What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-11-26 compared with 2023-11-21 · 211 added, 203 removed, 1673 unchanged (20% of the section changed)

4 unchanged sentences

Statements of Operations

Statements of Comprehensive Income

Statements of Comprehensive Income (Loss)

Statements of Changes in Stockholders’ Equity

10 unchanged sentences

(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated November 26, 2024 expressed an unqualified opinion.

Change in Accounting Principle

As discussed in Note 1 to the financial statements, the Company has changed its method of accounting for credit losses effective October 1, 2020 due to the adoption of Financial Accounting Standards Board’s Accounting Standards Codification No.

326, Financial Instruments – Credit Losses (ASC 326).

The Company adopted the new credit loss standard using the modified retrospective method such that prior period amounts are not adjusted and continue to be reported in accordance with previously applicable generally accepted accounting principles.

The adoption of the new credit loss standard and its subsequent application is also communicated as a critical audit matter below.

Basis for Opinion

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Allowance for Credit Losses (ACL) – Qualitative Adjustments

As described in Notes 1 and 4 to the financial statements, the Company adopted ASC 326 as of October 1, 2020, which, among other things, required the Company to recognize expected credit losses over the contractual lives of financial assets carried at amortized cost, including loans receivable, utilizing the Current Expected Credit Losses (“CECL”) methodology.

As described in Notes 1 and 3 to the financial statements, the Company recognizes expected credit losses over the contractual lives of financial assets carried at amortized cost, including loans receivable, utilizing the Current Expected Credit Losses (“CECL”) methodology.

Estimates of expected credit losses are based on relevant information about current conditions, past events, and reasonable and supportable forward-looking forecasts regarding collectability of the reported amounts.

73 unchanged sentences

Net interest income 455,118 387,861 307,324

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

Net interest income after provision for credit losses 330,507 278,786 229,225

Provision for credit loss 42,661 57,354 28,538

Net interest income after provision for credit loss 412,457 330,507 278,786

Noninterest income:

3 unchanged sentences

Rental income 54,157 54,190 46,558

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

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

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Other comprehensive income (loss):

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 )

Change in net unrealized gain (loss) on debt securities 136,028 ( 56,255 ) ( 292,665 )

136,028 ( 56,255 ) ( 292,665 )

1 unchanged sentence

Deferred income tax effect 34,060 ( 13,561 ) ( 73,722 )

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

Total other comprehensive income (loss) 102,049 ( 42,363 ) ( 220,679 )

Total comprehensive income (loss) 271,699 123,444 ( 61,325 )

Total comprehensive income attributable to noncontrolling interest 1,293 2,192 2,968

Comprehensive income (loss) attributable to parent $ 121,252 $ ( 64,293 ) $ 131,765

Comprehensive income attributable to parent $ 270,406 $ 121,252 $ ( 64,293 )

See Notes to Consolidated Financial Statements.

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

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

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

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— — ( 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

1 unchanged sentence

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

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

Net distribution to noncontrolling interest — — — — — — ( 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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Stock compensation — 10,286 — — — 10,286 — 10,286

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

Total other comprehensive income — — — 102,049 — 102,049 — 102,049

Joint venture membership interest divestiture — — ( 523 ) — — ( 523 ) — ( 523 )

Net income — — 168,357 — — 168,357 1,293 169,650

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

Net distribution to noncontrolling interest — — — — — — ( 565 ) ( 565 )

Balance, September 30, 2024 $ 248 $ 638,803 $ 354,474 $ ( 153,394 ) $ ( 249 ) $ 839,882 $ ( 277 ) $ 839,605

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Adjustments to reconcile net income to net cash provided by (used in) operating activities:

Depreciation, amortization and accretion, net 64,955 61,601 59,047

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

Depreciation and amortization 57,765 64,955 61,601

Provision for credit loss 42,661 57,354 28,538

Provision for deferred taxes 11,115 ( 175 ) 17,587

6 unchanged sentences

Net realized loss on premise, furniture, and equipment — 65 55

Net realized (gain) on lease receivables and equipment ( 1,741 ) ( 3,397 ) ( 2,257 )

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

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

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

Net realized (gain) on other ( 6,749 ) ( 1,832 ) ( 1,956 )

Change in bank-owned life insurance value ( 2,751 ) ( 1,497 ) ( 2,434 )

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Principal payments on other liabilities ( 621 ) ( 1,747 ) ( 2,751 )

Proceeds from other liabilities — — 80

Payment of debt issuance costs — ( 511 ) —

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Repurchases of common stock ( 86,853 ) ( 120,437 ) ( 168,235 )

Distributions to noncontrolling interest ( 3,167 ) ( 4,153 ) ( 4,033 )

Net cash provided by financing activities 604,858 117,818 422,933

Investment by (distributions to) noncontrolling interest ( 565 ) ( 3,167 ) ( 4,153 )

Net cash provided by (used in) financing activities ( 443,200 ) 604,858 117,818

Effect of exchange rate changes on cash 81 331 ( 1,736 )

8 unchanged sentences

Income taxes 19,633 14,056 13,940

Franchise taxes 250 250 250

Other taxes 1,109 541 722

Franchise and other taxes 726 1,359 791

Supplemental schedule of non-cash investing activities:

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Rental equipment to loan and leases 225,870 377,250 400,148

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

Recognition of operating lease ROU assets, net of measurements 654 — 117

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Accrued interest receivable 163

Foreclosed real estate and repossessed assets, net —

Other assets 1,110

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Amounts for noncontrolling interests reflect the proportionate share of membership interest (equity) and net income attributable to the holders of minority membership interest in the following entities:

• 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 customers of hospitals as a financing alternative for the self-pay and co-pay portions of patients’ hospital expenses.

