PATHWARD FINANCIAL, INC. 10-Q

Item 1. Financial Statements. PATHWARD FINANCIAL, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Financial Condition (Dollars in thousands, except per share data) December 31, 2024 September 30, 2024 ASSETS (Unaudited) (Audited) Cash and cash equivalents $ 597,396 $ 158,337 Securities available for sale, at fair value 1,480,090 1,741,221 Securities held to maturity, at amortized cost (fair value $ 27,431 and $ 30,236 , respectively) 32,001 33,092 Federal Reserve Bank and Federal Home Loan Bank Stock, at cost 24,454 36,014 Loans held for sale 72,648 688,870 Loans and leases 4,562,681 4,075,195 Allowance for credit losses ( 48,977 ) ( 45,336 ) Accrued interest receivable 35,279 31,385 Premises, furniture, and equipment, net 38,263 39,055 Rental equipment, net 206,754 205,339 Goodwill and intangible assets 313,074 326,094 Other assets 308,679 260,070 Total assets $ 7,622,342 $ 7,549,336 LIABILITIES AND STOCKHOLDERS’ EQUITY LIABILITIES Deposits $ 6,518,953 $ 5,875,085 Short-term borrowings — 377,000 Long-term borrowings 33,380 33,354 Accrued expenses and other liabilities 293,579 424,292 Total liabilities 6,845,912 6,709,731 STOCKHOLDERS’ EQUITY Preferred stock, 3,000,000 shares authorized, no shares issued, none outstanding at December 31, 2024 and September 30, 2024, respectively — — Common stock, $ 0.01 par value; 90,000,000 shares authorized, 24,189,631 and 24,851,122 shares issued, 24,119,416 and 24,847,353 shares outstanding at December 31, 2024 and September 30, 2024, respectively 241 248 Common stock, Nonvoting, $ 0.01 par value; 3,000,000 shares authorized, no shares issued, none outstanding at December 31, 2024 and September 30, 2024, respectively — — Additional paid-in capital 640,422 638,803 Retained earnings 332,322 354,474 Accumulated other comprehensive loss ( 190,917 ) ( 153,394 ) Treasury stock, at cost, 70,215 and 3,769 common shares at December 31, 2024 and September 30, 2024, respectively ( 4,882 ) ( 249 ) Total equity attributable to parent 777,186 839,882 Noncontrolling interest ( 756 ) ( 277 ) Total stockholders’ equity 776,430 839,605 Total liabilities and stockholders’ equity $ 7,622,342 $ 7,549,336 See Notes to Condensed Consolidated Financial Statements. 2 Table of Contents PATHWARD FINANCIAL, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Operations (Unaudited) Three Months Ended December 31, (Dollars in thousands, except per share data) 2024 2023 Interest and dividend income: Loans and leases, including fees $ 102,731 $ 94,963 Mortgage-backed securities 8,986 10,049 Other investments 7,522 10,886 119,239 115,898 Interest expense: Deposits 775 3,526 FHLB advances and other borrowings 2,331 2,336 3,106 5,862 Net interest income 116,133 110,036 Provision for credit loss 12,032 9,890 Net interest income after provision for credit loss 104,101 100,146 Noninterest income: Refund transfer product fees 410 422 Refund advance fee income 459 111 Card and deposit fees 29,066 30,750 Rental income 13,708 13,459 (Loss) on sale of securities ( 15,671 ) — Gain on divestitures 16,404 — Gain (loss) on sale of loans and leases 4,378 ( 31 ) Gain on sale of other 987 2,871 Other income 7,637 5,179 Total noninterest income 57,378 52,761 Noninterest expense: Compensation and benefits 49,292 46,652 Refund transfer product expense 108 192 Refund advance expense 34 30 Card processing 33,314 34,584 Occupancy and equipment expense 9,706 8,848 Operating lease equipment depreciation 11,426 10,423 Legal and consulting 5,225 4,892 Intangible amortization 812 984 Other expense 13,642 12,669 Total noninterest expense 123,559 119,274 Income before income tax expense 37,920 33,633 Income tax expense 6,294 5,719 Net income before noncontrolling interest 31,626 27,914 Net income attributable to noncontrolling interest 199 257 Net income attributable to parent $ 31,427 $ 27,657 Earnings per common share: Basic $ 1.29 $ 1.06 Diluted $ 1.29 $ 1.06 See Notes to Condensed Consolidated Financial Statements. 3 Table of Contents PATHWARD FINANCIAL, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) Three Months Ended December 31, (Dollars in thousands) 2024 2023 Net income before noncontrolling interest $ 31,626 $ 27,914 Other comprehensive income (loss): Change in net unrealized gain (loss) on debt securities ( 62,340 ) 88,535 Net loss realized on investment securities 15,671 — ( 46,669 ) 88,535 Unrealized gain (loss) on currency translation ( 2,017 ) 618 Deferred income tax effect ( 11,163 ) 22,143 Total other comprehensive income (loss) ( 37,523 ) 67,010 Total comprehensive income (loss) ( 5,897 ) 94,924 Total comprehensive income attributable to noncontrolling interest 199 257 Comprehensive income (loss) attributable to parent $ ( 6,096 ) $ 94,667 See Notes to Condensed Consolidated Financial Statements. 4 Table of Contents PATHWARD FINANCIAL, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Changes in Stockholders' Equity (Unaudited) (Dollars in thousands, except per share data) Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Treasury Stock Total Pathward Financial, Inc. Stockholders’ Equity Noncontrolling interest Total Stockholders’ Equity Three Months Ended December 31, 2024 Balance, September 30, 2024 $ 248 $ 638,803 $ 354,474 $ ( 153,394 ) $ ( 249 ) $ 839,882 $ ( 277 ) $ 839,605 Cash dividends declared on common stock ($ 0.05 per share) — — ( 1,202 ) — — ( 1,202 ) — ( 1,202 ) Repurchases of common stock ( 7 ) 7 ( 52,377 ) — ( 4,633 ) ( 57,010 ) — ( 57,010 ) Stock compensation — 1,612 — — — 1,612 — 1,612 Total other comprehensive loss — — — ( 37,523 ) — ( 37,523 ) — ( 37,523 ) Net income — — 31,427 — — 31,427 199 31,626 Net distribution to noncontrolling interest — — — — — — ( 678 ) ( 678 ) Balance, December 31, 2024 $ 241 $ 640,422 $ 332,322 $ ( 190,917 ) $ ( 4,882 ) $ 777,186 $ ( 756 ) $ 776,430 Three Months Ended December 31, 2023 Balance, September 30, 2023 $ 262 $ 628,500 $ 278,655 $ ( 255,443 ) $ ( 344 ) $ 651,630 $ ( 1,005 ) $ 650,625 Cash dividends declared on common stock ($ 0.05 per share) — — ( 1,299 ) — — ( 1,299 ) — ( 1,299 ) Issuance of common stock due to restricted stock 1 — — — — 1 — 1 Repurchases of common stock ( 3 ) 3 ( 11,027 ) — ( 4,891 ) ( 15,918 ) — ( 15,918 ) Stock compensation — 1,234 — — — 1,234 — 1,234 Total other comprehensive income — — — 67,010 — 67,010 — 67,010 Joint venture membership interest divestiture — — ( 523 ) — — ( 523 ) — ( 523 ) Net income — — 27,657 — — 27,657 257 27,914 Net distribution to noncontrolling interest — — — — — — 238 238 Balance, December 31, 2023 $ 260 $ 629,737 $ 293,463 $ ( 188,433 ) $ ( 5,235 ) $ 729,792 $ ( 510 ) $ 729,282 See Notes to Condensed Consolidated Financial Statements. 5 Table of Contents PATHWARD FINANCIAL, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows (Unaudited) Three Months Ended December 31, (Dollars in thousands) 2024 2023 Cash flows from operating activities: Net income before noncontrolling interest $ 31,626 $ 27,914 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 14,918 14,689 Provision for credit loss 12,032 9,890 Provision for deferred taxes 2,157 1,162 Originations of loans held for sale ( 853,109 ) ( 631,905 ) Proceeds from sales of loans held for sale 618,432 626,336 Net change in loans held for sale 264,136 13,829 Net realized (gain) loss on loans held for sale ( 4,378 ) 31 Net realized loss on securities available for sale 15,671 — Net realized (gain) on divestitures ( 16,404 ) — Net realized (gain) on other ( 987 ) ( 2,871 ) Net change in accrued interest receivable ( 3,894 ) ( 3,798 ) Net change in other assets ( 30,339 ) ( 14,344 ) Net change in accrued expenses and other liabilities ( 128,088 ) ( 19,723 ) Stock compensation 1,612 1,234 Net cash provided by (used in) operating activities ( 76,615 ) 22,444 Cash flows from investing activities: Purchases of securities available for sale ( 1,168 ) — Proceeds from sales of securities available for sale 160,135 — Proceeds from maturities of and principal collected on securities available for sale 39,727 41,936 Proceeds from maturities of and principal collected on securities held to maturity 1,038 1,093 Purchases of Federal Reserve Bank and Federal Home Loan Bank stock ( 90,725 ) ( 91,130 ) Redemption of Federal Reserve Bank and Federal Home Loan Bank stock 102,285 95,647 Purchases of loans and leases ( 139,359 ) ( 89,390 ) Net change in loans and leases ( 325,766 ) 98,895 Purchases of premises, furniture, and equipment ( 2,087 ) ( 1,885 ) Purchases of rental equipment ( 52,790 ) ( 106,160 ) Proceeds from sales of rental equipment 5,591 3,373 Net change in rental equipment 118 ( 79 ) Proceeds from divestitures, net of transaction costs 600,232 — Proceeds from sale of other assets 408 4,077 Net cash provided by (used in) investing activities 297,639 ( 43,623 ) Cash flows from financing activities: Net change in deposits 655,942 346,873 Net change in short-term borrowings ( 377,000 ) ( 13,000 ) Principal payments on other liabilities — ( 284 ) Dividends paid on common stock ( 1,202 ) ( 1,299 ) Issuance of common stock due to restricted stock — 1 Repurchases of common stock ( 57,010 ) ( 15,918 ) Investment by (distributions to) noncontrolling interest ( 678 ) 238 Net cash provided by financing activities 220,052 316,611 Effect of exchange rate changes on cash ( 2,017 ) 618 Net change in cash and cash equivalents 439,059 296,050 Cash and cash equivalents at beginning of fiscal year 158,337 375,580 Cash and cash equivalents at end of fiscal period $ 597,396 $ 671,630 6 Table of Contents Three Months Ended December 31, (Dollars in thousands) 2024 2023 Supplemental disclosure of cash flow information: Cash paid during the period for: Interest $ 2,906 $ 4,168 Income taxes 1,407 641 Franchise and other taxes 76 66 Supplemental schedule of non-cash investing activities: Transfers Held for sale to loans and leases 2,500 — Loans and leases to rental equipment 1,604 1,430 Rental equipment to loan and leases 36,263 76,941 Recognition of operating lease ROU assets, net of measurements — 654 Joint venture membership interest divestiture — 523 See Notes to Condensed Consolidated Financial Statements. 