What changed in this filing

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Item 1. Financial Statements

2024-05-07 compared with 2024-02-08 · 228 added, 120 removed, 959 unchanged (27% of the section changed)

3 unchanged sentences

Condensed Consolidated Statements of Financial Condition

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

(Dollars in thousands, except per share data) March 31, 2024 September 30, 2023

ASSETS (Unaudited) (Audited)

20 unchanged sentences

STOCKHOLDERS’ EQUITY

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

Preferred stock, 3,000,000 shares authorized, no shares issued, none outstanding at March 31, 2024 and September 30, 2023, respectively

Common stock, $ 0.01 par value;

90,000,000 shares authorized, 26,099,348 and 26,225,563 shares issued, 25,988,230 and 26,183,583 shares outstanding at December 31, 2023 and September 30, 2023, respectively

90,000,000 shares authorized, 25,507,915 and 26,225,563 shares issued, 25,377,986 and 26,183,583 shares outstanding at March 31, 2024 and September 30, 2023, respectively

Common stock, Nonvoting, $ 0.01 par value;

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

3,000,000 shares authorized, no shares issued, none outstanding at March 31, 2024 and September 30, 2023, respectively

Additional paid-in capital 634,415 628,500

1 unchanged sentence

Accumulated other comprehensive loss ( 206,570 ) ( 255,443 )

Treasury stock, at cost, 111,118 and 41,980 common shares at December 31, 2023 and September 30, 2023, respectively

Treasury stock, at cost, 129,929 and 41,980 common shares at March 31, 2024 and September 30, 2023, respectively

( 6,181 ) ( 344 )

7 unchanged sentences

Condensed Consolidated Statements of Operations (Unaudited)

Three Months Ended December 31,

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

(Dollars in thousands, except per share data) 2024 2023 2024 2023

7 unchanged sentences

FHLB advances and other borrowings 1,775 1,186 4,111 2,047

8,460 3,282 14,322 4,285

Net interest income 118,301 101,405 228,337 185,462

7 unchanged sentences

Gain on sale of trademarks — — — 10,000

Gain on sale of other 2,840 502

Gain (loss) on sale of other 1,695 ( 666 ) 4,535 ( 164 )

Other income 6,044 4,477 11,223 8,032

24 unchanged sentences

Condensed Consolidated Statements of Comprehensive Income (Unaudited)

Three Months Ended December 31,

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

(Dollars in thousands) 2024 2023 2024 2023

1 unchanged sentence

Other comprehensive income (loss):

Change in net unrealized gain on debt securities 88,535 14,708

Change in net unrealized gain (loss) on debt securities ( 23,414 ) 18,448 65,121 33,156

( 23,414 ) 18,448 65,121 33,156

Unrealized gain on currency translation 618 387

Unrealized gain (loss) on currency translation ( 579 ) 60 39 447

Deferred income tax effect ( 5,856 ) 4,647 16,287 8,352

Total other comprehensive income 67,010 11,390

Total other comprehensive income (loss) ( 18,137 ) 13,861 48,873 25,251

Total comprehensive income 47,380 69,229 142,304 109,041

15 unchanged sentences

Stockholders’

Three Months Ended December 31, 2023

Three Months Ended March 31, 2024

Balance, December 31, 2023 $ 260 $ 629,737 $ 293,463 $ ( 188,433 ) $ ( 5,235 ) $ 729,792 $ ( 510 ) $ 729,282

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

— — ( 1,267 ) — — ( 1,267 ) — ( 1,267 )

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

Repurchases of common stock ( 8 ) 8 ( 39,500 ) — ( 946 ) ( 40,446 ) — ( 40,446 )

Stock compensation — 4,670 — — — 4,670 — 4,670

Total other comprehensive loss — — — ( 18,137 ) — ( 18,137 ) — ( 18,137 )

Net income — — 65,268 — — 65,268 249 65,517

Net distribution to noncontrolling interest — — — — — — ( 159 ) ( 159 )

Balance, March 31, 2024

$ 254 $ 634,415 $ 317,964 $ ( 206,570 ) $ ( 6,181 ) $ 739,882 $ ( 420 ) $ 739,462

Three Months Ended March 31, 2023

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

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

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

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

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

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

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

Net distribution to noncontrolling interest — — — — — — ( 941 ) ( 941 )

Balance, March 31, 2023

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

(Dollars in thousands, except per share data) Common

Stock Additional

Capital Retained

Earnings Accumulated

Comprehensive

Income (Loss) Treasury

Stock Total Pathward Financial, Inc.