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• 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.

In the normal course of business, the Company enters into off-balance sheet transactions with 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.

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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.

At September 30, 2024, there are $ 18.4 million commercial term loans held at the SPE compared to $ 13.7 million for the prior fiscal year, and the Company’s equity investment in the SPE is $ 5.8 million compared to $ 1.2 million for the prior fiscal year.

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.

At September 30, 2024 and 2023, there were $ 4.6 million and no commercial term loans classified as held for sale related to this SPE, respectively.

NATURE OF BUSINESS AND INDUSTRY SEGMENT INFORMATION

One of the Company's primary sources of revenue relates to payment processing services for prepaid debit cards, ATM sponsorship, tax refund transfer and other money transfer systems and services.

One of the Company's primary sources of revenue relates to payment processing services for prepaid cards, ATM sponsorship, tax refund transfer and money movement.

Additionally, a significant source of revenue for the Company is interest from the purchase or origination of commercial finance loans, consumer finance loans, and warehouse finance loans.

The Company accepts deposits from customers in the normal course of business on a national basis through its Payments and tax services divisions, and through wholesale funding.

The Company accepts deposits from customers in the normal course of business on a national basis through its partner solutions and tax services divisions, and through wholesale funding.

The Company operates in the banking industry, which accounts for the majority of its revenues and assets.

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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 FHLB advances with terms less than 90 days.

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.

Previously, the FRB required all depository institutions to maintain reserves at specified levels against their transaction accounts, primarily checking accounts.

However, since March 26, 2020, the reserve requirement ratio has been zero percent.

At September 30, 2024, 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.

At September 30, 2023, the Company had $ 1.9 million interest-bearing deposits held at the FHLB and $ 260.3 million in interest-bearing deposits held at the FRB.

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

At September 30, 2024, the Company had $ 104.9 million in interest-bearing deposits held at the FRB and $ 1.7 million interest-bearing deposits held at the FHLB.

The Company does not believe these instruments carry a significant risk of loss but cannot provide assurances that no losses could occur if these institutions were to become insolvent.

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Available for Sale (“AFS”), Held to Maturity (“HTM”) or trading.

AFS debt securities are carried at fair value on the Consolidated Statements of Financial Condition.

Debt securities AFS are carried at fair value on the Consolidated Statements of Financial Condition.

Unrealized holding gains and losses due to risk of credit loss are recognized in earnings while unrealized holding gains and losses due to market conditions and other non-credit risk factors are excluded from earnings and recognized as a separate component of equity in accumulated other comprehensive income (loss) (“AOCI”).

Fair Values of Financial Instruments for additional information on fair value of AFS debt securities.

HTM debt securities are measured at amortized cost.

Debt securities HTM are measured at amortized cost.

The Company classifies the majority of its debt securities as AFS, which are those the Company may decide to sell if needed for liquidity, asset/liability management, or other reasons.

Both AFS and HTM are subject to an allowance for credit loss.

Both AFS and HTM are subject to an allowance for credit losses.

Pathward Financial did not hold trading securities at September 30, 2024 or 2023.

3 unchanged sentences

Debt Securities Credit Losses

The Company evaluates HTM debt securities for credit losses on a quarterly basis and records any such losses as a component of provision for credit losses in the Consolidated Statements of Operations.

The Company has concluded that its portfolio as of September 30, 2023 has a zero risk of credit loss due to the U.S.

Government financial guarantees underlying the securities within the HTM portfolio and as a result has not recorded an allowance for credit loss.

The Company evaluates AFS debt securities for credit losses on a quarterly basis and records any such losses as a component of provision for credit losses in the Consolidated Statements of Operations.

The Company has concluded that any unrealized holding losses in its portfolio as of September 30, 2023 are not related to credit loss and as a result has not recorded an allowance for credit loss.

The Company evaluates debt securities AFS for credit losses on a quarterly basis and records any such losses as a component of provision for credit loss in the Consolidated Statements of Operations.

The Company has concluded that any unrealized holding losses in its portfolio as of September 30, 2024 are not related to credit loss and as a result has not recorded an allowance for credit losses.

Securities for further information.

The Company evaluates debt securities HTM for credit losses on a quarterly basis and records any such losses as a component of provision for credit loss in the Consolidated Statements of Operations.

The Company has concluded that its portfolio as of September 30, 2024 has a zero risk of credit loss due to the related U.S.

Government financial guarantees underlying the securities within the HTM portfolio and as a result has not recorded an allowance for credit losses.

Equity Investments

3 unchanged sentences

Securities for additional information on marketable equity securities.

The Company also holds non-marketable equity investments that are included in Other Assets in the Company’s Consolidated Financial Statements.

