CASH Pathward Financial Inc

Pathward Financial, Inc. (“Pathward Financial” or the “Company”) (Nasdaq: CASH) reported net income of $35.9 million, or $1.36 per share, for the three months ended September 30, 2023, compared to net income of $23.4 million, or $0.81 per share, for the three months ended September 30, 2022.

The Company reported net income of $163.6 million, $5.99 per share, for the fiscal year ended September 30, 2023, compared to net income of $156.4 million, or $5.26 per share, for the fiscal year ended September 30, 2022. For the fiscal year ended September 30, 2023, the Company recognized return on average assets of 2.33% compared to 2.20% for the prior year period.

For the fiscal year ended September 30, 2023, the Company recognized adjusted net income of $166.5 million, or $6.09 per share, compared to adjusted net income of $133.6 million, or $4.49 per share, for the fiscal year ended September 30, 2022. See non-GAAP reconciliation table below.

CEO Brett Pharr said, “During fiscal year 2023, we focused on operations across the enterprise, growing the commercial finance loan book, and working with new and existing partners to expand their product offerings. As a result, we increased net income by 5%, earnings per diluted share by 14% and expanded our return on average assets to over 2.3%. I am very pleased by everything we accomplished and look forward to furthering our progress on our three strategic initiatives this year. We are raising our guidance to a range of $6.20 - $6.70 to reflect our updated view on fiscal year 2024.”

Company Highlights

• On October 5, 2023, the Company announced Greg Sigrist has been appointed Executive Vice President (“EVP”), Chief Financial Officer (“CFO”) - Designee, beginning November 1, 2023. Immediately after the filing of the Company’s Form 10-K for fiscal year 2023, Mr. Sigrist will transition to EVP, CFO, when he will succeed Glen Herrick, who will remain with the Company as EVP, Executive Advisor to the Chief Executive Officer to aid in the transition and other projects until his retirement on December 31, 2023.

• On August 25, 2023, the Company announced a new share repurchase program to repurchase up to 7,000,000 shares of the Company's outstanding common stock on or before September 30, 2028.

Financial Highlights for the 2023 Fiscal Fourth Quarter

• Total revenue for the fourth quarter was $161.0 million, an increase of $37.8 million, or 31%, compared to the same quarter in fiscal 2022, driven by an increase in both net interest income and noninterest income.

• Net interest margin ("NIM") increased 98 basis points to 6.19% for the fourth quarter from 5.21% during the same period of last year, primarily driven by increased yields and an improved earnings asset mix from the continued optimization of the portfolio. When including contractual, rate-related processing expense, NIM would have been 4.87% in the fiscal 2023 fourth quarter compared to 4.73% during the fiscal 2022 fourth quarter. See non-GAAP reconciliation table below.

• Total gross loans and leases at September 30, 2023 increased $829.8 million to $4.37 billion compared to September 30, 2022 and increased $293.2 million, or 7%, when compared to June 30, 2023. The increase compared to the prior year quarter was primarily due to growth in the commercial and consumer finance portfolios. The primary driver for the sequential increase was growth in commercial finance loans.

• During the 2023 fiscal fourth quarter, the Company repurchased 311,727 shares of common stock at an average share price of $51.29. An additional 232,588 shares of common stock were repurchased at an average price of $47.25 in October 2023 through October 16, 2023. As of October 16, 2023, there were 8,433,848 shares available for repurchase under the current common stock share repurchase programs.

• The Company is raising fiscal year 2024 GAAP earnings per diluted share guidance to a range of $6.20 to $6.70. See Outlook section below.

Net Interest Income

Net interest income for the fourth quarter of fiscal 2023 was $104.9 million, an increase of 32% from the same quarter in fiscal 2022. The increase was mainly attributable to increased yields, higher interest-earning asset balances and an improved earning asset mix.

The Company’s average interest-earning assets for the fourth fiscal quarter increased by $650.4 million to $6.72 billion compared with the same quarter in fiscal 2022, primarily due to growth in loans and leases and an increase in total investment balances, partially offset by a decrease in cash balances. The fourth quarter average outstanding balance of loans and leases increased $669.4 million compared to the same quarter of the prior fiscal year, primarily due to an increase in commercial finance loans and consumer finance loans.

Fiscal 2023 fourth quarter NIM increased to 6.19% from 5.21% in the fourth fiscal quarter of last year. When including contractual, rate-related processing expense, NIM would have been 4.87% in the fiscal 2023 fourth quarter compared to 4.73% during the fiscal 2022 fourth quarter. See non-GAAP reconciliation table below. The overall reported tax-equivalent yield (“TEY”) on average earning asset yields increased 122 basis points to 6.48% compared to the prior year quarter, driven by an increase in loan and lease, investment securities and cash yields. The yield on the loan and lease portfolio was 8.33% compared to 7.12% for the comparable period last year and the TEY on the securities portfolio was 3.13% compared to 2.56% over that same period.

The Company's cost of funds for all deposits and borrowings averaged 0.29% during the fiscal 2023 fourth quarter, as compared to 0.03% during the prior year quarter. The Company's overall cost of deposits was 0.12% in the fiscal fourth quarter of 2023, as compared to 0.01% during the prior year quarter. When including contractual, rate-related processing expense, the Company's overall cost of deposits was 1.56% in the fiscal 2023 fourth quarter, as compared to 0.52% during the prior year quarter. See non-GAAP reconciliation table below.

Noninterest Income

Fiscal 2023 fourth quarter noninterest income increased 29% to $56.1 million, compared to $43.5 million for the same period of the prior year. The increase was primarily attributable to increases within gain on sale of other, card and deposit fees, rental income, gain (loss) on sale of securities, and other income. The period-over-period increase was partially offset by a reduction in tax services fee income.

The increase in card and deposit fee income was primarily from servicing fee income on off-balance sheet deposits, which totaled $7.8 million during the 2023 fiscal fourth quarter, as compared to $5.9 million for the same period of the prior year. Servicing fee income on off-balance deposits totaled $14.6 million for the fiscal quarter ended June 30, 2023. The sequential quarter decrease was due to a reduction in off-balance deposits that the Company manages at other banks.

Noninterest Expense

Noninterest expense increased 15% to $118.2 million for the fiscal 2023 fourth quarter, from $103.0 million for the same quarter last year. The increase was primarily attributable to increases in card processing expense, compensation expense, other expense, and operating lease equipment depreciation. The period-over-period increase was partially offset by a decrease in legal and consulting expense.

The card processing expense increase was due to rate-related agreements with Banking as a Service ("BaaS") partners. The amount of expense paid under those agreements is based on an agreed upon rate index that varies depending on the deposit levels, floor rates, market conditions, and other performance conditions. Generally, this rate index averages between 50% to 85% of the Effective Federal Funds Rate ("EFFR") and reprices immediately upon a change in the EFFR. Approximately 49% of the deposit portfolio was subject to these higher rate-related processing expenses during the 2023 fiscal fourth quarter. For the fiscal quarter ended September 30, 2023, contractual, rate-related processing expenses were $22.5 million, as compared to $20.5 million for the fiscal quarter ended June 30, 2023, and $7.4 million for the fiscal quarter ended September 30, 2022.