Stockholders’

Equity Noncontrolling interest Total

Stockholders’

Six Months Ended March 31, 2024

Balance, September 30, 2023

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

Cash dividends declared on common stock ($ 0.10 per share)

6 unchanged sentences

Net income — — 92,925 — — 92,925 506 93,431

Net distribution to noncontrolling interests — — — — — — 238 238

Balance, December 31, 2023

Net investment by noncontrolling interest — — — — — — 79 79

Balance, March 31, 2024

$ 254 $ 634,415 $ 317,964 $ ( 206,570 ) $ ( 6,181 ) $ 739,882 $ ( 420 ) $ 739,462

Three Months Ended December 31, 2022

Six Months Ended March 31, 2023

Balance, September 30, 2022

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

Cash dividends declared on common stock ($ 0.10 per share)

5 unchanged sentences

Net income — — 82,613 — — 82,613 1,177 83,790

Net distribution to noncontrolling interests — — — — — — ( 757 ) ( 757 )

Balance, December 31, 2022

Net distribution to noncontrolling interest — — — — — — ( 1,698 ) ( 1,698 )

Balance, March 31, 2023

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

3 unchanged sentences

Condensed Consolidated Statements of Cash Flows (Unaudited)

Three Months Ended December 31,

Six Months Ended March 31,

(Dollars in thousands) 2024 2023

8 unchanged sentences

Net change in loans held for sale 17,924 652

Net realized (gain) on loans held for sale ( 1,370 ) ( 110 )

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

Net realized (gain) on other ( 2,840 ) ( 502 )

Net realized (gain) loss on other ( 3,165 ) 272

Impairment on rental equipment 2,013 24

18 unchanged sentences

Proceeds from sale of other assets 4,091 —

Net cash (used in) provided by investing activities ( 43,623 ) 45,443

Net cash provided by (used in) investing activities 19,105 ( 131,072 )

Cash flows from financing activities:

2 unchanged sentences

Principal payments on other liabilities ( 550 ) —

Proceeds from other liabilities — ( 1,026 )

Payment of debt issuance costs — ( 511 )

2 unchanged sentences

Repurchases of common stock ( 56,364 ) ( 82,281 )

Distributions to noncontrolling interest 238 ( 757 )

Net cash provided by (used in) financing activities 316,611 ( 107,072 )

Investment by (distributions to) noncontrolling interest 79 ( 1,698 )

Net cash (used in) financing activities ( 262,236 ) ( 8,644 )

Effect of exchange rate changes on cash 39 447

2 unchanged sentences

Cash and cash equivalents at end of fiscal period $ 347,888 $ 432,598

Three Months Ended December 31,

Six Months Ended March 31,

(Dollars in thousands) 2024 2023

16 unchanged sentences

Such information reflects all adjustments (consisting of normal recurring adjustments) that are, in the opinion of management, necessary for a fair presentation of the financial position and results of operations for the periods presented.

The results of the three months ended December 31, 2023 are not necessarily indicative of the results expected for the fiscal year ending September 30, 2024.

The results of the three and six months ended March 31, 2024 are not necessarily indicative of the results expected for the fiscal year ending September 30, 2024.

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

14 unchanged sentences

Debt Securities AFS

At December 31, 2023

At March 31, 2024

Corporate securities $ 25,000 $ — $ ( 6,875 ) $ 18,125

14 unchanged sentences

Debt Securities HTM

At December 31, 2023

At March 31, 2024

Non-bank qualified obligations of states and political subdivisions $ 32,602 $ — $ ( 3,321 ) $ 29,281

12 unchanged sentences

Debt Securities AFS

At December 31, 2023

At March 31, 2024

Corporate securities $ — $ — $ 18,125 $ ( 6,875 ) $ 18,125 $ ( 6,875 )

14 unchanged sentences

Debt Securities HTM

At December 31, 2023

At March 31, 2024

Non-bank qualified obligations of states and political subdivisions $ — $ — $ 29,281 $ ( 3,321 ) $ 29,281 $ ( 3,321 )

5 unchanged sentences

Total debt securities HTM $ — $ — $ 31,425 $ ( 5166 ) $ 31,425 $ ( 5,166 )

The increase in the fair value of investment securities balances when comparing December 31, 2023 to September 30, 2023 was primarily driven by decreases in unrealized losses due to steady interest rates during the three months.

At December 31, 2023, there were 199 securities AFS in an unrealized loss position.

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

The decrease in the fair value of investment securities balances when comparing March 31, 2024 to September 30, 2023 was primarily driven by principal pay downs during the six months.

At March 31, 2024, there were 194 securities AFS in an unrealized loss position.