7 Table of Contents NOTE 1. BASIS OF PRESENTATION The interim unaudited Condensed Consolidated Financial Statements contained herein should be read in conjunction with the audited consolidated financial statements and accompanying notes to the consolidated financial statements for the fiscal year ended September 30, 2024 included in Pathward Financial, Inc.’s ("Pathward Financial" or the “Company") Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on November 26, 2024. Accordingly, footnote disclosures which would substantially duplicate the disclosures contained in the audited consolidated financial statements have been omitted. The financial information of the Company included herein has been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial reporting and has been prepared pursuant to the rules and regulations for reporting on Form 10-Q and Rule 10-01 of Regulation S-X. 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, 2024 are not necessarily indicative of the results expected for the fiscal year ending September 30, 2025. Certain prior fiscal year amounts have been reclassified to conform to the current year financial statement presentation. These reclassifications did not impact previously reported net income, comprehensive income or the statement of financial condition. NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RECENTLY ADOPTED ACCOUNTING STANDARDS UPDATES ("ASU") Significant accounting policies in effect and disclosed within the Company’s most recent audited consolidated financial statements as of September 30, 2024 remain substantially unchanged. The following ASU became effective for the Company on October 1, 2024, and did not have a material impact on the Company’s significant accounting policies or Condensed Consolidated Financial Statements: 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 and additional interim disclosure requirements. The amendments will first be applied to the Company's annual financial statements for the year ending September 30, 2025 using a retrospective transition method. This ASU impacts disclosure only, and therefore does not have an impact on our consolidated financial statements. The following ASUs have been issued and are considered applicable to the Company but have not yet been adopted. 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. This ASU impacts annual income tax disclosures only. The Company is currently evaluating the impact of such amendments to our Income Tax disclosures. ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures . This ASU requires entities to disclose specified information about certain costs and expenses within relevant expense captions in both annual and interim financial reporting. If costs and expenses do not fall within one of the disaggregated captions, qualitative description is required. The amendments in this ASU will be effective for the Company beginning October 1, 2027. This ASU impacts disclosure only, and therefore will not impact our consolidated financial statements. The Company is currently evaluating the impact of this ASU on required annual and interim disclosures. 8 Table of Contents NOTE 3. DIVESTITURES On October 31, 2024, the Company completed the sale of substantially all of the assets and liabilities related to the Bank's commercial insurance premium finance business, a component of the Company's Commercial segment, pursuant to the 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 purchase price at closing was based on the net asset value of the assets purchased and liabilities assumed pursuant to the Purchase Agreement plus a $ 31.2 million premium. The Company has summarized the results of the transaction as follows: (Dollars in thousands) Assets Purchased and Liabilities Assumed Cash and cash equivalents $ 4,686 Loans 594,541 Premises, furniture, and equipment, net 484 Total assets purchased $ 599,711 Deposits $ 16,760 Accrued expenses and other liabilities 1,158 Total liabilities assumed $ 17,918 Net assets purchased $ 581,793 Consideration paid at close 603,290 Consideration due 9,703 Total purchase price 612,993 Premium on transaction 31,200 Other adjustments: Goodwill derecognition ( 11,577 ) Intangible derecognition ( 631 ) Building lease derecognition 471 Transaction costs ( 3,059 ) Total other adjustments ( 14,796 ) Gain on divestitures $ 16,404 The sale resulted in a gain of $ 16.4 million before tax that was recognized within noninterest income on the Company's Condensed Consolidated Statements of Operations. See Note 8. Goodwill and Intangible Assets and Note 9. Operating Lease Right-of-Use Assets and Liabilities to the Condensed Consolidated Financial Statements for further information on the amounts included in the divestiture. 9 Table of Contents NOTE 4. SECURITIES The amortized cost, gross unrealized gains and losses and estimated fair values of debt securities available for sale ("AFS") and held to maturity ("HTM") are presented below. (Dollars in thousands) Amortized Cost Gross Unrealized Gains Gross Unrealized (Losses) Fair Value Debt Securities AFS At December 31, 2024 Corporate securities $ 25,000 $ — $ ( 4,000 ) $ 21,000 SBA securities 34,501 — ( 3,972 ) 30,529 Obligations of states and political subdivisions 200 — — 200 Non-bank qualified obligations of states and political subdivisions 235,137 24 ( 34,436 ) 200,725 Asset-backed securities 184,645 322 ( 4,037 ) 180,930 Mortgage-backed securities 1,250,352 — ( 203,646 ) 1,046,706 Total debt securities AFS $ 1,729,835 $ 346 $ ( 250,091 ) $ 1,480,090 At September 30, 2024 Corporate securities $ 25,000 $ — $ ( 5,250 ) $ 19,750 SBA securities 86,036 — ( 4,101 ) 81,935 Obligations of states and political subdivisions 501 — ( 21 ) 480 Non-bank qualified obligations of states and political subdivisions 246,233 44 ( 28,287 ) 217,990 Asset-backed securities 192,979 337 ( 3,618 ) 189,698 Mortgage-backed securities 1,393,549 84 ( 162,265 ) 1,231,368 Total debt securities AFS $ 1,944,298 $ 465 $ ( 203,542 ) $ 1,741,221 Debt Securities HTM At December 31, 2024 Non-bank qualified obligations of states and political subdivisions $ 29,992 $ — $ ( 4,297 ) $ 25,695 Mortgage-backed securities 2,009 — ( 273 ) 1,736 Total debt securities HTM $ 32,001 $ — $ ( 4,570 ) $ 27,431 At September 30, 2024 Non-bank qualified obligations of states and political subdivisions $ 31,060 $ — $ ( 2,668 ) $ 28,392 Mortgage-backed securities 2,032 — ( 188 ) 1,844 Total debt securities HTM $ 33,092 $ — $ ( 2,856 ) $ 30,236 10 Table of Contents Gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous loss position, were as follows: LESS THAN 12 MONTHS OVER 12 MONTHS TOTAL (Dollars in thousands) Fair Value Gross Unrealized (Losses) Fair Value Gross Unrealized (Losses) Fair Value Gross Unrealized (Losses) Debt Securities AFS At December 31, 2024 Corporate securities $ — $ — $ 21,000 $ ( 4,000 ) $ 21,000 $ ( 4,000 ) SBA securities — — 30,528 ( 3,972 ) 30,528 ( 3,972 ) Non-bank qualified obligations of states and political subdivisions — — 198,747 ( 34,436 ) 198,747 ( 34,436 ) Asset-backed securities 48,261 ( 280 ) 84,879 ( 3,757 ) 133,140 ( 4,037 ) Mortgage-backed securities 15,390 ( 249 ) 1,031,316 ( 203,397 ) 1,046,706 ( 203,646 ) Total debt securities AFS $ 63,651 $ ( 529 ) $ 1,366,470 $ ( 249,562 ) $ 1,430,121 $ ( 250,091 ) At September 30, 2024 Corporate securities $ — $ — $ 19,750 $ ( 5,250 ) $ 19,750 $ ( 5,250 ) SBA securities — — 81,935 ( 4,101 ) 81,935 ( 4,101 ) Obligations of state and political subdivisions — — 280 ( 21 ) 280 ( 21 ) Non-bank qualified obligations of states and political subdivisions — — 215,956 ( 28,287 ) 215,956 ( 28,287 ) Asset-backed securities 52,101 ( 176 ) 88,576 ( 3,442 ) 140,677 ( 3,618 ) Mortgage-backed securities 2,377 ( 15 ) 1,215,781 ( 162,250 ) 1,218,158 ( 162,265 ) Total debt securities AFS $ 54,478 $ ( 191 ) $ 1,622,278 $ ( 203,351 ) $ 1,676,756 $ ( 203,542 ) Debt Securities HTM At December 31, 2024 Non-bank qualified obligations of states and political subdivisions $ — $ — $ 25,695 $ ( 4,297 ) $ 25,695 $ ( 4,297 ) Mortgage-backed securities — — 1,736 ( 273 ) 1,736 ( 273 ) Total debt securities HTM $ — $ — $ 27,431 $ ( 4,570 ) $ 27,431 $ ( 4,570 ) At