CASH Pathward Financial Inc

Pathward Financial, Inc. (“Pathward Financial” or the “Company”) (Nasdaq: CASH) reported net income of $45.1 million, or $1.68 per share, for the three months ended June 30, 2023, compared to net income of $22.4 million, or $0.76 per share, for the three months ended June 30, 2022. For the same period of the prior year, the Company recognized adjusted net income of $27.3 million, or $0.93 per share when excluding the impact of rebranding and separation expenses. See non-GAAP reconciliation table below.

CEO Brett Pharr said, “This quarter, Pathward once again produced solid results, consistent with our performance thus far in fiscal year 2023. Our results were driven by growth in net interest income and noninterest income compared to the same quarter in fiscal year 2022, with our net interest margin increasing to 6.18%. Our differentiated business model continues to deliver due to our stable deposit base and healthy commercial finance portfolio. Based on this performance, we are increasing our fiscal year 2023 GAAP earnings per diluted share guidance to $5.60 to $6.00 and introducing fiscal year 2024 GAAP earnings per diluted share guidance of $6.10 to $6.60.”

Company Highlights

• The Company launched a new line of credit for consumers with Propel Holdings Inc. and paired with Clair to offer spending and savings accounts as well as earned wage advances. Additionally, the Company announced a new partnership where it has become the banking partner to Finix to support their launch as a payments processor.
• On July 24, 2023, the Company published its third annual ESG report, which can be found on its website. The report documents the Company's progress over fiscal year 2022 showing the implementation plans, programs and policies that built on its culture as well as the Company's purpose to power Financial Inclusion for All.

Financial Highlights for the 2023 Fiscal Third Quarter

• Total revenue for the third quarter was $165.2 million, an increase of $39.1 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 142 basis points to 6.18% for the third quarter from 4.76% 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.
• Total gross loans and leases at June 30, 2023 increased $384.3 million to $4.07 billion, compared to June 30, 2022 and increased $347.3 million, or 9%, when compared to March 31, 2023. The increase compared to the prior year quarter was primarily due to growth in the commercial finance portfolio, partially offset by a reduction in consumer finance loans driven by the sale of the $81.5 million student loan portfolio during the fiscal 2022 fourth quarter and a reduction in warehouse finance loans. The primary drivers for the increase on a linked quarter basis was growth in both commercial finance and consumer finance loans.
• During the 2023 fiscal third quarter, the Company repurchased 490,120 shares of common stock at an average share price of $43.83. An additional 248,550 shares of common stock at an average price of $50.23 were repurchased in July 2023 through July 21, 2023. As of July 21, 2023, there are 1,729,613 shares available for repurchase under the common stock share repurchase program announced during the fourth quarter of fiscal year 2021.
• The Company is raising fiscal year 2023 GAAP earnings per diluted share guidance to a range of $5.60 to $6.00. The Company is also introducing fiscal year 2024 GAAP earnings per diluted share guidance in the range of $6.10 to $6.60. See Outlook section below.

Tax Season Recap

For the nine months ended June 30, 2023, total tax services product revenue was $79.7 million, a decrease of 3% compared to the same period of the prior year. This was driven by a decrease in refund advance fee income partially offset by an increase in refund transfer fee income. Provision expense for refund advances increased 17% compared to the prior year. This increase was due to a mix shift from partnership channels to independent tax providers, which was expected.

Total tax services product income, net of losses and direct product expenses, decreased 19% to $35.3 million from $43.5 million, when comparing the first nine months of fiscal 2023 to the same period of the prior fiscal year. The overall decrease in tax services product income was primarily due to higher provision expense and the two tax partners that the Company did not renew heading into the 2023 tax season, as previously disclosed.

Net Interest Income

Net interest income for the third quarter of fiscal 2023 was $97.5 million, an increase of 35% 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 third fiscal quarter increased by $244.4 million to $6.33 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 third quarter average outstanding balance of loans and leases increased $171.6 million compared to the same quarter of the prior fiscal year, primarily due to an increase in commercial finance loans, partially offset by decreases in consumer finance loans, warehouse finance loans, and tax services loans.

Fiscal 2023 third quarter NIM increased to 6.18% from 4.76% in the third fiscal quarter of last year. When including contractual card processing expense, NIM would have been 4.88% in the fiscal 2023 third quarter compared to 4.62% during the fiscal 2022 third quarter. The overall reported tax-equivalent yield (“TEY”) on average earning asset yields increased 142 basis points to 6.31% 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 8.31% compared to 6.69% for the comparable period last year and the TEY on the securities portfolio was 2.96% compared to 2.14% over that same period.

The Company's cost of funds for all deposits and borrowings averaged 0.13% during the fiscal 2023 third quarter, as compared to 0.12% during the prior year quarter. The Company's overall cost of deposits was 0.01% in the fiscal third quarter of 2023, as compared to 0.01% during the prior year quarter. When including contractual card processing expense, the Company's overall cost of deposits was 1.41% in the fiscal 2023 third quarter, as compared to 0.16% during the prior year quarter.

Noninterest Income

Fiscal 2023 third quarter noninterest income increased to $67.7 million, compared to $54.0 million for the same period of the prior year. The increase was primarily attributable to increases in card and deposit fees, rental income 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 $14.6 million during the 2023 fiscal third quarter, as compared to $18.2 million for the fiscal quarter ended March 31, 2023 and $0.5 million for the fiscal quarter ended June 30, 2022.

Noninterest Expense

Noninterest expense increased 19% to $114.6 million for the fiscal 2023 third quarter, from $96.7 million for the same quarter last year. The increase was primarily attributable to increases in card processing expense, compensation expense, other expense, impairment expense, and operating lease equipment depreciation. The period-over-period increase was partially offset by a decrease in legal and consulting expense and tax services expense. During the third quarter of fiscal year 2023, the Company recognized $2.7 million of impairment expense related to an investment in its Pathward Venture Capital business.

