Pathward Financial, Inc. ("Pathward Financial" or the "Company") (NASDAQ:CASH) reported net income of $74.3 million, or $3.11 per share, for the three months ended March 31, 2025, compared to net income of $65.3 million, or $2.56 per share, for the three months ended March 31, 2024.

CEO Brett Pharr said, "At the halfway point for the fiscal year, our businesses are healthy, and we are optimistic about the future. We have made significant progress toward our goals thanks in large part to the successful execution on our balance sheet strategy, which is allowing us to generate revenue above our asset size and means that we do not need to grow our balance sheet to grow revenues. This is evident in our financial performance during the quarter. We are also having a great tax season, which led the way to noninterest income growth for the quarter."

Company Highlights and Business Developments

On March 20, 2025, the Company's subsidiary Pathward®, N.A. announced it became Certified™ by Great Place to Work® for the third year in a row. Great Place to Work describes itself as the global authority on workplace culture, employee experience, and the leadership behaviors proven to deliver market-leading revenue, employee retention and increased innovation.

Financial Highlights for the 2025 Fiscal Second Quarter

Total tax services product income, net of losses and direct product expenses, increased 29% to $47.6 million from $36.9 million, when comparing the first six months of fiscal 2025 to the same period of the prior fiscal year.
Total revenue for the second quarter was $262.9 million, an increase of $15.6 million, or 6%, compared to the same quarter in fiscal 2024, driven by an increase in both net interest income and noninterest income.
Net interest margin ("NIM") increased 27 basis points to 6.50% for the second quarter from 6.23% during the same period last year, primarily driven by increased yields and balances in the loan and lease portfolio and an improved earning asset mix from the continued balance sheet optimization. When including contractual, rate-related processing expenses associated with deposits on the Company's balance sheet, NIM would have been 5.09% in the fiscal 2025 second quarter compared to 4.76% during the fiscal 2024 second quarter. See non-GAAP reconciliation table below.
Total gross loans and leases at March 31, 2025 increased $55.5 million to $4.46 billion compared to March 31, 2024 and decreased $97.8 million when compared to December 31, 2024. When excluding the insurance premium finance loans, which sold during the first quarter of fiscal 2025, of $522.9 million at March 31, 2024, total gross loans and leases at March 31, 2025 increased $578.4 million, or 15%, when compared to March 31, 2024.
During the 2025 fiscal second quarter, the Company repurchased 575,804 shares of common stock at an average share price of $78.11. As of March 31, 2025, there were 5,722,336 shares available for repurchase under the current common stock share repurchase program.

Tax Season

For the six months ended March 31, 2025, total tax services product revenue was $85.0 million, an increase of 17% compared to the same period of the prior year. Total tax services product fee income increased by $9.5 million and net interest income on tax services loans increased $2.6 million, while total tax services product expense increased marginally when compared to the prior year.

Provision for credit losses for the tax services portfolio increased $0.9 million for the six months ended March 31, 2025 when compared to the same period of the prior year, primarily due to an increase in loan originations.

Total tax services product income, net of losses and direct product expenses, increased 29% to $47.6 million from $36.9 million, when comparing the first six months of fiscal 2025 to the same period of the prior fiscal year. This increase was primarily due to a 13% increase in independent tax office enrollments this tax season as compared to the prior year period.

For the 2025 tax season through March 31, 2025, Pathward originated $1.66 billion in refund advance loans compared to $1.56 billion during the 2024 tax season.

Net Interest Income

Net interest income for the second quarter of fiscal 2025 was $124.3 million, an increase of 5% from the same quarter in fiscal 2024. The increase was mainly attributable to increased yields and balances in the loan and lease portfolio and an improved earning asset mix, along with a reduction in funding costs.

The Company's average interest-earning assets for the second quarter of fiscal 2025 increased by $125.3 million to $7.76 billion compared to the same quarter in fiscal 2024, due to increases in average outstanding balances of interest earning cash and total loan and lease balances, partially offset by a decrease in total investment securities. The second quarter average outstanding balance of loans and leases increased $185.2 million compared to the same quarter of the prior fiscal year, primarily due to increases in the warehouse finance and tax services portfolios, partially offset by decreases in the consumer finance and commercial finance loan portfolios. The decrease in the average outstanding balance of commercial finance loans and leases was primarily driven by the sale of the insurance premium finance loans during the first quarter of fiscal year 2025.

Fiscal 2025 second quarter NIM increased to 6.50% from 6.23% in the second fiscal quarter of 2024. When including contractual, rate-related processing expenses associated with deposits on the Company's balance sheet, NIM would have been 5.09% in the second quarter compared to 4.76% during the fiscal 2024 second quarter. See non-GAAP reconciliation table below. The overall reported tax-equivalent yield ("TEY") on average interest-earning assets increased 12 basis points to 6.81% compared to the prior year quarter, driven by an improved earning asset mix. The yield on the loan and lease portfolio was 8.59% compared to 8.43% for the comparable period last year and the TEY on the securities portfolio was 3.11% compared to 3.20% over that same period.

