What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-02-05 compared with 2025-09-16 · 94 added, 159 removed, 256 unchanged (50% of the section changed)

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expected growth opportunities may not be realized or may take longer to realize than expected;

the potential adverse effects of unusual and infrequently occurring events, including the impact on financial markets from geopolitical conflicts such as the military conflicts in Ukraine and the Middle East, weather-related disasters, or public health events, such as pandemics, and any governmental or societal responses thereto;

our ability to successfully implement measures designed to reduce expenses and increase efficiencies;

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technological risks and developments and cyber threats, attacks, or events;

and the success of the Company at maintaining its high quality asset level and managing and collecting assets of borrowers in default should problem assets increase.

the success of the Company at maintaining its high quality asset level and managing and collecting assets of borrowers in default should problem assets increase;

and the potential adverse effects of unusual and infrequently occurring events, including the impact on financial markets from geopolitical conflicts and tensions, weather-related disasters, or public health events, such as pandemics, and any governmental or societal responses thereto.

The foregoing list of factors is not exclusive.

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All subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section.

Additional discussions of factors affecting the Company’s business and prospects are reflected under the caption “Risk Factors” and in other sections of the Company’s Annual Report on Form 10-K/A for the Company’s fiscal year ended September 30, 2024, and in the Company's other filings made with the SEC.

Additional discussions of factors affecting the Company’s business and prospects are reflected under the caption “Risk Factors” and in other sections of the Company’s Annual Report on Form 10-K for the Company’s fiscal year ended September 30, 2025, and in the Company's other filings made with the SEC.

The Company expressly disclaims any intent or obligation to update, revise, or clarify any forward-looking statements, whether written or oral, that may be made from time to time by or on behalf of the Company or its subsidiaries, whether as a result of new information, changed circumstances, or future events or for any other reason.

The Company, a registered bank holding company that has elected to be a financial holding company, is a Delaware corporation, the principal assets of which are all the issued and outstanding shares of the Bank, a chartered national bank, the accounts of which are insured up to applicable limits by the FDIC as administrator of the Deposit Insurance Fund.

Pathward Financial, a registered bank holding company that has elected to be a financial holding company, is a Delaware corporation.

Pathward Financial's principal assets are all the issued and outstanding shares of the Bank, a chartered national bank, the accounts of which are insured up to applicable limits by the FDIC as administrator of the Deposit Insurance Fund.

Unless the context otherwise requires, references herein to the Company include Pathward Financial and the Bank, and all direct or indirect subsidiaries of Pathward Financial on a consolidated basis.

The Company’s common stock trades on the NASDAQ Global Select Market under the symbol “CASH.”

The following discussion focuses on the consolidated financial condition of the Company at June 30, 2025, compared to September 30, 2024, and the consolidated results of operations for the three and nine months ended June 30, 2025 and 2024.

This discussion should be read in conjunction with the Company’s consolidated financial statements, and notes thereto, for the fiscal year ended September 30, 2024 and the related management's discussion and analysis of financial condition and results of operations contained in the Company's Annual Report on Form 10-K/A for the fiscal year ended September 30, 2024.

As described in Note 17.

"Restatement of Previously Issued Financial Statements" to the condensed consolidated financial statements, the Company has restated its unaudited historical consolidated financial statements as of June 30, 2024 and for the three and nine months ended June 30, 2024.

Prior period financial information restated for three and nine months ended June 30, 2024, was restated in the Form 10-K/A for the fiscal year ended September 30, 2024.

As a result the previously reported financial information as of June 30, 2024 and for the three and nine months ended June 30, 2024 in this management's discussion and analysis has been updated to reflect the restatements.

The following discussion focuses on the consolidated financial condition of the Company at December 31, 2025, compared to September 30, 2025, and the consolidated results of operations for the three months ended December 31, 2025 and 2024.

This discussion should be read in conjunction with the Company’s consolidated financial statements, and notes thereto, for the fiscal year ended September 30, 2025 and the related management's discussion and analysis of financial condition and results of operations contained in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2025.

EXECUTIVE SUMMARY

Financial Highlights for the 2025 Fiscal Third Quarter

• Total revenue for the third quarter was $195.8 million, an increase of $7.1 million, or 4%, compared to the same quarter in fiscal 2024, driven by an increase in noninterest income.

• Net interest margin ("NIM") increased 17 basis points to 7.43% for the third quarter from 7.26% during the same period of last year, primarily driven by an improved earning asset mix from the continued balance sheet optimization and lower cost of funds.

• Total gross loans and leases at June 30, 2025 increased $127.7 million to $4.74 billion compared to June 30, 2024 and increased $278.5 million when compared to March 31, 2025.

When excluding the insurance premium finance loans, which sold during the first quarter of fiscal 2025, of $620.1 million at June 30, 2024, total gross loans and leases at June 30, 2025 increased $747.8 million, or 19%, when compared to June 30, 2024.

• During the 2025 fiscal third quarter, the Company repurchased 603,780 shares of common stock at an average share price of $74.49.

As of June 30, 2025, there were 5,118,556 shares available for repurchase under the current common stock share repurchase program.