September 30, 2024 Non-bank qualified obligations of states and political subdivisions $ — $ — $ 28,392 $ ( 2,668 ) $ 28,392 $ ( 2,668 ) Mortgage-backed securities — — 1,844 ( 188 ) 1,844 ( 188 ) Total debt securities HTM $ — $ — $ 30,236 $ ( 2,856 ) $ 30,236 $ ( 2,856 ) The decrease in the fair value of investment securities balances when comparing December 31, 2024 to September 30, 2024 was primarily driven by the sale of $ 160.1 million debt securities AFS and principal pay downs during the three months. The sale of debt securities AFS in the current period stemmed from the close of the commercial insurance premium finance business sale and associated gain that was recognized. Individual securities were identified for sale upon close of the transaction. At December 31, 2024, there were 163 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. At December 31, 2024, there was no allowance for credit losses ("ACL") for debt securities AFS. 11 Table of Contents The amortized cost and fair value of debt securities by contractual maturity are shown below. Certain securities have call features which allow the issuer to call the security prior to maturity. Expected maturities may differ from contractual maturities in MBS because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Therefore, MBS are not included in the maturity categories in the following maturity summary. The expected maturities of certain SBA securities may differ from contractual maturities because the borrowers may have the right to prepay the obligation. However, certain prepayment penalties may apply. (Dollars in thousands) At December 31, 2024 At September 30, 2024 Debt Securities AFS Amortized Cost Fair Value Amortized Cost Fair Value Due in one year or less $ 200 $ 199 $ 1,826 $ 1,796 Due after one year through five years 6,592 6,372 14,772 14,211 Due after five years through ten years 45,866 39,595 70,894 63,636 Due after ten years 426,825 387,218 463,257 430,210 479,483 433,384 550,749 509,853 Mortgage-backed securities 1,250,352 1,046,706 1,393,549 1,231,368 Total debt securities AFS $ 1,729,835 $ 1,480,090 $ 1,944,298 $ 1,741,221 Debt Securities HTM Due after ten years $ 29,992 $ 25,695 $ 31,060 $ 28,392 29,992 25,695 31,060 28,392 Mortgage-backed securities 2,009 1,736 2,032 1,844 Total debt securities HTM $ 32,001 $ 27,431 $ 33,092 $ 30,236 Federal Reserve Bank ("FRB") Stock. The Bank is required by federal law to subscribe to capital stock (divided into shares of $100 each) as a member of the FRB of Minneapolis with an amount equal to six per centum of the paid-up capital stock and surplus. 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, 2024 and September 30, 2024. These equity securities are 'restricted' in that they can only be owned by member banks. Federal Home Loan Bank ("FHLB") Stock. The Company's borrowings from the FHLB are secured by specific investment securities. Such advances can be made pursuant to several different credit programs, each of which has its own interest rate and range of maturities. The investments in the FHLB stock are required investments related to the Company's membership in and current borrowings from the FHLB of Des Moines. The investments in the FHLB of Des Moines could be adversely impacted by the financial operations of the FHLB and actions of their regulator, the Federal Housing Finance Agency. 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 $ 4.8 million and $ 16.3 million at December 31, 2024 and at September 30, 2024, 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 cost approximates fair value. Equity Securities. The Company held $ 3.6 million and $ 3.3 million in marketable equity securities within other assets on the Condensed Consolidated Statements of Financial Condition at December 31, 2024 and September 30, 2024, respectively. The Company recognized $ 0.1 million unrealized losses and $ 0.1 million unrealized gains on marketable equity securities during the three months ended December 31, 2024 and 2023, respectively. No such securities were sold during the three months ended December 31, 2024. 12 Table of Contents Non-marketable equity securities with a readily determinable fair value totaled $ 11.9 million and $ 11.8 million at December 31, 2024 and September 30, 2024, respectively. These securities are held within other assets on the Condensed Consolidated Statements of Financial Condition. The Company recognized $ 0.3 million in unrealized gains during the three months ended December 31, 2024 and 2023. No such securities were sold during the three months ended December 31, 2024. Non-marketable equity securities without readily determinable fair value totaled $ 14.1 million and $ 13.6 million at December 31, 2024 and September 30, 2024, respectively, reflecting Company ownership interests in other entities through its 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 quarter ended December 31, 2024, the Company recognized a $ 0.4 million gain on Visa shares, which is included in gain on sale of other on the Condensed Consolidated Statements of Operations, carried at a cost basis of $0. There was no additional such security sold during the three months ended December 31, 2024. Equity Securities Impairment. The Company evaluates impairment for investments held at cost on at least an annual basis based on the ultimate recoverability of the par value. All other equity investments, including those under the equity method, are reviewed for other-than-temporary impairment on at least a quarterly basis. The Company recognized no impairment for such investments for the three months ended December 31, 2024 and 2023. NOTE 5. LOANS AND LEASES, NET Loans and leases consist of the following: (Dollars in thousands) December 31, 2024 September 30, 2024 Term lending $ 1,735,539 $ 1,554,641 Asset-based lending 608,261 471,897 Factoring 364,477 362,295 Lease financing 138,305 152,174 SBA/USDA 595,965 568,628 Other commercial finance 174,097 185,964 Commercial finance 3,616,644 3,295,599 Consumer finance 280,001 248,800 Tax services 45,051 8,825 Warehouse finance 624,251 517,847 Total loans and leases 4,565,947 4,071,071 Net deferred loan origination costs (fees) ( 3,266 ) 4,124 Total gross loans and leases 4,562,681 4,075,195 Allowance for credit losses ( 48,977 ) ( 45,336 ) Total loans and leases, net $ 4,513,704 $ 4,029,859 During the three months ended December 31, 2024 and 2023, the Company originated $ 853.1 million and $ 631.9 million of commercial finance and consumer finance as held for sale, respectively. The Company sold held for sale loans resulting in proceeds of $ 618.4 million and a $ 4.4 million gain on sale during the three months ended December 31, 2024. 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. See Note 3. Divestitures to the Condensed Consolidated Financial Statements for further information on the sale of the Company's commercial insurance premium finance business. 13 Table of Contents Loans purchased and sold by portfolio segment, including participation interests, were as follows: Three Months Ended December 31, (Dollars in thousands) 2024 2023 Loans Purchased Loans held for investment: Commercial finance $ 19,540 $ — Warehouse finance 119,819 89,390 Total purchases $ 139,359 $ 89,390 Loans Sold Loans held for sale: Commercial finance $ 65,802 $ 3,872 Consumer finance 552,630 622,464 Total sales $ 618,432 $ 626,336 Leasing Portfolio. The net investment in direct financing and sales-type leases was comprised of the following: (Dollars in thousands) December 31, 2024 September 30, 2024 Minimum lease payments receivable $ 147,969 $ 162,757 Unguaranteed residual assets 8,097 9,300 Unamortized initial direct costs 129 102 Unearned income ( 17,726 ) ( 19,883 ) Total net investment in direct financing and sales-type leases $ 138,469 $ 152,276 The components of total lease income were as follows: Three Months Ended December 31, (Dollars in thousands) 2024 2023 Interest income - loans and leases Interest income on net investments in direct financing and sales-type leases $ 3,187 $ 3,108 Leasing and equipment finance noninterest income Lease income from operating lease payments 13,448 13,255 Other (1) 1,307 724 Total leasing and equipment finance noninterest income 14,755 13,979 Total lease income $ 17,942 $ 17,087 (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. 14 Table of Contents Undiscounted future minimum lease payments receivable for direct financing and sales-type leases, and a reconciliation to the carrying amount recorded at December 31, 2024 were as follows: (Dollars in thousands) Remaining in 2025 $ 43,987 2026 42,905 2027 28,342 2028 16,599 2029 10,401 Thereafter 5,735 Total undiscounted future minimum lease payments receivable for direct financing and sales-type leases 147,969 Third-party residual value guarantees — Total carrying amount of direct financing and sales-type leases $ 147,969 The Company did not record any contingent rental income from direct financing and sales-type leases in the three months ended December 31, 2024. A number of factors that affected the economic environment in 2023 continued throughout 2024 including geopolitical conflict, supply chain disruptions, inflation, and increased interest rates, with the Federal Reserve beginning to lower the target federal funds rate at the end of 2024. 