The Company also holds non-marketable equity securities that are included in Other Assets in the Company’s Consolidated Financial Statements.

The Company generally accounts for these investments under the equity method or the provisions of Accounting Standards Codification ("ASC") 321.

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For measurement alternative investments, the asset carrying value is reduced when the fair value is less than the carrying value, without the consideration of recovery.

The Company held the following non-marketable equity investments:

The Company held the following non-marketable equity securities:

• Equity Method - The Company held equity method investments of $ 4.1 million within other assets as of September 30, 2024 and $ 4.1 million at September 30, 2023.

7 unchanged sentences

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.

The Company did not recognize any fair value adjustments in the fiscal years ended September 30, 2024 and 2023.

Additionally, the Company recognized impairment loss of $ 1.0 million and $ 3.3 million of such investments during the fiscal years ended September 30, 2024 and 2023, respectively.

LOANS HELD FOR SALE ("LHFS")

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For consumer loans, the Company fully charges off or charges down to net realizable value when deemed uncollectible due to bankruptcy or other factors, or meets a defined number of days past due.

As part of the Company’s ongoing risk management practices, management generally attempts to work with borrowers when necessary to extend or modify loan terms to better align with their current ability to repay.

Extensions and modifications to loans are made in accordance with internal policies and guidelines which conform to regulatory guidance.

Modified loan terms may include interest rate reductions, principal forgiveness, term extensions, payment forbearance or other actions intended to minimize the Company’s economic loss and to avoid foreclosure or repossession of the collateral.

Each occurrence is unique to the borrower and is evaluated separately.

In a situation where an economic concession has been granted to a borrower that is experiencing financial difficulty, the Company identifies and reports that loan as a troubled debt restructuring (“TDR”).

Management considers regulatory guidelines when restructuring loans to ensure that prudent lending practices are followed.

As such, qualification criteria and payment terms consider the borrower’s current and prospective ability to comply with the modified terms of the loan.

Additionally, the Company structures loan modifications with the intent of strengthening repayment prospects.

Loans that are reported as TDRs apply the identical criteria in the determination of whether the loan should be accruing or not accruing.

The event of classifying the loan as a TDR due to a modification of terms may be independent from the determination of accruing interest on a loan.

Leases Receivable

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The determination of lease classification requires various judgments and estimates by management, including the fair value of equipment at lease inception, useful life of the equipment under lease, lease residual value, and collectability of minimum lease payments.

Sales-type leases generate dealer profit, which is recognized at lease inception by recording lease revenue net of lease cost.

Sales-type leases generate a gain or loss at lease inception by recording lease revenue less lease cost.

Lease revenue consists of the present value of the future minimum lease payments.

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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.

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.

A $ 2.0 million impairment expense from rental equipment was recognized for the fiscal year ended September 30, 2024, a nominal impairment expense was recognized for fiscal year ended September 30, 2023, and no impairment expense was recognized for the fiscal year ended September 30, 2022.

Loan Servicing and Transfers of Financial Assets

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Such estimates, appraisals, evaluations, cash flows and forecasts may be subject to frequent adjustments due to changing economic prospects of borrowers, lessees, properties or economic conditions.

These estimates are reviewed quarterly and adjustments, if necessary, are recorded in the provision for credit losses in the periods in which they become known.

These estimates are reviewed quarterly and adjustments, if necessary, are recorded in the provision for credit loss in the periods in which they become known.

Accrued interest receivable is presented separately on the Consolidated Statements of Financial Condition, and an ACL is not recorded for these balances.

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The Company attempts to mitigate these risks by adhering to its underwriting policies in evaluating the management of the business and the credit-worthiness of borrowers and guarantors.

Subsequent Events for further information on the Company's commercial premium finance insurance business.

Consumer Finance

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

The Bank 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.

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Certain loans are sold to third parties based on terms and conditions within the Program Agreement.

The Bank's BaaS business line also offers tax solutions, which includes short-term refund advance loans.

The Bank's Partner Solutions business line also offers tax solutions, which includes short-term refund advance loans.

Through this product, taxpayers are underwritten to determine eligibility for these unsecured loans.

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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 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 nonvested (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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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 upon vesting of restricted stock grants and after the allocation of earnings to the participating securities.

Basic EPS is computed using the two-class method 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 EPS 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.

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RECENTLY ADOPTED ACCOUNTING STANDARDS UPDATES ("ASU")

The following ASUs were adopted by the Company during the fiscal year ended September 30, 2023, none of which had a material impact on the Company's Consolidated Financial Statements.

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

ASU 2021-05, Leases (Topic 842):

Lessors – Certain Leases with Variable Lease Payments.

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

The following ASU was adopted by the Company during the fiscal year ended September 30, 2024 and did not have a material impact on the Company's Consolidated Financial Statements.

The following ASU became effective for the Company on October 1, 2023.

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

1 unchanged sentence

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.

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

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 ASU also requires current period gross charge-offs by year of origination to be disclosed for loans and leases within scope of ASC Topic 326, Financial Instruments – Credit Losses.

The following ASUs have been issued and are considered applicable to the Company, but have not yet been adopted as of September 30, 2024.

ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures.

This ASU improves reportable segment disclosures primarily by enhancing disclosure requirements about significant segment expenses.

The amendments will be effective for the Company beginning with the fiscal year ended September 30, 2025 and subsequent interim periods.

The amendments will be applied retrospectively to all prior periods in the consolidated financial statements.

The Company is currently evaluating the impact of such amendments to the consolidated financial statements and related disclosures.

ASU 2023-09, Income Taxes (ASC 740):

Improvements to Income Tax Disclosures.

This ASU requires enhanced income tax disclosures primarily related to the rate reconciliation and income taxes paid information to provide further transparency surrounding the Company’s income tax position.

The amendments in this ASU will be effective for the Company beginning on October 1, 2025.

The Company is currently evaluating the impact of such amendments to the consolidated financial statements and related disclosures.

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

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

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 all unrealized losses on these securities were due to change in interest rates versus credit loss.

The decrease in the fair value of investment securities balances when comparing September 30, 2024 to the prior year was primarily driven by principal pay downs during the fiscal year.

At September 30, 2024, there were 195 debt securities AFS in an unrealized loss position.

Management assessed each investment security with unrealized losses for credit loss by evaluating qualitative factors, including materiality of loss position as a percentage of book value, credit ratings, outstanding principal and interest payments, and changes in the underlying implicit or explicit guarantee of the security, 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.

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(Dollars in thousands) 2024 2023

Securities AFS at Fair Value Amortized Cost Fair

Debt Securities AFS Amortized Cost Fair

Value Amortized Cost Fair

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Mortgage-backed securities 1,393,549 1,231,368 1,495,636 1,225,525

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

Securities HTM at Fair Value

Total debt securities AFS $ 1,944,298 $ 1,741,221 $ 2,143,333 $ 1,804,228

Debt Securities HTM

Due after ten years $ 31,060 $ 28,392 $ 34,415 $ 29,571

1 unchanged sentence

Mortgage-backed securities 2,032 1,844 2,176 1,854

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

Total debt securities HTM $ 33,092 $ 30,236 $ 36,591 $ 31,425

Activity related to the sale of securities is summarized below.

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Gross losses on sales — — 1,588

Net gain (loss) on securities AFS $ — $ 154 $ 6

Net gain on securities AFS $ — $ — $ 154

There was no activity related to the sale of securities held to maturity during the fiscal years ended September 30, 2024, 2023, and 2022.

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The carrying value of the stock held at the FHLB was $ 16.3 million and $ 8.5 million at September 30, 2024 and 2023, 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.

At fiscal year-end 2024 and 2023, the Company pledged securities with fair values of approximately $ 1.04 billion and $ 996.9 million, respectively, as collateral against FHLB advances.

There was approximately $ 136.9 million and $ 21.3 million of qualifying loans pledged as collateral at September 30, 2024 and 2023, respectively.

Included in interest and dividend income from other investments is $ 0.7 million, $ 0.5 million and $ 0.3 million related to dividend income on FHLB stock for the fiscal years ended September 30, 2024, 2023 and 2022, respectively.

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

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

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

Equity Securities.

The Company held $ 3.3 million and $ 3.4 million in marketable equity securities at September 30, 2024 and 2023, 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.

The Company recognized $ 0.1 million and $ 0.2 million in unrealized losses on marketable equity securities during the fiscal years ended September 30, 2024 and 2023, respectively.

No such securities were sold during the fiscal year.

Non-marketable equity securities with a readily determinable fair value totaled $ 11.8 million and $ 8.4 million at September 30, 2024 and 2023, 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 .

The Company recognized $ 1.1 million in unrealized gains and $ 0.2 million in unrealized losses during the fiscal years ended September 30, 2024 and 2023, respectively.

No such securities were sold during the fiscal year.

Non-marketable equity securities without readily determinable fair value totaled $ 13.6 million and $ 16.2 million at September 30, 2024 and 2023, respectively, reflecting the Company's ownership interests in other entities through Pathward Venture Capital, LLC, a wholly-owned service corporation subsidiary of the Bank that was formed in 2017 for the purpose of making minority equity investments and other corporate investments.

During the fiscal year, the Company recognized a $ 2.4 million gain on Visa shares previously carried at cost basis of $0 since 2008.

On April 8, 2024, Visa Inc.

announced the commencement of an exchange offer for Visa Class B-1 common stock and the Company subsequently tendered its Visa Class B-1 common stock in exchange for a combination of Visa Class C common stock and Visa Class B-2 common stock.

After entering the exchange, the Company sold its Visa Class C common stock and Visa Class B-2 common stock in the secondary market.

There was one additional security sold during the fiscal year for a $ 2.5 million gain which is included in gain on sale of other on the 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 $ 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.

The Company recognized $ 1.0 million, $ 3.3 million, and zero in impairment for such investments for the fiscal years ended September 30, 2024, 2023, and 2022, respectively.

LOANS AND LEASES, NET

18 unchanged sentences

Total loans and leases, net $ 4,029,859 $ 4,316,411

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.

During the fiscal years ended September 30, 2024 and 2023, the Company originated $ 2.03 billion and $ 1.21 billion of consumer finance and SBA/USDA loans as held for sale, respectively.