The Company's cost of funds for all deposits and borrowings averaged 0.32% during the fiscal 2025 second quarter, as compared to 0.47% during the prior year quarter. The Company's overall cost of deposits was 0.23% in the fiscal second quarter of 2025, as compared to 0.38% during the prior year quarter. When including contractual, rate-related processing expenses associated with deposits on the Company's balance sheet, the Company's overall cost of deposits was 1.75% in the fiscal 2025 second quarter, as compared to 1.95% during the prior year quarter. See non-GAAP reconciliation table below.

Noninterest Income

Fiscal 2025 second quarter noninterest income increased 7% to $138.5 million, compared to $128.9 million for the same period of the prior year. The increase in noninterest income when comparing the current period to the same period of the prior year was primarily driven by secondary market revenue, refund advance and other tax product income, and refund transfer product fees, partially offset by a loss on sale of investment securities, a reduction in card and deposit fees, and a loss on sale of divestiture related to closing business activities from the insurance premium finance business sale that occurred during the first quarter of the fiscal year.

The period-over-period decrease in card and deposit fee income was primarily related to lower quarterly average deposit balances held at partner banks along with lower servicing fee income due to a reduction in rates following reductions in the Effective Federal Funds Rate ("EFFR"). Servicing fee income on custodial deposits totaled $6.5 million during the 2025 fiscal second quarter, compared to $10.4 million for the same period of the prior year. For the fiscal quarter ended December 31, 2024, servicing fee income on custodial deposits totaled $4.5 million.

Noninterest Expense

Noninterest expense increased 1% to $142.5 million for the fiscal 2025 second quarter, from $140.4 million for the same quarter last year. The increase was primarily attributable to increases in operating lease equipment depreciation expense, other expense, refund transfer product expense, card processing expense, and occupancy and equipment expense. This increase was partially offset primarily by reductions in compensation and benefits expense, refund advance product expense, and impairment expense.

Card processing expense is primarily driven by rate-related agreements with Partner Solutions relationships. 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 is based on a percentage of the EFFR and reprices immediately upon a change in the EFFR. Approximately 62% of the deposit portfolio was subject to these rate-related processing expenses during the fiscal 2025 second quarter. For the fiscal quarter ended March 31, 2025, contractual, rate-related processing expenses were $28.4 million, as compared to $25.6 million for the fiscal quarter ended December 31, 2024, and $30.1 million for the fiscal quarter ended March 31, 2024.

Income Tax Expense

The Company recorded an income tax expense of $15.9 million, representing an effective tax rate of 17.6%, for the fiscal 2025 second quarter, compared to an income tax expense of $15.2 million, representing an effective tax rate of 18.9%, for the second quarter last fiscal year. The current quarter increase in income tax expense compared to the prior year quarter was primarily due to an increase in income.

The Company originated $1.9 million in renewable energy leases during the fiscal 2025 second quarter, resulting in $0.5 million in total net investment tax credits. During the second quarter of fiscal 2024, the Company originated $25.9 million in renewable energy leases resulting in $7.0 million in total net investment tax credits. For the six months ended March 31, 2025, the Company originated $11.2 million in renewable energy leases, compared to $38.1 million for the comparable prior year period. Investment tax credits related to renewable energy leases are recognized ratably based on income throughout each fiscal year.


Investments, Loans and Leases

(Dollars in thousands)	March 31, 2025			December 31, 2024			September 30, 2024			June 30, 2024			March 31, 2024
Total investments	$	1,442,855		$	1,512,091		$	1,774,313		$	1,759,486		$	1,814,140

Loans held for sale
Term lending		—			7,860			4,567			—			1,977
Lease financing		—			424			—			—			—
Insurance premium finance		—			—			594,359			—			—
SBA/USDA		15,188			21,786			65,734			7,030			7,372
Consumer finance		30,579			42,578			24,210			22,350			16,597
Total loans held for sale		45,767			72,648			688,870			29,380			25,946