Income Tax Expense

The Company recorded an income tax benefit of $2.7 million, representing an effective tax rate of (7.9%), for the fiscal 2023 fourth quarter, compared to income tax benefit of $1.3 million, representing an effective tax rate of (5.6%), for the fourth quarter last fiscal year. The current quarter increase in income tax benefit was primarily due to an increase in investment tax credits recognized ratably when compared to the prior year quarter.

The Company originated $42.6 million in renewable energy leases during the fiscal 2023 fourth quarter, resulting in $13.7 million in total net investment tax credits. During the fourth quarter of fiscal 2022, the Company originated $35.9 million in renewable energy leases resulting in $9.6 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. For the fiscal year ended September 30, 2023, the Company originated $93.6 million in renewable energy leases, compared to $62.8 million for the prior fiscal year. The timing and impact of future renewable energy tax credits are expected to vary from period to period, and the Company intends to undertake only those tax credit opportunities that meet the Company's underwriting and return criteria.

Outlook

The following forward-looking statements reflect the Company’s expectations as of the date of this release and are subject to substantial uncertainty. The Company's results may be materially affected by many factors, such as changes in economic conditions and customer demand, changes in interest rates, adverse developments in the financial services industry generally, inflation, competition, and other factors detailed below under “Forward-looking Statements.”

The Company is raising fiscal year 2024 GAAP earnings per diluted share guidance to a range of $6.20 to $6.70. As part of this guidance, the Company expects that its annual effective tax rate in fiscal year 2024 will range between 16% and 20%.

Investments, Loans and Leases

(Dollars in thousands)

September 30, 2023

 

June 30, 2023

 

March 31, 2023

 

December 31, 2022

 

September 30, 2022

Total investments

$

1,840,819

 

 

$

1,951,996

 

 

$

1,864,276

 

 

$

1,888,343

 

 

$

1,924,551

 

 

 

 

 

 

 

 

 

 

 

Loans held for sale

 

 

 

 

 

 

 

 

 

Term lending

 

—

 

 

 

3,000

 

 

 

—

 

 

 

—

 

 

 

—

 

Consumer Finance

 

77,779

 

 

 

84,351

 

 

 

24,780

 

 

 

17,148

 

 

 

21,071

 

Total loans held for sale

 

77,779

 

 

 

87,351

 

 

 

24,780

 

 

 

17,148

 

 

 

21,071

 

 

 

 

 

 

 

 

 

 

 

Term lending

 

1,308,133

 

 

 

1,253,841

 

 

 

1,235,453

 

 

 

1,160,100

 

 

 

1,090,289

 

Asset-based lending

 

382,371

 

 

 

373,160

 

 

 

377,965

 

 

 

359,516

 

 

 

351,696

 

Factoring

 

358,344

 

 

 

351,133

 

 

 

338,884

 

 

 

338,594

 

 

 

372,595

 

Lease financing

 

183,392

 

 

 

201,996

 

 

 

170,645

 

 

 

189,868

 

 

 

210,692

 

Insurance premium finance

 

800,077

 

 

 

666,265

 

 

 

437,700

 

 

 

436,977

 

 

 

479,754

 

SBA/USDA

 

524,750

 

 

 

422,389

 

 

 

405,612

 

 

 

357,084

 

 

 

359,238

 

Other commercial finance

 

166,091

 

 

 

171,954

 

 

 

166,402

 

 

 

164,734

 

 

 

159,409

 

Commercial finance

 

3,723,158

 

 

 

3,440,738

 

 

 

3,132,661

 

 

 

3,006,873

 

 

 

3,023,673

 

Consumer finance

 

254,416

 

 

 

200,121

 

 

 

148,648

 

 

 

186,930

 

 

 

169,659

 

Tax services

 

5,192

 

 

 

47,194

 

 

 

61,553

 

 

 

30,364

 

 

 

9,098

 

Warehouse finance

 

376,915

 

 

 

380,458

 

 

 

377,036

 

 

 

279,899

 

 

 

326,850

 

Total loans and leases

 

4,359,681

 

 

 

4,068,511

 

 

 

3,719,898

 

 

 

3,504,066

 

 

 

3,529,280

 

Net deferred loan origination costs

 

6,435

 

 

 

4,388

 

 

 

5,718

 

 

 

5,664

 

 

 

7,025

 

Total gross loans and leases

 

4,366,116

 

 

 

4,072,899

 

 

 

3,725,616

 

 

 

3,509,730

 

 

 

3,536,305

 

Allowance for credit losses

 

(49,705

)

 

 

(81,916

)

 

 

(84,304

)

 

 

(52,592

)

 

 

(45,947

)

Total loans and leases, net

$

4,316,411

 

 

$

3,990,983

 

 

$

3,641,312

 

 

$

3,457,138

 

 

$

3,490,358

 

The Company's investment security balances at September 30, 2023 totaled $1.84 billion, as compared to $1.95 billion at June 30, 2023 and $1.92 billion at September 30, 2022.

Total gross loans and leases totaled $4.37 billion at September 30, 2023, as compared to $4.07 billion at June 30, 2023 and $3.54 billion at September 30, 2022. The primary driver for the sequential increase was an increase in commercial finance and consumer finance loans, partially offset by a decrease in seasonal tax services loans and warehouse finance loans. The year-over-year increase was primarily due to an increase in commercial finance, consumer finance, and warehouse finance loans, partially offset by a slight reduction in seasonal tax services loans.

Commercial finance loans, which comprised 85% of the Company's loan and lease portfolio, totaled $3.72 billion at September 30, 2023, reflecting an increase of $282.4 million, or 8%, from June 30, 2023 and an increase of $699.5 million, or 23%, from September 30, 2022. The sequential increase in commercial finance loans was primarily driven by a $133.8 million increase in the insurance premium finance portfolio and a $102.4 million increase in the SBA/USDA portfolio. The increase in commercial finance loans when comparing the current period to the same period of the prior year was primarily driven by increases in the insurance premium finance, SBA/USDA, term lending, and asset-based lending portfolios, partially offset by reductions in the factoring and lease financing portfolios.

Asset Quality

The Company’s allowance for credit losses ("ACL") totaled $49.7 million at September 30, 2023, a decrease compared to $81.9 million at June 30, 2023 and an increase compared to $45.9 million at September 30, 2022. The decrease in the ACL at September 30, 2023, when compared to June 30, 2023, was primarily due to a $33.1 million decrease in the allowance related to the seasonal tax services portfolio, partially offset by slight increases in the allowance related to the commercial and consumer finance portfolios.

The $3.8 million year-over-year increase in the ACL was primarily driven by a $2.8 million increase in the allowance related to the commercial finance portfolio and a $0.9 million increase in the allowance related to the consumer finance portfolio. The year-over-year increase in the allowance related to both the commercial finance and consumer finance portfolios was primarily attributable to loan growth in each respective portfolio.