The Company sold held for sale loans resulting in proceeds of $ 2.04 billion and gain on sale of $ 5.9 million during the fiscal year ended September 30, 2024.

11 unchanged sentences

Consumer finance 1,937,079 1,123,271

Community banking — 153,222

Loans held for investment:

Commercial finance — 15,549

Consumer finance — 77,456

Community banking — 30,235

Total sales $ 2,036,084 $ 1,139,881

15 unchanged sentences

Lease income from operating lease payments 53,365 53,551 46,017

4,921 3,964 5,982

Total leasing and equipment finance noninterest income 58,286 57,515 51,999

9 unchanged sentences

The Company did not record any contingent rental income from direct financing and sales-type leases in the fiscal year ended September 30, 2024.

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.

A number of factors affected the economic environment in 2023 continued throughout 2024 including geopolitical conflict, supply chain disruptions, inflation, and increased interest rates.

The 2023 bank failures that were brought on by, among other things, rising interest rates, deposit outflows and liquidity crises also continued to impact the banking industry.

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.

3 unchanged sentences

Beginning balance $ 49,705 $ 45,947

Provision for credit losses 57,448 28,862

Provision for credit loss 42,238 57,448

Charge-offs ( 57,681 ) ( 59,898 )

35 unchanged sentences

Warehouse finance 327 50 — — 377

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

Unfunded commitments (1)

366 ( 94 ) — — 272

Total $ 46,313 $ 57,354 $ ( 59,898 ) $ 6,208 $ 49,977

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

At September 30, 2022

(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

Asset-based lending 1,726 ( 1,092 ) ( 16 ) 432 1,050

Factoring 3,997 11,699 ( 11,057 ) 1,917 6,556

Lease financing 7,629 ( 2,062 ) ( 301 ) 636 5,902

Insurance premium finance 1,394 597 ( 767 ) 226 1,450

SBA/USDA 2,978 863 ( 652 ) 74 3,263

Other commercial finance 1,168 142 — — 1,310

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

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

Tax services 2 28,093 ( 30,852 ) 2,762 5

Warehouse finance 420 ( 93 ) — — 327

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

12 unchanged sentences

Commercial finance (1)

22,210 25,255

Total $ 22,210 $ 25,255

22 unchanged sentences

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.

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 modifications or loans and leases on nonaccrual status.

The Company recognizes that concentrations of credit may naturally occur and may take the form of a large volume of related loans and leases to an individual, a specific industry, or a geographic location.

13 unchanged sentences

Total 655,091 479,907 182,049 135,800 71,916 29,878 — 1,554,641

Current period charge-offs 114 3,102 8,502 3,576 2,184 715 — 18,193

Asset-based lending

3 unchanged sentences

Substandard — — — — — — 3,921 3,921

Doubtful — — — — — — 501 501

Total — — — — — — 471,897 471,897

Current period charge-offs — — — — — — — —

Pass — — — — — — 292,436 292,436

2 unchanged sentences

Substandard — — — — — — 7,306 7,306

Doubtful — — — — — — 12 12

Total — — — — — — 362,295 362,295

Current period charge-offs — — — — — — 2,453 2,453

Lease financing

5 unchanged sentences

Total 46,720 59,329 15,955 16,220 11,574 2,376 — 152,174

Current period charge-offs — — — 207 80 — — 287

Insurance premium finance

Current period charge-offs 86 890 173 — — — — 1,149

Pass 60,636 171,136 179,490 20,825 28,588 39,319 — 499,994

4 unchanged sentences

Total 66,917 194,211 191,703 23,678 38,179 53,940 — 568,628

Pass 158,675 148,525 26,244 36,274 8,798 18,252 — 396,768

Watch 49,010 48,833 658 51 357 2,572 — 101,481

Special mention — — 530 — — — — 530

Substandard 252 2,356 1,718 5,418 8,509 7,718 — 25,971

Total 207,937 199,714 29,150 41,743 17,664 28,542 — 524,750

Current period charge-offs — 549 79 — 127 — — 755

Other commercial finance

3 unchanged sentences

Total 73,330 5,198 6,685 29,274 1,274 70,203 — 185,964

Current period charge-offs — — — — — — — —

Warehouse finance

1 unchanged sentence

Total — — — — — — 517,847 517,847

Current period charge-offs — — — — — — — —

Total loans and leases

5 unchanged sentences

Total $ 842,058 $ 738,645 $ 396,392 $ 204,972 $ 122,943 $ 156,397 $ 1,352,039 $ 3,813,446

Current period charge-offs $ 200 $ 4,541 $ 8,754 $ 3,783 $ 2,391 $ 715 $ 2,453 $ 22,837

