account services, overdraft protection, and wire transfers.

Fee income for account services is recognized over the course of the month as the performance obligation is satisfied.

Fee income for overdraft protection and wire transfers is recognized point in time when such event occurs.

For Payments, the fees for account services and overdraft protection are based on standalone pricing within the terms and conditions of the Program Agreement with the sponsorship partner.

For these relationships, the

Company is considered the agent and certain expenses with the partner are netted with deposit fee revenue.

Fee income for overdraft protection and wire transfers is recognized at the point in time when such event occurs.

For BaaS, the fees for account services and overdraft protection are based on standalone pricing within the terms and conditions of the Program Agreement with the sponsorship partner.

For these relationships, the Company is considered the agent and certain expenses with the partner are netted with deposit fee revenue.

For Commercial Finance, fees for wire transfers are based on standalone pricing within the terms and conditions of the customer deposit agreement.

Bank and deposit fees for the Payments and Commercial Finance divisions are included in the Consumer and Commercial reporting segments, respectively.

Bank and deposit fees for the BaaS and Commercial Finance business lines are included in the Consumer and Commercial reporting segments, respectively.

Also included within Card and Deposit Fees for the Consumer reporting segment are servicing fees the Company recognizes for custodial off-balance sheet deposits.

This fee income is for services the Bank performs to maintain records of cardholder funds placed at one or more third-party banks insured by the FDIC.

The servicing fee is typically reflective of the EFFR.

SEGMENT REPORTING

10 unchanged sentences

Net interest income $ 154,316 $ 195,239 $ 38,306 $ 387,861

Provision (reversal of) for credit losses 30,680 14,674 ( 16,816 ) 28,538

Provision for (reversal of) credit losses 38,920 18,384 50 57,354

Noninterest income 233,544 66,051 17,004 316,599

7 unchanged sentences

Net interest income $ 98,366 $ 187,209 $ 21,749 $ 307,324

Provision (reversal of) for credit losses 35,765 19,791 ( 5,790 ) 49,766

Provision for (reversal of) credit losses 30,680 14,674 ( 16,816 ) 28,538

Noninterest income 189,252 68,412 36,143 293,807

7 unchanged sentences

Net interest income $ 91,489 $ 173,969 $ 13,533 $ 278,991

Provision for loan and lease losses 21,807 29,296 13,673 64,776

Provision for (reversal of) credit losses 35,765 19,791 ( 5,790 ) 49,766

Noninterest income 195,708 61,813 13,383 270,904

28 unchanged sentences

Condensed Statements of Operations

Fiscal Years Ended September 30,

Fiscal Year Ended September 30,

(Dollars in thousands) 2023 2022 2021

3 unchanged sentences

Loss before income taxes and equity in undistributed net income of subsidiaries ( 3,947 ) ( 5,044 ) ( 6,202 )

Income tax benefit ( 1,029 ) 395 ( 3,638 )

Income tax (benefit) expense ( 967 ) ( 1,029 ) 395

Loss before equity in undistributed net income of subsidiaries ( 2,980 ) ( 4,015 ) ( 6,597 )

22 unchanged sentences

Redemption of long-term borrowings — ( 75,000 ) —

Payment of debt issuance costs ( 511 ) — —

Proceeds from long-term borrowings — 20,000 —

Dividends paid on common stock ( 5,426 ) ( 5,921 ) ( 6,400 )

Issuance of common stock due to exercise of stock options — — 266

Issuance of common stock due to restricted stock 1 1 —

14 unchanged sentences

Net interest income 84,057 101,405 97,465 104,934

Provision (reversal of) for credit losses 186 32,302 ( 1,302 ) ( 2,648 )

Provision for credit losses 9,776 36,763 1,773 9,042

Noninterest income 65,777 127,038 67,733 56,051

8 unchanged sentences

Net interest income 71,613 83,800 72,151 79,760

Provision for loan and lease losses 6,089 30,290 4,612 8,775

Provision for (reversal of) loan and lease losses 186 32,302 ( 1,302 ) ( 2,648 )

Noninterest income 86,591 109,766 53,994 43,456

31 unchanged sentences

The fair values of marketable equity securities are determined by obtaining quoted prices on nationally recognized securities exchanges (Level 1 inputs).

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

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.

Fair Value At September 30, 2023

32 unchanged sentences

The Company does not record loans and leases at fair value on a recurring basis.

However, if a loan or lease is individually evaluated for risk of credit loss and repayment is expected to be solely provided by the values underlying collateral, the Company measures fair value on a nonrecurring bases.

However, if a loan or lease is individually evaluated for risk of credit loss and repayment is expected to be solely provided by the values of the underlying collateral, the Company measures fair value on a nonrecurring basis.

Fair value is determined by the fair value of the underlying collateral less estimated costs to sell.

7 unchanged sentences

for credit loss 21,829 — — 21,829

Foreclosed assets, net 1 — — 1

Total $ 21,829 $ — $ — $ 21,829

1 unchanged sentence

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

Impaired loans and leases, net

Loans and leases, net individually evaluated for credit loss

Commercial finance $ 1,575 $ — $ — $ 1,575

Community banking 9,371 — — 9,371

Total impaired loans and leases, net 12,775 — — 12,775

Total loans and leases, net individually evaluated

for credit loss 1,575 — — 1,575

Foreclosed assets, net 1 — — 1

7 unchanged sentences

Management reduced the appraised value by estimated selling costs and other inputs in a range of 3 % to 25 %.

Management discloses the estimated fair value amounts of its financial instruments, including assets and liabilities on and off the Consolidated Statements of Financial Condition, for which it is practicable to estimate fair value.

Management discloses the estimated fair value of financial instruments, including assets and liabilities on and off the Consolidated Statements of Financial Condition, for which it is practicable to estimate fair value.

These fair values estimates were made at September 30, 2023 and 2022 based on relevant market information and information about financial instruments.

59 unchanged sentences

Consumer loans held for sale are classified as Level 3 in the fair value hierarchy as the price at which these loans are sold are dictated by terms of the Program Agreements with consumer lending partners .

LOANS AND LEASES, NET

LOANS AND LEASES

The fair values of loans and leases were estimated using an exit price methodology.

23 unchanged sentences

During this period, up to the filing date of this Annual Report on Form 10-K, management identified the following subsequent events:

• On October 27, 2022, the Company announced that Sonja Theisen, currently Executive Vice President of Governance, Risk and Compliance, was appointed to succeed Glen Herrick as the Chief Financial Officer effective April 30, 2023.

Ms.Theisen, who joined Pathward in 2013, has held leaderships roles across the organization including Chief Accounting Officer, Chief of Staff, and EVP of Governance, Risk and Compliance.

• On October 4, 2022, the Company launched its new brand identity and website as part of its rebranding efforts and overall transition to Pathward Financial, Inc.

• On October 5, 2023 the Company announced that Gregory A.

Sigrist was appointed as Executive Vice President, Chief Financial Officer effective immediately after the filing of the Company's Annual Form 10-K for the fiscal year ended September 30, 2023.

Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

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-K

Item 8. Financial Statements and Supplementary Data