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

 

As of the Period Ended

(Unaudited)

September 30, 2023

June 30, 2023

March 31, 2023

December 31, 2022

September 30, 2022

Commercial finance

1.26

%

1.35

%

1.53

%

1.62

%

1.46

%

Consumer finance

0.95

%

0.92

%

1.99

%

1.54

%

0.86

%

Tax services

0.06

%

70.20

%

53.77

%

2.01

%

0.05

%

Warehouse finance

0.10

%

0.10

%

0.10

%

0.10

%

0.10

%

Total loans and leases

1.14

%

2.01

%

2.27

%

1.50

%

1.30

%

Total loans and leases excluding tax services

1.14

%

1.21

%

1.40

%

1.50

%

1.30

%

The Company's ACL as a percentage of total loans and leases decreased to 1.14% at September 30, 2023 from 2.01% at June 30, 2023. The decrease in the total loans and leases coverage ratio was primarily driven by a decrease in the seasonal tax services portfolio. The Company expects to continue to diligently monitor the ACL and adjust as necessary in future periods to maintain an appropriate and supportable level.

Activity in the allowance for credit losses for the periods presented was as follows.

(Unaudited)

Three Months Ended

 

Year Ended

(Dollars in thousands)

September 30, 2023

June 30, 2023

September 30, 2022

 

September 30, 2023

September 30, 2022

Beginning balance

$

81,916

 

$

84,304

 

$

75,206

 

 

$

45,947

 

$

68,281

 

Provision (reversal of) - tax services loans

 

2,945

 

 

(229

)

 

—

 

 

 

35,775

 

 

28,093

 

Provision (reversal of) - all other loans and leases

 

6,124

 

 

2,059

 

 

(2,617

)

 

 

21,673

 

 

769

 

Charge-offs - tax services loans

 

(36,606

)

 

(404

)

 

(22,599

)

 

 

(38,741

)

 

(30,852

)

Charge-offs - all other loans and leases

 

(6,227

)

 

(5,597

)

 

(6,844

)

 

 

(21,158

)

 

(30,210

)

Recoveries - tax services loans

 

531

 

 

671

 

 

5

 

 

 

2,963

 

 

2,762

 

Recoveries - all other loans and leases

 

1,022

 

 

1,112

 

 

2,796

 

 

 

3,246

 

 

7,104

 

Ending balance

$

49,705

 

$

81,916

 

$

45,947

 

 

$

49,705

 

$

45,947

 

The Company recognized a provision for credit losses of $9.0 million for the quarter ended September 30, 2023, compared to a reversal of provision for credit losses of $2.6 million for the comparable period in the prior fiscal year. The increase in provision for credit losses during the current quarter compared to the prior year period was primarily driven by growth in the commercial finance portfolio. The reversal of provision for credit losses during the prior year quarter was primarily driven by the student loan portfolio sale and commercial finance recoveries. Net charge-offs were $41.3 million for the quarter ended September 30, 2023, compared to $26.6 million for the quarter ended September 30, 2022. Net charge-offs attributable to the tax services, commercial finance and consumer finance portfolios for the current quarter were $32.1 million, $5.1 million, and $0.1 million, respectively. Net charge-offs attributable to the tax services, commercial finance and consumer finance portfolios for the same quarter of the prior year were $22.6 million, $3.4 million, and $0.6 million, respectively.

The Company's past due loans and leases were as follows for the periods presented.

As of September 30, 2023

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

$

626

 

$

549

 

$

306

 

$

1,481

 

$

76,298

 

$

77,779

 

$

306

 

$

—

 

$

306

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial finance

 

23,434

 

 

9,143

 

 

20,352

 

 

52,929

 

 

3,670,229

 

 

3,723,158

 

 

11,242

 

 

37,372

 

 

48,614

Consumer finance

 

2,992

 

 

2,425

 

 

2,210

 

 

7,627

 

 

246,789

 

 

254,416

 

 

2,210

 

 

—

 

 

2,210

Tax services

 

—

 

 

—

 

 

5,082

 

 

5,082

 

 

110

 

 

5,192

 

 

5,082

 

 

—

 

 

5,082

Warehouse finance

 

—

 

 

—

 

 

—

 

 

—

 

 

376,915

 

 

376,915

 

 

—

 

 

—

 

 

—

Total loans and leases held for investment

 

26,426

 

 

11,568

 

 

27,644

 

 

65,638

 

 

4,294,043

 

 

4,359,681

 

 

18,534

 

 

37,372

 

 

55,906

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total loans and leases

$

27,052

 

$

12,117

 

$

27,950

 

$

67,119

 

$

4,370,341

 

$

4,437,460

 

$

18,840

 

$

37,372

 

$

56,212

As of June 30, 2023

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

$

10

 

$

—

 

$

—

 

$

10

 

$

87,341

 

$

87,351

 

$

—

 

$

—

 

$

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial finance

 

35,344

 

 

5,934

 

 

13,720

 

 

54,998

 

 

3,385,740

 

 

3,440,738

 

 

6,542

 

 

30,170

 

 

36,712

Consumer finance

 

2,538

 

 

2,050

 

 

2,087

 

 

6,675

 

 

193,446

 

 

200,121

 

 

2,087

 

 

—

 

 

2,087

Tax services

 

—

 

 

47,194

 

 

—

 

 

47,194

 

 

—

 

 

47,194

 

 

—

 

 

—

 

 

—

Warehouse finance

 

—

 

 

—

 

 

—

 

 

—

 

 

380,458

 

 

380,458

 

 

—

 

 

—

 

 

—

Total loans and leases held for investment

 

37,882

 

 

55,178

 

 

15,807

 

 

108,867

 

 

3,959,644

 

 

4,068,511

 

 

8,629

 

 

30,170

 

 

38,799

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total loans and leases

$

37,892

 

$

55,178

 

$

15,807

 

$

108,877

 

$

4,046,985

 

$

4,155,862

 

$

8,629

 

$

30,170

 

$

38,799

The Company's nonperforming assets at September 30, 2023 were $58.0 million, representing 0.77% of total assets, compared to $40.8 million, or 0.55% of total assets at June 30, 2023 and $30.9 million, or 0.46% of total assets at September 30, 2022.

The Company's nonperforming loans and leases at September 30, 2023, were $56.2 million, representing 1.26% of total gross loans and leases, compared to $38.8 million, or 0.93% of total gross loans and leases at June 30, 2023 and $29.2 million, or 0.82% of total gross loans and leases at September 30, 2022.

The increase in the nonperforming assets as a percentage of total assets at September 30, 2023 compared to June 30, 2023, was driven by an increase in nonperforming loans in the commercial finance portfolio and in the seasonal tax services portfolio. When comparing the current period to the same period of the prior year, the increase in nonperforming assets was primarily due to one sizable relationship moving to nonaccrual within the commercial finance portfolio, partially offset by a decrease in nonperforming loans in the seasonal tax services portfolio and the consumer finance portfolio.

The Company has various portfolios of consumer lending 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 their evaluation of the appropriateness of the allowance for credit losses on these portfolios, and as such, these loans are not included in the asset classification table below. The Company's loans and leases held for investment by asset classification were as follows for the periods presented.