Term lending		1,766,432			1,735,539			1,554,641			1,533,722			1,489,054
Asset-based lending		542,483			608,261			471,897			473,289			429,556
Factoring		224,520			364,477			362,295			350,740			336,442
Lease financing		134,856			138,305			152,174			155,044			168,616
Insurance premium finance		—			—			—			617,054			522,904
SBA/USDA		701,736			595,965			568,628			563,689			560,433
Other commercial finance		154,728			174,097			185,964			166,653			149,056
Commercial finance		3,524,755			3,616,644			3,295,599			3,860,191			3,656,061
Consumer finance		246,202			280,001			248,800			253,358			267,031
Tax services		55,973			45,051			8,825			43,184			84,502
Warehouse finance		643,124			624,251			517,847			449,962			394,814
Total loans and leases		4,470,054			4,565,947			4,071,071			4,606,695			4,402,408
Net deferred loan origination costs (fees)		(5,184	)		(3,266	)		4,124			5,857			6,977
Total gross loans and leases		4,464,870			4,562,681			4,075,195			4,612,552			4,409,385
Allowance for credit losses		(78,449	)		(48,977	)		(45,336	)		(79,836	)		(80,777	)
Total loans and leases, net	$	4,386,421		$	4,513,704		$	4,029,859		$	4,532,716		$	4,328,608

The Company's investment security balances at March 31, 2025 totaled $1.44 billion, as compared to $1.51 billion at December 31, 2024 and $1.81 billion at March 31, 2024. The sequential decrease was primarily related to the sale of $57.7 million of investment securities AFS during the second quarter of fiscal 2025. The year-over-year decrease was primarily related to the sale of investment securities AFS during both the second and first quarters of fiscal 2025.

Total gross loans and leases totaled $4.46 billion at March 31, 2025, as compared to $4.56 billion at December 31, 2024 and $4.41 billion at March 31, 2024. The drivers for the sequential decrease were reductions in the commercial finance and consumer finance loan portfolios, partially offset by increases in the warehouse finance and the seasonal tax services portfolios. The year-over-year increase was due to an increase in the warehouse finance portfolio, partially offset by decreases in the commercial finance, tax services, and consumer finance loan portfolios. When excluding the insurance premium finance loans, which sold during the first quarter of fiscal 2025, of $522.9 million at March 31, 2024, total gross loans and leases at March 31, 2025 increased $578.4 million, or 15%, when compared to March 31, 2024.

Commercial finance loans, which comprised 79% of the Company's loan and lease portfolio, totaled $3.52 billion at March 31, 2025, reflecting a decrease of $91.9 million, or 3%, from December 31, 2024 and a decrease of $131.3 million, or 4%, from March 31, 2024. The sequential decrease was primarily driven by decreases of $140.0 million in factoring loans and $65.8 million in asset-based lending, partially offset by increases of $105.8 million in SBA/USDA and $30.9 million in term lending. The year-over-year decrease was primarily related to the sale of insurance premium finance loans during the first quarter of fiscal 2025 and a decrease of $111.9 million in factoring loans, partially offset by increases of $277.4 million in term lending, $141.3 million in SBA/USDA, and $112.9 million in asset-based lending. When excluding the insurance premium finance loans of $522.9 million at March 31, 2024, commercial finance loans at March 31, 2025 increased by $391.6 million when compared to March 31, 2024.

Asset Quality

The Company's allowance for credit losses ("ACL") totaled $78.4 million at March 31, 2025, an increase compared to $49.0 million at December 31, 2024 and a decrease compared to $80.8 million at March 31, 2024. The increase in the ACL at March 31, 2025, when compared to December 31, 2024, was primarily due to a $33.0 million increase in the allowance related to the seasonal tax services portfolio, partially offset by a $3.7 million decrease in the allowance related to the commercial finance portfolio.

The $2.4 million year-over-year decrease in the ACL was primarily driven by a $5.4 million decrease in the allowance related to the commercial finance portfolio, partially offset by a $2.3 million increase in the allowance related to the tax services portfolio.

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

	As of the Period Ended
(Unaudited)	March 31, 2025		December 31, 2024		September 30, 2024		June 30, 2024		March 31, 2024
Commercial finance	1.10	%	1.18	%	1.29	%	1.17	%	1.21	%
Consumer finance	2.11	%	1.79	%	0.90	%	2.23	%	1.71	%
Tax services	60.35	%	1.75	%	0.02	%	66.35	%	37.31	%
Warehouse finance	0.10	%	0.10	%	0.10	%	0.10	%	0.10	%
Total loans and leases	1.75	%	1.07	%	1.11	%	1.73	%	1.83	%
Total loans and leases excluding tax services	1.01	%	1.07	%	1.12	%	1.12	%	1.14	%

The Company's ACL as a percentage of total loans and leases increased to 1.75% at March 31, 2025 from 1.07% at December 31, 2024. The increase in the total loans and leases coverage ratio was primarily driven by seasonality in both the tax services portfolio and consumer finance portfolio.