For the nine months ended June 30, 2025, total tax services product revenue was $95.2 million, an increase of 16% compared to the same period of the prior year.

The increase in revenue was driven by increases in tax product fee income, refund advance fee income, and tax services net interest income.

Provision for credit losses for the tax services portfolio decreased $0.5 million for the nine months ended June 30, 2025 when compared to the same period of the prior year, due to improvements in data analytics, underwriting and monitoring.

Total tax services product income, net of losses and direct product expenses, increased 27% to $59.8 million from $47.1 million, when comparing the first nine months of fiscal 2025 to the same period of the prior fiscal year.

Financial Highlights for the 2026 Fiscal First Quarter

All highlights are compared to the same fiscal quarter in the prior year period.

• Total revenue for the first quarter was $173.1 million.

Net interest income on commercial finance loans increased $9.2 million reflecting the ongoing balance sheet optimization strategy.

• New loan originations during the quarter increased from $1.38 billion to $1.89 billion, driven by increases in consumer and commercial finance.

The increase in consumer loan originations was primarily due to the new contract announced during fiscal 2025 and growth with current partners.

• Annualized return on average assets was 1.87% and return on average tangible equity was 26.72%, both improvements over the prior year period.

• The Company repurchased 651,804 shares of common stock at an average share price of $72.07.

As of December 31, 2025, there were 4,286,012 shares available for repurchase under the current common stock share repurchase program.

FINANCIAL CONDITION

At June 30, 2025, the Company’s total assets decreased to $7.23 billion compared to $7.53 billion at September 30, 2024, primarily due to reductions of $641.9 million in loans held for sale and $373.9 million in securities AFS, partially offset by growth of $668.1 million in loans and leases and $100.0 million in cash and cash equivalents.

Total cash and cash equivalents were $258.3 million at June 30, 2025, increasing from $158.3 million at September 30, 2024.

The increase is primarily due to the proceeds from the sale of the commercial insurance premium finance business, net transaction costs, the sale of the transportation portfolio within the Company's working capital lending solutions, and the sale of debt securities AFS, partially offset by the repayment of short-term borrowings during the nine months ended June 30, 2025.

At December 31, 2025, the Company’s total assets increased to $7.56 billion compared to $7.17 billion at September 30, 2025, primarily due to growth of $317.9 million in loans and leases and $210.6 million in cash and cash equivalents, partially offset by reductions of $91.5 million in loans held for sale, $18.7 million in other assets and $17.8 million in debt securities AFS.

Total cash and cash equivalents were $331.2 million at December 31, 2025, increasing from $120.6 million at September 30, 2025.

The Company maintains its cash investments primarily in interest-bearing overnight deposits with the FHLB of Des Moines and the FRB.

At June 30, 2025, the Company did not have any federal funds sold.

The Company's investment security balances at June 30, 2025 totaled $1.40 billion, as compared to $1.77 billion at September 30, 2024.

The decrease is primarily due to $217.9 million of debt securities AFS sold by the Bank during the nine months ended June 30, 2025.

At December 31, 2025, the Company did not have any federal funds sold.

The Company's investment security balances at December 31, 2025 totaled $1.34 billion, as compared to $1.36 billion at September 30, 2025, due to maturities and principal pay downs.

The Company’s portfolio of securities customarily consists primarily of MBS, which have expected lives much shorter than the stated final maturity, non-bank qualified obligations of states and political subdivisions, which mature in approximately 15 years or less, and other tax exempt municipal mortgage related pass through securities which have average lives much shorter than their stated final maturities.

During the nine months ended June 30, 2025, the Company made $2.3 million of purchases of investment securities.

During the three months ended December 31, 2025, the Company made no purchases of investment securities.

Through the Bank, the Company owns stock in the FHLB due to the Bank’s membership and participation in this banking system as well as stock in the FRB.

The FHLB requires a level of stock investment based on a pre-determined formula.

The Company’s investment in these stocks was $29.5 million at June 30, 2025 and $36.0 million at September 30, 2024, as redemptions were partially offset by purchases of FHLB membership stock during the nine months ended June 30, 2025.

Loans held for sale at June 30, 2025 totaled $49.8 million, decreasing from $691.7 million at September 30, 2024.

This decrease was primarily driven by the sale of the commercial insurance premium finance loans and a reduction in SBA/USDA loans held for sale, partially offset by an increase in consumer credit products held for sale at June 30, 2025 compared to September 30, 2024.

Total gross loans and leases totaled $4.74 billion at June 30, 2025, as compared to $4.08 billion at September 30, 2024.

The increase was due to growth in the commercial finance, warehouse finance, and the tax services loan portfolios, partially offset by a reduction in the consumer finance loan portfolio.

The Company’s investment in these stocks was $24.3 million at December 31, 2025 and $24.7 million at September 30, 2025, as redemptions were partially offset by purchases of FHLB membership stock during the three months ended December 31, 2025.

Loans held for sale at December 31, 2025 totaled $88.0 million, decreasing from $179.4 million at September 30, 2025.

This decrease was primarily driven by the sale of more than half of the held for sale consumer finance portfolio in October 2025, partially offset by an increase in SBA/USDA loans held for sale at December 31, 2025 compared to September 30, 2025.