All of the mortgage-backed securities ("MBS") in an unrealized loss position at March 31, 2024 were government guaranteed or issued by a private label where the Company held a senior tranche.

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

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

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

At March 31, 2024, there was no allowance for credit losses ("ACL") for debt securities AFS or debt securities HTM.

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

4 unchanged sentences

However, certain prepayment penalties may apply.

(Dollars in thousands) At December 31, 2023 At September 30, 2023

(Dollars in thousands) At March 31, 2024 At September 30, 2023

Debt Securities AFS Amortized Cost Fair

15 unchanged sentences

One-half of the subscription is paid at time of application, and one-half is subject to call of the Board of Governors of the Federal Reserve System.

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

FRB of Minneapolis stock held by the Bank totaled $ 19.7 million at March 31, 2024 and September 30, 2023.

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

5 unchanged sentences

The FHLB stock is carried at cost since it is generally redeemable at par value.

The carrying value of the stock held at the FHLB was $ 4.0 million and $ 8.5 million at December 31, 2023 and at September 30, 2023, respectively.

The carrying value of the stock held at the FHLB was $ 6.2 million and $ 8.5 million at March 31, 2024 and at September 30, 2023, respectively.

These equity securities are ‘restricted’ in that they can only be sold back to the respective institution from which they were acquired or another member institution at par.

1 unchanged sentence

Equity Securities.

The Company held $ 4.2 million and $ 3.4 million in marketable equity securities within other assets on the Condensed Consolidated Statements of Financial Condition at December 31, 2023 and September 30, 2023, respectively.

The Company recognized $ 0.1 million and zero in unrealized gains on marketable equity securities during the three months ended December 31, 2023 and 2022, respectively.

No such securities were sold during the three months ended December 31, 2023.

Non-marketable equity securities with a readily determinable fair value totaled $ 9.7 million and $ 8.4 million at December 31, 2023 and September 30, 2023, respectively.

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

No such securities were sold during the three months ended December 31, 2023.

Non-marketable equity securities without readily determinable fair value totaled $ 14.9 million and $ 16.2 million at December 31, 2023 and September 30, 2023, respectively.

There was one such security sold during the three months ended December 31, 2023 for a $ 2.5 million gain.

The Company held $ 4.3 million and $ 3.4 million in marketable equity securities within other assets on the Condensed Consolidated Statements of Financial Condition at March 31, 2024 and September 30, 2023, respectively.

The Company recognized no unrealized gains on marketable equity securities during the six months ended March 31, 2024 and 2023.

No such securities were sold during the six months ended March 31, 2024.

Non-marketable equity securities with a readily determinable fair value totaled $ 10.0 million and $ 8.4 million at March 31, 2024 and September 30, 2023, respectively.

These securities are held within other assets on the Condensed Consolidated Statements of Financial Condition.

The Company recognized $ 0.4 million in unrealized gains and $ 0.1 million in unrealized losses during the six months ended March 31, 2024 and 2023, respectively.

No such securities were sold during the six months ended March 31, 2024.

Non-marketable equity securities without readily determinable fair value totaled $ 14.8 million and $ 16.2 million at March 31, 2024 and September 30, 2023, respectively.

There was one such security sold during the six months ended March 31, 2024 for a $ 2.5 million gain which is included in gain on sale of other on the Condensed Consolidated Statements of Operations.

Equity Securities Impairment.

1 unchanged sentence

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

The Company recognized no impairment for such investments for the three months ended December 31, 2023 and 2022, respectively.

The Company recognized no and $ 0.5 million impairment for such investments for the six months ended March 31, 2024 and 2023, respectively.

LOANS AND LEASES, NET

Loans and leases consist of the following:

(Dollars in thousands) December 31, 2023 September 30, 2023

(Dollars in thousands) March 31, 2024 September 30, 2023

Term lending $ 1,489,054 $ 1,308,133

14 unchanged sentences

Total loans and leases, net $ 4,328,608 $ 4,316,411

During the three months ended December 31, 2023 and 2022, the Company originated $ 631.9 million and $ 398.8 million of commercial finance and consumer finance as held for sale, respectively.

The Company sold held for sale loans resulting in proceeds of $ 626.3 million and a nominal gain on sale during the three months ended December 31, 2023.

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

During the six months ended March 31, 2024 and 2023, the Company originated $ 933.8 million and $ 608.6 million of commercial finance and consumer finance as held for sale, respectively.

The Company sold held for sale loans resulting in proceeds of $ 969.0 million and a $ 1.4 million gain on sale during the six months ended March 31, 2024.