Amortized Cost Basis

12 unchanged sentences

Substandard — — — — — — 19,501 19,501

Doubtful — — — — — — 501 501

Total — — — — — — 382,371 382,371

25 unchanged sentences

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

2 unchanged sentences

Pass — — — — — — 376,915 376,915

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

Total — — — — — — 376,915 376,915

15 unchanged sentences

Lease financing 3,605 1,595 109 5,309 146,865 152,174 60 746 806

Insurance premium finance 2,159 1,262 2,339 5,760 794,317 800,077 2,339 — 2,339

SBA/USDA — 952 2,172 3,124 565,504 568,628 331 2,175 2,506

28 unchanged sentences

Term lending $ 9,281 $ 3,433 $ 5,369 $ 1,386 $ 625 $ 3,368 $ — $ 23,462 $ 2,579

Asset-based lending — — — — — — 18,082 18,082 —

Factoring — — — — — — 29 29 —

20 unchanged sentences

Lease financing — — — 2 58 — — 60

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

SBA/USDA — — 331 — — — — 331

Other commercial finance — — — — — 91 — 91

Commercial finance — 621 685 721 275 12 — 2,314

6 unchanged sentences

At September 30, 2023 2023 2022 2021 2020 2019 Prior

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

Term lending 1,604 1,371 500 233 29 — — 3,737

Asset-based lending — — — — — — 39 39

Lease financing 151 490 979 784 1,794 44 — 4,242

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

SBA/USDA — — — 833 — — — 833

Other commercial finance — — — — — 91 — 91

Commercial finance 1,755 2,275 1,593 1,850 2,157 1,612 — 11,242

1 unchanged sentence

Tax services 5,082 — — — — — — 5,082

Total loans and leases held for investment 7,728 3,320 1,839 1,850 2,157 1,612 28 18,534

Total 90 days or more delinquent and accruing $ 8,034 $ 3,320 $ 1,839 $ 1,850 $ 2,157 $ 1,612 $ 28 $ 18,840

11 unchanged sentences

The recognized interest income on the Company's nonaccrual loans and leases for the fiscal years ended September 30, 2024 and 2023 was not significant.

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

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.

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.

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.

TDR net charge-offs and the impact of TDRs on the Company's allowance for credit losses were insignificant during the fiscal years ended September 30, 2023 and September 30, 2022.

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 fiscal year ended September 30, 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 fiscal year ended September 30, 2024 were $ 9.8 million in the commercial finance loan portfolio.

The types of modifications granted were term extensions and reduced payments.

During the fiscal year ended September 30, 2024, the Company had $ 1.5 million of commercial finance loans where a modification was granted in the previous 12 months in which there was a payment default.

At September 30, 2024, $ 1.5 million of modifications granted were in the over 89 days past due category.

There were $ 1.1 million loans that were modified in a trouble debt restructuring ("TDR") during the fiscal year ended September 30, 2023.

The Company had $ 0.9 million of commercial finance loans that were modified within the previous 12 months experience a payment default during the fiscal year ended September 30, 2023.

TDR net charge-offs and the impact of TDRs on the Company's allowance for credit losses were insignificant during the fiscal year ended September 30, 2023.

EARNINGS PER COMMON SHARE ("EPS")

2 unchanged sentences

Diluted EPS is calculated using the more dilutive of the treasury stock method or the two-class method.

Diluted EPS 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, performance share units, and nonvested restricted stock, where applicable.

Diluted EPS under the two-class method also considers the allocation of earnings to the participating securities.

Diluted EPS is calculated using the more dilutive of the two-class method or the treasury stock method.

Diluted EPS 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 performance share units ("PSUs") and restricted stock grants, the exercise of stock options, if any, and after the allocation of earnings to the participating securities.

Antidilutive securities are disregarded in earnings per share calculations.

66 unchanged sentences

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 and disposals during the period — — ( 670 ) ( 203 ) ( 873 )

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

14 unchanged sentences

Total anticipated intangible amortization $ 16,589

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.

There were no impairments to intangible assets for the fiscal years ended September 30, 2024 and 2023.

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

8 unchanged sentences

Total operating lease liabilities $ 26,022

The weighted-average discount rate and remaining lease term for operating leases at September 30, 2023 were as follows:

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

At September 30,

Weighted-average discount rate 2.45 % 2.38 %

12 unchanged sentences

(Dollars in thousands)

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

(1) As of September 30, 2024, the Company had $ 25.0 million 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.

5 unchanged sentences

Total $ 377,000 $ 13,000

The Company had $ 257.0 million of overnight federal funds purchased from the FHLB and $ 120.0 million from other financial institutions at September 30, 2024, as compared to $ 13.0 million from the FHLB at September 30, 2023.

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.

1 unchanged sentence

Under the agreement, the Bank must maintain “eligible collateral” that has a “lending value” at least equal to the “required collateral amount,” all as defined by the agreement.

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

At September 30, 2024 and 2023, the Bank pledged securities with fair values of approximately $ 1.04 billion and $ 996.9 million, respectively, to be used against FHLB advances as needed.

In addition, qualifying loans of approximately $ 136.9 million were pledged as collateral at September 30, 2024 compared to $ 21.3 million at September 30, 2023.

The Company had no securities sold under agreements to repurchase at September 30, 2024 and 2023.

6 unchanged sentences

Total $ 33,354 $ 33,873

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

(1) Includes zero and $ 0.6 million of discounted leases at September 30, 2024 and 2023, respectively.