The card processing expense increase was due to structured 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 48% of the deposit portfolio was subject to these higher card processing expenses during the 2023 fiscal third quarter. For the fiscal quarter ended June 30, 2023, card processing expenses related to these structured agreements were $20.5 million, as compared to $20.4 million for the fiscal quarter ended March 31, 2023 and $2.2 million for the fiscal quarter ended June 30, 2022.

Income Tax Expense

The Company recorded an income tax expense of $3.2 million, representing an effective tax rate of 6.6%, for the fiscal 2023 third quarter, compared to income tax expense of $7.0 million, representing an effective tax rate of 22.6%, for the third quarter last fiscal year. The current quarter decrease in income tax expense was primarily due to an increase in investment tax credits recognized ratably when compared to the prior year quarter.

The Company originated $21.4 million in renewable energy leases during the fiscal 2023 third quarter, resulting in $5.8 million in total net investment tax credits. During the third quarter of fiscal 2022, the Company originated $4.4 million in renewable energy leases resulting in $1.0 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 nine months ended June 30, 2023, the Company originated $50.9 million in renewable energy leases, compared to $26.9 million for the comparable prior year period. 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.” Because the Company’s reported GAAP results include certain income and expense items that are not expected to continue indefinitely and may include additional elements that the Company cannot currently predict, the Company is also providing guidance on a non-GAAP or “adjusted” basis for fiscal year 2023. The Company is not currently aware of any such income or expense items expected to impact fiscal year 2024.

The Company is raising its fiscal year 2023 GAAP earnings per diluted share guidance and expects it to be in the range of $5.60 to $6.00. The Company expects its effective tax rate to range between 10% and 14% for fiscal year 2023. When adjusting for gain on sale of trademarks and rebrand related expenses, the Company expects fiscal year 2023 adjusted earnings per share to be in the range of $5.45 to $5.85. See non-GAAP reconciliation table below.

The Company is also introducing fiscal year 2024 GAAP earnings per diluted share guidance in the range of $6.10 to $6.60. 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)

June 30, 2023

 

March 31, 2023

 

December 31, 2022

 

September 30, 2022

 

June 30, 2022

Total investments

$

1,951,996

 

 

$

1,864,276

 

 

$

1,888,343

 

 

$

1,924,551

 

 

$

2,000,400

 

 

 

 

 

 

 

 

 

 

 

Loans held for sale

 

 

 

 

 

 

 

 

 

Term lending

 

3,000

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

SBA/USDA

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

43,861

 

Consumer credit products

 

84,351

 

 

 

24,780

 

 

 

17,148

 

 

 

21,071

 

 

 

23,710

 

Total loans held for sale

 

87,351

 

 

 

24,780

 

 

 

17,148

 

 

 

21,071

 

 

 

67,571

 

 

 

 

 

 

 

 

 

 

 

Term lending

 

1,253,841

 

 

 

1,235,453

 

 

 

1,160,100

 

 

 

1,090,289

 

 

 

1,047,764

 

Asset based lending

 

373,160

 

 

 

377,965

 

 

 

359,516

 

 

 

351,696

 

 

 

402,506

 

Factoring

 

351,133

 

 

 

338,884

 

 

 

338,594

 

 

 

372,595

 

 

 

408,777

 

Lease financing

 

201,996

 

 

 

170,645

 

 

 

189,868

 

 

 

210,692

 

 

 

218,789

 

Insurance premium finance

 

666,265

 

 

 

437,700

 

 

 

436,977

 

 

 

479,754

 

 

 

481,219

 

SBA/USDA

 

422,389

 

 

 

405,612

 

 

 

357,084

 

 

 

359,238

 

 

 

215,510

 

Other commercial finance

 

171,954

 

 

 

166,402

 

 

 

164,734

 

 

 

159,409

 

 

 

173,338

 

Commercial finance

 

3,440,738

 

 

 

3,132,661

 

 

 

3,006,873

 

 

 

3,023,673

 

 

 

2,947,903

 

Consumer credit products

 

175,158

 

 

 

120,739

 

 

 

130,750

 

 

 

144,353

 

 

 

152,106

 

Other consumer finance

 

24,963

 

 

 

27,909

 

 

 

56,180

 

 

 

25,306

 

 

 

107,135

 

Consumer finance

 

200,121

 

 

 

148,648

 

 

 

186,930

 

 

 

169,659

 

 

 

259,241

 

Tax services

 

47,194

 

 

 

61,553

 

 

 

30,364

 

 

 

9,098

 

 

 

41,627

 

Warehouse finance

 

380,458

 

 

 

377,036

 

 

 

279,899

 

 

 

326,850

 

 

 

434,748

 

Total loans and leases

 

4,068,511

 

 

 

3,719,898

 

 

 

3,504,066

 

 

 

3,529,280

 

 

 

3,683,519

 

Net deferred loan origination costs

 

4,388

 

 

 

5,718

 

 

 

5,664

 

 

 

7,025

 

 

 

5,047

 

Total gross loans and leases

 

4,072,899

 

 

 

3,725,616

 

 

 

3,509,730

 

 

 

3,536,305

 

 

 

3,688,566

 

Allowance for credit losses

 

(81,916

)

 

 

(84,304

)

 

 

(52,592

)

 

 

(45,947

)

 

 

(75,206

)

Total loans and leases, net

$

3,990,983

 

 

$

3,641,312

 

 

$

3,457,138

 

 

$

3,490,358

 

 

$

3,613,360

 

The Company's investment security balances at June 30, 2023 totaled $1.95 billion, as compared to $1.86 billion at March 31, 2023 and $2.00 billion at June 30, 2022.