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

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

Three Months Ended December 31,

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

(Dollars in thousands) 2024 2023 2024 2023

9 unchanged sentences

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

(Dollars in thousands) December 31, 2023 September 30, 2023

(Dollars in thousands) March 31, 2024 September 30, 2023

Minimum lease payments receivable $ 177,498 $ 191,807

4 unchanged sentences

The components of total lease income were as follows:

Three Months Ended December 31,

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

(Dollars in thousands) 2024 2023 2024 2023

3 unchanged sentences

Lease income from operating lease payments 13,605 12,843 26,860 25,397

869 ( 356 ) 1,593 346

Total leasing and equipment finance noninterest income 14,474 12,487 28,453 25,743

1 unchanged sentence

(1) Other leasing and equipment finance noninterest income consists of gains (losses) on sales of leased equipment, fees and service charges on leases and gains (losses) on sales of leases.

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

Undiscounted future minimum lease payments receivable for direct financing and sales-type leases, and a reconciliation to the carrying amount recorded at March 31, 2024 were as follows:

(Dollars in thousands)

4 unchanged sentences

Total carrying amount of direct financing and sales-type leases $ 177,498

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

The Company did not record any contingent rental income from direct financing and sales-type leases in the six months ended March 31, 2024.

A number of factors affected 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.

While the ultimate impact of these factors, some of which continue to impact the economic environment in 2024, 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 and balances of loans and leases by portfolio segment was as follows:

Three Months Ended December 31, 2023

Three Months Ended March 31, 2024

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

16 unchanged sentences

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

Three Months Ended December 31, 2022

Three Months Ended March 31, 2023

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

16 unchanged sentences

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

Six Months Ended March 31, 2024

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

Allowance for credit losses:

Term lending $ 25,686 $ 12,125 $ ( 10,297 ) $ 1,113 $ 28,627

Asset-based lending 2,738 ( 1,764 ) — 241 1,215

Factoring 6,566 128 ( 35 ) 155 6,814

Lease financing 3,302 ( 1,781 ) ( 125 ) 155 1,551

Insurance premium finance 2,637 ( 771 ) ( 660 ) 203 1,409

SBA/USDA 2,962 ( 20 ) — — 2,942

Other commercial finance 3,089 ( 1,369 ) — — 1,720

Commercial finance 46,980 6,548 ( 11,117 ) 1,867 44,278

Consumer finance 2,346 2,328 ( 100 ) 2 4,576

Tax services 2 26,577 ( 1,145 ) 6,094 31,528

Warehouse finance 377 18 — — 395

Total loans and leases 49,705 35,471 ( 12,362 ) 7,963 80,777

Unfunded commitments (1)

272 471 — — 743

Total $ 49,977 $ 35,942 $ ( 12,362 ) $ 7,963 $ 81,520

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

Six Months Ended March 31, 2023

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

Allowance for credit losses:

Term lending $ 24,621 $ 7,645 $ ( 4,522 ) $ 671 $ 28,415

Asset-based lending 1,050 2,904 ( 2,873 ) — 1,081

Factoring 6,556 ( 804 ) ( 183 ) 19 5,588

Lease financing 5,902 ( 621 ) ( 1,013 ) 281 4,549

Insurance premium finance 1,450 108 ( 409 ) 114 1,263

SBA/USDA 3,263 ( 649 ) — 26 2,640

Other commercial finance 1,310 3,022 — — 4,332

Commercial finance 44,152 11,605 ( 9,000 ) 1,111 47,868

Consumer finance 1,463 1,835 ( 333 ) — 2,965

Tax services 5 33,059 ( 1,731 ) 1,761 33,094

Warehouse finance 327 50 — — 377

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

Unfunded commitments (1)

366 ( 10 ) — — 356

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

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

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

(Dollars in thousands) At December 31, 2023 At September 30, 2023

(Dollars in thousands) At March 31, 2024 At September 30, 2023

Term lending $ 7,100 $ 3,516

9 unchanged sentences

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

The balance of these pass rated cash collateral loans totaled $ 114.3 million and $ 117.0 million at December 31, 2023 and at September 30, 2023, respectively.

The balance of these pass rated cash collateral loans totaled $ 119.1 million and $ 117.0 million at March 31, 2024 and at September 30, 2023, 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:

22 unchanged sentences

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 $ 301.5 million and $ 33.4 million at December 31, 2023, respectively, and $ 254.4 million and $ 5.2 million at September 30, 2023, respectively.

The outstanding balances of consumer finance loans and tax services loans were $ 267.0 million and $ 84.5 million at March 31, 2024, respectively, and $ 254.4 million and $ 5.2 million at September 30, 2023, respectively.