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. 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. 15 Table of Contents Activity in the allowance for credit losses by portfolio segment was as follows: Three Months Ended December 31, 2024 (Dollars in thousands) Beginning Balance Provision (Reversal) Charge-offs Recoveries Ending Balance Allowance for credit losses: Term lending $ 30,394 $ 7,289 $ ( 8,375 ) $ 617 $ 29,925 Asset-based lending 1,356 406 — — 1,762 Factoring 5,757 ( 170 ) ( 74 ) 252 5,765 Lease financing 1,189 ( 247 ) ( 63 ) 2 881 Insurance premium finance — 91 ( 93 ) 2 — SBA/USDA 3,273 831 ( 297 ) — 3,807 Other commercial finance 607 ( 186 ) — — 421 Commercial finance 42,576 8,014 ( 8,902 ) 873 42,561 Consumer finance 2,240 2,792 ( 33 ) 2 5,001 Tax services 2 1,301 ( 741 ) 228 790 Warehouse finance 518 107 — — 625 Total loans and leases 45,336 12,214 ( 9,676 ) 1,103 48,977 Unfunded commitments (1) 695 ( 182 ) — — 513 Total $ 46,031 $ 12,032 $ ( 9,676 ) $ 1,103 $ 49,490 (1) Reserve for unfunded commitments is recognized within other liabilities on the Condensed Consolidated Statements of Financial Condition. Three Months Ended December 31, 2023 (Dollars in thousands) Beginning Balance Provision (Reversal) Charge-offs Recoveries Ending Balance Allowance for credit losses: Term lending $ 25,686 $ 5,822 $ ( 5,121 ) $ 626 $ 27,013 Asset-based lending 2,738 ( 1,510 ) — 142 1,370 Factoring 6,566 751 ( 23 ) 139 7,433 Lease financing 3,302 766 ( 153 ) 93 4,008 Insurance premium finance 2,637 ( 239 ) ( 365 ) 90 2,123 SBA/USDA 2,962 327 — — 3,289 Other commercial finance 3,089 223 — — 3,312 Commercial finance 46,980 6,140 ( 5,662 ) 1,090 48,548 Consumer finance 2,346 2,097 ( 63 ) — 4,380 Tax services 2 1,356 ( 1,145 ) 294 507 Warehouse finance 377 ( 27 ) — — 350 Total loans and leases 49,705 9,566 ( 6,870 ) 1,384 53,785 Unfunded commitments (1) 272 324 — — 596 Total $ 49,977 $ 9,890 $ ( 6,870 ) $ 1,384 $ 54,381 (1) Reserve for unfunded commitments is recognized within other liabilities on the Condensed Consolidated Statements of Financial Condition. 16 Table of Contents 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, 2024 At September 30, 2024 Term lending $ 14,034 $ 15,491 Lease financing 1,302 5,300 SBA/USDA 680 1,419 Commercial finance (1) 16,016 22,210 Total $ 16,016 $ 22,210 (1) For commercial finance, collateral dependent financial assets have collateral in the form of cash, equipment, or other business assets. Management has identified certain structured finance credits for alternative energy projects in which a substantial cash collateral account has been established to mitigate credit risk. 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 $ 116.4 million and $ 105.1 million at December 31, 2024 and at September 30, 2024, 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: Pass - A pass asset is of sufficient quality in terms of repayment, collateral and management to preclude a special mention or an adverse rating. Watch - A watch asset is generally a credit performing well under current terms and conditions but with identifiable weakness meriting additional scrutiny and corrective measures. Watch is not a regulatory classification but can be used to designate assets that are exhibiting one or more weaknesses that deserve management’s attention. These assets are of better quality than special mention assets. Special Mention - A special mention asset is a credit with potential weaknesses deserving management’s close attention and, if left uncorrected, may result in deterioration of the repayment prospects for the asset. Special mention assets are not adversely classified and do not expose an institution to sufficient risk to warrant adverse classification. Special mention is a temporary status with aggressive credit management required to garner adequate progress and move to watch or higher. The adverse classifications are as follows: Substandard - A substandard asset is inadequately protected by the net worth and/or repayment ability or by a weak collateral position. Assets so classified will have well-defined weaknesses creating a distinct possibility the Bank will sustain some loss if the weaknesses are not corrected. Loss potential does not have to exist for an asset to be classified as substandard. Doubtful - A doubtful asset has weaknesses similar to those classified substandard, with the degree of weakness causing the likely loss of some principal in any reasonable collection effort. Due to pending factors, the asset’s classification as loss is not yet appropriate. Loss - A loss asset is considered uncollectible and of such little value that the asset’s continuance on the Bank’s balance sheet is no longer warranted. This classification does not necessarily mean an asset has no recovery or salvage value leaving room for future collection efforts. Loans and leases, or portions thereof, are generally charged off when collection of principal becomes doubtful. Typically, this is associated with a delay or shortfall in payments of 120 days or more for consumer credit products and leases, and 90 days or more for commercial finance loans. Action is taken to charge off electronic return originator ("ERO") loans if such loans have not been collected by the end of June and refund advance loans if such loans have not been collected by the end of the calendar year. 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. 17 Table of Contents 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. Credit concentration is a direct, indirect, or contingent obligation that has a common bond where the aggregate exposure equals or exceeds a certain percentage of the Company’s Tier 1 Capital plus the allowable Allowance for Credit Losses. The Company has various portfolios of consumer finance and tax services loans that present unique risks that are statistically managed. Due to the unique risks associated with these portfolios, the Company monitors other credit quality indicators in 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 $ 280.0 million and $ 45.1 million at December 31, 2024, respectively, and $ 248.8 million and $ 8.8 million at September 30, 2024, respectively. The amortized cost basis of loans and leases by asset classification and year of origination was as follows: Amortized Cost Basis (Dollars in thousands) Term Loans and Leases by Origination Year Revolving Loans and Leases Total At December 31, 2024 2025 2024 2023 2022 2021 Prior Term lending Pass $ 166,954 $ 579,028 $ 406,327 $ 108,421 $ 73,456 $ 58,759 $ — $ 1,392,945 Watch 16,193 29,618 35,022 26,480 21,118 12,300 — 140,731 Special mention 1,160 57,525 6,151 8,911 16,720 332 — 90,799 Substandard 8,110 9,337 31,501 22,152 14,933 20,498 — 106,531 Doubtful — 466 855 1,765 468 979 — 4,533 Total 192,417 675,974 479,856 167,729 126,695 92,868 — 1,735,539 Current period charge-offs 4,385 2,043 1,408 423 85 31 — 8,375 Asset-based lending Pass — — — — — — 372,119 372,119 Watch — — — — — — 213,107 213,107 Special mention — — — — — — 19,510 19,510 Substandard — — — — — — 3,525 3,525 Total — — — — — — 608,261 608,261 Current period charge-offs — — — — — — — — Factoring Pass — — — — — — 295,712 295,712 Watch — — — — — — 63,573 63,573 Special mention — — — — — — 1,620 1,620 Substandard — — — — — — 3,553 3,553 Doubtful — — — — — — 19 19 Total — — — — — — 364,477 364,477 Current period charge-offs — — — — — — 74 74 Lease financing Pass 8,349 41,145 40,805 10,546 7,156 7,854 — 115,855 Watch — 703 3,046 61 387 1,877 — 6,074 Special mention — — 235 253 — 177 — 665 Substandard — — 6,489 2,276 5,758 1,185 — 15,708 Doubtful — — — — 3 — — 3 Total 8,349 41,848 50,575 13,136 13,304 11,093 — 138,305 Current period charge-offs — — — 31 32 — — 63 Insurance premium finance Current period charge-offs 62 31 — — — — — 93 SBA/USDA Pass 10,265 83,724 169,125 175,510 20,514 65,396 — 524,534 Watch — 6,218 6,813 2,140 631 3,805 — 19,607 Special mention — — — — 156 361 — 517 Substandard — 795 16,859 12,031 1,984 19,369 — 51,038 Doubtful — — — 55 55 159 — 269 Total 10,265 90,737 192,797 189,736 23,340 89,090 — 595,965 18 Table of Contents Current period charge-offs — 171 — — 14 112 — 297 Other commercial finance Pass 369 71,724 2,180 144 12,234 67,632 — 154,283 Watch — — 2,466 — — — — 2,466 Substandard — — 493 — 16,855 — — 17,348 Total 369 71,724 5,139 144 29,089 67,632 — 174,097 Current period charge-offs — — — — — — — — Warehouse finance Pass — — — — — — 624,251 624,251 Total — — — — — — 624,251 624,251 Current period charge-offs — — — — — — — — Total loans and leases Pass 185,937 775,621 618,437 294,621 113,360 199,641 1,292,082 3,479,699 Watch 16,193 36,539 47,347 28,681 22,136 17,982 276,680 445,558 Special mention 1,160 57,525 6,386 9,164 16,876 870 21,130 113,111 Substandard 8,110 10,132 55,342 36,459 39,530 41,052 7,078 197,703 Doubtful — 466 855 1,820 526 1,138 19 4,824 Total $ 211,400 $ 880,283 $ 728,367 $ 370,745 $ 192,428 $ 260,683 $ 1,596,989 $ 4,240,895 Current period charge-offs $ 4,447 $ 2,245 $ 1,408 $ 454 $ 131 $ 143 $ 74 $ 8,902 Amortized Cost Basis (Dollars in thousands) Term Loans and Leases by Origination Year Revolving Loans and Leases Total At September 30, 2024 2024 2023 2022 2021 2020 Prior Term lending Pass $ 548,597 $ 398,832 $ 117,180 $ 77,585 $ 42,950 $ 24,166 $ — $ 1,209,310 Watch 47,765 52,317 34,964 31,025 2,720 2,312 — 171,103 Special mention 44,617 3,106 9,121 14,772 7,238 2 — 78,856 Substandard 9,798 24,187 18,537 11,660 18,894 2,631 — 85,707 Doubtful 4,314 1,465 2,247 758 114 767 — 9,665 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 Pass — — — — — — 233,268 233,268 Watch — — — — — — 221,521 221,521 Special mention — — — — — — 13,187 13,187 Substandard — — — — — — 3,921 3,921 Total — — — — — — 471,897 471,897 Current period charge-offs — — — — — — — — Factoring Pass — — — — — — 292,436 292,436 Watch — — — — — — 62,270 62,270 Special mention — — — — — — 271 271 Substandard — — — — — — 7,306 7,306 Doubtful — — — — — — 12 12 Total — — — — — — 362,295 362,295 Current period charge-offs — — — — — — 2,453 2,453 Lease financing Pass 44,883 48,851 12,862 7,101 7,938 1,733 — 123,368 Watch 1,837 3,537 370 6,264 1,362 40 — 13,410 Special mention — 250 — — 174 — — 424 Substandard — 6,691 2,723 2,717 2,069 603 — 14,803 Doubtful — — — 138 31 — — 169 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 19 Table of Contents Current period charge-offs 86 890 173 — — — — 1,149 SBA/USDA Pass 60,636 171,136 179,490 20,825 28,588 39,319 — 499,994 Watch 5,244 6,967 — 639 10 3,026 — 15,886 Special mention — — — 156 — 363 — 519 Substandard 1,037 15,923 12,158 2,003 9,519 11,134 — 51,774 Doubtful — 185 55 55 62 98 — 455 Total 66,917 194,211 191,703 23,678 38,179 53,940 — 568,628 Current period charge-offs — 549 79 — 127 — — 755 Other commercial finance Pass 73,330 2,210 6,685 12,351 1,274 70,203 — 166,053 Watch — 2,480 — — — — — 2,480 Substandard — 508 — 16,923 — — — 17,431 Total 73,330 5,198 6,685 29,274 1,274 70,203 — 185,964 Current period charge-offs — — — — — — — — Warehouse finance Pass — — — — — — 517,847 517,847 Total — — — — — — 517,847 517,847 Current period charge-offs — — — — — — — — Total loans and leases Pass 727,446 621,029 316,217 117,862 80,750 135,421 1,043,551 3,042,276 Watch 54,846 65,301 35,334 37,928 4,092 5,378 283,791 486,670 Special mention 44,617 3,356 9,121 14,928 7,412 365 13,458 93,257 Substandard 10,835 47,309 33,418 33,303 30,482 14,368 11,227 180,942 Doubtful 4,314 1,650 2,302 951 207 865 12 10,301 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 Past due loans and leases were as follows: At December 31, 2024 Accruing and Nonaccruing Loans and Leases Nonperforming Loans and Leases (Dollars in thousands) 30-59 Days Past Due 60-89 Days Past Due > 89 Days Past Due Total Past Due Current Total Loans and Leases Receivable > 89 Days Past Due and Accruing Nonaccrual Balance Total Loans held for sale $ — $ — $ — $ — $ 72,648 $ 72,648 $ — $ — $ — Term lending 19,298 4,901 20,122 44,321 1,691,218 1,735,539 5,010 22,226 27,236 Asset-based lending — — — — 608,261 608,261 — 603 603 Factoring — — — — 364,477 364,477 — 561 561 Lease financing 4,278 3,878 1,440 9,596 128,709 138,305 59 2,038 2,097 SBA/USDA 1,504 187 1,983 3,674 592,291 595,965 486 1,803 2,289 Other commercial finance — — — — 174,097 174,097 — — — Commercial finance 25,080 8,966 23,545 57,591 3,559,053 3,616,644 5,555 27,231 32,786 Consumer finance 4,502 2,936 2,423 9,861 270,140 280,001 2,423 — 2,423 Tax services — — — — 45,051 45,051 — — — Warehouse finance — — — — 624,251 624,251 — — — Total loans and leases held for investment 29,582 11,902 25,968 67,452 4,498,495 4,565,947 7,978 27,231 35,209 Total loans and leases $ 29,582 $ 11,902 $ 25,968 $ 67,452 $ 4,571,143 $ 4,638,595 $ 7,978 $ 27,231 $ 35,209 20 Table of Contents At September 30, 2024 Accruing and Nonaccruing Loans and Leases Nonperforming Loans and Leases (Dollars in thousands) 30-59 Days Past Due 60-89 Days Past Due > 89 Days Past Due Total Past Due Current Total Loans and Leases Receivable > 89 Days Past Due and Accruing Nonaccrual Balance Total Loans held for sale $ 2,266 $ 1,361 $ 1,050 $ 4,677 $ 684,193 $ 688,870 $ 1,050 $ — $ 1,050 Term lending 19,776 5,124 17,694 42,594 1,512,047 1,554,641 1,923 23,462 25,385 Asset-based lending — — — — 471,897 471,897 — — — Factoring — — — — 362,295 362,295 — 29 29 Lease financing 3,605 1,595 109 5,309 146,865 152,174 60 746 806 SBA/USDA — 952 2,172 3,124 565,504 568,628 331 2,175 2,506 Other commercial finance — — — — 185,964 185,964 — — — Commercial finance 23,381 7,671 19,975 51,027 3,244,572 3,295,599 2,314 26,412 28,726 Consumer finance 3,962 3,186 3,053 10,201 238,599 248,800 3,053 — 3,053 Tax services — — 8,733 8,733 92 8,825 8,733 — 8,733 Warehouse finance — — — — 517,847 517,847 — — — Total loans and leases held for investment 27,343 10,857 31,761 69,961 4,001,110 4,071,071 14,100 26,412 40,512 Total loans and leases $ 29,609 $ 12,218 $ 32,811 $ 74,638 $ 4,685,303 $ 4,759,941 $ 15,150 $ 26,412 $ 41,562 Nonaccrual loans and leases by year of origination were as follows: Amortized Cost Basis (Dollars in thousands) Term Loans and Leases by Origination Year Revolving Loans and Leases Total Nonaccrual with No ACL At December 31, 2024 2025 2024 2023 2022 2021 Prior Term lending $ — $ 5,456 $ 6,958 $ 4,703 $ 1,200 $ 3,909 $ — $ 22,226 $ 6,552 Asset-based lending — — — — — — 603 603 — Factoring — — — — — — 561 561 — Lease financing — — 533 — 1,323 182 — 2,038 — SBA/USDA — — 513 90 55 1,145 — 1,803 — Commercial finance — 5,456 8,004 4,793 2,578 5,236 1,164 27,231 6,552 Total nonaccrual loans and leases $ — $ 5,456 $ 8,004 $ 4,793 $ 2,578 $ 5,236 $ 1,164 $ 27,231 $ 6,552 Amortized Cost Basis (Dollars in thousands) Term Loans and Leases by Origination Year Revolving Loans and Leases Total Nonaccrual with No ACL At September 30, 2024 2024 2023 2022 2021 2020 Prior Term lending $ 9,281 $ 3,433 $ 5,369 $ 1,386 $ 625 $ 3,368 $ — $ 23,462 $ 2,579 Factoring — — — — — — 29 29 — Lease financing — 577 11 46 2 110 — 746 — SBA/USDA — 738 55 55 742 585 — 2,175 681 Commercial finance 9,281 4,748 5,435 1,487 1,369 4,063 29 26,412 3,260 Total nonaccrual loans and leases $ 9,281 $ 4,748 $ 5,435 $ 1,487 $ 1,369 $ 4,063 $ 29 $ 26,412 $ 3,260 21 Table of Contents Loans and leases that are 90 days or more delinquent and accruing by year of origination were as follows: Amortized Cost Basis (Dollars in thousands) Term Loans and Leases by Origination Year Revolving Loans and Leases Total At December 31, 2024 2025 2024 2023 2022 2021 Prior Term lending $ — $ — $ — $ 560 $ 4,448 $ 2 $ — $ 5,010 Lease financing — 55 1 — 1 2 — 59 SBA/USDA — — — 330 156 — — 486 Commercial finance — 55 1 890 4,605 4 — 5,555 Consumer finance — 976 1,235 190 22 — — 2,423 Total loans and leases held for investment — 1,031 1,236 1,080 4,627 4 — 7,978 Total 90 days or more delinquent and accruing $ — $ 1,031 $ 1,236 $ 1,080 $ 4,627 $ 4 $ — $ 7,978 Amortized Cost Basis (Dollars in thousands) Term Loans and Leases by Origination Year Revolving Loans and Leases Total At September 30, 2024 2024 2023 2022 2021 2020 Prior Loans held for sale $ 1,031 $ 19 $ — $ — $ — $ — $ — $ 1,050 Term lending — 621 354 719 217 12 — 1,923 Lease financing — — — 2 58 — — 60 SBA/USDA — — 331 — — — — 331 Commercial finance — 621 685 721 275 12 — 2,314 Consumer finance 736 1,841 388 88 — — — 3,053 Tax services 8,733 — — — — — — 8,733 Total loans and leases held for investment 9,469 2,462 1,073 809 275 12 — 14,100 Total 90 days or more delinquent and accruing $ 10,500 $ 2,481 $ 1,073 $ 809 $ 275 $ 12 $ — $ 15,150 Certain loans and leases 90 days or more past due as to interest or principal continue to accrue because they are (1) well-secured and in the process of collection or (2) consumer loans exempt under regulatory rules from being classified as nonaccrual until later delinquency, usually 120 days past due. The following table provides the average recorded investment in nonaccrual loans and leases: Three Months Ended December 31, (Dollars in thousands) 2024 2023 Term lending $ 23,208 $ 17,419 Asset-based lending 591 9,711 Factoring 265 1,180 Lease financing 1,565 1,623 SBA/USDA 1,900 1,488 Commercial finance 27,529 31,421 Total loans and leases $ 27,529 $ 31,421 The recognized interest income on the Company's nonaccrual loans and leases for the three months ended December 31, 2024 and 2023 was not significant. Modifications made to borrowers experiencing financial difficulty during the three months ended December 31, 2024 were $ 3.3 million in the commercial finance loan portfolio. The types of modifications granted were term extensions. Modifications made to borrowers experiencing financial difficulty during the three months ended December 31, 2023 were insignificant. 22 Table of Contents During the three months ended December 31, 2024, the Company had $ 1.4 million of commercial finance loans where a modification was granted in the previous 12 months in which there was a payment default. As of December 31, 2024, no modifications granted were in the 60-89 days past due category. During the three months ended December 31, 2023, there were no modifications granted in the previous 12 months in which there was a payment default. NOTE 6. EARNINGS PER COMMON SHARE ("EPS") The Company has granted restricted share awards with dividend rights that are considered to be participating securities. Accordingly, a portion of the Company’s earnings is allocated to those participating securities in the earnings per share calculation under the two-class method. 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 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, and after the allocation of earnings to the participating securities. Antidilutive securities are disregarded in earnings per share calculations. Diluted EPS shown below reflects the two-class method, as diluted EPS under the two-class method was more dilutive than under the treasury stock method. 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, (Dollars in thousands, except per share data) 2024 2023 Basic income per common share: Net income attributable to Pathward Financial, Inc. $ 31,427 $ 27,657 Dividends and undistributed earnings allocated to participating securities ( 130 ) ( 220 ) Basic net earnings available to common stockholders 31,297 27,437 Undistributed earnings allocated to nonvested restricted stockholders 125 210 Reallocation of undistributed earnings to nonvested restricted stockholders ( 125 ) ( 210 ) Diluted net earnings available to common stockholders $ 31,297 $ 27,437 Total weighted-average basic common shares outstanding 24,221,697 25,776,845 Effect of dilutive securities (1) PSUs 58,674 24,693 Total effect of dilutive securities 58,674 24,693 Total weighted-average diluted common shares outstanding 24,280,371 25,801,538 Net earnings per common share: Basic earnings per common share $ 1.29 $ 1.06 Diluted earnings per common share (2) $ 1.29 $ 1.06 (1) Represents the effect of the assumed vesting of PSUs 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, 2024 and 2023, respectively, were 100,406 and 207,074 weighted average shares of nonvested restricted stock because their inclusion would be anti-dilutive. 23 Table of Contents NOTE 7. RENTAL EQUIPMENT, NET Rental equipment consists of the following: (Dollars in thousands) December 31, 2024 September 30, 2024 Computers and IT networking equipment $ 18,219 $ 21,308 Motor vehicles and other 148,940 140,920 Other furniture and equipment 37,195 38,755 Solar panels and equipment 129,821 128,296 Total 334,175 329,279 Accumulated depreciation ( 128,425 ) ( 124,987 ) Unamortized initial direct costs 1,004 1,047 Net book value $ 206,754 $ 205,339 Future minimum lease payments expected to be received for operating leases at December 31, 2024 were as follows: (Dollars in thousands) Remaining in 2025 $ 31,957 2026 34,726 2027 26,540 2028 17,823 2029 12,010 Thereafter 6,178 Total $ 129,234 NOTE 8. GOODWILL AND INTANGIBLE ASSETS The Company held a total of $ 297.9 million of goodwill at December 31, 2024. The recorded goodwill is a result of multiple business combinations that occurred from 2015 to 2018. During the three months ended December 31, 2024, the Company closed on the sale of the commercial insurance premium finance business and derecognized the goodwill associated with that reporting unit. The goodwill was included in the carrying amount of the disposed business. See Note 3. Divestitures to the Condensed Consolidated Financial Statements for further information. The changes in the carrying amount of the Company's goodwill were as follows: (Dollars in thousands) Consumer Commercial Corporate Services/Other Total At September 30, 2024 $ 87,145 $ 222,360 $ — $ 309,505 Divestiture — ( 11,577 ) — ( 11,577 ) At December 31, 2024 $ 87,145 $ 210,783 $ — $ 297,928 At September 30, 2023 $ 87,145 $ 222,360 $ — $ 309,505 At December 31, 2023 $ 87,145 $ 222,360 $ — $ 309,505 24 Table of Contents The changes in the carrying amount of the Company’s intangible assets during the three months ended December 31, 2024 include certain intangibles disposed of as part of the commercial insurance premium finance business sale. The relevant intangibles were included in the carrying amount of the disposed business. See Note 3. Divestitures to the Condensed Consolidated Financial Statements for further information. (Dollars in thousands) Trademark (1) Non-Compete Customer Relationships (2) All Others (3) Total At September 30, 2024 $ 6,422 $ — $ 6,566 $ 3,601 $ 16,589 Amortization during the period ( 269 ) — ( 411 ) ( 132 ) ( 812 ) Write-offs and disposals during the period — — ( 631 ) — ( 631 ) At December 31, 2024 $ 6,153 $ — $ 5,524 $ 3,469 $ 15,146 Gross carrying amount $ 13,774 $ 301 $ 70,338 $ 7,732 $ 92,145 Accumulated amortization ( 7,621 ) ( 301 ) ( 53,896 ) ( 4,110 ) ( 65,928 ) Accumulated impairment — — ( 10,918 ) ( 153 ) ( 11,071 ) At December 31, 2024 $ 6,153 $ — $ 5,524 $ 3,469 $ 15,146 At September 30, 2023 $ 7,477 $ — $ 9,110 $ 4,133 $ 20,720 Amortization during the period ( 264 ) — ( 587 ) ( 133 ) ( 984 ) At December 31, 2023 $ 7,213 $ — $ 8,523 $ 4,000 $ 19,736 Gross carrying amount $ 13,774 $ 301 $ 77,578 $ 7,798 $ 99,451 Accumulated amortization ( 6,561 ) ( 301 ) ( 58,137 ) ( 3,579 ) ( 68,578 ) Accumulated impairment — — ( 10,918 ) ( 219 ) ( 11,137 ) At December 31, 2023 $ 7,213 $ — $ 8,523 $ 4,000 $ 19,736 (1) Book amortization period of 5 - 15 years. Amortized using the straight line and accelerated methods. (2) Book amortization period of 10 - 30 years. Amortized using the accelerated method. (3) Book amortization period of 3 - 20 years. Amortized using the straight line method. 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 2025 and subsequent fiscal years at December 31, 2024 was as follows: (Dollars in thousands) Remaining in 2025 $ 2,620 2026 3,109 2027 2,489 2028 2,200 2029 1,585 Thereafter 3,143 Total anticipated intangible amortization $ 15,146 There were no impairments to intangible assets during the three months ended December 31, 2024 and 2023. Intangible impairment expense is recorded within the impairment expense line of the Condensed Consolidated Statements of Operations. NOTE 9. OPERATING LEASE RIGHT-OF-USE ASSETS AND LIABILITIES Operating lease right-of-use ("ROU") assets, included in other assets , were $ 22.6 million and $ 24.4 million at December 31, 2024 and September 30, 2024, respectively. Operating lease liabilities, included in accrued expenses and other liabilities , were $ 23.8 million and $ 26.0 million at December 31, 2024 and September 30, 2024, respectively. 25 Table of Contents The decreases in lease ROU assets and liabilities relate to normal amortization and lease payments made during the three months ended December 31, 2024, but also include adjustments for lease assignments that occurred as a result of the commercial insurance premium finance business sale during the quarter. Two office locations, Newport Beach, California and Addison, Texas, were included in the sale of the commercial insurance premium finance business and the relevant lease ROU assets and liabilities are no longer reflected in the Company's Condensed Consolidated Financial Statements after the transaction closed. The derecognition of the relevant lease ROU assets and liabilities resulted in a $ 0.5 million gain on remeasurement that was recognized as part of the overall gain on divestitures from the commercial insurance premium finance business sale. See Note 3. Divestitures to the Condensed Consolidated Financial Statements for further information. Undiscounted future minimum operating lease payments and a reconciliation to the amount recorded as operating lease liabilities at December 31, 2024 were as follows: (Dollars in thousands) Remaining in 2025 $ 2,535 2026 3,048 2027 2,856 2028 2,816 2029 2,841 Thereafter 12,703 Total undiscounted future minimum lease payments 26,799 Discount ( 3,049 ) Total operating lease liabilities $ 23,750 The weighted-average discount rate and remaining lease term for operating leases were as follows: December 31, 2024 September 30, 2024 Weighted-average discount rate 2.50 % 2.45 % Weighted-average remaining lease term (years) 8.91 8.78 The components of total lease costs for operating leases were as follows: Three Months Ended December 31, (Dollars in thousands) 2024 2023 Lease expense $ 919 $ 1,025 Short-term and variable lease cost 21 ( 7 ) Sublease income ( 352 ) ( 370 ) Total lease cost for operating leases $ 588 $ 648 NOTE 10. STOCKHOLDERS' EQUITY Repurchase of Common Stock. The Company's Board of Directors authorized the September 3, 2021 share repurchase program to repurchase up to 6,000,000 shares of the Company's outstanding common stock. This authorization 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. During the three months ended December 31, 2024 and 2023, the Company repurchased 701,860 and 232,588 shares, respectively, as part of the share repurchase programs. Under the repurchase programs, repurchased shares were retired and designated as authorized but unissued shares. The Company accounts for repurchased shares using the par value method under which the repurchase price is credited to paid-in capital up to the amount of the original proceeds of those shares. When the repurchase price is greater than the original issue proceeds, the excess is charged to retained earnings. As of December 31, 2024, 6,298,140 shares of common stock remained available for repurchase. 26 Table of Contents For the three months ended December 31, 2024 and 2023, the Company also repurchased 66,446 and 103,641 shares, or $ 4.6 million and $ 4.9 million, of common stock, respectively, in settlement of employee tax withholding obligations due upon the vesting of restricted stock. Retirement of Treasury Stock. The Company accounts for the retirement of repurchased shares, including treasury stock, using the par value method under which the repurchase price is charged to paid-in capital up to the amount of the original proceeds of those shares. 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, 2024 and 2023. NOTE 11. STOCK COMPENSATION 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. These shares vest at various times ranging from immediately to three years based on circumstances at time of grant. The fair value is determined based on the fair market value of the Company’s stock on the grant date. Director shares are issued to the Company’s directors, and these shares 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 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. For those PSUs subject to a market condition, a simulation valuation is performed. In addition, during the first and second quarters of fiscal year 2017, shares were granted to certain executive officers of the Company in connection with their signing of employment agreements with the Company. These stock awards vest in equal installments over eight years . 27 Table of Contents 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, 2024. Number of Shares Weighted Average Fair Value at Grant Restricted Stock Awards Nonvested shares outstanding, September 30, 2024 248,670 $ 41.19 Granted — — Vested ( 164,069 ) 37.80 Forfeited or expired ( 782 ) 50.15 Nonvested shares outstanding, December 31, 2024 83,819 $ 47.75 Restricted Stock Units Nonvested shares outstanding, September 30, 2024 — $ — Granted 84,038 79.66 Vested — — Forfeited or expired — — Nonvested shares outstanding, December 31, 2024 84,038 $ 79.66 Number of Units Weighted Average Fair Value at Grant PSUs outstanding, September 30, 2024 142,462 $ 47.24 Granted 33,136 79.63 Vested ( 34,304 ) 57.21 Forfeited or expired — — PSUs outstanding, December 31, 2024 141,294 $ 52.42 Compensation expense for share-based awards is recorded over the vesting period at the fair value of the award at the time of the grant. The exercise price of fair value of nonvested (restricted) shares and PSUs granted under the Company’s incentive plans is equal to the fair market value of the underlying stock at the grant date, adjusted for dividends where applicable. The Company has elected to record forfeitures as they occur. As of December 31, 2024, stock-based compensation expense not yet recognized in income totaled $ 13.7 million, which is expected to be recognized over a weighted average remaining period of 1.95 years. NOTE 12. INCOME TAXES The Company recorded an income tax expense of $ 6.3 million for the three months ended December 31, 2024, resulting in an effective tax rate of 16.60 %, compared to an income tax expense of $ 5.7 million, or an effective tax rate of 17.00 %, for the three months ended December 31, 2023. The Company’s effective tax rate was lower than the U.S. statutory rate of 21% primarily because of the effect of investment tax credits during fiscal year 2025. The Company's effective tax rate in the future will depend in part on actual investment tax credits generated from qualified renewable energy property. 28 Table of Contents The table below compares the income tax expense components for the periods presented. Three Months Ended December 31, (Dollars in thousands) 2024 2023 Provision at statutory rate $ 7,921 $ 7,009 Tax-exempt income ( 168 ) ( 174 ) State income taxes 1,243 1,228 Interim period effective rate adjustment 1,659 2,806 Tax credit investments, net - federal ( 3,167 ) ( 4,377 ) IRC 162(m) nondeductible compensation 55 ( 280 ) Other, net ( 1,249 ) ( 493 ) Income tax expense $ 6,294 $ 5,719 Effective tax rate 16.60 % 17.00 % NOTE 13. 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. For additional descriptions of the Company’s operating segments, including additional financial information and the underlying management accounting process, see Note 14. Segment Reporting to the Condensed Consolidated Financial Statements. (Dollars in thousands) Consumer Commercial Corporate Services/Other Consolidated Company Three Months Ended December 31, 2024 2023 2024 2023 2024 2023 2024 2023 Net interest income (1) $ 69,127 $ 59,356 $ 46,111 $ 45,881 $ 895 $ 4,799 $ 116,133 $ 110,036 Noninterest income: Refund transfer product fees 410 422 — — — — 410 422 Refund advance fee income (1) 459 111 — — — — 459 111 Card and deposit fees 28,828 30,507 232 236 6 7 29,066 30,750 Rental income (1) — — 13,508 13,235 200 224 13,708 13,459 (Loss) on sale of securities (1) — — — — ( 15,671 ) — ( 15,671 ) — Gain on divestitures (1) — — — — 16,404 — 16,404 — Gain (loss) on sale of loans and leases (1) 40 ( 31 ) 4,338 — — — 4,378 ( 31 ) Gain on sale of other (1) — — 531 362 456 2,509 987 2,871 Other income (1) 3,864 1,778 2,630 2,166 1,143 1,235 7,637 5,179 Total noninterest income 33,601 32,787 21,239 15,999 2,538 3,975 57,378 52,761 Revenue $ 102,728 $ 92,143 $ 67,350 $ 61,880 $ 3,433 $ 8,774 $ 173,511 $ 162,797 (1) These revenues are not within the scope of Topic 606. Additional details are included in other footnotes to the accompanying financial statements. The scope of Topic 606 explicitly excludes net interest income as well as many other revenues for financial assets and liabilities, including loans, leases, and securities. Following is a discussion of key revenues within the scope of Topic 606. The Company provides services to customers that have related performance obligations that must be completed to recognize revenue. Revenues are generally recognized immediately upon the completion of the service or over time as services are performed. Any services performed over time generally require that the Company renders services each period; 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, 2024. 29 Table of Contents Refund Transfer Product Fees. 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. Refund transfer fees are recognized by the Company immediately after the taxpayer's refund has been disbursed in accordance with the contract and are based on standalone pricing included within the terms and conditions. Certain expenses to tax preparation software providers are netted with refund transfer fee income as the Company is considered the agent in these contractual relationships. All refund transfer fees are recorded within the Consumer reporting segment. Card and Deposit Fees. 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. Since interchange fees are generated by cardholder activity, the Company recognizes the income as transactions occur. Fee income for merchant services and other card related services reflect account management and transaction fees charged to merchants for processing card association network transactions. The associated income is recognized as transactions occur or as services are performed. For the Company's internally managed prepaid card programs, fees are based on standalone pricing within the terms and conditions of the cardholder agreement. The Company is considered the principal of these relationships resulting in all fee income being presented on a gross basis within the Condensed Consolidated Statement of Operations. For the Company's sponsorship prepaid card programs where a third-party is considered the Program Manager, the fees are based on standalone pricing within the terms and conditions of the Program Agreement. For these relationships, the Company is considered the agent and certain expenses with the Program Manager, networks and associations are netted with card fee revenue. All card fee income is included in the Consumer reporting segment. 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 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 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 off-balance sheet custodial deposits. This fee income is for services the Bank performs to maintain records of cardholder funds placed at one or more third-party banks insured by the Federal Deposit Insurance Corporation ("FDIC"). The servicing fee is typically reflective of the effective federal funds rate ("EFFR"). NOTE 14. SEGMENT REPORTING An operating segment is generally defined as a component of a business for which discrete financial information is available and whose results are reviewed by the chief operating decision-maker. Operating segments are aggregated into reportable segments if certain criteria are met. The Company reports its results of operations through the following three business segments: Consumer, Commercial, and Corporate Services/Other. The Partner Solutions business line is reported in the Consumer segment. The Commercial Finance business line is reported in the Commercial segment. The Corporate Services/Other segment includes certain shared services as well as treasury related functions such as the investment portfolio, warehouse finance, wholesale deposits, and borrowings. 30 Table of Contents The following table presents segment data for the Company: (Dollars in thousands) Consumer Commercial Corporate Services/Other Total Three Months Ended December 31, 2024 2023 2024 2023 2024 2023 2024 2023 Net interest income $ 69,127 $ 59,356 $ 46,111 $ 45,881 $ 895 $ 4,799 $ 116,133 $ 110,036 Provision for (reversal of) credit loss 4,095 3,454 7,831 6,463 106 ( 27 ) 12,032 9,890 Noninterest income 33,601 32,787 21,239 15,999 2,538 3,975 57,378 52,761 Noninterest expense 49,142 50,013 32,765 34,856 41,652 34,405 123,559 119,274 Income (loss) before income tax expense 49,491 38,676 26,754 20,561 ( 38,325 ) ( 25,604 ) 37,920 33,633 Total assets 535,134 563,706 4,086,116 4,206,522 3,001,092 3,157,209 7,622,342 7,927,437 Total goodwill 87,145 87,145 210,783 222,360 — — 297,928 309,505 Total deposits 6,305,236 6,587,052 1,439 3,669 212,278 345,334 6,518,953 6,936,055 NOTE 15. FAIR VALUES OF FINANCIAL INSTRUMENTS ASC 820, Fair Value Measurements defines fair value, establishes a framework for measuring the fair value of assets and liabilities using a hierarchy system and requires disclosures about fair value measurement. It clarifies that fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the market in which the reporting entity transacts. The fair value hierarchy is as follows: Level 1 Inputs - Valuation is based upon quoted prices for identical instruments traded in active markets that the Company has the ability to access at measurement date. Level 2 Inputs - Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques for which significant assumptions are observable in the market. Level 3 Inputs - Valuation is generated from model-based techniques that use significant assumptions not observable in the market and are used only to the extent that observable inputs are not available. These unobservable assumptions reflect the Company’s own estimates of assumptions that market participants would use in pricing the asset or liability. Debt Securities AFS and HTM . Debt securities AFS are recorded at fair value on a recurring basis and debt securities HTM are carried at amortized cost. The fair value of debt securities AFS, 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. Management reviews the prices obtained from independent asset pricing services for unusual fluctuations and compares to current market trading activity. Equity Securities. Marketable equity securities and certain non-marketable equity securities are recorded at fair value on a recurring basis. The fair values of marketable equity securities are determined by obtaining quoted prices on nationally recognized securities exchanges (Level 1 inputs). 31 Table of Contents The following tables summarize the fair values of debt securities AFS and equity securities as they are measured at fair value on a recurring basis. At December 31, 2024 (Dollars in thousands) Total Level 1 Level 2 Level 3 Debt securities AFS Corporate securities $ 21,000 $ — $ 21,000 $ — SBA securities 30,529 — 30,529 — Obligations of states and political subdivisions 200 — 200 — Non-bank qualified obligations of states and political subdivisions 200,725 — 200,725 — Asset-backed securities 180,930 — 180,930 — Mortgage-backed securities 1,046,706 — 1,046,706 — Total debt securities AFS $ 1,480,090 $ — $ 1,480,090 $ — Common equities and mutual funds (1) $ 3,563 $ 3,563 $ — $ — Non-marketable equity securities (2) $ 11,870 $ — $ — $ — (1) Equity securities at fair value are included within other assets on the Condensed Consolidated Statements of Financial Condition at December 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. At September 30, 2024 (Dollars in thousands) Total Level 1 Level 2 Level 3 Debt securities AFS Corporate securities $ 19,750 $ — $ 19,750 $ — SBA securities 81,935 — 81,935 — Obligations of states and political subdivisions 480 — 480 — Non-bank qualified obligations of states and political subdivisions 217,990 — 217,990 — Asset-backed securities 189,698 — 189,698 — Mortgage-backed securities 1,231,368 — 1,231,368 — Total debt securities AFS $ 1,741,221 $ — $ 1,741,221 $ — Common equities and mutual funds (1) $ 3,303 $ 3,303 $ — $ — Non-marketable equity securities (2) $ 11,828 $ — $ — $ — (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. Loans and Leases. The Company does not record loans and leases at fair value on a recurring basis. However, if a loan or lease is individually evaluated for risk of credit loss and repayment is expected to be solely provided by the values of the underlying collateral, the Company measures fair value on a nonrecurring basis. Fair value is determined by the fair value of the underlying collateral less estimated costs to sell. 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 45 %. 32 Table of Contents 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, 2024 (Dollars in thousands) Total Level 1 Level 2 Level 3 Loans and leases, net individually evaluated for credit loss Commercial finance $ 4,751 $ — $ — $ 4,751 Total loans and leases, net individually evaluated for credit loss 4,751 — — 4,751 Total $ 4,751 $ — $ — $ 4,751 At September 30, 2024 (Dollars in thousands) Total Level 1 Level 2 Level 3 Loans and leases, net individually evaluated for credit loss Commercial finance $ 7,652 $ — $ — $ 7,652 Total loans and leases, net individually evaluated for credit loss 7,652 — — 7,652 Total $ 7,652 $ — $ — $ 7,652 Quantitative Information About Level 3 Fair Value Measurements (Dollars in thousands) Fair Value at December 31, 2024 Fair Value at September 30, 2024 Valuation Technique Unobservable Input Range of Inputs Loans and leases, net individually evaluated for credit loss $ 4,751 $ 7,652 Market approach Appraised values (1) 3 % - 45 % (1) The Company generally relies on external appraisers to develop this information. Management reduced the appraised value by estimating selling costs and other inputs in a range of 3 % to 45 %. 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, 2024 and September 30, 2024 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. However, since there is no active market for certain financial instruments of the Company, the estimates of fair value are subjective in nature, involve uncertainties, and include matters of significant judgment. Changes in assumptions as well as tax considerations could significantly affect the estimated values. Accordingly, the aggregate fair value estimates are not intended to represent the underlying value of the Company, on either a going concern or a liquidation basis. 33 Table of Contents The following tables present the carrying amount and estimated fair value of the financial instruments held by the Company: At December 31, 2024 (Dollars in thousands) Carrying Amount Estimated Fair Value Level 1 Level 2 Level 3 Financial assets Cash and cash equivalents $ 597,396 $ 597,396 $ 597,396 $ — $ — Debt securities available for sale 1,480,090 1,480,090 — 1,480,090 — Debt securities held to maturity 32,001 27,431 — 27,431 — Common equities and mutual funds (1) 3,563 3,563 3,563 — — Non-marketable equity securities (1)(2) 21,569 21,569 — 9,699 — Loans held for sale 72,648 72,648 — 72,648 — Loans and leases 4,565,947 4,501,798 — — 4,501,798 Federal Reserve Bank and Federal Home Loan Bank stocks 24,454 24,454 — 24,454 — Accrued interest receivable 35,279 35,279 35,279 — — Financial liabilities Deposits 6,518,953 6,518,852 6,514,740 4,112 — Other short- and long-term borrowings 33,380 32,332 — 32,332 — Accrued interest payable 771 771 771 — — (1) Equity securities at fair value are included within other assets on the Condensed Consolidated Statements of Financial Condition at December 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. At September 30, 2024 (Dollars in thousands) Carrying Amount Estimated Fair Value Level 1 Level 2 Level 3 Financial assets Cash and cash equivalents $ 158,337 $ 158,337 $ 158,337 $ — $ — Debt securities available for sale 1,741,221 1,741,221 — 1,741,221 — Debt securities held to maturity 33,092 30,236 — 30,236 — Common equities and mutual funds (1) 3,303 3,303 3,303 — — Non-marketable equity securities (1)(2) 21,350 21,350 — 9,522 — Loans held for sale 688,870 688,870 — 688,870 — Loans and leases 4,071,071 4,036,490 — — 4,036,490 Federal Reserve Bank and Federal Home Loan Bank stocks 36,014 36,014 — 36,014 — Accrued interest receivable 31,385 31,385 31,385 — — Financial liabilities 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 — Accrued interest payable 571 571 571 — — (1) Equity securities at fair value are included within other assets on the Consolidated Statements of Financial Condition at September 30, 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. NOTE 16. SUBSEQUENT EVENTS Management has evaluated subsequent events that occurred after December 31, 2024. 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, 2024. 34 Table of Contents