Total gross loans and leases totaled $4.07 billion at June 30, 2023, as compared to $3.73 billion at March 31, 2023 and $3.69 billion at June 30, 2022. The primary driver for the increase on a linked quarter basis was due to increases in commercial finance, consumer finance, and warehouse finance, partially offset by a decrease in seasonal tax services loans. The year-over-year increase was primarily due to an increase in commercial finance loans and tax services loans, partially offset by a reduction in consumer finance loans driven by the sale of the student loan portfolio during the fiscal 2022 fourth quarter and a reduction in warehouse finance loans.

Commercial finance loans, which comprised 85% of the Company's loan and lease portfolio, totaled $3.44 billion at June 30, 2023, reflecting an increase of $308.1 million, or 10%, from March 31, 2023 and an increase of $492.8 million, or 17%, from June 30, 2022. The increase in commercial finance loans on linked quarter basis was primarily driven by a $228.6 million increase in the insurance premium finance 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 SBA/USDA, insurance premium finance, and term lending portfolios, partially offset by reductions in the factoring, asset-based lending, and lease financing portfolios.

Asset Quality

The Company’s allowance for credit losses ("ACL") totaled $81.9 million at June 30, 2023, a decrease compared to $84.3 million at March 31, 2023 and an increase compared to $75.2 million at June 30, 2022. The decrease in the ACL at June 30, 2023, when compared to March 31, 2023, was primarily due to a $1.3 million decrease in the allowance related to the commercial finance portfolio and a $1.1 million decrease in the allowance related to the consumer finance portfolio.

The $6.7 million year-over-year increase in the ACL was primarily driven by a $10.5 million increase in the allowance related to the seasonal tax services portfolio and a $0.7 million increase in the allowance related to the commercial finance portfolio, partially offset by a decrease of $4.5 million in the allowance related to the consumer finance portfolio. The year-over-year increase in the allowance related to the seasonal tax services portfolio was primarily attributable to prior year charge-off activity related to a partner the Company did not renew after the 2022 tax season. The year-over-year decrease in the allowance related to the consumer finance portfolio was primarily attributable to the sale of the student loan portfolio during the fourth quarter of fiscal 2022.

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

 

As of the Period Ended

(Unaudited)

June 30, 2023

March 31, 2023

December 31, 2022

September 30, 2022

June 30, 2022

Commercial finance

1.35

%

1.53

%

1.62

%

1.46

%

1.56

%

Consumer finance

0.92

%

1.99

%

1.54

%

0.86

%

2.44

%

Tax services

70.20

%

53.77

%

2.01

%

0.05

%

54.29

%

Warehouse finance

0.10

%

0.10

%

0.10

%

0.10

%

0.10

%

Total loans and leases

2.01

%

2.27

%

1.50

%

1.30

%

2.04

%

Total loans and leases excluding tax services

1.21

%

1.40

%

1.50

%

1.30

%

1.44

%

The Company's ACL as a percentage of total loans and leases decreased to 2.01% at June 30, 2023 from 2.27% at March 31, 2023. The decrease in the total loans and leases coverage ratio was primarily driven by the commercial finance and consumer finance portfolios, partially offset by an increase in the seasonal tax services portfolio. The decrease in the consumer finance portfolio was related to seasonal activity. 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

 

Nine Months Ended

(Dollars in thousands)

June 30, 2023

March 31, 2023

June 30, 2022

 

June 30, 2023

June 30, 2022

Beginning balance

$

84,304

 

$

52,592

 

$

88,552

 

 

$

45,947

 

$

68,281

 

Provision (reversal of) - tax services loans

 

(229

)

 

31,422

 

 

(166

)

 

 

32,830

 

 

28,093

 

Provision (reversal of) - all other loans and leases

 

2,059

 

 

5,264

 

 

(982

)

 

 

15,549

 

 

3,386

 

Charge-offs - tax services loans

 

(404

)

 

—

 

 

(7,998

)

 

 

(2,135

)

 

(8,253

)

Charge-offs - all other loans and leases

 

(5,597

)

 

(6,625

)

 

(6,346

)

 

 

(14,931

)

 

(23,366

)

Recoveries - tax services loans

 

671

 

 

1,063

 

 

6

 

 

 

2,432

 

 

2,757

 

Recoveries - all other loans and leases

 

1,112

 

 

588

 

 

2,140

 

 

 

2,224

 

 

4,308

 

Ending balance

$

81,916

 

$

84,304

 

$

75,206

 

 

$

81,916

 

$

75,206

 

The Company recognized a provision for credit losses of $1.8 million for the quarter ended June 30, 2023, compared to a reversal of provision for credit losses expense of $1.3 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 increases in the commercial finance portfolio. Net charge-offs were $4.2 million for the quarter ended June 30, 2023, compared to $12.2 million for the quarter ended June 30, 2022. Net charge-offs attributable to the commercial finance and consumer finance portfolios for the current quarter were $2.6 million and $1.9 million, respectively, while a recovery of $0.3 million was recognized in the tax services portfolio.