 

Asset Classification

(Dollars in thousands)

Pass

Watch

Special Mention

Substandard

Doubtful

Total

As of September 30, 2023

 

 

 

 

 

 

Commercial finance

$

2,845,587

$

559,112

$

102,111

$

208,193

$

8,155

$

3,723,158

Warehouse finance

 

376,915

 

—

 

—

 

—

 

—

 

376,915

Total loans and leases

$

3,222,502

$

559,112

$

102,111

$

208,193

$

8,155

$

4,100,073

 

Asset Classification

(Dollars in thousands)

Pass

Watch

Special Mention

Substandard

Doubtful

Total

As of June 30, 2023

 

Commercial finance

$

2,692,865

$

459,885

$

84,450

$

189,743

$

13,795

$

3,440,738

Warehouse finance

 

380,458

 

—

 

—

 

—

 

—

 

380,458

Total loans and leases

$

3,073,323

$

459,885

$

84,450

$

189,743

$

13,795

$

3,821,196

Deposits, Borrowings and Other Liabilities

Total average deposits for the fiscal 2023 fourth quarter increased by $439.9 million to $6.20 billion compared to the same period in fiscal 2022. The increase in average deposits was primarily due to increases in noninterest bearing deposits, money market deposits, and wholesale deposits, partially offset by a decrease in savings deposits and time deposits.

The average balance of total deposits and interest-bearing liabilities was $6.39 billion for the three-month period ended September 30, 2023, compared to $5.80 billion for the same period in the prior fiscal year, representing an increase of 10%.

Total end-of-period deposits increased 12% to $6.59 billion at September 30, 2023, compared to $5.87 billion at September 30, 2022. The increase in end-of-period deposits was primarily driven by increases in noninterest-bearing deposits of $685.8 million and money market deposits of $47.4 million, partially offset by decreases in savings deposits of $8.1 million and certificate of deposits of $2.1 million.

As of September 30, 2023, the Company had $897.5 million in deposits related to government stimulus programs. Of the total amount of government stimulus program deposits, $340.7 million are on activated cards while $556.8 million are on inactivated cards. During fiscal year 2024, these card balances are expected to decrease by approximately $380 million as the Company actively returns unclaimed balances to the U.S. Treasury.

As of September 30, 2023, the Company managed $267.6 million of customer deposits at other banks in its capacity as custodian. These deposits provide the Company with excess deposits that can earn servicing fee income, typically reflective of the EFFR.

Approximately 49% of the deposit portfolio during the 2023 fiscal fourth quarter were subject to variable, rate-related processing expenses that are derived from the terms of contractual agreements with certain BaaS partners. These agreements are tied to a portion of a rate index, typically the EFFR.

Regulatory Capital

The Company and its subsidiary Pathward®, N.A. (the "Bank") remained above the federal regulatory minimum capital requirements at September 30, 2023, and continued to be classified as well-capitalized, and in good standing with the regulatory agencies. Regulatory capital ratios of the Company and the Bank are stated in the table below. Regulatory capital is not affected by the unrealized loss on accumulated other comprehensive income (“AOCI”). The securities portfolio is primarily comprised of amortizing securities that should provide consistent cash flow. The Company does not intend to sell these securities, or recognize the unrealized losses on its income statement, to fund future loan growth.

The tables below include certain non-GAAP financial measures that are used by investors, analysts and bank regulatory agencies to assess the capital position of financial services companies. Management reviews these measures along with other measures of capital as part of its financial analysis.

As of the Periods Indicated

September 30, 2023(1)

 

June 30, 2023

 

March 31, 2023

 

December 31, 2022

 

September 30, 2022

Company

 

 

 

 

 

 

 

 

 

Tier 1 leverage capital ratio

8.11

%

 

8.40

%

 

7.53

%

 

8.37

%

 

8.10

%

Common equity Tier 1 capital ratio

11.25

%

 

11.52

%

 

12.05

%

 

12.31

%

 

12.07

%

Tier 1 capital ratio

11.50

%

 

11.79

%

 

12.35

%

 

12.63

%

 

12.39

%

Total capital ratio

12.84

%

 

13.45

%

 

14.06

%

 

14.29

%

 

13.88

%

Bank

 

 

 

 

 

 

 

 

 

Tier 1 leverage ratio

8.32

%

 

8.67

%

 

7.79

%

 

8.68

%

 

8.19

%

Common equity Tier 1 capital ratio

11.81

%

 

12.17

%

 

12.77

%

 

13.09

%

 

12.55

%

Tier 1 capital ratio

11.81

%

 

12.17

%

 

12.77

%

 

13.09

%

 

12.55

%

Total capital ratio

12.76

%

 

13.42

%

 

14.03

%

 

14.29

%

 

13.57

%

 

(1) September 30, 2023 percentages are preliminary pending completion and filing of the Company's regulatory reports. Regulatory capital ratios for periods presented reflect the Company's election of the five-year CECL transition for regulatory capital purposes.

The following table provides the non-GAAP financial measures used to compute certain of the ratios included in the table above, as well as a reconciliation of such non-GAAP financial measures to the most directly comparable financial measure in accordance with GAAP:

 

Standardized Approach(1)

As of the Periods Indicated

 (Dollars in thousands)

September 30, 2023

 

June 30, 2023

 

March 31, 2023

 

December 31, 2022

 

September 30, 2022

Total stockholders' equity

$

650,625

 

 

$

677,721

 

 

$

673,244

 

 

$

659,133

 

 

$

645,140

 

Adjustments:

 

 

 

 

 

 

 

 

 

LESS: Goodwill, net of associated deferred tax liabilities

 

297,679

 

 

 

298,092

 

 

 

298,390

 

 

 

298,788

 

 

 

299,186

 

LESS: Certain other intangible assets

 

21,228

 

 

 

22,372

 

 

 

23,553

 

 

 

25,053

 

 

 

26,406

 

LESS: Net deferred tax assets from operating loss and tax credit carry-forwards

 

19,679

 

 

 

12,157

 

 

 

13,219

 

 

 

16,641

 

 

 

17,968

 

LESS: Net unrealized (losses) on available for sale securities

 

(254,294

)

 

 

(207,358

)

 

 

(186,796

)

 

 

(200,597

)

 

 

(211,600

)

LESS: Noncontrolling interest

 

(1,005

)

 

 

(631

)

 

 

(551

)

 

 

(207

)

 

 

(30

)

ADD: Adoption of Accounting Standards Update 2016-13

 

2,017

 

 

 

2,017

 

 

 

2,017

 

 

 

2,017

 

 

 

2,689

 

Common Equity Tier 1(1)

 

569,355

 

 

 

555,106

 

 

 

527,446

 

 

 

521,472

 

 

 

515,899

 

Long-term borrowings and other instruments qualifying as Tier 1

 

13,661

 

 

 

13,661

 

 

 

13,661

 

 

 

13,661

 

 

 

13,661

 

Tier 1 minority interest not included in common equity Tier 1 capital

 

(826

)

 

 

(454

)

 

 

(404

)

 

 

(138

)

 

 

(20

)

Total Tier 1 capital

 

582,190

 

 

 

568,313

 

 

 

540,703

 

 

 

534,995

 

 

 

529,540

 

Allowance for credit losses

 

47,960

 

 

 

60,489

 

 

 

55,058

 

 

 

50,853

 

 

 

43,623

 

Subordinated debentures, net of issuance costs

 

19,591

 

 

 

19,566

 

 

 

19,540

 

 

 

19,521

 

 

 

20,000

 

Total capital

$

649,741

 

 

$

648,368

 

 

$

615,301

 

 

$

650,369

 

 

$

593,163

 

 

(1) Capital ratios were determined using the Basel III capital rules that became effective on January 1, 2015. Basel III revised the definition of capital, increased minimum capital ratios, and introduced a minimum CET1 ratio; those changes were fully phased in through the end of calendar year 2021.