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

(Unaudited)	Three Months Ended									Six Months Ended
(Dollars in thousands)	March 31, 2025			December 31, 2024			March 31, 2024			March 31, 2025			March 31, 2024
Beginning balance	$	48,977		$	45,336		$	53,785		$	45,336		$	49,705
Provision (reversal of) - tax services loans		26,178			1,301			25,221			27,479			26,577
Provision (reversal of) - all other loans and leases		3,389			10,913			684			14,302			8,894
Charge-offs - tax services loans		—			(741	)		—			(741	)		(1,145	)
Charge-offs - all other loans and leases		(8,114	)		(8,935	)		(5,492	)		(17,050	)		(11,218	)
Recoveries - tax services loans		6,813			228			5,800			7,041			6,094
Recoveries - all other loans and leases		1,206			875			779			2,082			1,870
Ending balance	$	78,449		$	48,977		$	80,777		$	78,449		$	80,777

The Company recognized a provision for credit losses of $29.9 million for the quarter ended March 31, 2025, compared to $26.1 million for the comparable period in the prior fiscal year. The period-over-period increase in provision for credit losses was primarily due to increases in provision for credit losses in the commercial finance portfolio of $2.8 million and the seasonal tax services portfolio of $1.0 million. The Company recognized net charge-offs of $0.1 million for the quarter ended March 31, 2025, compared to net recoveries of $1.1 million for the quarter ended March 31, 2024. Net charge-offs attributable to the commercial finance portfolio for the current quarter were $6.9 million while recoveries of $6.8 million were recognized in the tax services portfolio. Net charge-offs attributable to the commercial finance portfolio for the same quarter of the prior year were $4.7 million, while recoveries of $5.8 million were recognized in the tax services portfolio.

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

As of March 31, 2025	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	$	—	$	—	$	—	$	—	$	45,767	$	45,767	$	—	$	—	$	—

Commercial finance		41,161		14,933		18,273		74,367		3,450,388		3,524,755		1,359		36,049		37,408
Consumer finance		3,922		2,769		2,397		9,088		237,114		246,202		2,398		—		2,398
Tax services		1,036		—		—		1,036		54,937		55,973		—		—		—
Warehouse finance		—		—		—		—		643,124		643,124		—		—		—
Total loans and leases held for investment		46,119		17,702		20,670		84,491		4,385,563		4,470,054		3,757		36,049		39,806

Total loans and leases	$	46,119	$	17,702	$	20,670	$	84,491	$	4,431,330	$	4,515,821	$	3,757	$	36,049	$	39,806


As of December 31, 2024	Accruing and Nonaccruing Loans and Leases												Nonperforming Loans and Leases
(Dollars in thousands)	30-59 Days Past Due		60-89 Days Past Due		> 89 Days Past Due		Total Past Due		Current		Total Loans and Leases Receivable		> 89 Days Past Due and Accruing		Nonaccrual Balance		Total
Loans held for sale	$	—	$	—	$	—	$	—	$	72,648	$	72,648	$	—	$	—	$	—

Commercial finance		25,080		8,966		23,545		57,591		3,559,053		3,616,644		5,555		27,231		32,786
Consumer finance		4,502		2,936		2,423		9,861		270,140		280,001		2,423		—		2,423
Tax services		—		—		—		—		45,051		45,051		—		—		—
Warehouse finance		—		—		—		—		624,251		624,251		—		—		—
Total loans and leases held for investment		29,582		11,902		25,968		67,452		4,498,495		4,565,947		7,978		27,231		35,209

Total loans and leases	$	29,582	$	11,902	$	25,968	$	67,452	$	4,571,143	$	4,638,595	$	7,978	$	27,231	$	35,209

The Company's nonperforming assets at March 31, 2025 were $41.6 million, representing 0.59% of total assets, compared to $37.5 million, or 0.49% of total assets at December 31, 2024 and $37.2 million, or 0.50% of total assets at March 31, 2024.

The increase in the nonperforming assets as a percentage of total assets at March 31, 2025 compared to December 31, 2024, was driven by an increase in nonperforming loans in the commercial finance portfolio, partially offset by a slight decrease in nonperforming loans in the consumer finance portfolio. When comparing the current period to the same period of the prior year, the increase was driven by 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's nonperforming loans and leases at March 31, 2025, were $39.8 million, representing 0.88% of total gross loans and leases, compared to $35.2 million, or 0.76% of total gross loans and leases at December 31, 2024 and $34.4 million, or 0.78% of total gross loans and leases at March 31, 2024.

Deposits, Borrowings and Other Liabilities

The average balance of total deposits and interest-bearing liabilities was $7.30 billion for the three-month period ended March 31, 2025, compared to $7.28 billion for the same period in the prior fiscal year. Total average deposits for the fiscal 2025 second quarter increased by $12.6 million to $7.18 billion compared to the same period in fiscal 2024. The increase in average deposits was primarily due to increases in noninterest bearing deposits and interest bearing checking, partially offset by a decrease in wholesale deposits.

Total end-of-period deposits decreased 9% to $5.82 billion at March 31, 2025, compared to $6.37 billion at March 31, 2024. The decrease in end-of-period deposits was primarily driven by decreases in noninterest-bearing deposits of $458.0 million, wholesale deposits of $100.9 million, and money market deposits of $10.0 million, partially offset by an increase in interest bearing checking deposits of $25.1 million.