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

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

As of March 31, 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

$

—

 

$

—

 

$

—

 

$

—

 

$

24,780

 

$

24,780

 

$

—

 

$

—

 

$

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial finance

 

34,065

 

 

4,159

 

 

11,125

 

 

49,349

 

 

3,083,312

 

 

3,132,661

 

 

5,724

 

 

19,585

 

 

25,309

Consumer finance

 

3,261

 

 

3,857

 

 

3,217

 

 

10,335

 

 

138,313

 

 

148,648

 

 

3,217

 

 

—

 

 

3,217

Tax services

 

639

 

 

—

 

 

—

 

 

639

 

 

60,914

 

 

61,553

 

 

—

 

 

—

 

 

—

Warehouse finance

 

—

 

 

—

 

 

—

 

 

—

 

 

377,036

 

 

377,036

 

 

—

 

 

—

 

 

—

Total loans and leases held for investment

 

37,965

 

 

8,016

 

 

14,342

 

 

60,323

 

 

3,659,575

 

 

3,719,898

 

 

8,941

 

 

19,585

 

 

28,526

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total loans and leases

$

37,965

 

$

8,016

 

$

14,342

 

$

60,323

 

$

3,684,355

 

$

3,744,678

 

$

8,941

 

$

19,585

 

$

28,526

The Company's nonperforming assets at June 30, 2023 were $40.8 million, representing 0.55% of total assets, compared to $30.1 million, or 0.44% of total assets at March 31, 2023 and $26.8 million, or 0.40% of total assets at June 30, 2022.

The Company's nonperforming loans and leases at June 30, 2023, were $38.8 million, representing 0.93% of total gross loans and leases, compared to $28.5 million, or 0.76% of total gross loans and leases at March 31, 2023 and $26.6 million, or 0.71% of total gross loans and leases at June 30, 2022.

The increase in the nonperforming assets as a percentage of total assets at June 30, 2023 compared to March 31, 2023, was driven by an increase in nonperforming loans in the commercial finance portfolio, primarily due to one sizable relationship moving to nonaccrual during the current quarter. The increase was partially offset by a decrease in nonperforming loans in the consumer finance portfolio. When comparing the current period to the same period of the prior year, the increase in nonperforming assets was due to an increase in nonperforming loans in the commercial finance portfolio, partially offset by a decrease in nonperforming loans in 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 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

 

Asset Classification

(Dollars in thousands)

Pass

Watch

Special Mention

Substandard

Doubtful

Total

As of March 31, 2023

 

Commercial finance

$

2,405,837

$

426,543

$

64,560

$

230,029

$

5,692

$

3,132,661

Warehouse finance

 

377,036

 

—

 

—

 

—

 

—

 

377,036

Total loans and leases

$

2,782,873

$

426,543

$

64,560

$

230,029

$

5,692

$

3,509,697

Deposits, Borrowings and Other Liabilities

Total average deposits for the fiscal 2023 third quarter increased by $154.2 million to $5.90 billion compared to the same period in fiscal 2022. The increase in average deposits was primarily due to increases in noninterest bearing deposits and money market deposits, partially offset by a decrease in savings deposits, wholesale deposits, and time deposits.

The average balance of total deposits and interest-bearing liabilities was $6.01 billion for the three-month period ended June 30, 2023, compared to $5.81 billion for the same period in the prior fiscal year, representing an increase of 3%.

Total end-of-period deposits increased 10% to $6.31 billion at June 30, 2023, compared to $5.71 billion at June 30, 2022. The increase in end-of-period deposits was primarily driven by increases in noninterest-bearing deposits of $562.3 million and money market deposits of $45.1 million, partially offset by decreases in savings deposits of $7.8 million, certificate of deposits of $2.7 million, and wholesale deposits of $0.9 million.

As of June 30, 2023, the Company had $966.6 billion in deposits related to government stimulus programs. Of the total amount of government stimulus program deposits, $349.4 million are on activated cards while $617.2 million are on inactivated cards. Between July 2023 and the end of fiscal year 2024, these card balances are expected to decrease by approximately $450 million as the Company actively returns unclaimed balances to the U.S. Treasury.

As of June 30, 2023, the Company managed $781 million of customer deposits at other banks in its capacity as custodian. These deposits provide the Company with excess deposits that can earn record keeping service fee income, typically reflective of the EFFR.

Approximately 48% of the deposit balances at June 30, 2023 are subject to variable card 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 June 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

June 30, 2023(1)

 

March 31, 2023

 

December 31, 2022

 

September 30, 2022

 

June 30, 2022

Company

 

 

 

 

 

 

 

 

 

Tier 1 leverage capital ratio

8.41

%

 

7.53

%

 

8.37

%

 

8.10

%

 

8.23

%

Common equity Tier 1 capital ratio

11.52

%

 

12.05

%

 

12.31

%

 

12.07

%

 

11.87

%

Tier 1 capital ratio

11.79

%

 

12.35

%

 

12.63

%

 

12.39

%

 

12.19

%

Total capital ratio

13.45

%

 

14.06

%

 

14.29

%

 

13.88

%

 

13.44

%

Bank

 

 

 

 

 

 

 

 

 

Tier 1 leverage ratio

8.67

%

 

7.79

%

 

8.68

%

 

8.19

%

 

8.22

%

Common equity Tier 1 capital ratio

12.17

%

 

12.77

%

 

13.09

%

 

12.55

%

 

12.17

%

Tier 1 capital ratio

12.17

%

 

12.77

%

 

13.09

%

 

12.55

%

 

12.18

%

Total capital ratio

13.42

%

 

14.03

%

 

14.29

%

 

13.57

%

 

13.43

%

(1)

June 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)

June 30, 2023

 

March 31, 2023

 

December 31, 2022

 

September 30, 2022

 

June 30, 2022

Total stockholders' equity

$

677,721

 

 

$

673,244

 

 

$

659,133

 

 

$

645,140

 

 

$

724,774

 

Adjustments:

 

 

 

 

 

 

 

 

 

LESS: Goodwill, net of associated deferred tax liabilities

 

298,092

 

 

 

298,390

 

 

 

298,788

 

 

 

299,186

 

 

 