The following table provides a reconciliation of tangible common equity and tangible common equity excluding AOCI, each of which is used in calculating tangible book value data, to Total Stockholders' Equity. Each of tangible common equity and tangible common equity excluding AOCI is a non-GAAP financial measure that is commonly used within the banking industry.

As of the Periods Indicated

(Dollars in thousands)

September 30, 2023

 

June 30, 2023

 

March 31, 2023

 

December 31, 2022

 

September 30, 2022

Total stockholders' equity

$

650,625

 

 

$

677,721

 

 

$

673,244

 

 

$

659,133

 

 

$

645,140

 

Less: Goodwill

 

309,505

 

 

 

309,505

 

 

 

309,505

 

 

 

309,505

 

 

 

309,505

 

Less: Intangible assets

 

20,720

 

 

 

21,830

 

 

 

22,998

 

 

 

24,433

 

 

 

25,691

 

Tangible common equity

 

320,400

 

 

 

346,386

 

 

 

340,741

 

 

 

325,195

 

 

 

309,944

 

Less: AOCI

 

(255,443

)

 

 

(207,896

)

 

 

(187,829

)

 

 

(201,690

)

 

 

(213,080

)

Tangible common equity excluding AOCI

$

575,843

 

 

$

554,282

 

 

$

528,570

 

 

$

526,885

 

 

$

523,024

 

Conference Call

The Company will host a conference call and earnings webcast with a corresponding presentation at 4:00 p.m. Central Time (5:00 p.m. Eastern Time) on Wednesday, October 25, 2023. The live webcast of the call can be accessed from Pathward’s Investor Relations website at www.pathwardfinancial.com. Telephone participants may access the conference call by dialing 1-833-470-1428 approximately 10 minutes prior to start time and reference access code 644009. A webcast replay will also be archived at www.pathwardfinancial.com for one year.

Upcoming Investor Events

• Piper Sandler East Coast Financial Services Conference, November 16, 2023 | Miami, FL

About Pathward Financial, Inc.

Pathward Financial, Inc.(Nasdaq: CASH) is a U.S.-based financial holding company driven by its purpose to power financial inclusion for all. Through our subsidiary, Pathward®, N.A., we strive to increase financial availability, choice, and opportunity across our Banking as a Service and Commercial Finance business lines. These strategic business lines provide end-to-end support to individuals and businesses. Learn more at www.pathwardfinancial.com.

Forward-Looking Statements

The Company and the Bank may from time to time make written or oral “forward-looking statements,” including statements contained in this press release, the Company’s filings with the Securities and Exchange Commission ("SEC"), the Company’s reports to stockholders, and in other communications by the Company and the Bank, which are made in good faith by the Company pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995.

You can identify forward-looking statements by words such as “may,” “hope,” “will,” “should,” “expect,” “plan,” “anticipate,” “intend,” “believe,” “estimate,” “predict,” “potential,” “continue,” “could,” “future,” "target," or the negative of those terms, or other words of similar meaning or similar expressions. You should carefully read statements that contain these words because they discuss our future expectations or state other “forward-looking” information. These forward-looking statements are based on information currently available to us and assumptions about future events, and include statements with respect to the Company’s beliefs, expectations, estimates, and intentions, which are subject to significant risks and uncertainties, and are subject to change based on various factors, some of which are beyond the Company’s control. Such risks, uncertainties and other factors may cause our actual growth, results of operations, financial condition, cash flows, performance and business prospects and opportunities to differ materially from those expressed in, or implied by, these forward-looking statements. Such statements address, among others, the following subjects: future operating results including our earnings per share guidance, future effective tax rate and related performance expectations; the performance of our securities portfolio; the impact of card balances related to government stimulus programs; customer retention; loan and other product demand; new products and services; credit quality; the level of net charge-offs and the adequacy of the allowance for credit losses; and technology. The following factors, among others, could cause the Company's financial performance and results of operations to differ materially from the expectations, estimates, and intentions expressed in such forward-looking statements: maintaining our executive management team; 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 the COVID-19 pandemic and any governmental or societal responses thereto; our ability to achieve brand recognition for the Bank equal to or greater than we enjoyed for MetaBank; our ability to successfully implement measures designed to reduce expenses and increase efficiencies; changes in trade, monetary, and fiscal policies and laws, including actual changes in interest rates and the Fed Funds rate, and their related impacts on macroeconomic conditions, customer behavior, or funding costs and or loan and securities portfolio; changes in tax laws; the strength of the United States' economy and the local economies in which the Company operates; adverse developments in the financial services industry generally such as recent bank failures, responsive measures to mitigate and manage such developments, related supervisory and regulatory actions and costs, and related impacts on customer behavior; inflation, market, and monetary fluctuations; the timely and efficient development of new products and services offered by the Company or its strategic partners, as well as risks (including reputational and litigation) attendant thereto, and the perceived overall value of these products and services by users; the Bank's ability to maintain its Durbin Amendment exemption; the risks of dealing with or utilizing third parties, including, in connection with the Company’s prepaid card and tax refund advance businesses, the risk of reduced volume of refund advance loans as a result of reduced customer demand for or usage of the Bank's strategic partners’ refund advance products; our relationship with, and any actions which may be initiated by, our regulators; changes in financial services laws and regulations, including laws and regulations relating to the tax refund industry and the insurance premium finance industry; technological changes, including, but not limited to, the protection of our electronic systems and information; the impact of acquisitions and divestitures; litigation risk; the growth of the Company’s business, as well as expenses related thereto; continued maintenance by the Bank of its status as a well-capitalized institution; changes in consumer spending and saving habits; losses from fraudulent or illegal activity; 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 foregoing list of factors is not exclusive. We caution you not to place undue reliance on these forward-looking statements. The forward-looking statements included in this press release speak only as of the date hereof. 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, 2022, and in other filings made with the SEC. The Company expressly disclaims any intent or obligation to update 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.

Condensed Consolidated Statements of Financial Condition (Unaudited)

 

(Dollars in Thousands, Except Share Data)

September 30, 2023

 

June 30, 2023

 

March 31, 2023

 

December 31, 2022

 

September 30, 2022

ASSETS

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

$

375,580

 

 

$

515,271

 

 

$

432,598

 

 

$

369,169

 

 

$

388,038

 

Securities available for sale, at fair value

 

1,804,228

 

 

 

1,914,271

 

 

 

1,825,563

 

 

 

1,847,778

 

 

 

1,882,869

 

Securities held to maturity, at amortized cost

 

36,591

 

 

 

37,725

 

 

 

38,713

 

 

 

40,565

 

 

 

41,682

 

Federal Reserve Bank and Federal Home Loan Bank Stock, at cost

 

28,210

 

 

 

30,890

 

 

 

29,387

 

 

 

28,812

 

 

 

28,812

 

Loans held for sale

 

77,779

 

 

 

87,351

 

 

 

24,780

 

 

 

17,148

 

 

 

21,071

 

Loans and leases

 

4,366,116

 

 

 

4,072,899

 

 

 

3,725,616

 

 

 

3,509,730

 

 

 

3,536,305

 

Allowance for credit losses

 

(49,705

)

 

 

(81,916

)

 

 

(84,304

)

 

 

(52,592

)

 

