Item 9A. Controls and Procedures
Item 9A. Controls and Procedures.
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
Management, under the direction of its Chief Executive Officer and Chief Financial Officer, is responsible for maintaining disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “1934 Act”)) that are designed to ensure that information required to be disclosed in reports filed or submitted under the 1934 Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and that such information is accumulated and communicated to management, including the Company’s Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures.
In connection with the preparation of this Annual Report on Form 10-K, management evaluated the Company’s disclosure controls and procedures. The evaluation was performed under the direction of the Company’s Chief Executive Officer and Chief Financial Officer to determine the effectiveness, as of September 30, 2023, of the design and operation of the Company’s disclosure controls and procedures. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of September 30, 2023, the Company’s disclosure controls and procedures were designed effectively to ensure timely alerting of material information relating to the Company required to be included in the Company’s periodic SEC filings.
INHERENT LIMITATIONS ON THE EFFECTIVENESS OF CONTROLS
Any control system, no matter how well designed and operated, can provide only reasonable (not absolute) assurance that its objectives will be met. Furthermore, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in a cost-effective control system, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected.
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CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
Management conducted an evaluation of the Company’s internal control over financial reporting to determine whether any changes occurred during the three months ended September 30, 2023 that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting. Based on this evaluation, management concluded that, as of the end of the period covered by this report, there were no changes in the Company’s internal controls over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the 1934 Act) during the fiscal fourth quarter to which this report relates that could have materially affected the Company’s internal controls over financial reporting.
MANAGEMENT'S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
The Company’s management is responsible for establishing and maintaining effective internal control over financial reporting. The Company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. The Company's internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of the Company are being made only in accordance with authorizations of the Company’s management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company assets that could have a material effect on the financial statements.
Management assessed the effectiveness of the Company’s internal control over financial reporting as of September 30, 2023, based on the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in “Internal Control Integrated Framework (2013).” Based on this assessment, our management concluded that our internal control over financial reporting was effective as of September 30, 2023.
The effectiveness of the Company’s internal control over financial reporting as of September 30, 2023, has been audited by Crowe LLP, the independent registered public accounting firm that also has audited the Company’s Consolidated Financial Statements included in this Annual Report on Form 10-K. Crowe LLP’s attestation report on the Company’s internal controls over financial reporting appears below.
Item 9B. Other Information.
Adoption or Termination of Trading Arrangements by Directors and Executive Officers
During the fiscal quarter ended September 30, 2023, none of our directors or officers (as defined in Rule 16a-1(f) of the 1934 Act) informed us of the adoption or termination of any "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement," as those terms are defined in Item 408 of Regulation S-K.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
Not applicable.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Stockholders and the Board of Directors of Pathward Financial, Inc.
Sioux Falls, South Dakota
Opinion on Internal Control over Financial Reporting
We have audited Pathward Financial, Inc. and Subsidiaries’ (the “Company”) 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). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of September 30, 2023, based on criteria established in Internal Control – Integrated Framework: (2013) issued by COSO.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated statements of financial condition of the Company as of September 30, 2023 and 2022, the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity, and cash flows for each of the years in the three-year period ended September 30, 2023, and the related notes (collectively referred to as the "financial statements") and our report dated November 21, 2023, expressed an unqualified opinion.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying 2023 Management’s Assessment of Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Crowe LLP
South Bend, Indiana
November 21, 2023
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PART III
Item 10. Directors, Executive Officers and Corporate Governance.
Directors
Information concerning directors of the Company required by this item will be included under the captions “Election of Directors,” “Communicating with Our Directors,” "Committees of the Board" and “Stockholder Proposals For The Fiscal Year 2025 Annual Meeting” in the Company’s definitive Proxy Statement for the Annual Meeting of Stockholders to be held on February 27, 2024, a copy of which will be filed no later than 120 days after September 30, 2023 (the “2024 Proxy Statement”), and is incorporated herein by reference.
Executive Officers
Information concerning the executive officers of the Company required by this item will be included under the captions “Executive Officers” and “Election of Directors” in the 2024 Proxy Statement and is incorporated herein by reference.
Compliance with Section 16(a)
Information, if applicable, required by this item regarding compliance with Section 16(a) of the Exchange Act will be included under the caption “Delinquent Section 16(a) Reports” in the Company’s 2024 Proxy Statement and is incorporated herein by reference.