299,616

 

LESS: Certain other intangible assets

 

22,372

 

 

 

23,553

 

 

 

25,053

 

 

 

26,406

 

 

 

27,809

 

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

 

12,157

 

 

 

13,219

 

 

 

16,641

 

 

 

17,968

 

 

 

11,978

 

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

 

(207,358

)

 

 

(186,796

)

 

 

(200,597

)

 

 

(211,600

)

 

 

(131,352

)

LESS: Noncontrolling interest

 

(631

)

 

 

(551

)

 

 

(207

)

 

 

(30

)

 

 

665

 

ADD: Adoption of Accounting Standards Update 2016-13

 

2,017

 

 

 

2,017

 

 

 

2,017

 

 

 

2,689

 

 

 

10,011

 

Common Equity Tier 1(1)

 

555,106

 

 

 

527,446

 

 

 

521,472

 

 

 

515,899

 

 

 

526,069

 

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

 

(454

)

 

 

(404

)

 

 

(138

)

 

 

(20

)

 

 

377

 

Total Tier 1 capital

 

568,313

 

 

 

540,703

 

 

 

534,995

 

 

 

529,540

 

 

 

540,107

 

Allowance for credit losses

 

60,489

 

 

 

55,058

 

 

 

50,853

 

 

 

43,623

 

 

 

55,506

 

Subordinated debentures, net of issuance costs

 

19,566

 

 

 

19,540

 

 

 

19,521

 

 

 

20,000

 

 

 

—

 

Total capital

$

648,368

 

 

$

615,301

 

 

$

650,369

 

 

$

593,163

 

 

$

595,613

 

(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)

June 30, 2023

 

March 31, 2023

 

December 31, 2022

 

September 30, 2022

 

June 30, 2022

Total stockholders' equity

$

677,721

 

 

$

673,244

 

 

$

659,133

 

 

$

645,140

 

 

$

724,774

 

Less: Goodwill

 

309,505

 

 

 

309,505

 

 

 

309,505

 

 

 

309,505

 

 

 

309,505

 

Less: Intangible assets

 

21,830

 

 

 

22,998

 

 

 

24,433

 

 

 

25,691

 

 

 

27,088

 

Tangible common equity

 

346,386

 

 

 

340,741

 

 

 

325,195

 

 

 

309,944

 

 

 

388,181

 

Less: AOCI

 

(207,896

)

 

 

(187,829

)

 

 

(201,690

)

 

 

(213,080

)

 

 

(131,407

)

Tangible common equity excluding AOCI

$

554,282

 

 

$

528,570

 

 

$

526,885

 

 

$

523,024

 

 

$

519,588

 

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, July 26, 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 572170. A webcast replay will also be archived at www.pathwardfinancial.com for one year.

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,” 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 conflict between Russia and Ukraine; 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)

June 30, 2023

 

March 31, 2023

 

December 31, 2022

 

September 30, 2022

 

June 30, 2022

ASSETS

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

$

515,271

 

 

$

432,598

 

 

$

369,169

 

 

$

388,038

 

 

$

157,260

 

Securities available for sale, at fair value

 

1,914,271

 

 

 

1,825,563

 

 

 

1,847,778

 

 

 

1,882,869

 

 

 

1,956,523

 

Securities held to maturity, at amortized cost

 

37,725

 

 

 

38,713

 

 

 

40,565

 

 

 

41,682

 

 

 

43,877

 

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

 

30,890

 

 

 

29,387

 

 

 

28,812

 

 

 

28,812

 

 

 

28,812

 

Loans held for sale

 

87,351

 

 

 

24,780

 

 

 

17,148

 

 

 

21,071

 

 

 

67,571

 

Loans and leases

 

4,072,899

 

 

 

3,725,616

 

 

 

3,509,730

 

 

 

3,536,305

 

 

 

3,688,566

 

Allowance for credit losses

 

(81,916

)

 

 

(84,304

)

 

 

(52,592

)

 

 

(45,947

)

 

 

(75,206

)

Accrued interest receivable

 

22,332

 

 

 

22,434

 

 

 

20,170

 

 

 

17,979

 

 

 

16,818

 

Premises, furniture, and equipment, net

 

38,601

 

 

 

39,735

 

 

 

41,029

 

 

 

41,710

 

 

 

42,076

 

Rental equipment, net

 

224,212

 

 

 

210,844

 

 

 

231,129

 

 

 

204,371

 

 

 

222,023

 

Goodwill and intangible assets

 

331,335

 

 

 

332,503

 

 

 

333,938

 

 

 

335,196

 

 

 

336,593

 

Other assets

 

265,654

 

 

 

270,387

 

 

 

272,349

 

 

 

295,324

 

 

 

243,265

 

Total assets

$

7,458,625

 

 

$

6,868,256

 

 

$

6,659,225

 

 

$

6,747,410

 

 

$

6,728,178

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

 

 

 

 

Deposits

 

6,306,976

 

 

 

5,902,696

 

 

 

5,789,132

 

 

 

5,866,037

 

 

 

5,710,799

 

Short-term borrowings

 

230,000

 

 

 

43,000

 

 

 

—

 

 

 

—

 

 

 

—

 

Long-term borrowings

 

34,178

 

 

 

34,543

 

 

 

34,977

 

 

 

36,028

 

 

 

16,616

 

Accrued expenses and other liabilities

 

209,750

 

 

 

214,773

 

 

 

175,983

 

 

 

200,205

 

 

 

275,989

 

Total liabilities

 

6,780,904

 

 

 

6,195,012

 

 

 

6,000,092

 

 

 

6,102,270

 

 

 

6,003,404

 

 

 

 

 

 

 

 

 

 

 

STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

Preferred stock

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Common stock, $.01 par value

 

266

 

 

 

271

 

 

 

282

 

 

 

288

 

 

 

294

 

Common stock, Nonvoting, $.01 par value

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Additional paid-in capital

 

625,825

 

 

 

623,250

 

 

 

620,681

 

 

 

617,403

 

 

 

615,159

 

Retained earnings

 

267,100

 

 

 

245,046

 

 

 

246,891

 

 

 

245,394

 

 

 

244,686

 

Accumulated other comprehensive loss

 

(207,896

)

 

 

(187,829

)

 

 

(201,690

)

 

 

(213,080

)

 

 

(131,407

)

Treasury stock, at cost

 

(6,943

)

 

 

(6,943

)

 

 

(6,824

)

 

 

(4,835

)

 

 

(4,623

)

Total equity attributable to parent

 

678,352

 

 

 

673,795

 

 

 

659,340

 

 

 

645,170

 

 

 

724,109

 

Noncontrolling interest

 

(631

)

 

 

(551

)

 

 

(207

)

 

 

(30

)

 

 

665

 

Total stockholders’ equity

 

677,721

 

 

 

673,244

 

 

 

659,133

 

 

 

645,140

 

 

 

724,774

 

Total liabilities and stockholders’ equity

$

7,458,625

 

 

$

6,868,256

 

 

$

6,659,225

 

 

$

6,747,410

 

 

$

6,728,178

 

Condensed Consolidated Statements of Operations (Unaudited)

 

 

Three Months Ended

 

Nine Months Ended

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

June 30, 2023

 

March 31, 2023

 

June 30, 2022

 

June 30, 2023

 

June 30, 2022

Interest and dividend income:

 

 

 

 

 

 

 

 

 

Loans and leases, including fees

$

81,242

 

 

$

83,879

 

 

$

62,541

 

 

$

233,517

 

$

203,115

 

Mortgage-backed securities

 

10,234

 

 

 

10,326

 

 

 

7,381

 

 

 

30,972

 

 

16,690

 

Other investments

 

7,870

 

 

 

10,482

 

 

 

3,984

 

 

 

24,604

 

 

12,169

 

 

 

99,346

 

 

 

104,687

 

 

 

73,906

 

 

 

289,093

 

 

231,974

 

Interest expense:

 

 

 

 

 

 

 

 

 

Deposits

 

164

 

 

 

2,096

 

 

 

94

 

 

 

2,402

 

 

400

 

FHLB advances and other borrowings

 

1,717

 

 

 

1,186

 

 

 

1,661

 

 

 

3,764

 

 

4,010

 

 

 

1,881

 

 

 

3,282

 

 

 

1,755

 

 

 

6,166

 

 

4,410

 

 

 

 

 

 

 

 

 

 

 

Net interest income

 

97,465

 

 

 

101,405

 

 

 

72,151

 

 

 

282,927

 

 

227,564

 

 

 

 

 

 

 

 

 

 

 

Provision for (reversal of) credit losses

 

1,773

 

 

 

36,763

 

 

 

(1,302

)

 

 

48,312

 

 

31,186

 

 

 

 

 

 

 

 

 

 

 

Net interest income after provision for credit losses

 

95,692

 

 

 

64,642

 

 

 

73,453

 

 

 

234,615

 

 

196,378

 

 

 

 

 

 

 

 

 

 

 

Noninterest income:

 

 

 

 

 

 

 

 

 

Refund transfer product fees

 

8,262

 

 

 

30,205

 

 

 

10,289

 

 

 

39,144

 

 

38,674

 

Refund advance fee income

 

(927

)

 

 

37,995

 

 

 

(20

)

 

 

37,685

 

 

40,513

 

Card and deposit fees

 

39,708

 

 

 

42,087

 

 

 

24,935

 

 

 

119,513

 

 

76,825

 

Rental income

 

13,980

 

 

 

12,940

 

 

 

12,082

 

 

 

39,628

 

 

34,534

 

Gain on sale of securities

 

9

 

 

 

82

 

 

 

198

 

 

 

91

 

 

595

 

Gain on sale of trademarks

 

—

 

 

 

—

 

 

 

—

 

 

 

10,000

 

 

50,000

 

Gain (loss) on sale of other

 

812

 

 

 

(748

)

 

 

1,239

 

 

 

566

 

 

(1,601

)

Other income

 

5,889

 

 

 

4,477

 

 

 

5,271

 

 

 

13,921

 

 

10,811

 

Total noninterest income

 

67,733

 

 

 

127,038

 

 

 

53,994

 

 

 

260,548

 

 

250,351

 

 

 

 

 

 

 

 

 

 

 

Noninterest expense:

 

 

 

 

 

 

 

 

 

Compensation and benefits

 

47,402

 

 

 

47,547

 

 

 

45,091

 

 

 

137,966

 

 

128,364

 

Refund transfer product expense

 

1,727

 

 

 

7,863

 

 

 

2,457

 

 

 

9,695

 

 

8,855

 

Refund advance expense

 

239

 

 

 

1,603

 

 

 

(29

)

 

 

1,869

 

 

2,156

 

Card processing

 

26,342

 

 

 

26,924

 

 

 

8,438

 

 

 

75,949

 

 

23,067

 

Occupancy and equipment expense

 

8,595

 

 

 

8,510

 

 

 

8,996

 

 

 

25,417

 

 

25,845

 

Operating lease equipment depreciation

 

10,517

 

 

 

14,719

 

 

 

9,145

 

 

 

34,864

 

 

26,331

 

Legal and consulting

 

5,089

 

 

 

4,921

 

 

 

11,724

 

 

 

19,469

 

 

27,279

 

Intangible amortization

 