 

(45,947

)

Accrued interest receivable

 

23,282

 

 

 

22,332

 

 

 

22,434

 

 

 

20,170

 

 

 

17,979

 

Premises, furniture, and equipment, net

 

39,160

 

 

 

38,601

 

 

 

39,735

 

 

 

41,029

 

 

 

41,710

 

Rental equipment, net

 

211,750

 

 

 

224,212

 

 

 

210,844

 

 

 

231,129

 

 

 

204,371

 

Goodwill and intangible assets

 

330,225

 

 

 

331,335

 

 

 

332,503

 

 

 

333,938

 

 

 

335,196

 

Other assets

 

292,327

 

 

 

265,654

 

 

 

270,387

 

 

 

272,349

 

 

 

295,324

 

Total assets

$

7,535,543

 

 

$

7,458,625

 

 

$

6,868,256

 

 

$

6,659,225

 

 

$

6,747,410

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

 

 

 

 

Deposits

 

6,589,182

 

 

 

6,306,976

 

 

 

5,902,696

 

 

 

5,789,132

 

 

 

5,866,037

 

Short-term borrowings

 

13,000

 

 

 

230,000

 

 

 

43,000

 

 

 

—

 

 

 

—

 

Long-term borrowings

 

33,873

 

 

 

34,178

 

 

 

34,543

 

 

 

34,977

 

 

 

36,028

 

Accrued expenses and other liabilities

 

248,863

 

 

 

209,750

 

 

 

214,773

 

 

 

175,983

 

 

 

200,205

 

Total liabilities

 

6,884,918

 

 

 

6,780,904

 

 

 

6,195,012

 

 

 

6,000,092

 

 

 

6,102,270

 

 

 

 

 

 

 

 

 

 

 

STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

Preferred stock

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Common stock, $.01 par value

 

262

 

 

 

266

 

 

 

271

 

 

 

282

 

 

 

288

 

Common stock, Nonvoting, $.01 par value

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Additional paid-in capital

 

628,500

 

 

 

625,825

 

 

 

623,250

 

 

 

620,681

 

 

 

617,403

 

Retained earnings

 

278,655

 

 

 

267,100

 

 

 

245,046

 

 

 

246,891

 

 

 

245,394

 

Accumulated other comprehensive loss

 

(255,443

)

 

 

(207,896

)

 

 

(187,829

)

 

 

(201,690

)

 

 

(213,080

)

Treasury stock, at cost

 

(344

)

 

 

(6,943

)

 

 

(6,943

)

 

 

(6,824

)

 

 

(4,835

)

Total equity attributable to parent

 

651,630

 

 

 

678,352

 

 

 

673,795

 

 

 

659,340

 

 

 

645,170

 

Noncontrolling interest

 

(1,005

)

 

 

(631

)

 

 

(551

)

 

 

(207

)

 

 

(30

)

Total stockholders’ equity

 

650,625

 

 

 

677,721

 

 

 

673,244

 

 

 

659,133

 

 

 

645,140

 

Total liabilities and stockholders’ equity

$

7,535,543

 

 

$

7,458,625

 

 

$

6,868,256

 

 

$

6,659,225

 

 

$

6,747,410

 

Condensed Consolidated Statements of Operations (Unaudited)

 

 

Three Months Ended

 

Year Ended

(Dollars in Thousands, Except Share and Per Share Data)

September 30, 2023

 

June 30, 2023

 

September 30, 2022

 

September 30, 2023

 

September 30, 2022

Interest and dividend income:

 

 

 

 

 

 

 

 

 

Loans and leases, including fees

$

90,085

 

 

$

81,242

 

 

$

64,963

 

 

$

323,602

 

$

268,078

 

Mortgage-backed securities

 

10,225

 

 

 

10,234

 

 

 

10,155

 

 

 

41,197

 

 

 

26,846

 

Other investments

 

9,332

 

 

 

7,870

 

 

 

5,104

 

 

 

33,936

 

 

 

17,272

 

 

 

109,642

 

 

 

99,346

 

 

 

80,222

 

 

 

398,735

 

 

 

312,196

 

Interest expense:

 

 

 

 

 

 

 

 

 

Deposits

 

1,954

 

 

 

164

 

 

 

99

 

 

 

4,356

 

 

 

500

 

FHLB advances and other borrowings

 

2,754

 

 

 

1,717

 

 

 

363

 

 

 

6,518

 

 

 

4,372

 

 

 

4,708

 

 

 

1,881

 

 

 

462

 

 

 

10,874

 

 

 

4,872

 

 

 

 

 

 

 

 

 

 

 

Net interest income

 

104,934

 

 

 

97,465

 

 

 

79,760

 

 

 

387,861

 

 

 

307,324

 

 

 

 

 

 

 

 

 

 

 

Provision for (reversal of) credit losses

 

9,042

 

 

 

1,773

 

 

 

(2,648

)

 

 

57,354

 

 

 

28,538

 

 

 

 

 

 

 

 

 

 

 

Net interest income after provision for credit losses

 

95,892

 

 

 

95,692

 

 

 

82,408

 

 

 

330,507

 

 

 

278,786

 

 

 

 

 

 

 

 

 

 

 

Noninterest income:

 

 

 

 

 

 

 

 

 

Refund transfer product fees

 

308

 

 

 

8,262

 

 

 

1,135

 

 

 

39,452

 

 

 

39,809

 

Refund advance fee income

 

(252

)

 

 

(927

)

 

 

44

 

 

 

37,433

 

 

 

40,557

 

Card and deposit fees

 

31,233

 

 

 

39,708

 

 

 

28,908

 

 

 

150,746

 

 

 

105,733

 

Rental income

 

14,562

 

 

 

13,980

 

 

 

12,024

 

 

 

54,190

 

 

 

46,558

 

Gain (loss) on sale of securities

 

—

 

 

 

9

 

 

 

(1,882

)

 

 

91

 

 

 

(1,287

)

Gain on sale of trademarks

 

—

 

 

 

—

 

 

 

—

 

 

 

10,000

 

 

 

50,000

 

Gain (loss) on sale of other

 

2,006

 

 

 

812

 

 

 

(3,319

)

 

 

2,572

 

 

 

(4,920

)

Other income

 

8,194

 

 

 

5,889

 

 

 

6,546

 

 

 

22,115

 

 

 

17,357

 

Total noninterest income

 

56,051

 

 

 

67,733

 

 

 

43,456

 

 

 

316,599

 

 

 

293,807

 

 

 

 

 

 

 

 

 

 

 

Noninterest expense:

 

 

 

 

 

 

 

 

 

Compensation and benefits

 

46,352

 

 

 

47,402

 

 

 

42,762

 

 

 

184,318

 

 

 

171,126

 

Refund transfer product expense

 

28

 

 

 

1,727

 

 

 

52

 

 

 

9,723

 

 

 

8,908

 

Refund advance expense

 

(6

)

 

 

239

 

 

 

1

 

 

 

1,863

 

 

 

2,157

 

Card processing

 

29,549

 

 

 

26,342

 

 

 

15,718

 

 

 

105,498

 

 

 

38,785

 

Occupancy and equipment expense

 

9,274

 

 

 

8,595

 

 

 

9,064

 

 

 

34,691

 

 

 

34,909

 