As of March 31, 2025, the Company managed $1.12 billion of customer deposits at other banks in its capacity as custodian. These deposits provide the Company with the ability to earn servicing fee income, typically reflective of the EFFR. The sequential quarter increase in these customer deposits held at other banks reflects normal seasonal patterns during the second quarter of the fiscal year.

Regulatory Capital

The Company and its subsidiary Pathward®, N.A. (the "Bank") remained above the federal regulatory minimum capital requirements at March 31, 2025, 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. The decrease in Tier 1 leverage capital ratio for the period as compared to the sequential quarter is the result of higher quarterly average assets related to the Company's seasonal tax business. The Bank's Tier 1 leverage capital ratio using end of period assets of 10.49% better reflects the expected capital position of the Company post tax season. See non-GAAP reconciliation 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 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	March 31, 2025⁽¹⁾		December 31, 2024		September 30, 2024		June 30, 2024		March 31, 2024
Company
Tier 1 leverage capital ratio	8.53	%	9.15	%	9.26	%	9.13	%	7.75	%
Common equity Tier 1 capital ratio	13.98	%	12.53	%	12.61	%	12.44	%	12.30	%
Tier 1 capital ratio	14.25	%	12.79	%	12.86	%	12.70	%	12.56	%
Total capital ratio	15.90	%	14.11	%	14.08	%	14.33	%	14.21	%
Bank
Tier 1 leverage ratio	8.73	%	9.42	%	9.44	%	9.36	%	7.92	%
Common equity Tier 1 capital ratio	14.59	%	13.16	%	13.12	%	13.02	%	12.83	%
Tier 1 capital ratio	14.59	%	13.16	%	13.12	%	13.02	%	12.83	%
Total capital ratio	15.84	%	14.10	%	13.97	%	14.27	%	14.09	%

⁽¹⁾

March 31, 2025 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)	March 31, 2025			December 31, 2024			September 30, 2024			June 30, 2024			March 31, 2024
Total stockholders' equity	$	832,232		$	776,430		$	839,605		$	765,248		$	739,462
Adjustments:
LESS: Goodwill, net of associated deferred tax liabilities		285,865			286,171			296,105			296,496			296,889
LESS: Certain other intangible assets		16,363			16,951			18,018			18,315			19,146
LESS: Net deferred tax assets from operating loss and tax credit carry-forwards		3,410			12,298			13,253			11,880			15,862
LESS: Net unrealized (losses) on available for sale securities		(163,206	)		(187,834	)		(152,328	)		(206,584	)		(205,460	)
LESS: Noncontrolling interest		(658	)		(756	)		(277	)		(506	)		(420	)
ADD: Adoption of Accounting Standards Update 2016-13		672			672			1,345			1,345			1,345
Common Equity Tier 1⁽¹⁾		691,130			650,272			666,179			646,992			614,790
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		(381	)		(462	)		(150	)		(374	)		(311	)
Total Tier 1 capital		704,410			663,471			679,690			660,279			628,140
Allowance for credit losses		61,994			48,818			44,687			65,182			62,715
Subordinated debentures, net of issuance costs		19,744			19,719			19,693			19,668			19,642
Total capital	$	786,148		$	732,008		$	744,070		$	745,129		$	710,497

⁽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.

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 Tuesday, April 22, 2025. 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 162083.

The Quarterly Investor Update slide presentation prepared for use in connection with the Company's conference call and earnings webcast is available under the Presentations link in the Investor Relations - Events & Presentations section of the Company's website at www.pathwardfinancial.com. 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 Partner Solutions and Commercial Finance business lines. These strategic business lines provide 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; progress on key strategic initiatives; expected results of our partnerships; underwriting and monitoring processes; expected nonperforming loan resolutions and net charge off rates; 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 pandemics, and any governmental or societal responses thereto; 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 changes in international trade policies, tariffs, and treaties affecting imports and exports, and their related impacts on macroeconomic conditions, customer behavior, funding costs and loan and securities portfolios; changes in tax laws; trade disputes, barriers to trade or the emergence of trade restrictions; 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 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; our liquidity and capital positions, including the sufficiency of our liquidity; 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 and acceptance 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, and any related increases in compliance and other costs; changes in financial services laws and regulations, including laws and regulations relating to the tax refund 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 borrowing, 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. All subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Additional discussions of factors affecting the Company's business and prospects are reflected under the caption "Risk Factors" and in other sections of the Company's Annual Report on Form 10-K for the Company's fiscal year ended September 30, 2024, and in the Company's other filings made with the SEC. The Company expressly disclaims any intent or obligation to update, revise or clarify any forward-looking statements, whether written or oral, that may be made from time to time by or on behalf of the Company or its subsidiaries, whether as a result of new information, changed circumstances, or future events or for any other reason.