Total gross loans and leases totaled $4.98 billion at December 31, 2025, as compared to $4.66 billion at September 30, 2025.

The increase was due to increases in the commercial finance, seasonal tax services, and seasonal consumer finance portfolios, partially offset by a slight decrease in the warehouse finance portfolio.

Loans and Leases, Net to the “Notes to Condensed Consolidated Financial Statements” of this Quarterly Report on Form 10-Q.

Commercial finance loans, which comprised 80% of the Company's loan and lease portfolio, totaled $3.82 billion at June 30, 2025 , reflecting an increase of $522.4 million, 16%, from September 30, 2024.

The increase was primarily driven by increases of $449.1 million in term lending, $139.0 million in asset-based lending, and $106.3 million in SBA/USDA, partially offset by decreases of $121.3 million in factoring loans, $18.0 million in lease financing and $32.6 million in other commercial finance.

Total end-of-period deposits increased 2% to $6.01 billion at June 30, 2025, compared to $5.88 billion at September 30, 2024, primarily driven by increases in noninterest-bearing deposits of $152.6 million, interest-bearing deposits of $9.6 million, and savings deposits of $2.1 million, partially offset by a decrease in wholesale deposits of $25.0 million.

As of June 30, 2025, the Company had $365.6 million in deposits related to government stimulus programs.

The Company's total borrowings decreased from $410.4 million at September 30, 2024 to $148.4 million at June 30, 2025, primarily driven by a decrease in short-term borrowings of $262.0 million as the Company used total deposits to fund loans and leases and investment balances.

Commercial finance loans, which comprised 83% of the Company's loan and lease portfolio, totaled $4.15 billion at December 31, 2025 , reflecting an increase of $223.2 million, or 6%, from September 30, 2025.

The increase was primarily driven by increases of $204.2 million in term lending and $36.1 million in asset-based lending, partially offset by decreases in lease financing, other commercial finance, and factoring.

Total end-of-period deposits increased 8% to $6.35 billion at December 31, 2025, compared to $5.89 billion at September 30, 2025, primarily driven by increases in noninterest-bearing deposits of $458.6 million and in money market deposits of $5.9 million, partially offset by a decrease in savings deposits of $1.4 million.

The Company's total borrowings decreased from $42.5 million at September 30, 2025 to $33.5 million at December 31, 2025, primarily driven by a decrease in short-term borrowings of $9.0 million as the Company used total deposits to fund loans and leases and investment balances.

The Company's short-term borrowings fluctuate on a daily basis due to the nature of a portion of its noninterest-bearing deposit base.

At June 30, 2025, the Company’s stockholders’ equity totaled $818.1 million, a decrease of $4.0 million, from $822.2 million at September 30, 2024.

The decrease was primarily attributable to an increase in accumulated other comprehensive loss, partially offset by an increase in retained earnings.

The Company and Bank remained above the federal regulatory minimum capital requirements at June 30, 2025, and continued to be classified as well-capitalized, and in good standing with the regulatory agencies.

At December 31, 2025, the Company’s stockholders’ equity totaled $853.7 million, a decrease of $3.7 million, from $857.5 million at September 30, 2025.

The decrease was primarily attributable to a decrease in retained earnings, partially offset by a decrease in accumulated other comprehensive loss.

The Company and Bank remained above the federal regulatory minimum capital requirements at December 31, 2025, and continued to be classified as well-capitalized, and in good standing with the regulatory agencies.

See “Liquidity and Capital Resources” for further information.

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The following table summarizes the Company's negative deposit balances within the Partner Solutions business line:

(Dollars in thousands) June 30, 2025 September 30, 2024

(Dollars in thousands) December 31, 2025 September 30, 2025

Noninterest-bearing deposits $ 6,366,126 $ 5,886,873

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Noninterest-bearing checking, net $ 6,078,191 $ 5,619,554

Off-Balance Sheet Custodial Deposits.

Custodial Deposits.

The Bank utilizes a custodial deposit transference structure for certain prepaid and deposit programs whereby the Bank, acting as custodian of cardholder funds, places a portion of such cardholder funds that are not needed to support near term settlement at one or more third-party banks insured by the FDIC (each, a “Program Bank”).

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Program Banks undergo robust due diligence prior to becoming a Program Bank and are also subject to continuous monitoring.

As of June 30, 2025, the Company managed $430.7 million of customer deposits at other banks in its capacity as custodian.

As of December 31, 2025, the Company managed $1.05 billion of customer deposits at other banks in its capacity as custodian.

These deposits provide the Company with the ability to earn servicing fee income, typically reflective of the EFFR.

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The balances presented in the tables below are calculated on a daily average basis.

Tax-equivalent adjustments have been made in yields on interest-bearing assets and NIM.

Tax-equivalent adjustments have been made in yields on interest-bearing assets and net interest margin ("NIM").

Nonaccruing loans and leases have been included in the table as loans or leases carrying a zero yield.