Audit Committee and Audit Committee Financial Expert
Information regarding the audit committee of the Company’s Board of Directors will be included under the captions “Committees of the Board” and “Election of Directors” in the Company’s 2024 Proxy Statement and is incorporated herein by reference.
Code of Business Conduct
Information regarding the Company’s Code of Business Conduct will be included under the caption “Corporate Governance” in the Company’s 2024 Proxy Statement and is incorporated herein by reference.
Item 11. Executive Compensation.
Information concerning executive and director compensation will be included under the captions “Compensation of Directors”, “Executive Compensation” and "Compensation Committee Report" in the Company’s 2024 Proxy Statement and is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
(a) Security Ownership of Certain Beneficial Owners and Management
The information required by this item will be included under the caption “Stock Ownership” in the Company’s 2024 Proxy Statement and is incorporated herein by reference.
(b) Changes in Control
Management of the Company knows of no arrangements, including any pledge by any persons of securities of the Company, the operation of which may, at a subsequent date, result in a change in control of the Registrant.
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(c) Equity Compensation Plan Information
The table below presents information on the Company's equity compensation plans as of September 30, 2023, as required by SEC rules.
Plan Category (a)
Number of shares
to be issued under
outstanding options,
warrants and rights (1)
(#)
(b)
Weighted-average
exercise price of
outstanding options,
warrants and rights (2)
($)
(c)
Number of shares
remaining for future issuance under equity
compensation plans
(excluding securities
reflected in column (a)) (3)
(#)
Equity compensation plans approved by stockholders 241,287 N/A N/A
Equity compensation plans not approved by stockholders — — —
Total 241,287 N/A N/A
(1) Consists of outstanding performance share units awarded under the Prior Omnibus Incentive Plan, reflected based on the assumption that
target performance is probable.
(2) Performance share units do not have an exercise price and are delivered without any payment or consideration.
(3) There was no equity compensation plan in effect as of September 30, 2023.
(4) In accordance with SEC rules, this table does not include information regarding the New Omnibus Incentive Plan. For more information on the
New Omnibus Incentive Plan, see Proposal 4 “Approval of the 2023 Omnibus Incentive Plan” of the Company’s 2024 Proxy Statement.
For more information on the Company’s equity compensation plans, see Note 13 to the “Notes to Consolidated Financial Statements,” which is included in Part II, Item 8 “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
The information required by this item will be included under the captions “Election of Directors,” “Committees of the Board”, “Related Person Transactions” and "Corporate Governance" in the Company’s 2024 Proxy Statement and is incorporated herein by reference.
Item 14. Principal Accountant Fees and Services.
The information required by this item will be included under the caption “Ratification of Appointment of Independent Registered Public Accounting Firm” in the Company’s 2024 Proxy Statement and is incorporated herein by reference.
The Independent Registered Public Accounting Firm is Crowe LLP (Public Company Accounting Oversight Board Firm ID No. 173 ) located in South Bend, Indiana .
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PART IV
Item 15. Exhibit and Financial Statement Schedules.
The following is a list of documents filed as Part of this report:
(a) Financial Statements:
The following financial statements are included under Part II, Item 8 of this Annual Report on Form 10-K:
1. Report of Independent Registered Public Accounting Firm.
2. Consolidated Statements of Financial Condition as of September 30, 2023 and 2022.
3. Consolidated Statements of Operations for the Fiscal Years Ended September 30, 2023, 2022 and 2021.
4. Consolidated Statements of Comprehensive Income (Loss) for the Fiscal Years ended September 30, 2023, 2022, and 2021.
5. Consolidated Statements of Changes in Stockholders’ Equity for the Fiscal Years Ended September 30, 2023, 2022, and 2021.
6. Consolidated Statements of Cash Flows for the Fiscal Years Ended September 30, 2023, 2022, and 2021.
7. Notes to Consolidated Financial Statements.
(b) Exhibits:
Exhibit
Number
Description
3.1
Registrant’s Amended and Restated Certificate of Incorporation, filed on July 13, 2022 as an exhibit to the Registrant's Current Report on Form 8-K, is incorporated herein by reference.
3.2
Registrant’s Fourth Amended and Restated By-laws, filed on December 12, 2022 as an exhibit to the Registrant’s Current Report on Form 8-K, is incorporated herein by reference.
4.1
Description of the Securities of the Registrant filed on November 30, 2020 as an exhibit to the Registrant's Annual Report on Form 10-K for the fiscal year ended September 30, 2022, is incorporated herein by reference.
4.2
Registrant’s Specimen Stock Certificate, filed on June 27, 2016 as an exhibit to the Registrant’s registration statement on Form S-3 (Commission File No. 333-212269), is incorporated herein by reference.
4.3
Indenture, dated as of September 23, 2022, by and between the Registrant and UMB Bank, N.A. as Trustee, filed on September 26, 2022 as an exhibit to the Registrant’s Current Report on Form 8-K, is incorporated herein by reference.
4.4
Forms of 6.625% Fixed-to-Floating Subordinated Note due 2032 (included as Exhibit A-1 and Exhibit A-2 to the Indenture, dated as of September 23, 2022, by and between the Registrant and UMB Bank, N.A. as Trustee), filed on September 26, 2022 as an exhibit to the Registrant’s Current Report on Form 8-K, is incorporated herein by reference.
*10. 1
Performance-Based Restricted Stock Agreement between Meta and Glen W. Herrick, dated as of December 2, 2016, filed on December 6, 2016 as an exhibit to the Registrant’s Current Report on Form 8-K, is incorporated herein by reference.
* 10. 2
Registrant’s Supplemental Employees’ Investment Plan, originally filed as an exhibit to the Registrant’s Annual Report on Form 10-KSB for the fiscal year ended September 30, 1994. First amendment to such agreement, filed as an exhibit to the Registrant’s Annual Report on Form 10-K for the fiscal year ended September 30, 2008, is incorporated herein by reference.
* 10. 3
Registrant’s Amended and Restated 2002 Omnibus Incentive Plan, as amended, filed on January 24, 2018 as an exhibit to the Registrant’s Current Report on Form 8-K, is incorporated herein by reference.
10. 4
Investor Rights Agreement by and among Meta Financial Group, Inc., BEP IV LLC and BEP Investors, LLC, dated as of December 17, 2015, filed on December 17, 2015 as an exhibit to the Registrant’s Current Report on Form 8‑K, is incorporated herein by reference.
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* 10.5
Form of Performance Share Unit Award Agreement, filed on November 23, 2021 as an exhibit to the Registrant's Annual Report on Form 10-K, is incorporated herein by reference.
* 10.6
Form of Performance-Based Restricted Stock Award Agreement, filed on November 23, 2021 as an exhibit to the Registrant's Annual Report on Form 10-K, is incorporated herein by reference.
* 10.7
Executive Nonqualified Deferred Compensation Plan Adoption Agreement by MetaBank, National Association, effective as of July 1, 2021, filed on May 20, 2021 as an exhibit to the Registrant’s Current Report on Form 8-K, is incorporated herein by reference.
* 10.8
Executive Nonqualified Deferred Compensation Plan, effective as of July 1, 2021, filed on May 20, 2021 as an exhibit to the Registrant’s Current Report on Form 8-K, is incorporated herein by reference.
* 10.9
First Amendment to the MetaBank, National Association Amended and Restated Supplemental Employees’ Investment Plan for Salaried Employees, effective as of June 30, 2021, filed on May 20, 2021 as an exhibit to the Registrant’s Current Report on Form 8-K, is incorporated herein by reference.
* 10.10
Executive Severance Pay Policy, effective as of November 1, 2021, filed on November 2, 2021 as an exhibit to the Registrant’s Current Report on Form 8-K, is incorporated herein by reference.
* 10.11
Termination Agreement by and among Meta Financial Group, Inc., MetaBank, National Associate and Glen W. Herrick, effective as of November 1, 2021, filed on November 2, 2021 as an exhibit to the Registrant’s Current Report on Form 8-K, is incorporated herein by reference.
† 10.12
Purchase Agreement, dated December 7, 2021, between the Registrant and Beige Key LLC, filed on February 8, 2022 as an exhibit to the Registrant’s Quarterly Report on Form 10-Q, is incorporated herein by reference.
* 10.13
Form of 2002 Omnibus Incentive Plan Restricted Stock Agreement (Non-Employee Directors Annual Equity Award), filed on May 9, 2022 as an exhibit to the Registrant’s Quarterly Report on Form 10-Q, is incorporated herein by reference.
* 10.14
Form of 2002 Omnibus Incentive Plan Restricted Stock Agreement (Non-Employee Directors Award in Lieu of Cash Retainer), filed on May 9, 2022 as an exhibit to the Registrant’s Quarterly Report on Form 10-Q, is incorporated herein by reference.
* 10.15
Amendment No. 3 to the Registrant’s Amended and Restated 2002 Omnibus Incentive Plan, as amended, filed on May 9, 2022 as an exhibit to the Registrant’s Quarterly Report on Form 10-Q, is incorporated herein by reference.
10.16
Form of Subordinated Note Purchase Agreement, dated as of September 23, 2022, by and among the Registrant and the Purchasers (as defined therein), filed on September 26, 2022 as an exhibit to the Registrant’s Current Report on Form 8-K, in incorporated by reference herein.
10.17
Form of Registration Rights Agreement, dated as of September 23, 2022, by and among the Registrant and the Purchasers (as defined therein), filed on September 26, 2022 as an exhibit to the Registrant’s Current Report on Form 8-K, is incorporated herein by reference.
* 10.1 8
Offer Letter between the Company and Gregory Sigrist, dated as of October 2, 2023, filed on October 5, 2023 as an exhibit to the Registrant’s Current Report on Form 8-K, is incorporated herein by reference.
21
Subsidiaries of the Registrant is filed herewith.
23.1
Consent of Independent Registered Public Accounting Firm of Crowe LLP is filed herewith.
31.1
Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes‑Oxley Act of 2002 is filed herewith.
31.2
Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes‑Oxley Act of 2002 is filed herewith.
32.1
Certification of the CEO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 is filed herewith.
32.2
Certification of the CFO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 is filed herewith.
97.1
Pathward Financial, Inc. and Pathward, N.A. Dodd-Frank Clawback Policy is filed herewith.
101 Interactive data files formatted in Inline eXtensible Business Reporting Language - pursuant to Rule 405 of Regulation S-T: (i) Consolidated Statements of Financial Condition as of September 30, 2023 and September 30, 2022, (ii) the Consolidated Statements of Operations for the fiscal years ended September 30, 2023, 2022, and 2021, (iii) the Consolidated Statements of Comprehensive Income (Loss) for the fiscal years ended September 30, 2023, 2022, and 2021, (iv) the Consolidated Statements of Changes in Stockholders’ Equity for the fiscal years ended September 30, 2023, 2022, and 2021, (v) the Consolidated Statements of Cash Flows for the fiscal years ended September 30, 2023, 2022, and 2021 and (vi) the Notes to the Consolidated Financial Statements for the fiscal years ended September 30, 2023, 2022, and 2021.
104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).
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* Management Contract or Compensatory Plan or Agreement.
† Certain schedules or exhibits have been omitted pursuant to Item 601(a)(5) of Regulation S-K. A copy of any omitted schedule or exhibit will be furnished supplementally to the Securities and Exchange Commission upon request; provided , however that the Registrant may request confidential treatment for any schedule or exhibit so furnished.
(c) Financial Statement Schedules:
All financial statement schedules have been omitted as the information is not required under the related
instructions or is inapplicable.
Item 16. Form 10-K Summary
None.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
Pathward Financial, Inc.
Date: November 21, 2023
By: /s/ Brett L. Pharr
Brett L. Pharr,
Chief Executive Officer and Director
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Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
By: /s/ Brett L. Pharr Date: November 21, 2023
Brett L. Pharr, Chief Executive Officer and Director
(Principal Executive Officer)
By: /s/ Douglas J. Hajek Date: November 21, 2023
Douglas J. Hajek, Director
By: /s/ Elizabeth G. Hoople Date: November 21, 2023
Elizabeth G. Hoople, Director
By: /s/ Ronald D. McCray Date: November 21, 2023
Ronald D. McCray, Director
By: /s/ Frederick V. Moore Date: November 21, 2023
Frederick V. Moore, Director
By: /s/ Christopher Perretta Date: November 21, 2023
Christopher Perretta, Director
By: /s/ Becky S. Shulman Date: November 21, 2023
Becky S. Shulman, Director
By: /s/ Kendall E. Stork Date: November 21, 2023
Kendall E. Stork, Director
By: /s/ Lizabeth H. Zlatkus Date: November 21, 2023
Lizabeth H. Zlatkus, Director
By: /s/ Glen W. Herrick Date: November 21, 2023
Glen W. Herrick, Executive Vice President
and Chief Financial Officer
(Principal Financial Officer)
By: /s/ Jennifer W. Warren Date: November 21, 2023
Jennifer W. Warren, Senior Vice President
and Chief Accounting Officer
(Principal Accounting Officer)
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