Scheduled maturities of the Company's long-term borrowings at September 30, 2024 were as follows for the fiscal years ending:

1 unchanged sentence

2025 $ — $ — $ — $ —

2025 — — 621 621

Thereafter 13,661 19,693 — 33,354

19 unchanged sentences

The Company has the option to defer interest payments on the subordinated debentures from time to time for a period not to exceed five consecutive years.

The Company redeemed its $ 75.0 million of 5.75 % fixed-to-floating rate subordinated debentures on May 15, 2022 with payment of $ 75.0 million principal and approximately $ 1.0 million interest.

On September 23, 2022, the Company completed a private placement of $ 20.0 million of its 6.625 % fixed-to-floating rate subordinated debentures due 2032 to certain qualified institutional buyers and accredited investors.

6 unchanged sentences

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.

This authorization was effective from September 3, 2021 through September 30, 2024, with 146,435 shares authorized by this repurchase program not repurchased when it expired.

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.

8 unchanged sentences

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

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.

The Company retired 129,929 and 149,679 shares of common stock held in treasury during the fiscal years ended September 30, 2024 and 2023, respectively.

STOCK COMPENSATION

1 unchanged sentence

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.

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

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 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.

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

1 unchanged sentence

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.

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.

Director shares are issued to the Company’s directors, and these shares have historically vested from immediately 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 PSUs 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 earned is converted into one share of common stock.

Upon vesting, each PSU 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.

16 unchanged sentences

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

Vested ( 60,984 ) 55.47

Forfeited or expired ( 4,483 ) 44.59

Performance share units outstanding, September 30, 2024 142,462 $ 47.24

Performance share units outstanding, September 30, 2022 96,689 $ 42.59

Forfeited or expired — —

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

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

The final performance was assessed after September 30, 2023, resulted in an achievement greater than target, and an additional 47,252 shares were allocated to the participants in the plan.

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

23 unchanged sentences

Deferred tax assets:

Bad debts $ 11,606 $ 10,636

Allowance for credit losses $ 11,042 $ 11,606

Deferred compensation 4,351 3,739

6 unchanged sentences

Net unrealized loss on securities available for sale 50,819 84,908

Premises and equipment 3,939 —

Other assets 3,940 4,193

53 unchanged sentences

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

The tables below include certain non-GAAP financial measures that are used by investors, analysts and bank regulatory agencies to assess the capital position of financial services companies.

The table below includes certain non-GAAP financial measures that are used by investors, analysts and bank regulatory agencies to assess the capital position of financial services companies.

Management reviews these measures along with other measures of capital as part of its financial analyses and has included this non-GAAP financial information, and the corresponding reconciliation to total equity.

12 unchanged sentences

The following table provides a reconciliation of the amounts included in the table above for the Company.

(Dollars in thousands) Standardized Approach (1)

Standardized Approach (1)

(Dollars in thousands) September 30, 2024

September 30, 2023

7 unchanged sentences

Common Equity Tier 1 (1)

666,179 569,355

Long-term borrowings and other instruments qualifying as Tier 1 13,661 13,661

6 unchanged sentences

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

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.

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

(Dollars in thousands) At September 30, 2023

Total stockholders' equity $ 650,625

Goodwill 309,505

Intangible assets 20,720

Tangible common equity 320,400

AOCI ( 255,443 )

Tangible common equity excluding AOCI $ 575,843

Since January 1, 2016, the Company and the Bank have been required to maintain a capital conservation buffer above the minimum risk-based capital requirements in order to avoid certain limitations on capital distributions, stock repurchases and discretionary bonus payments to executive officers.

those changes were fully phased in through the end of 2021.

The Company and the Bank are required to maintain a capital conservation buffer above the minimum risk-based capital requirements in order to avoid certain limitations on capital distributions, stock repurchases and discretionary bonus payments to executive officers.

The capital conservation buffer is exclusively composed of Common Equity Tier 1 capital, and it applies to each of the three risk-based capital ratios but not the leverage ratio.

17 unchanged sentences

— — 53,443 53,346 714 844 54,157 54,190

Gain (loss) on sale of securities (1)

— — — — 91 ( 1,287 ) 91 ( 1,287 )

Gain on trademarks (1)

16 unchanged sentences

Refund Transfer Product Fees.

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.

Refund transfer fees are specific to the Partner Solutions 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.

3 unchanged sentences

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.

Card fees relate to the Partner Solutions business line and consist 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.

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.

Deposit fees relate to the Partner Solutions 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 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 partner solutions, 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 BaaS and Commercial Finance business lines are included in the Consumer and Commercial reporting segments, respectively.

Bank and deposit fees for the Partner Solutions 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.

6 unchanged sentences

Consumer, Commercial, and Corporate Services/Other.

The BaaS business line is reported in the Consumer segment.

The Partner Solutions business line is reported in the Consumer segment.

The Commercial Finance business line is reported in the Commercial segment.

4 unchanged sentences

Net interest income $ 236,011 $ 194,967 $ 24,140 $ 455,118

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

Provision for credit loss 26,950 15,571 140 42,661

Noninterest income 217,107 71,748 10,732 299,587

7 unchanged sentences

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

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

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

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

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

5 unchanged sentences

PARENT COMPANY FINANCIAL STATEMENTS

Presented below are the condensed financial statements for the parent company, Pathward Financial.

Presented below are the condensed financial statements for the parent company, Pathward Financial, Inc.

Condensed Statements of Financial Condition

1 unchanged sentence

Cash and cash equivalents $ 1,898 $ 1,399

Investment securities held to maturity, at cost 9,220 8,003

Securities held to maturity, at amortized cost 10,896 9,220

Investment in subsidiaries 865,843 678,572

2 unchanged sentences

LIABILITIES AND STOCKHOLDERS' EQUITY

Subordinated debentures $ 33,252 $ 33,661

Long-term borrowings $ 33,354 $ 33,252

Other liabilities 7,941 6,626

4 unchanged sentences

Retained earnings 354,474 278,655

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

Accumulated other comprehensive loss ( 153,394 ) ( 255,443 )

Treasury stock, at cost ( 249 ) ( 344 )

Total equity attributable to parent 839,882 651,630

Non-controlling interest ( 1,005 ) ( 30 )

Noncontrolling interest ( 277 ) ( 1,005 )

Total stockholders' equity 839,605 650,625

7 unchanged sentences

Loss before income taxes and equity in undistributed net income of subsidiaries ( 5,964 ) ( 3,947 ) ( 5,044 )

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

Income tax benefit ( 1,147 ) ( 967 ) ( 1,029 )

Loss before equity in undistributed net income of subsidiaries ( 4,817 ) ( 2,980 ) ( 4,015 )

33 unchanged sentences

The extent to which the Company may pay cash dividends to stockholders will depend on the cash currently available at the Company, as well as the ability of the Bank to pay dividends to the Company.

For further discussion, see Note 15 herein.

SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

5 unchanged sentences

Net interest income 110,036 118,301 110,859 115,922

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

Provision for credit loss 9,890 26,052 5,881 838

Noninterest income 52,761 128,945 65,871 52,010

8 unchanged sentences

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

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

Provision for credit loss 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) credit loss 186 32,302 ( 1,302 ) ( 2,648 )

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

15 unchanged sentences

Debt securities available for sale are recorded at fair value on a recurring basis and debt securities held to maturity are carried at amortized cost.

The fair values of debt securities available for sale, categorized primarily as Level 2, is recorded using prices obtained from independent asset pricing services that are based on observable transactions, but not quoted markets.

The fair values of debt securities AFS, categorized primarily as Level 2, are recorded using prices obtained from independent asset pricing services that are based on observable transactions, but not quoted markets.

Management reviews the prices obtained from independent asset pricing services for unusual fluctuations and compares to current market trading activity.

3 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.

Fair Value At September 30, 2023

At September 30, 2024

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

11 unchanged sentences

$ 11,828 $ — $ — $ —

(1) Equity securities at fair value are included within other assets on the consolidated statement of financial condition at September 30, 2023.

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

Fair Value At September 30, 2022

(1) Equity securities at fair value are included within other assets on the Consolidated Statements of Financial Condition at September 30, 2024.

(2) Consists of 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.

At September 30, 2023

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

18 unchanged sentences

The fair value of the collateral is determined based on the internal estimates and/or assessment provided by third-party appraisers and the valuation relies on discount rates ranging from 3 % to 37 %.

The following table summarizes the assets of the Company that are measured at fair value in the Consolidated Statements of Financial Condition on a non-recurring basis:

Fair Value At September 30, 2023

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

At September 30, 2024

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

4 unchanged sentences

Total $ 7,652 $ — $ — $ 7,652

Fair Value At September 30, 2022

At September 30, 2023

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

9 unchanged sentences

Loans and leases, net individually evaluated for credit loss $ 7,652 21,829 Market approach Appraised values (1)

Foreclosed assets, net $ — 1 Market approach Appraised values (1)

(1) The Company generally relies on external appraisers to develop this information.

25 unchanged sentences

Deposits 5,875,085 5,874,994 5,845,879 29,115 —

Overnight federal funds purchased 377,000 377,000 377,000 — —

Other short- and long-term borrowings 33,354 31,787 — 31,787 —

20 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 —

39 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 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.

• On October 31, 2024, Pathward, N.A.

completed the sale (the "Transaction") of substantially all of the assets and liabilities related to the Bank's commercial insurance premium finance business (the "Business") pursuant to an Asset Purchase and Sale Agreement (the "Purchase Agreement") dated August 28, 2024 with Honor Capital Corporation, a Florida corporation (the "Purchaser"), the successor by assignment to AFS IBEX Financial Services, LLC, and Honor Capital Holdings, LLC as guarantor.

The cash purchase price paid by the Purchaser at the closing was $ 603.3 million, based on the net asset value of the assets purchased and liabilities assumed pursuant to the Purchase Agreement plus a $ 31.2 million premium, subject to customary post-closing adjustment based on the final determination of the net asset value of the assets purchased and liabilities assumed pursuant to the terms of the Purchase Agreement.

The Bank recorded a gain on the Transaction of $ 16.4 million.

As part of the Transaction, $ 588.4 million of commercial insurance premium finance loans were sold.

• On November 1, 2024, the Bank sold $ 161.6 million of debt securities AFS with a loss on sale of securities of $ 15.8 million.

This loss largely offsets the gain from the Transaction discussed above.

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