Three Months Ended June 30,

(As Restated)

(Dollars in thousands) Average

Balance Interest

Interest-earning assets:

Cash and fed funds sold $ 281,545 $ 2,326 3.31 % $ 224,987 $ 2,053 3.67 %

Mortgage-backed securities 1,198,015 8,337 2.79 % 1,438,683 9,748 2.73 %

Tax-exempt investment securities 113,886 782 3.49 % 128,117 911 3.62 %

Asset-backed securities 152,635 1,968 5.17 % 220,461 3,148 5.74 %

Other investment securities 179,942 1,413 3.15 % 282,966 2,211 3.14 %

Total investments 1,644,478 12,500 3.10 % 2,070,227 16,018 3.16 %

Commercial finance 3,717,018 76,736 8.28 % 3,758,771 78,791 8.43 %

Consumer finance 268,132 16,791 25.12 % 286,476 18,318 25.72 %

Tax services 43,035 48 0.45 % 56,836 55 0.39 %

Warehouse finance 648,059 15,191 9.40 % 407,210 10,598 10.47 %

Total loans and leases 4,676,244 108,766 9.33 % 4,509,293 107,762 9.61 %

Total interest-earning assets 6,602,267 $ 123,592 7.52 % 6,804,507 $ 125,833 7.45 %

Noninterest-earning assets 567,794 516,133

Total assets $ 7,170,061 $ 7,320,640

Interest-bearing liabilities:

Interest-bearing checking $ 1,196 $ — 0.06 % $ 684 $ — 0.14 %

Savings 53,450 4 0.03 % 56,565 3 0.02 %

Money markets 171,503 264 0.62 % 178,255 584 1.32 %

Time deposits 2,855 7 1.03 % 4,265 3 0.32 %

Wholesale deposits 1,035 12 4.56 % 74,167 1,099 5.96 %

Total interest-bearing deposits (a) 230,039 287 0.50 % 313,936 1,689 2.16 %

Overnight fed funds purchased 31,365 360 4.61 % 52,374 730 5.61 %

Subordinated debentures 19,753 355 7.21 % 19,651 355 7.26 %

Other borrowings 13,661 277 8.13 % 13,705 309 9.07 %

Total borrowings 64,779 992 6.14 % 85,730 1,394 6.54 %

Total interest-bearing liabilities 294,818 1,279 1.74 % 399,666 3,083 3.10 %

Noninterest-bearing deposits (b) 5,772,508 — — % 5,947,054 — — %

Total deposits and interest-bearing liabilities 6,067,326 $ 1,279 0.08 % 6,346,720 $ 3,083 0.20 %

Other noninterest-bearing liabilities 304,786 252,841

Total liabilities 6,372,112 6,599,561

Shareholders' equity 797,949 721,079

Total liabilities and shareholders' equity $ 7,170,061 $ 7,320,640

Net interest income and net interest rate spread including noninterest-bearing deposits $ 122,313 7.44 % $ 122,750 7.26 %

Net interest margin 7.43 % 7.26 %

Tax-equivalent effect 0.01 % 0.01 %

Net interest margin, tax-equivalent (2)

7.44 % 7.27 %

Total cost of deposits (a+b) 6,002,547 287 0.02 % 6,260,990 1,689 0.11 %

(1) Tax rate used to arrive at the TEY for the three months ended June 30, 2025 and 2024 was 21%.

(2) Net interest margin expressed on a fully-taxable-equivalent basis ("net interest margin, tax-equivalent") is a non-GAAP financial measure.

The tax-equivalent adjustment to net interest income recognizes the estimated income tax savings when comparing taxable and tax-exempt assets and adjusting for federal and state exemption of interest income.

The Company believes that it is a standard practice in the banking industry to present net interest margin expressed on a fully taxable equivalent basis and, accordingly, believes the presentation of this non-GAAP financial measure may be useful for peer comparison purposes.

Nine Months Ended June 30,

(As Restated)

Three Months Ended December 31,

(Dollars in thousands) Average

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Total cost of deposits (a+b) 6,173,866 206 0.01 % 6,081,235 775 0.05 %

(1) Tax rate used to arrive at the TEY for the nine months ended June 30, 2025 and 2024 was 21%.

(1) Tax rate used to arrive at the TEY for the three months ended December 31, 2025 and 2024 was 21%.

(2) Net interest margin expressed on a fully-taxable-equivalent basis ("net interest margin, tax-equivalent") is a non-GAAP financial measure.

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The Company recorded net income of $42.1 million, or $1.81 per diluted share, for the three months ended June 30, 2025, compared to net income of $44.9 million, or $1.78 per diluted share, for the three months ended June 30, 2024.

The Company recorded net income of $147.1 million, or $6.17 per diluted share, for the nine months ended June 30, 2025, compared to net income of $149.7 million, or $5.85 per diluted share, for the nine months ended June 30, 2024.

The Company reported net income of $35.2 million, or $1.57 per diluted share, for the three months ended December 31, 2025, compared to net income of $30.0 million, or $1.23 per diluted share, for the three months ended December 31, 2024.

Net Interest Income

Net interest income for the third quarter of fiscal 2025 was $122.3 million, a slight decrease from the same quarter in fiscal 2024.

For the nine months ended June 30, 2025, net interest income was $383.8 million, an increase of 4%, from $370.3 million compared to the same period in the prior fiscal year.