Operating lease equipment depreciation

 

10,846

 

 

 

10,517

 

 

 

9,306

 

 

 

45,710

 

 

 

35,636

 

Legal and consulting

 

7,633

 

 

 

5,089

 

 

 

13,355

 

 

 

27,102

 

 

 

40,634

 

Intangible amortization

 

1,110

 

 

 

1,168

 

 

 

1,397

 

 

 

4,971

 

 

 

6,585

 

Impairment expense

 

—

 

 

 

2,749

 

 

 

—

 

 

 

3,273

 

 

 

670

 

Other expense

 

13,416

 

 

 

10,750

 

 

 

11,375

 

 

 

47,826

 

 

 

45,865

 

Total noninterest expense

 

118,202

 

 

 

114,578

 

 

 

103,030

 

 

 

464,975

 

 

 

385,275

 

 

 

 

 

 

 

 

 

 

 

Income before income tax expense

 

33,741

 

 

 

48,847

 

 

 

22,834

 

 

 

182,131

 

 

 

187,318

 

 

 

 

 

 

 

 

 

 

 

Income tax expense (benefit)

 

(2,672

)

 

 

3,243

 

 

 

(1,272

)

 

 

16,324

 

 

 

27,964

 

 

 

 

 

 

 

 

 

 

 

Net income before noncontrolling interest

 

36,413

 

 

 

45,604

 

 

 

24,106

 

 

 

165,807

 

 

 

159,354

 

Net income attributable to noncontrolling interest

 

507

 

 

 

508

 

 

 

686

 

 

 

2,192

 

 

 

2,968

 

Net income attributable to parent

$

35,906

 

 

$

45,096

 

 

$

23,420

 

 

$

163,615

 

 

$

156,386

 

 

 

 

 

 

 

 

 

 

 

Less: Allocation of Earnings to participating securities(1)

 

531

 

 

 

690

 

 

 

393

 

 

 

2,445

 

 

 

2,566

 

Net income attributable to common shareholders(1)

 

35,375

 

 

 

44,406

 

 

 

23,027

 

 

 

161,170

 

 

 

153,821

 

Earnings per common share:

 

 

 

 

 

 

 

 

 

Basic

$

1.37

 

 

$

1.69

 

 

$

0.81

 

 

$

6.01

 

 

$

5.26

 

Diluted

$

1.36

 

 

$

1.68

 

 

$

0.81

 

 

$

5.99

 

 

$

5.26

 

Shares used in computing earnings per common share:

 

 

 

 

 

 

 

 

 

Basic

 

25,883,807

 

 

 

26,346,693

 

 

 

28,581,236

 

 

 

26,833,079

 

 

 

29,227,071

 

Diluted

 

25,991,449

 

 

 

26,447,032

 

 

 

28,581,236

 

 

 

26,925,606

 

 

 

29,232,247

 

 

(1) Amounts presented are used in the two-class earnings per common share calculation.

Average Balances, Interest Rates and Yields

The following table presents, for the periods indicated, the total dollar amount of interest income from average interest-earning assets and the resulting yields, as well as the interest expense on average interest-bearing liabilities, expressed both in dollars and in rates. Only the yield/rate reflects tax-equivalent adjustments. Nonaccruing loans and leases have been included in the table as loans carrying a zero yield.

Three Months Ended September 30,

2023

 

2022

(Dollars in thousands)

Average Outstanding Balance

 

Interest Earned / Paid

 

Yield / Rate(1)

 

Average Outstanding Balance

 

Interest Earned / Paid

 

Yield / Rate(1)

Interest-earning assets:

 

 

 

 

 

 

 

 

 

 

 

Cash and fed funds sold

$

230,032

 

$

2,425

 

 

4.18

%

 

$

275,344

 

$

1,467

 

 

2.11

%

Mortgage-backed securities

 

1,514,318

 

 

 

10,225

 

 

2.68

%

 

 

1,583,415

 

 

 

10,155

 

 

2.54

%

Tax exempt investment securities

 

141,328

 

 

 

964

 

 

3.43

%

 

 

165,718

 

 

 

990

 

 

3.00

%

Asset-backed securities

 

260,460

 

 

 

3,656

 

 

5.57

%

 

 

167,053

 

 

 

854

 

 

2.03

%

Other investment securities

 

289,980

 

 

 

2,287

 

 

3.13

%

 

 

263,615

 

 

 

1,792

 

 

2.70

%

Total investments

 

2,206,086

 

 

 

17,132

 

 

3.13

%

 

 

2,179,801

 

 

 

13,791

 

 

2.56

%

Commercial finance

 

3,543,353

 

 

 

74,157

 

 

8.30

%

 

 

2,960,988

 

 

 

54,325

 

 

7.28

%

Consumer finance

 

312,292

 

 

 

7,125

 

 

9.05

%

 

 

234,295

 

 

 

4,128

 

 

6.99

%

Tax services

 

44,192

 

 

 

(147

)

 

(1.32

)%

 

 

35,484

 

 

 

(148

)

 

(1.65

)%

Warehouse finance

 

388,230

 

 

 

8,950

 

 

9.15

%

 

 

387,910

 

 

 

6,658

 

 

6.81

%

Total loans and leases

 

4,288,067

 

 

 

90,085

 

 

8.33

%

 

 

3,618,678

 

 

 

64,963

 

 

7.12

%

Total interest-earning assets

$

6,724,185

 

 

$

109,642

 

 

6.48

%

 

$

6,073,822

 

 

$

80,222

 

 

5.26

%

Noninterest-earning assets

 

566,890

 

 

 

 

 

 

 

657,498

 

 

 

 

 

Total assets

$

7,291,075

 

 

 

 

 

 

$

6,731,321

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing liabilities:

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing checking

$

364

 

 

$

—

 

 

0.33

%

 

$

380

 

 

$

—

 

 

0.33

%

Savings

 

58,907

 

 

 

6

 

 

0.04

%

 

 

67,937

 

 

 

6

 

 

0.04

%

Money markets

 

156,671

 

 

 

237

 

 

0.60

%

 

 

104,570

 

 

 

55

 

 

0.21

%

Time deposits

 

5,589

 

 

 

3

 

 

0.19

%

 

 

7,969

 

 

 

5

 

 

0.23

%

Wholesale deposits

 

128,155

 

 

 

1,708

 

 

5.29

%

 

 

6,479

 

 

 

32

 

 

1.98

%

Total interest-bearing deposits

 

349,686

 

 

 

1,954

 

 

2.22

%

 

 

187,335

 

 

 

99

 

 

0.21

%

Overnight fed funds purchased

 

148,837

 

 

 

2,077

 

 

5.54

%

 

 

15,511

 

 

 

100

 

 

2.56

%

Subordinated debentures

 

19,574

 

 

 

357

 

 

7.23

%

 

 

1,739

 

 

 

29

 

 

6.72

%

Other borrowings

 

14,484

 

 

 

320

 

 

8.76

%

 

 

16,397

 

 

 

234

 

 

5.66

%

Total borrowings

 

182,895

 

 

 

2,754

 

 

5.97

%

 

 

33,647

 

 

 

363

 

 

4.29

%

Total interest-bearing liabilities

 

532,581

 

 

 

4,708

 

 

3.51

%

 

 

220,981

 

 

 