1,168

 

 

 

1,435

 

 

 

1,532

 

 

 

3,861

 

 

5,188

 

Impairment expense

 

2,749

 

 

 

500

 

 

 

670

 

 

 

3,273

 

 

670

 

Other expense

 

10,750

 

 

 

13,114

 

 

 

8,626

 

 

 

34,410

 

 

34,491

 

Total noninterest expense

 

114,578

 

 

 

127,136

 

 

 

96,650

 

 

 

346,773

 

 

282,246

 

 

 

 

 

 

 

 

 

 

 

Income before income tax expense

 

48,847

 

 

 

64,544

 

 

 

30,797

 

 

 

148,390

 

 

164,483

 

 

 

 

 

 

 

 

 

 

 

Income tax expense

 

3,243

 

 

 

9,176

 

 

 

6,958

 

 

 

18,996

 

 

29,236

 

 

 

 

 

 

 

 

 

 

 

Net income before noncontrolling interest

 

45,604

 

 

 

55,368

 

 

 

23,839

 

 

 

129,394

 

 

135,247

 

Net income attributable to noncontrolling interest

 

508

 

 

 

597

 

 

 

1,448

 

 

 

1,685

 

 

2,281

 

Net income attributable to parent

$

45,096

 

 

$

54,771

 

 

$

22,391

 

 

$

127,709

 

$

132,966

 

 

 

 

 

 

 

 

 

 

 

Less: Allocation of Earnings to participating securities(1)

 

690

 

 

 

839

 

 

 

377

 

 

 

1,920

 

 

2,166

 

Net income attributable to common shareholders(1)

 

44,406

 

 

 

53,932

 

 

 

22,014

 

 

 

125,789

 

 

130,800

 

Earnings per common share:

 

 

 

 

 

 

 

 

 

Basic

$

1.69

 

 

$

1.99

 

 

$

0.76

 

 

$

4.63

 

$

4.44

 

Diluted

$

1.68

 

 

$

1.99

 

 

$

0.76

 

 

$

4.62

 

$

4.44

 

Shares used in computing earnings per common share:

 

 

 

 

 

 

 

 

 

Basic

 

26,346,693

 

 

 

27,078,048

 

 

 

28,868,136

 

 

 

27,152,773

 

 

29,444,979

 

Diluted

 

26,447,032

 

 

 

27,169,569

 

 

 

28,868,136

 

 

 

27,238,801

 

 

29,454,586

 

(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 June 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

$

248,865

 

$

2,441

 

3.93

%

 

$

309,324

 

$

787

 

1.02

%

Mortgage-backed securities

 

1,533,122

 

 

10,234

 

2.68

%

 

 

1,395,149

 

 

7,381

 

2.12

%

Tax exempt investment securities

 

145,474

 

 

989

 

3.45

%

 

 

173,192

 

 

851

 

2.50

%

Asset-backed securities

 

188,039

 

 

2,120

 

4.52

%

 

 

210,815

 

 

750

 

1.43

%

Other investment securities

 

292,025

 

 

2,320

 

3.19

%

 

 

246,218

 

 

1,596

 

2.60

%

Total investments

 

2,158,660

 

 

15,663

 

2.96

%

 

 

2,025,374

 

 

10,578

 

2.14

%

Commercial finance

 

3,268,780

 

 

68,174

 

8.37

%

 

 

2,949,813

 

 

50,785

 

6.91

%

Consumer finance

 

225,470

 

 

4,665

 

8.30

%

 

 

300,352

 

 

4,964

 

6.63

%

Tax services

 

52,477

 

 

25

 

0.19

%

 

 

62,934

 

 

53

 

0.34

%

Warehouse finance

 

372,498

 

 

8,378

 

9.02

%

 

 

434,532

 

 

6,739

 

6.22

%

Total loans and leases

 

3,919,225

 

 

81,242

 

8.31

%

 

 

3,747,631

 

 

62,541

 

6.69

%

Total interest-earning assets

$

6,326,750

 

$

99,346

 

6.31

%

 

$

6,082,329

 

$

73,906

 

4.89

%

Noninterest-earning assets

 

574,840

 

 

 

 

 

 

695,468

 

 

 

 

Total assets

$

6,901,590

 

 

 

 

 

$

6,777,797

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing liabilities:

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing checking

$

339

 

$

—

 

0.22

%

 

$

292

 

$

—

 

0.33

%

Savings

 

69,310

 

 

7

 

0.04

%

 

 

82,989

 

 

7

 

0.03

%

Money markets

 

126,994

 

 

76

 

0.24

%

 

 

101,943

 

 

53

 

0.21

%

Time deposits

 

6,224

 

 

3

 

0.19

%

 

 

8,709

 

 

9

 

0.40

%

Wholesale deposits

 

5,794

 

 

78

 

5.38

%

 

 

8,554

 

 

25

 

1.19

%

Total interest-bearing deposits

 

208,661

 

 

164

 

0.32

%

 

 

202,487

 

 

94

 

0.19

%

Overnight fed funds purchased

 

78,320

 

 

1,057

 

5.42

%

 

 

19,353

 

 

72

 

1.50

%

Subordinated debentures

 

19,549

 

 

355

 

7.28

%

 

 

36,480

 

 

1,444

 

15.87

%

Other borrowings

 

14,850

 

 

305

 

8.24

%

 

 

17,056

 

 

145

 

3.40

%

Total borrowings

 

112,719

 

 

1,717

 

6.11

%

 

 

72,889

 

 

1,661

 

9.14

%

Total interest-bearing liabilities

 

321,380

 

 

1,881

 

2.35

%

 

 

275,376

 

 

1,755

 

2.56

%

Noninterest-bearing deposits

 