The Company’s average interest-earning assets for the third quarter of fiscal 2025 decreased by $202.2 million to $6.60 billion compared to the same quarter in fiscal 2024, due to decreases in average outstanding balances of total investment securities, partially offset by increases in total loan and lease balances and interest earning cash balances.

The third quarter average outstanding balance of loans and leases increased $167.0 million compared to the same quarter of the prior fiscal year, primarily due to increases in the warehouse finance, partially offset by decreases in the commercial finance, consumer finance and tax services loan portfolios.

The decrease in the average outstanding balance of commercial finance loans and leases was primarily driven by the sale of the insurance premium finance loans during the first quarter of fiscal year 2025.

Fiscal 2025 third quarter NIM increased to 7.43% from 7.26% in the third fiscal quarter of 2024 .

The overall reported tax-equivalent yield (“TEY”) on average interest-earning assets increased 7 basis points to 7.52% compared to the prior year quarter, driven by an improved earning asset mix.

Net interest income for the first quarter of fiscal 2026 was $119.3 million, which was a decrease of 5% compared to the same quarter in fiscal 2025.

The Company’s average interest-earning assets for the first quarter of fiscal 2026 increased by $75.8 million to $6.81 billion compared to the same quarter in fiscal 2025, primarily due to increases in average outstanding balances in total loan and lease balances partially offset by decreases in securities investment balances.

The first quarter average outstanding balance of loans and leases increased $353.7 million compared to the same quarter of the prior fiscal year, due to increases in the commercial finance, warehouse finance, and tax services portfolios, partially offset by a decrease in the consumer finance portfolio.

Fiscal 2026 first quarter NIM decreased to 6.95% from 7.38% in the first fiscal quarter of 2025 .

The overall reported tax-equivalent yield (“TEY”) on average interest-earning assets decreased 50 basis points to 7.07% compared to the prior year quarter.

The yield on the loan and lease portfolio was 8.56% compared to 9.55% for the comparable period last year and the TEY on the securities portfolio was 3.05% compared to 3.10% over that same period.

For the nine months ended June 30, 2025, NIM was 7.30%, an increase of 40 basis points from 6.90% compared to the same period in the prior fiscal year.

The Company's cost of funds for all deposits and borrowings averaged 0.08% during the fiscal 2025 third quarter, as compared to 0.20% during the prior year quarter.

The Company's overall cost of deposits was 0.02% in the fiscal third quarter of 2025, as compared to 0.11% during the prior year quarter.

The decreases in NIM, the TEY on average interest-earning assets, and the yield on the loan and lease portfolio was primarily driven by the sale of more than half of the held for sale consumer finance portfolio in October 2025 that was accounted for using a gross accounting methodology, and therefore, recorded at higher yields with offsetting entries not included in net interest income.

The Company's cost of funds for all deposits and borrowings averaged 0.12% during the fiscal 2026 first quarter, as compared to 0.20% during the prior year quarter.

The Company's overall cost of deposits was 0.01% in the fiscal first quarter of 2026, as compared to 0.05% during the prior year quarter.

Provision for Credit Loss

The Company recognized a provision for credit losses of $9.3 million for the quarter ended June 30, 2025, compared to $11.9 million for the comparable period in the prior fiscal year.

The period-over-period decrease in provision for credit losses was primarily due to increases in provision for credit losses in the commercial finance portfolio of $3.6 million, offset by decreases in the provision for credit losses in the tax services portfolio of $1.4 million and $4.5 million in the consumer finance portfolio.

The Company recognized net charge-offs of $6.1 million for the quarter ended June 30, 2025, compared to net charge-offs of $16.2 million for the quarter ended June 30, 2024.

Net charge-offs attributable to the commercial finance portfolio and the consumer finance portfolio for the quarter ended June 30, 2025, were $1.7 million and $5.8 million, respectively, while net recoveries of $1.4 million were recognized in the tax services portfolio.

Net charge-offs attributable to the commercial finance portfolio and the consumer finance portfolio for the same quarter of the prior year were $6.9 million and $9.7 million, respectively, while net recoveries of $0.4 million were recognized in the tax services portfolio.

The Company recognized a provision for credit losses of $63.2 million for the nine months ended June 30, 2025, compared to $49.4 million for the comparable period in the prior fiscal year.

The increase was primarily due to increases in provision for credit losses in all loan portfolios except the tax services portfolio.

The Company recognized net charge-offs of $28.8 million for the nine months ended June 30, 2025, compared to net charge-offs of $38.8 million for the nine months ended June 30, 2024.

Net charge-offs attributable to the commercial finance portfolio and consumer finance portfolio for the nine months ended June 30, 2025, were $16.6 million and $19.8 million, respectively, while recoveries of $7.7 million were recognized in the tax services portfolio.

Net charge-offs attributable to the commercial finance portfolio and consumer finance portfolio were $16.2 million and $28.0 million, respectively, for the same nine months of the prior year, while net recoveries of $5.4 million were recognized in the tax services portfolio.

The Company recognized a provision for credit losses of $3.2 million for the quarter ended December 31, 2025, compared to provision for credit losses of $18.7 million for the comparable period in the prior fiscal year.