Condensed Consolidated Statements of Financial Condition (Unaudited)

(Dollars in Thousands, Except Share Data)	March 31, 2025			December 31, 2024			September 30, 2024			June 30, 2024			March 31, 2024
ASSETS
Cash and cash equivalents	$	254,249		$	597,396		$	158,337		$	298,926		$	347,888
Securities available for sale, at fair value		1,411,520			1,480,090			1,741,221			1,725,460			1,779,458
Securities held to maturity, at amortized cost		31,335			32,001			33,092			34,026			34,682
Federal Reserve Bank and Federal Home Loan Bank Stock, at cost		24,276			24,454			36,014			24,449			25,844
Loans held for sale		45,767			72,648			688,870			29,380			25,946
Loans and leases		4,464,870			4,562,681			4,075,195			4,612,552			4,409,385
Allowance for credit losses		(78,449	)		(48,977	)		(45,336	)		(79,836	)		(80,777	)
Accrued interest receivable		37,081			35,279			31,385			31,755			30,294
Premises, furniture, and equipment, net		39,542			38,263			39,055			36,953			37,266
Rental equipment, net		202,194			206,754			205,339			209,544			215,885
Goodwill and intangible assets		311,992			313,074			326,094			327,018			328,001
Other assets		268,636			308,679			260,070			280,053			283,245
Total assets	$	7,013,013		$	7,622,342		$	7,549,336		$	7,530,280		$	7,437,117

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES
Deposits		5,819,209			6,518,953			5,875,085			6,431,516			6,368,344
Short-term borrowings		—			—			377,000			—			31,000
Long-term borrowings		33,405			33,380			33,354			33,329			33,373
Accrued expenses and other liabilities		328,167			293,579			424,292			300,187			264,938
Total liabilities		6,180,781			6,845,912			6,709,731			6,765,032			6,697,655

STOCKHOLDERS' EQUITY
Preferred stock		—			—			—			—			—
Common stock, $.01 par value		236			241			248			251			254
Common stock, Nonvoting, $.01 par value		—			—			—			—			—
Additional paid-in capital		643,887			640,422			638,803			636,284			634,415
Retained earnings		359,960			332,322			354,474			343,392			317,964
Accumulated other comprehensive loss		(166,311	)		(190,917	)		(153,394	)		(207,992	)		(206,570	)
Treasury stock, at cost		(4,882	)		(4,882	)		(249	)		(6,181	)		(6,181	)
Total equity attributable to parent		832,890			777,186			839,882			765,754			739,882
Noncontrolling interest		(658	)		(756	)		(277	)		(506	)		(420	)
Total stockholders' equity		832,232			776,430			839,605			765,248			739,462
Total liabilities and stockholders' equity	$	7,013,013		$	7,622,342		$	7,549,336		$	7,530,280		$	7,437,117





Condensed Consolidated Statements of Operations (Unaudited)

	Three Months Ended								Six Months Ended
(Dollars in thousands, except per share data)	March 31, 2025			December 31, 2024			March 31, 2024		March 31, 2025			March 31, 2024
Interest and dividend income:
Loans and leases, including fees	$	107,818		$	102,731		$	102,750	$	210,549		$	197,713
Mortgage-backed securities		8,580			8,986			9,998		17,566			20,047
Other investments		13,669			7,522			14,013		21,191			24,899
		130,067			119,239			126,761		249,306			242,659
Interest expense:
Deposits		4,086			775			6,685		4,861			10,211
FHLB advances and other borrowings		1,640			2,331			1,775		3,971			4,111
		5,726			3,106			8,460		8,832			14,322

Net interest income		124,341			116,133			118,301		240,474			228,337

Provision for credit loss		29,905			12,032			26,052		41,937			35,942

Net interest income after provision for credit loss		94,436			104,101			92,249		198,537			192,395

Noninterest income:
Refund transfer product fees		32,663			410			28,942		33,073			29,364
Refund advance and other tax fee income		48,585			524			43,200		49,109			43,311
Card and deposit fees		30,793			29,066			35,344		59,859			66,094
Rental income		13,200			13,708			13,720		26,908			27,179
(Loss) on sale of securities		(7,228	)		(15,671	)		—		(22,899	)		—
Gain (loss) on divestitures		(1,360	)		16,404			—		15,044			—
Secondary market revenue		15,378			4,378			1,401		19,756			1,370
Gain on sale of other		627			987			294		1,614			3,165
Other income		5,866			7,572			6,044		13,438			11,223
Total noninterest income		138,524			57,378			128,945		195,902			181,706