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

1 unchanged sentence

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

At December 31, 2023 2024 2023 2022 2021 2020 Prior

At March 31, 2024 2024 2023 2022 2021 2020 Prior

Pass $ 308,787 $ 492,087 $ 125,586 $ 97,696 $ 54,397 $ 48,457 $ — $ 1,127,010

16 unchanged sentences

Substandard — — — — — — 16,970 16,970

Doubtful — — — — — — 1,554 1,554

Total — — — — — — 336,442 336,442

20 unchanged sentences

Substandard — 10,144 11,173 1,295 5,217 11,694 — 39,523

Doubtful — — 79 — — — — 79

Total 34,482 206,896 195,521 27,649 40,206 55,679 — 560,433

74 unchanged sentences

Past due loans and leases were as follows:

At December 31, 2023

At March 31, 2024

Accruing and Nonaccruing Loans and Leases Nonperforming Loans and Leases

34 unchanged sentences

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

At December 31, 2023 2024 2023 2022 2021 2020 Prior

At March 31, 2024 2024 2023 2022 2021 2020 Prior

Term lending $ 1,121 $ 2,683 $ 7,414 $ 2,222 $ 1,446 $ 4,074 $ — $ 18,960 $ —

Asset-based lending — — — — — — 4,593 4,593 4,469

Factoring — — — — — — 4,580 4,580 —

16 unchanged sentences

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

At December 31, 2023 2024 2023 2022 2021 2020 Prior

At March 31, 2024 2024 2023 2022 2021 2020 Prior

Loans held for sale $ — $ 843 $ — $ — $ — $ — $ — $ 843

2 unchanged sentences

Insurance premium finance 198 839 — — — — — 1,037

SBA/USDA — — — — 191 253 — 444

Commercial finance 552 1,145 58 393 256 275 — 2,679

18 unchanged sentences

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

Three Months Ended December 31,

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

(Dollars in thousands) 2024 2023 2024 2023

6 unchanged sentences

Total loans and leases $ 28,794 $ 20,579 $ 30,107 $ 19,699

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

The recognized interest income on the Company's nonaccrual loans and leases for the three and six months ended March 31, 2024 and 2023 was not significant.

Effective October 1, 2023, the Company adopted ASU 2022-02, Financial Instruments – Credit Losses (Topic 326):

Troubled Debt Restructurings and Vintage Disclosures on a prospective basis.

Financial information at and for the quarter ended December 31, 2023 is reflected as such.

Financial information at and for the three and six months ended March 31, 2024 is reflected as such.

The historical information disclosed is in accordance with Subtopic ASC 310-40, Receivables – Troubled Debt Restructurings by Creditors .

Modifications made to borrowers experiencing financial difficulty during the three months ended December 31, 2023 were insignificant.

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

The Company had $ 0.1 million of commercial finance loans that were modified within the previous 12 months experience a payment default during the three months ended December 31, 2022.

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

Modifications made to borrowers experiencing financial difficulty during the three and six months ended March 31, 2024 were $ 1.6 million in the commercial finance loan portfolio.

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

The Company had an immaterial amount and $ 0.1 million of commercial finance loans that were modified within the previous 12 months experience a payment default during the three and six months ended March 31, 2023, respectively.

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

EARNINGS PER COMMON SHARE ("EPS")

7 unchanged sentences

A reconciliation of net income and common stock share amounts used in the computation of basic and diluted earnings per share is presented below.

Three Months Ended December 31,

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

(Dollars in thousands, except per share data) 2024 2023 2024 2023

17 unchanged sentences

(1) Represents the effect of the assumed exercise of stock options and vesting of performance share units and restricted stock, as applicable, utilizing the treasury stock method.

(2) Excluded from the computation of diluted earnings per share for the three months ended December 31, 2023 and 2022, respectively, were 207,074 and 411,794 weighted average shares of nonvested restricted stock because their inclusion would be anti-dilutive.

(2) Excluded from the computation of diluted earnings per share for the three months ended March 31, 2024 and 2023, respectively, were 204,877 and 422,461 weighted average shares of nonvested restricted stock because their inclusion would be anti-dilutive.

Excluded from the computation of diluted earnings per share for the six months ended March 31, 2024 and 2023, respectively, were 206,060 and 417,012 weighted average shares of nonvested restricted stock because their inclusion would be anti-dilutive.