The period-over-period decrease in provision for credit losses was primarily due to decreases in provision for credit losses in the commercial finance portfolio of $7.4 million, consumer finance portfolio of $5.3 million, and the tax services portfolio of $2.7 million.

The commercial finance decrease in provision for credit losses was primarily driven by net recoveries recognized during the current period as compared to net charge-offs recognized in the prior year period.

The consumer finance decrease in provision for credit losses was primarily driven by a reduction in loan balances stemming from the aforementioned consumer finance portfolio sale in October 2025.

The decrease in the tax services portfolio provision for credit losses was driven by net recoveries recognized during the current period as compared to net charge-offs recognized during the prior year period.

The Company recognized net recoveries of $2.2 million for the quarter ended December 31, 2025, compared to net charge-offs of $16.3 million for the quarter ended December 31, 2024.

Net recoveries attributable to the seasonal tax services and commercial finance portfolios for the quarter ended December 31, 2025 were $2.5 million and $1.3 million, respectively, while net charge-offs of $1.5 million were recognized in the consumer finance portfolio.

Net charge-offs attributable to the commercial finance, consumer finance, and tax services portfolios for the same quarter of the prior year were $8.1 million, $7.7 million, and $0.5 million, respectively.

Noninterest Income

Fiscal 2025 third quarter noninterest income increased 11% to $73.4 million, compared to $65.9 million for the same period of the prior year.

The increase in noninterest income when comparing the current period to the same period of the prior year was primarily driven by secondary market revenue, card and deposit fees, and total tax services product fee income, partially offset by reductions in gain on other and rental income.

Included in card and deposit fees is servicing fee income on custodial deposits, which totaled $7.9 million during the 2025 fiscal third quarter, compared to $8.6 million for the same period of the prior year.

For the fiscal quarter ended March 31, 2025, servicing fee income on custodial deposits totaled $6.5 million.

The period-over-period decrease in servicing fee income on deposit balances held at partner banks was primarily due to a reduction in rates following reductions in the EFFR.

The sequential quarter increase in servicing fee income was due to an increase in custodial deposits.

Noninterest income for the nine months ended June 30, 2025 increased to $269.3 million from $247.6 million for the same period of the prior year.

Fiscal 2026 first quarter noninterest income decreased 6% to $53.8 million, compared to $57.4 million for the same period of the prior year.

The decrease in noninterest income when comparing the current period to the same period of the prior year was primarily driven by decreases in rental income, other income, and gain on sale of other, partially offset by an increase in card and deposit fee income.

Additionally, during the prior year period, the Company recognized a $16.4 million gain on divestiture which was almost completely offset by a loss on sale of securities of $15.7 million.

Servicing fee income on custodial deposits totaled $3.4 million during the 2026 fiscal first quarter, compared to $4.5 million for the same period of the prior year.

For the fiscal quarter ended September 30, 2025, servicing fee income on custodial deposits totaled $2.6 million.

The year-over-year decrease in servicing fee income on custodial deposit balances held at partner banks was due to a reduction in rates following reductions in the EFFR.

sequential quarter increase in servicing fee income on custodial deposit balances held at partner banks was due to higher quarterly average deposits balances held at partner banks.

Noninterest Expense

Noninterest expense increased 11% to $139.3 million for the fiscal 2025 third quarter, from $125.5 million for the same quarter last year.

The increase was primarily attributable to increases in legal and consulting expense, other expense, card processing expense, occupancy and equipment expense, and operating lease equipment depreciation expense.

Noninterest expense was $127.2 million for the fiscal 2026 first quarter, as compared to $127.8 million for the same quarter last year.

The marginal decrease was primarily attributable to reductions in card processing expense, other expense, and operating and lease equipment depreciation, partially offset by increases in compensation and benefits, building and software, and legal and consulting expense.

Card processing expense is primarily driven by rate-related agreements with Partner Solutions relationships.

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Generally, this rate index is based on a percentage of the EFFR and reprices immediately upon a change in the EFFR.

Approximately 62% of the deposit portfolio was subject to these rate-related processing expenses during the fiscal 2025 third quarter.

For the fiscal quarter ended June 30, 2025, contractual, rate-related processing expenses were $25.1 million, as compared to $28.4 million for the fiscal quarter ended March 31, 2025 and $27.6 million for the fiscal quarter ended June 30, 2024.

Noninterest expense for the nine months ended June 30, 2025 increased to $415.3 million from $387.3 million for the same period of the prior year.

Approximately 66% of the deposit portfolio was subject to these rate-related processing expenses during the fiscal 2026 first quarter.

For the fiscal quarter ended December 31, 2025, contractual, rate-related processing expenses were $23.8 million, as compared to $24.9 million for the fiscal quarter ended September 30, 2025 and $25.6 million for the fiscal quarter ended December 31, 2024.

Income Tax Expense

The Company recorded income tax expense of $4.8 million, representing an effective tax rate of 10.2%, for the fiscal 2025 third quarter, compared to an income tax expense of $6.1 million, representing an effective tax rate of 11.9%, for the third quarter last fiscal year.