5,686,581

 

 

—

 

—

%

 

 

5,538,585

 

 

—

 

—

%

Total deposits and interest-bearing liabilities

$

6,007,961

 

$

1,881

 

0.13

%

 

$

5,813,961

 

$

1,755

 

0.12

%

Other noninterest-bearing liabilities

 

206,708

 

 

 

 

 

 

213,293

 

 

 

 

Total liabilities

 

6,214,669

 

 

 

 

 

 

6,027,254

 

 

 

 

Shareholders' equity

 

686,921

 

 

 

 

 

 

750,543

 

 

 

 

Total liabilities and shareholders' equity

$

6,901,590

 

 

 

 

 

$

6,777,797

 

 

 

 

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

 

 

$

97,465

 

6.19

%

 

 

 

$

72,151

 

4.77

%

 

 

 

 

 

 

 

 

 

 

 

 

Net interest margin

 

 

 

 

6.18

%

 

 

 

 

 

4.76

%

Tax-equivalent effect

 

 

 

 

0.02

%

 

 

 

 

 

0.01

%

Net interest margin, tax-equivalent(2)

 

 

 

 

6.20

%

 

 

 

 

 

4.77

%

(1)

Tax rate used to arrive at the TEY for the three months ended June 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

June 30, 2023

 

March 31, 2023

 

December 31, 2022

 

September 30, 2022

 

June 30, 2022

Equity to total assets

 

9.09

%

 

 

9.80

%

 

 

9.90

%

 

 

9.56

%

 

 

10.77

%

Book value per common share outstanding

$

25.54

 

 

$

24.88

 

 

$

23.36

 

 

$

22.41

 

 

$

24.69

 

Tangible book value per common share outstanding

$

13.05

 

 

$

12.59

 

 

$

11.53

 

 

$

10.77

 

 

$

13.22

 

Tangible book value per common share outstanding excluding AOCI

$

20.89

 

 

$

19.54

 

 

$

18.68

 

 

$

18.17

 

 

$

17.70

 

Common shares outstanding

 

26,539,272

 

 

 

27,055,727

 

 

 

28,211,239

 

 

 

28,788,124

 

 

 

29,356,707

 

Nonperforming assets to total assets

 

0.55

%

 

 

0.44

%

 

 

0.68

%

 

 

0.46

%

 

 

0.40

%

Nonperforming loans and leases to total loans and leases

 

0.93

%

 

 

0.76

%

 

 

1.16

%

 

 

0.82

%

 

 

0.71

%

Net interest margin

 

6.18

%

 

 

6.12

%

 

 

5.62

%

 

 

5.21

%

 

 

4.76

%

Net interest margin, tax-equivalent

 

6.20

%

 

 

6.14

%

 

 

5.64

%

 

 

5.23

%

 

 

4.77

%

Return on average assets

 

2.61

%

 

 

2.99

%

 

 

1.71

%

 

 

1.39

%

 

 

1.32

%

Return on average equity

 

26.26

%

 

 

32.68

%

 

 

17.18

%

 

 

12.82

%

 

 

11.93

%

Full-time equivalent employees

 

1,186

 

 

 

1,164

 

 

 

1,150

 

 

 

1,141

 

 

 

1,178

 

Non-GAAP Reconciliations

 

Adjusted Net Income and Adjusted Earnings Per Share

At and For the Three Months Ended

 

At and For the Nine Months Ended

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

June 30, 2023

March 31, 2023

June 30, 2022

 

June 30, 2023

June 30, 2022

Net Income - GAAP

$

45,096

 

$

54,771

 

$

22,391

 

 

$

127,709

 

$

132,966

Less: Gain on sale of trademarks

 

—

 

 

—

 

 

—

 

 

 

10,000

 

 

50,000

Less: Loss on disposal of certain mobile solar generators

 

—

 

 

(1,993

)

 

—

 

 

 

(1,993

)

 

—

Add: Accelerated depreciation on certain mobile solar generators

 

—

 

 

4,822

 

 

—

 

 

 

4,822

 

 

—

Add: Rebranding expenses

 

—

 

 

—

 

 

3,427

 

 

 

3,737

 

 

6,249

Add: Separation related expenses

 

—

 

 

—

 

 

3,116

 

 

 

11

 

 

4,080

Add: Impairment on Venture Capital investments

 

2,749

 

 

500

 

 

—

 

 

 

3,249

 

 

—

Add: Income tax effect resulting from the above listed items

 

(687

)

 

(1,829

)

 

(1,677

)

 

 

(942

)

 

9,965

Adjusted net income

$

47,158

 

$

60,257

 

$

27,257

 

 

$

130,579

 

$

103,260

Less: Adjusted allocation of earnings to participating securities

 

722

 

 

923

 

 

458

 

 

 

1,963

 

 

1,682

Adjusted Net income attributable to common shareholders

 

46,436

 

 

59,334

 

 

26,799

 

 

 

128,616

 

 

101,578

Weighted average diluted common shares outstanding

 

26,447,032

 

 

27,169,569

 

 

28,868,136

 

 

 

27,238,801

 

 

29,454,586

Adjusted earnings per common share - diluted

$

1.76

 

$

2.18

 

$

0.93

 

 

$

4.72

 

$

3.45

Adjusted Diluted Earnings Per Share Guidance

 

(Earnings per share amounts)

Fiscal Year Ended 2023 (Guidance)

Diluted earnings per share - GAAP

$5.60 - $6.00

Less: Net extraordinary items, net of tax(1)

$0.15

Diluted earnings per share - Adjusted

$5.45 - $5.85

(1)

Includes gain on sale of trademarks and rebranding-related expenses.

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20230726021835/en/

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