Noninterest expense:
Compensation and benefits		51,905			49,292			54,073		101,197			100,725
Refund transfer product expense		8,475			108			7,366		8,583			7,558
Refund advance expense		1,265			34			1,846		1,299			1,876
Card processing		36,238			33,314			35,163		69,552			69,747
Occupancy and equipment expense		10,307			9,706			9,293		20,013			18,141
Operating lease equipment depreciation		11,780			11,426			10,424		23,206			20,847
Legal and consulting		5,878			5,225			6,141		11,103			11,033
Intangible amortization		1,082			812			1,240		1,894			2,224
Impairment expense		1,514			—			2,013		1,514			2,013
Other expense		14,076			13,642			12,872		27,718			25,541
Total noninterest expense		142,520			123,559			140,431		266,079			259,705

Income before income tax expense		90,440			37,920			80,763		128,360			114,396

Income tax expense		15,937			6,294			15,246		22,231			20,965

Net income before noncontrolling interest		74,503			31,626			65,517		106,129			93,431
Net income attributable to noncontrolling interest		237			199			249		436			506
Net income attributable to parent	$	74,266		$	31,427		$	65,268	$	105,693		$	92,925

Less: Allocation of Earnings to participating securities⁽¹⁾		261			130			524		404			744
Net income attributable to common shareholders⁽¹⁾		74,005			31,297			64,744		105,289			92,181
Earnings per common share:
Basic	$	3.13		$	1.29		$	2.56	$	4.40		$	3.61
Diluted	$	3.11		$	1.29		$	2.56	$	4.38		$	3.61
Shares used in computing earnings per common share:
Basic		23,657,145			24,221,697			25,281,743		23,941,980			25,529,186
Diluted		23,776,023			24,280,371			25,311,144		24,039,020			25,555,656

⁽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 March 31,	2025						2024
(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	$	926,841	$	9,088	3.98	%	$	616,288	$	7,422	4.84	%
Mortgage-backed securities		1,240,243		8,580	2.81	%		1,464,530		9,998	2.75	%
Tax-exempt investment securities		116,976		797	3.50	%		132,733		932	3.57	%
Asset-backed securities		180,750		2,228	5.00	%		237,421		3,368	5.71	%
Other investment securities		207,973		1,556	3.03	%		281,695		2,291	3.27	%
Total investments		1,745,942		13,161	3.11	%		2,116,379		16,589	3.20	%
Commercial finance		3,597,280		73,053	8.24	%		3,650,845		74,330	8.19	%
Consumer finance		295,099		8,039	11.05	%		351,459		9,144	10.46	%
Tax services		557,229		11,913	8.67	%		493,168		9,014	7.35	%
Warehouse finance		638,747		14,813	9.41	%		407,703		10,262	10.12	%
Total loans and leases		5,088,355		107,818	8.59	%		4,903,175		102,750	8.43	%
Total interest-earning assets	$	7,761,138	$	130,067	6.81	%	$	7,635,842	$	126,761	6.69	%
Noninterest-earning assets		630,782						600,354
Total assets	$	8,391,920					$	8,236,196

Interest-bearing liabilities:
Interest-bearing checking	$	2,462	$	—	0.04	%	$	266	$	—	0.31	%
Savings		53,120		3	0.02	%		59,914		5	0.04	%
Money markets		179,591		270	0.61	%		190,143		598	1.26	%
Time deposits		4,213		3	0.25	%		5,027		4	0.29	%
Wholesale deposits		349,706		3,810	4.42	%		439,785		6,078	5.56	%
Total interest-bearing deposits (a)		589,092		4,086	2.81	%		695,135		6,685	3.87	%
Overnight fed funds purchased		88,522		1,004	4.60	%		79,484		1,107	5.60	%
Subordinated debentures		19,728		355	7.29	%		19,625		355	7.27	%
Other borrowings		13,661		281	8.34	%		13,901		313	9.07	%
Total borrowings		121,911		1,640	5.45	%		113,010		1,775	6.32	%
Total interest-bearing liabilities		711,003		5,726	3.27	%		808,145		8,460	4.21	%
Noninterest-bearing deposits (b)		6,592,216		—	—	%		6,473,538		—	—	%
Total deposits and interest-bearing liabilities	$	7,303,219	$	5,726	0.32	%	$	7,281,683	$	8,460	0.47	%
Other noninterest-bearing liabilities		294,121						223,560
Total liabilities		7,597,340						7,505,243
Shareholders' equity		794,580						730,953
Total liabilities and shareholders' equity	$	8,391,920					$	8,236,196
Net interest income and net interest rate spread including noninterest-bearing deposits			$	124,341	6.49	%			$	118,301	6.22	%

Net interest margin					6.50	%					6.23	%
Tax-equivalent effect					0.01	%					0.01	%
Net interest margin, tax-equivalent⁽²⁾					6.51	%					6.24	%