The current quarter decrease in income tax expense compared to the prior year quarter was primarily due to a decrease in income.

The Company originated $2.1 million in renewable energy leases during the fiscal 2025 third quarter, resulting in $0.2 million in total net investment tax credits.

During the third quarter of fiscal 2024, the Company originated $4.3 million in renewable energy leases resulting in $1.2 million in total net investment tax credits.

For the nine months ended June 30, 2025, the Company originated $13.3 million in renewable energy leases, compared to $42.1 million for the comparable prior year period.

The Company recorded an income tax expense of $7.2 million, representing an effective tax rate of 16.9%, for the fiscal 2026 first quarter, compared to an income tax expense of $6.0 million, representing an effective tax rate of 16.6%, for the first quarter last fiscal year.

The current quarter increase in income tax expense compared to the prior year quarter was primarily due to the increase in income.

The Company originated $19.7 million in renewable energy leases during the fiscal 2026 first quarter, resulting in $5.2 million in total net investment tax credits.

During the first quarter of fiscal 2025, the Company originated $9.3 million in renewable energy leases resulting in $3.2 million in total net investment tax credits.

Investment tax credits related to renewable energy leases are recognized ratably based on income throughout each fiscal year.

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The Company considers these relationships as being in the process of collection.

Insurance premium finance loans, consumer finance and tax services loans are generally not placed on nonaccrual status, but are instead written off when the collection of principal and interest become doubtful.

Consumer finance and tax services loans are generally not placed on nonaccrual status, but are instead written off when the collection of principal and interest become doubtful.

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

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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 believes that the level of allowance for credit losses at June 30, 2025 was appropriate and reflected probable losses related to these loans and leases;

The Company believes that the level of allowance for credit losses at December 31, 2025 was appropriate and reflected probable losses related to these loans and leases;

however, there can be no assurance that all loans and leases will be fully collectible or that the present level of the allowance will be adequate in the future.

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The table below sets forth the amounts and categories of the Company's nonperforming assets.

(Dollars in thousands) June 30, 2025 September 30, 2024

(Dollars in thousands) December 31, 2025 September 30, 2025

Nonperforming Loans and Leases

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(1) Certain tax services loans do not bear interest.

The Company's nonperforming assets at June 30, 2025 were $74.7 million, representing 1.03% of total assets, compared to $43.0 million, or 0.57% of total assets at September 30, 2024.

The increase in the nonperforming assets as a percentage of total assets at June 30, 2025 compared to September 30, 2024, was primarily driven by an increase in nonperforming loans in the commercial finance portfolio, and to a lesser extent, an increase in the consumer finance portfolio, partially offset a decrease in nonperforming loans in the seasonal tax services portfolio.

The Company's nonperforming loans and leases at June 30, 2025 were $71.3 million, representing 1.49% of total gross loans and leases, compared to $41.6 million, or 0.87% of total gross loans and leases at September 30, 2024.

The Company's nonperforming assets at December 31, 2025 were $111.5 million, representing 1.47% of total assets, compared to $101.7 million, or 1.42% of total assets at September 30, 2025.

The increase in the nonperforming assets as a percentage of total assets at December 31, 2025 compared to September 30, 2025, was driven by an increase in nonperforming loans in the commercial finance portfolio, partially offset by decreases in the tax services and consumer finance portfolios.

The Company's nonperforming loans and leases at December 31, 2025 were $109.1 million, representing 2.15% of total gross loans and leases, compared to $99.1 million, or 2.05% of total gross loans and leases at September 30, 2025.

Classified Assets .

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The Bank’s determinations as to the classification of its assets and the amount of its valuation allowances are subject to review by its regulatory authorities, which may order the establishment of additional general or specific loss allowances.

On the basis of management’s review of its loans, leases, and other assets, at June 30, 2025, the Company had classified loans and leases of $207.0 million as substandard, $14.4 million as doubtful and none as loss.

On the basis of management’s review of its loans, leases, and other assets, at December 31, 2025, the Company had classified loans and leases of $286.9 million as substandard, $10.2 million as doubtful and none as loss.

At September 30, 2025, the Company classified loans and leases of $244.9 million as substandard, $13.7 million as doubtful and none as loss.

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If an individually evaluated loan or lease is not collateral dependent, credit loss is measured at the present value of expected future cash flows discounted at the loan or lease initial effective interest rate.

The Company's ACL totaled $106.0 million at June 30, 2025, an increase compared to $71.8 million at September 30, 2024.

The increase in the ACL at June 30, 2025, when compared to September 30, 2024, was primarily due to a $30.4 million increase in the allowance related to the seasonal tax services portfolio and a $5.9 million increase related to the commercial finance portfolio, partially offset by a $2.2 million decrease in the allowance related to the consumer finance portfolio.

The Company's ACL totaled $58.8 million at December 31, 2025, an increase compared to $53.3 million at September 30, 2025.

The increase in the ACL at December 31, 2025, when compared to September 30, 2025, was primarily due to a $2.6 million increase in the allowance related to the consumer finance portfolio, a $1.9 million increase in the allowance related to the commercial finance portfolio, and a $1.1 million increase in the allowance related to the tax services portfolio.