RENTAL EQUIPMENT, NET

Rental equipment consists of the following:

(Dollars in thousands) December 31, 2023 September 30, 2023

(Dollars in thousands) March 31, 2024 September 30, 2023

Computers and IT networking equipment $ 24,435 $ 25,094

6 unchanged sentences

Net book value $ 215,885 $ 211,750

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

Future minimum lease payments expected to be received for operating leases at March 31, 2024 were as follows:

(Dollars in thousands)

3 unchanged sentences

GOODWILL AND INTANGIBLE ASSETS

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

The Company held a total of $ 309.5 million of goodwill at March 31, 2024.

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

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

There have been no changes to the carrying amount of goodwill during the six months ended March 31, 2024.

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

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Amortization during the period ( 527 ) — ( 1,431 ) ( 266 ) ( 2,224 )

At December 31, 2023 $ 7,213 $ — $ 8,523 $ 4,000 $ 19,736

At March 31, 2024 $ 6,950 $ — $ 7,679 $ 3,867 $ 18,496

Gross carrying amount $ 13,774 $ 301 $ 77,578 $ 7,798 $ 99,451

1 unchanged sentence

Accumulated impairment — — ( 10,918 ) ( 219 ) ( 11,137 )

At December 31, 2023 $ 7,213 $ — $ 8,523 $ 4,000 $ 19,736

At March 31, 2024 $ 6,950 $ — $ 7,679 $ 3,867 $ 18,496

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

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

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

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

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

1 unchanged sentence

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

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

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

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

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The estimated amortization expense of intangible assets assumes no activities, such as acquisitions, which would result in additional amortizable intangible assets.

Estimated amortization expense of intangible assets in the remaining nine months of fiscal 2024 and subsequent fiscal years at December 31, 2023 was as follows:

Estimated amortization expense of intangible assets in the remaining six months of fiscal 2024 and subsequent fiscal years at March 31, 2024 was as follows:

(Dollars in thousands)

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Total anticipated intangible amortization $ 18,496

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

There were no impairments to intangible assets during the six months ended March 31, 2024 and 2023.

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

OPERATING LEASE RIGHT-OF-USE ASSETS AND LIABILITIES

Operating lease right-of-use ("ROU") assets, included in other assets , were $ 26.8 million and $ 26.9 million at December 31, 2023 and September 30, 2023, respectively.

Operating lease liabilities, included in accrued expenses and other liabilities , were $ 28.6 million and $ 28.8 million at December 31, 2023 and September 30, 2023, respectively.

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

Operating lease right-of-use ("ROU") assets, included in other assets , were $ 26.0 million and $ 26.9 million at March 31, 2024 and September 30, 2023, respectively.

Operating lease liabilities, included in accrued expenses and other liabilities , were $ 27.8 million and $ 28.8 million at March 31, 2024 and September 30, 2023, respectively.

Undiscounted future minimum operating lease payments and a reconciliation to the amount recorded as operating lease liabilities at March 31, 2024 were as follows:

(Dollars in thousands)

4 unchanged sentences

Total operating lease liabilities $ 27,818

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

The weighted-average discount rate and remaining lease term for operating leases were as follows:

March 31, 2024 September 30, 2023

Weighted-average discount rate 2.44 % 2.38 %

1 unchanged sentence

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

Three Months Ended December 31,

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

(Dollars in thousands) 2024 2023 2024 2023

8 unchanged sentences

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 three months ended December 31, 2023 and 2022, the Company repurchased 232,588 and 653,994 shares, respectively, as part of the share repurchase programs.

During the six months ended March 31, 2024 and 2023, the Company repurchased 996,773 and 1,826,694 shares, respectively, as part of the share repurchase programs.

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

1 unchanged sentence

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

As of December 31, 2023, 8,433,848 shares of common stock remained available for repurchase.

For the three months ended December 31, 2023 and 2022, the Company also repurchased 103,641 and 57,291 shares, or $ 4.9 million and $ 2.0 million, of common stock, respectively, in settlement of employee tax withholding obligations due upon the vesting of restricted stock.

As of March 31, 2024, 7,669,663 shares of common stock remained available for repurchase.

For the six months ended March 31, 2024 and 2023, the Company also repurchased 122,452 and 59,626 shares, or $ 5.8 million and $ 2.1 million, of common stock, respectively, in settlement of employee tax withholding obligations due upon the vesting of restricted stock.

Retirement of Treasury Stock.

1 unchanged sentence

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

The Company retired no shares of common stock held in treasury during the three months ended December 31, 2023 and 2022.

The Company retired no shares of common stock held in treasury during the six months ended March 31, 2024 and 2023.

STOCK COMPENSATION

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

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

The 2023 Omnibus Incentive Plan permits the granting of various types of awards including but not limited to nonvested (restricted) shares and performance share units ("PSUs") to certain officers and directors of the Company.

On February 27, 2024, the shareholders of the Company voted to approve the Pathward Financial, Inc.

2023 Omnibus Incentive Plan (the "Plan").

The Plan permits the granting of various types of awards including but not limited to nonvested (restricted) shares and performance share units ("PSUs") to certain officers and directors of the Company.

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

2 unchanged sentences

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

Director shares are issued to the Company’s directors, and these shares have historically vested 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.

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

The Company also grants selected executives PSU awards.

The vesting of these awards is contingent on meeting company-wide performance goals, including earnings per share.

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

5 unchanged sentences

These stock awards vest in equal installments over eight years .

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 three months ended December 31, 2023.

Number of Shares Weighted Average Fair Value at Grant

Nonvested shares outstanding, September 30, 2023 370,151 $ 35.87

Granted 177,317 49.53

Vested ( 277,447 ) 39.33

Forfeited or expired ( 6,428 ) 41.84

Nonvested shares outstanding, December 31, 2023 191,588 $ 35.31

Nonvested shares outstanding, March 31, 2024 263,593 $ 41.27

Number of Units (1)

1 unchanged sentence

Performance share units outstanding, September 30, 2023 155,804 $ 41.20

Granted 52,125 50.15

Vested ( 60,984 ) 55.47

Forfeited or expired — —

Performance share units outstanding, December 31, 2023 94,820 $ 55.47

(1) While no shares were granted during the first quarter of fiscal year 2024, 150,522 of nonvested shares and 44,800 of target performance share units were issued under awards contingent on the stockholder approval of the 2023 Omnibus Incentive Plan.

Performance share units outstanding, March 31, 2024 146,945 $ 47.35

(1) The activity in this table includes 60,984 shares related to the fiscal year 2021 performance share units, which are included in this table under the assumption of a target performance achievement.

3 unchanged sentences

The Company has elected to record forfeitures as they occur.

At December 31, 2023, stock-based compensation expense not yet recognized in income totaled $ 4.1 million, which is expected to be recognized over a weighted average remaining period of 1.27 years.

The Company recorded an income tax expense of $ 5.7 million for the three months ended December 31, 2023, resulting in an effective tax rate of 17.00 %, compared to an income tax expense of $ 6.6 million, or an effective tax rate of 18.79 %, for the three months ended December 31, 2022.

At March 31, 2024, stock-based compensation expense not yet recognized in income totaled $ 10.5 million, which is expected to be recognized over a weighted average remaining period of 1.61 years.

The Company recorded an income tax expense of $ 21.0 million for the six months ended March 31, 2024, resulting in an effective tax rate of 18.33 %, compared to an income tax expense of $ 15.8 million, or an effective tax rate of 15.83 %, for the six months ended March 31, 2023.

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

2 unchanged sentences

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

Three Months Ended December 31,

Six Months Ended March 31,

(Dollars in thousands) 2024 2023

4 unchanged sentences

Tax credit investments, net - federal ( 11,363 ) ( 7,916 )

Research tax credit — ( 805 )

IRC 162(m) nondeductible compensation 340 576

3 unchanged sentences

REVENUE FROM CONTRACTS WITH CUSTOMERS

Topic 606 applies to all contracts with customers unless such revenue is specifically addressed under existing guidance.

The table below presents the Company’s revenue by operating segment.

2 unchanged sentences

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

Three Months Ended December 31, 2023 2022 2023 2022 2023 2022 2023 2022

Three Months Ended March 31, 2024 2023 2024 2023 2024 2023 2024 2023

Net interest income (1)

7 unchanged sentences

— — 13,594 12,737 126 203 13,720 12,940

Gain (loss) on sale of other (1)

16 — 1,607 ( 748 ) 72 82 1,695 ( 666 )

Other income (1)

2,432 1,748 2,307 1,935 1,305 794 6,044 4,477

Total noninterest income 109,687 111,776 17,749 14,176 1,509 1,086 128,945 127,038

Revenue $ 166,214 $ 153,194 $ 62,662 $ 60,934 $ 18,370 $ 14,315 $ 247,246 $ 228,443

Six Months Ended March 31,

Net interest income (1)

$ 115,883 $ 75,690 $ 90,794 $ 89,082 $ 21,660 $ 20,690 $ 228,337 $ 185,462

Noninterest income:

Refund transfer product fees 29,364 30,882 — — — — 29,364 30,882

Refund advance fee income (1)

43,311 38,612 — — — — 43,311 38,612

Card and deposit fees 65,604 79,280 477 513 13 12 66,094 79,805

Rental income (1)

— — 26,829 25,252 350 396 27,179 25,648

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

13 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 for the three months ended December 31, 2023.

Revenue from contracts with customers did not generate significant contract assets and liabilities for the six months ended March 31, 2024.

Refund Transfer Product Fees.

35 unchanged sentences

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

Three Months Ended December 31, 2023 2022 2023 2022 2023 2022 2023 2022

Three Months Ended March 31, 2024 2023 2024 2023 2024 2023 2024 2023

Net interest income $ 56,527 $ 41,418 $ 44,913 $ 46,758 $ 16,861 $ 13,229 $ 118,301 $ 101,405

Provision for (reversal of) credit loss 3,454 3,240 6,463 6,583 ( 27 ) ( 47 ) 9,890 9,776

Provision for credit loss 25,452 31,654 555 5,012 45 97 26,052 36,763

Noninterest income 109,687 111,776 17,749 14,176 1,509 1,086 128,945 127,038

4 unchanged sentences

Total deposits 6,063,339 5,744,278 7,143 9,313 297,862 149,105 6,368,344 5,902,696

Six Months Ended March 31,

Net interest income $ 115,883 $ 75,690 $ 90,794 $ 89,082 $ 21,660 $ 20,690 $ 228,337 $ 185,462

Provision for credit loss 28,906 34,894 7,018 11,595 18 50 35,942 46,539

Noninterest income 142,474 151,315 33,748 28,538 5,484 12,962 181,706 192,815

Noninterest expense 109,465 84,404 72,986 71,595 77,254 76,196 259,705 232,195

Income (loss) before income tax expense 119,986 107,707 44,538 34,430 ( 50,128 ) ( 42,594 ) 114,396 99,543

Total assets 493,718 361,528 4,124,909 3,581,677 2,818,490 2,925,051 7,437,117 6,868,256

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

Total deposits 6,063,339 5,744,278 7,143 9,313 297,862 149,105 6,368,344 5,902,696

FAIR VALUES OF FINANCIAL INSTRUMENTS

14 unchanged sentences

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

At December 31, 2023

At March 31, 2024

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

11 unchanged sentences

$ 10,000 $ — $ — $ —

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

(1) Equity securities at fair value are included within other assets on the Condensed Consolidated Statements of Financial Condition at March 31, 2024.

(2) Consists of certain non-marketable equity securities that are measured at fair value using net asset value ("NAV") per share (or its equivalent) as a practical expedient and are excluded from the fair value hierarchy.

21 unchanged sentences

The following tables summarize the assets of the Company that are measured at fair value in the Condensed Consolidated Statements of Financial Condition on a nonrecurring basis:

At December 31, 2023

At March 31, 2024

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

11 unchanged sentences

(Dollars in thousands) Fair Value at

December 31, 2023

March 31, 2024

Fair Value at

5 unchanged sentences

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

These fair value estimates were made at December 31, 2023 and September 30, 2023 based on relevant market information and information about financial instruments.

These fair value estimates were made at March 31, 2024 and September 30, 2023 based on relevant market information and information about financial instruments.

Fair value estimates are intended to represent the price at which an asset could be sold or a liability could be settled.

3 unchanged sentences

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

At December 31, 2023

At March 31, 2024

(Dollars in thousands) Carrying

15 unchanged sentences

Deposits 6,368,344 6,368,058 6,267,603 100,455 —

Overnight federal funds purchased 31,000 31,000 31,000 — —

Other short- and long-term borrowings 33,373 31,297 — 31,297 —

Accrued interest payable 1,961 1,961 1,961 — —

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

(1) Equity securities at fair value are included within other assets on the Condensed Consolidated Statements of Financial Condition at March 31, 2024.

(2) Includes certain non-marketable equity securities that are measured at fair value using NAV per share (or its equivalent) as a practical expedient and are excluded from the fair value hierarchy.

17 unchanged sentences

Deposits 6,589,182 6,589,065 6,583,648 5,417 —

Overnight federal funds purchased 13,000 13,000 13,000 — —

Other short- and long-term borrowings 33,873 31,187 — 31,187 —

3 unchanged sentences

SUBSEQUENT EVENTS

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

During this period, up to the filing date of this Quarterly Report on Form 10-Q, management did not identify any material subsequent events that would require recognition or disclosure in our Condensed Consolidated Financial Statements as of or for the quarter ended December 31, 2023.

Management has evaluated subsequent events that occurred after March 31, 2024.

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

What changed 10-Q

Item 1. Financial Statements