Total cost of deposits (a+b)		7,181,308		4,086	0.23	%		7,168,673		6,685	0.38	%

⁽¹⁾	Tax rate used to arrive at the TEY for the three months ended March 31, 2025 and 2024 was 21%.
⁽²⁾	Net interest margin expressed on a fully-taxable-equivalent basis ("net interest margin, tax-equivalent") is a non-GAAP financial measure. 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	March 31, 2025			December 31, 2024			September 30, 2024			June 30, 2024			March 31, 2024
Equity to total assets		11.87	%		10.19	%		11.12	%		10.16	%		9.94	%
Book value per common share outstanding	$	35.33		$	32.19		$	33.79		$	30.51		$	29.14
Tangible book value per common share outstanding	$	22.08		$	19.21		$	20.67		$	17.47		$	16.21
Common shares outstanding		23,558,939			24,119,416			24,847,353			25,085,230			25,377,986
Nonperforming assets to total assets		0.59	%		0.49	%		0.57	%		0.61	%		0.50	%
Nonperforming loans and leases to total loans and leases		0.88	%		0.76	%		0.87	%		0.96	%		0.78	%
Net interest margin		6.50	%		6.84	%		6.66	%		6.56	%		6.23	%
Net interest margin, tax-equivalent		6.51	%		6.85	%		6.67	%		6.57	%		6.24	%
Return on average assets		3.59	%		1.69	%		1.79	%		2.28	%		3.17	%
Return on average equity		37.91	%		15.51	%		16.80	%		22.62	%		35.72	%
Return on average tangible equity		62.50	%		25.65	%		28.40	%		40.59	%		64.92	%
Full-time equivalent employees		1,155			1,170			1,241			1,232			1,204



Non-GAAP Reconciliations

Net Interest Margin and Cost of Deposits	At and For the Three Months Ended
(Dollars in thousands)	March 31, 2025			December 31, 2024			March 31, 2024
Average interest earning assets	$	7,761,138		$	6,735,958		$	7,635,842
Net interest income	$	124,341		$	116,133		$	118,301
Net interest margin		6.50	%		6.84	%		6.23	%
Quarterly average total deposits	$	7,181,308		$	6,081,235		$	7,168,673
Deposit interest expense	$	4,086		$	775		$	6,685
Cost of deposits		0.23	%		0.05	%		0.38	%

Adjusted Net Interest Margin with contractual, rate-related card expenses associated with deposits on the Company's balance sheet
Average interest earning assets	$	7,761,138		$	6,735,958		$	7,635,842
Net interest income		124,341			116,133			118,301
Less: Contractual, rate-related processing expense		26,852			24,241			28,024
Adjusted net interest income	$	97,489		$	91,892		$	90,277
Adjusted net interest margin		5.09	%		5.41	%		4.76	%
Average total deposits	$	7,181,308		$	6,081,235		$	7,168,673
Deposit interest expense		4,086			775			6,685
Add: Contractual, rate-related processing expense		26,852			24,241			28,024
Adjusted deposit expense	$	30,938		$	25,016		$	34,709
Adjusted cost of deposits		1.75	%		1.63	%		1.95	%




Pathward, N.A. Period-end Tier 1 Leverage
(Dollars in thousands)	March 31, 2025
Total stockholders' equity	$	861,879
Adjustments:
Less: Goodwill, net of associated deferred tax liabilities		285,865
Less: Certain other intangible assets		16,363
Less: Net deferred tax assets from operating loss and tax credit carry-forwards		3,410
Less: Net unrealized gains (losses) on available for sale securities		(163,206	)
Less: Noncontrolling interest		(658	)
Add: Adoption of Accounting Standards Update 2016-13		672
Common Equity Tier 1		720,777
Tier 1 minority interest not included in common equity Tier 1 capital		—
Total Tier 1 capital	$	720,777

Total Assets (Quarter Average)	$	8,391,490
Add: Available for sale securities amortized cost		223,365
Add: Deferred tax		(55,372	)
Add: Adoption of Accounting Standards Updated 2016-13		672
Less: Deductions from CET1		305,638
Adjusted total assets	$	8,254,517
Pathward, N.A. Regulatory Tier 1 Leverage		8.73	%

Total Assets (Period End)	$	7,011,075
Add: Available for sale securities amortized cost		217,000
Add: Deferred tax		(53,794	)
Add: Adoption of Accounting Standards Updated 2016-13		672
Less: Deductions from CET1		305,638
Adjusted total assets	$	6,869,315
Pathward, N.A. Period-end Tier 1 Leverage		10.49	%

View source version on businesswire.com: https://www.businesswire.com/news/home/20250422403602/en/

Investor Relations Contact

Darby Schoenfeld, CPA

SVP, Chief of Staff & Investor Relations

877-497-7497

investorrelations@pathward.com

Media Relations Contact

mediarelations@pathward.com

Pathward Financial, Inc. Announces Results for 2025 Fiscal Second Quarter