462

 

 

0.83

%

Noninterest-bearing deposits

 

5,855,248

 

 

 

—

 

 

—

%

 

 

5,577,713

 

 

 

—

 

 

—

%

Total deposits and interest-bearing liabilities

$

6,387,829

 

 

$

4,708

 

 

0.29

%

 

$

5,798,694

 

 

$

462

 

 

0.03

%

Other noninterest-bearing liabilities

 

223,242

 

 

 

 

 

 

 

201,711

 

 

 

 

 

Total liabilities

 

6,611,071

 

 

 

 

 

 

 

6,000,404

 

 

 

 

 

Shareholders' equity

 

680,004

 

 

 

 

 

 

 

730,916

 

 

 

 

 

Total liabilities and shareholders' equity

$

7,291,075

 

 

 

 

 

 

$

6,731,321

 

 

 

 

 

Net interest income and net interest rate spread including noninterest-bearing deposits

 

 

$

104,934

 

 

6.19

%

 

 

 

$

79,760

 

 

5.23

%

 

 

 

 

 

 

 

 

 

 

 

 

Net interest margin

 

 

 

 

6.19

%

 

 

 

 

 

5.21

%

Tax-equivalent effect

 

 

 

 

0.02

%

 

 

 

 

 

0.02

%

Net interest margin, tax-equivalent(2)

 

 

 

 

6.21

%

 

 

 

 

 

5.23

%

 

(1) Tax rate used to arrive at the TEY for the three months ended September 30, 2023 and 2022 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.

Selected Financial Information

 

As of and For the Three Months Ended

September 30, 2023

 

June 30, 2023

 

March 31, 2023

 

December 31, 2022

 

September 30, 2022

Equity to total assets

 

8.63

%

 

 

9.09

%

 

 

9.80

%

 

 

9.90

%

 

 

9.56

%

Book value per common share outstanding

$

24.85

 

 

$

25.54

 

 

$

24.88

 

 

$

23.36

 

 

$

22.41

 

Tangible book value per common share outstanding

$

12.24

 

 

$

13.05

 

 

$

12.59

 

 

$

11.53

 

 

$

10.77

 

Tangible book value per common share outstanding excluding AOCI

$

21.99

 

 

$

20.89

 

 

$

19.54

 

 

$

18.68

 

 

$

18.17

 

Common shares outstanding

 

26,183,583

 

 

 

26,539,272

 

 

 

27,055,727

 

 

 

28,211,239

 

 

 

28,788,124

 

Nonperforming assets to total assets

 

0.77

%

 

 

0.55

%

 

 

0.44

%

 

 

0.68

%

 

 

0.46

%

Nonperforming loans and leases to total loans and leases

 

1.26

%

 

 

0.93

%

 

 

0.76

%

 

 

1.16

%

 

 

0.82

%

Net interest margin

 

6.19

%

 

 

6.18

%

 

 

6.12

%

 

 

5.62

%

 

 

5.21

%

Net interest margin, tax-equivalent

 

6.21

%

 

 

6.20

%

 

 

6.14

%

 

 

5.64

%

 

 

5.23

%

Return on average assets

 

1.97

%

 

 

2.61

%

 

 

2.99

%

 

 

1.71

%

 

 

1.39

%

Return on average equity

 

21.12

%

 

 

26.26

%

 

 

32.68

%

 

 

17.18

%

 

 

12.82

%

Full-time equivalent employees

 

1,193

 

 

 

1,186

 

 

 

1,164

 

 

 

1,150

 

 

 

1,141

 

Non-GAAP Reconciliations

 

Adjusted Net Income and Adjusted Earnings Per Share

At and For the Three Months Ended

 

At and For the Year Ended

(Dollars in Thousands, Except Share and Per Share Data)

September 30, 2023

June 30, 2023

September 30, 2022

 

September 30, 2023

September 30, 2022

Net Income - GAAP

$

35,906

$

45,096

 

$

23,420

 

 

$

163,615

 

$

156,386

Less: Gain on sale of trademarks

 

—

 

 

—

 

 

—

 

 

 

10,000

 

 

50,000

 

Less: Loss on disposal of certain mobile solar generators

 

—

 

 

—

 

 

—

 

 

 

(1,993

)

 

—

 

Add: Accelerated depreciation on certain mobile solar generators

 

—

 

 

—

 

 

—

 

 

 

4,822

 

 

—

 

Add: Rebranding expenses

 

—

 

 

—

 

 

6,899

 

 

 

3,737

 

 

13,148

 

Add: Separation related expenses

 

—

 

 

—

 

 

1,029

 

 

 

11

 

 

5,109

 

Add: Impairment on Venture Capital investments

 

—

 

 

2,749

 

 

—

 

 

 

3,249

 

 

—

 

Add: Income tax effect resulting from the above listed items

 

—

 

 

(687

)

 

(1,029

)

 

 

(942

)

 

8,936

 

Adjusted net income

$

35,906

 

$

47,158

 

$

30,319

 

 

$

166,485

 

$

133,579

 

Less: Adjusted allocation of earnings to participating securities

 

531

 

 

722

 

 

508

 

 

 

2,488

 

 

2,191

 

Adjusted Net income attributable to common shareholders

 

35,375

 

 

46,436

 

 

29,811

 

 

 

163,997

 

 

131,388

 

Weighted average diluted common shares outstanding

 

25,991,449

 

 

26,447,032

 

 

28,581,236

 

 

 

26,925,606

 

 

29,232,247

 

Adjusted earnings per common share - diluted

$

1.36

 

$

1.76

 

$

1.04

 

 

$

6.09

 

$

4.49

 

Net Interest Margin and Cost of Deposits

At and For the Three Months Ended

(Dollars in thousands)

September 30, 2023

June 30, 2023

September 30, 2022

Average interest earning assets

$

6,724,185

 

$

6,326,750

 

$

6,073,822

 

Net interest income

$

104,935

 

$

97,465

 

$

79,760

 

Net interest margin

 

6.19

%

 

6.18

%

 

5.21

%

Quarterly average total deposits

$

6,204,934

 

$

5,895,242

 

$

5,765,047

 

Deposit interest expense

$

1,954

 

$

164

 

$

99

 

Cost of deposits

 

0.12

%

 

0.01

%

 

0.01

%

 

 

 

 

Adjusted Net Interest Margin and Adjusted Cost of Deposits

 

 

 

Average interest earning assets

$

6,724,185

 

$

6,326,750

 

$

6,073,822

 

Net interest income

$

104,935

 

$

97,465

 

$

79,760

 

Less: Contractual, rate-related processing expense

$

22,473

 

$

20,528

 

$

7,372

 

Adjusted net interest income

$

82,462

 

$

76,937

 

$

72,388

 

Adjusted net interest margin

 

4.87

%

 

4.88

%

 

4.73

%

Average total deposits

$

6,204,934

 

$

5,895,242

 

$

5,765,047

 

Deposit interest expense

$

1,954

 

$

164

 

$

99

 

Add: Contractual, rate-related processing expense

$

22,473

 

$

20,528

 

$

7,372

 

Adjusted deposit expense

$

24,427

 

$

20,692

 

$

7,471

 

Adjusted cost of deposits

 

1.56

%

 

1.41

%

 

0.52

%

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20231025949337/en/

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