The following table presents the Company's ACL as a percentage of its total loans and leases.

As of the Period Ended

June 30, 2025 March 31, 2025 December 31, 2024 September 30, 2024 June 30, 2024

December 31, 2025 September 30, 2025 June 30, 2025 March 31, 2025 December 31, 2024

Commercial finance 1.16 % 1.18 % 1.27 % 1.10 % 1.18 %

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Total loans and leases excluding tax services 1.17 % 1.14 % 1.60 % 1.57 % 1.63 %

The Company's ACL as a percentage of total loans and leases increased to 2.23% at June 30, 2025 from 1.76% at September 30, 2024.

The increase in the total loans and leases coverage ratio was primarily driven by seasonality in both the tax services portfolio and consumer finance portfolio.

When comparing the current quarter to the same quarter of the prior year, the increase in the tax services coverage ratio was due to higher repayments during the current quarter which decreased the outstanding loan balance within the portfolio.

The Company's ACL as a percentage of total loans and leases increased to 1.18% at December 31, 2025 from 1.14% at September 30, 2025 and decreased from 1.63% at December 31, 2024.

The year-over-year decrease in the total loans and leases coverage ratio was primarily driven by the decrease in the ACL related to the decrease in the consumer finance portfolio due to the aforementioned loan sale within the consumer finance portfolio that occurred in October 2025.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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Some of these estimates may be uncertain at the time they are made, could change from period to period, and could have a material impact on the financial statements.

A discussion of the Company’s critical accounting policies and estimates can be found in the Company's Form 10-K/A for the year ended September 30, 2024.

There were no significant changes to these critical accounting policies and estimates during the first nine months of fiscal 2025.

A discussion of the Company’s critical accounting policies and estimates can be found in the Company's Form 10-K for the year ended September 30, 2025.

There were no significant changes to these critical accounting policies and estimates during the first three months of fiscal 2026.

LIQUIDITY AND CAPITAL RESOURCES

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The Company uses its capital resources principally to meet ongoing commitments to fund maturing certificates of deposit and loan commitments, to maintain liquidity, and to meet operating expenses.

At June 30, 2025, the Company had unfunded loan and lease commitments of $1.27 billion.

At December 31, 2025, the Company had unfunded loan and lease commitments of $1.30 billion.

Management believes that loan repayment and other sources of funds will be adequate to meet its foreseeable short- and long-term liquidity needs.

The liquidity sources as of June 30, 2025 include $258.3 million in cash and cash equivalents and $430.7 million in off-balance sheet custodial deposits.

When factoring in additional resources, such as the Federal Home Loan Bank, the Federal Reserve Discount Window and other unsecured funding and wholesale options, the Company has over $2.65 billion in total available liquidity as of June 30, 2025.

Due to the characteristics of the Company's deposit portfolio, uninsured deposits remained less than 15% of total deposits during the fiscal 2025 third quarter and below the Company's available liquidity.

The liquidity sources as of December 31, 2025 include $331.2 million in cash and cash equivalents and $1.05 billion in custodial deposits.

When factoring in additional resources, such as the Federal Home Loan Bank, the Federal Reserve Discount Window and other unsecured funding and wholesale options, the Company has over $3.66 billion in total available liquidity as of December 31, 2025.

Due to the characteristics of the Company's deposit portfolio, uninsured deposits remained less than 15% of total deposits during the fiscal 2026 first quarter and below the Company's available liquidity.

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

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The Capital Rules require the Company and the Bank to maintain minimum ratios (set forth in the table below) of total risk-based capital and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined), and a leverage ratio consisting of Tier 1 capital (as defined) to average assets (as defined).

At June 30, 2025, the Company and the Bank exceeded federal regulatory minimum capital requirements to be classified as well-capitalized under the prompt corrective action requirements.

At December 31, 2025, the Company and the Bank exceeded federal regulatory minimum capital requirements to be classified as well-capitalized under the prompt corrective action requirements.

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

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to be Adequately Capitalized Under Prompt Corrective Action Provisions Minimum to be Well Capitalized Under Prompt Corrective Action Provisions

June 30, 2025

December 31, 2025

Tier 1 leverage capital ratio 9.51 % 9.84 % 4.00 % 5.00 %

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Standardized Approach (1)

(Dollars in thousands) June 30, 2025 September 30, 2024

(Dollars in thousands) December 31, 2025 September 30, 2025

Total stockholders' equity $ 853,712 $ 857,454

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CONTRACTUAL OBLIGATIONS

Management's Discussion and Analysis of Financial Condition and Results of Operations-Contractual Obligations " in the Company’s Form 10-K/A for its fiscal year ended September 30, 2024 for a summary of our contractual obligations as of September 30, 2024.

There were no material changes outside the ordinary course of our business in contractual obligations from September 30, 2024 through June 30, 2025.

Management's Discussion and Analysis of Financial Condition and Results of Operations-Contractual Obligations " in the Company’s Form 10-K for its fiscal year ended September 30, 2025 for a summary of our contractual obligations as of September 30, 2025.

There were no material changes outside the ordinary course of our business in contractual obligations from September 30, 2025 through December 31, 2025.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis