PATHWARD FINANCIAL, INC.
For the period ended Dec 31, 2024. Filed Feb 6, 2025.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Dec 31, 2024 · Filed Feb 6, 2025
CASH$76.26-0.5%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-06-30; filed 2024-08-06.
0000907471-24-000084
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-12-31; filed 2025-02-06.
0000907471-25-000012
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 96 previous paragraphs and 88 current paragraphs.
41 unchanged; 42 reworded; 5 added; 13 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 7 previous and 6 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (5)
Current report
Company Highlights and Business Developments
Current report
•On October 31, 2024, Pathward®, N.A. completed the sale of substantially all of the assets and liabilities related to the Bank's commercial insurance premium finance business. The purchase price was $603.3 million, plus a $31.2 million premium. The Bank recorded a $16.4 million pre-tax gain on the sale.
Current report
•On November 30, 2024, the Bank sold $160.1 million of debt securities AFS with a pre-tax loss on the sale of securities of $15.7 million. This loss largely offsets the gain from the sale of the commercial insurance premium finance business.
Current report
•Total gross loans and leases at December 31, 2024 increased $136.4 million to $4.56 billion compared to December 31, 2023 and increased $487.5 million when compared to September 30, 2024. When excluding the insurance premium finance loans of $671.0 million at December 31, 2023, total gross loans and leases at December 31, 2024 increased $807.4 million, or 22%, when compared to December 31, 2023.
Current report
Fiscal 2025 first quarter noninterest income increased 9% to $57.4 million, compared to $52.8 million for the same period of the prior year. During the first fiscal quarter of 2025, the Company recognized a gain on divestiture of $16.4 million from the sale of its commercial insurance premium finance business. This gain on divestiture was largely offset by a loss on sale of securities of $15.7 million also recognized during the current quarter. The increase in noninterest income when comparing the current period to the same period of the prior yearwas primarily driven by an increase in gain on sale of loans and leases, other income, tax services product fees, and rental income. The period-over-period increasewas partially offset by a decrease in card and deposit fees and a reduction in gain on sale of other. The increase in gain on sale of loans was primarily driven by SBA/USDA loan sales.
Removed paragraphs (13)
Previous report
Company Highlights
Previous report
•On April 30, 2024, Pathward Financial was recognized on Keefe, Bruyette & Woods, Inc.'s (also known as "KBW") honor roll list of the top banks producing "industry-leading and consistent earnings growth for investors."
Previous report
•During the quarter, Pathward announced the expansion and transformation of its Solutions for Financial Institutions, which previously only provided prepaid cards to banks and credit unions. With this expansion, Pathward can now also provide Commercial Finance Solutions to their business clients that do not qualify for traditional financing or when a product is not offered. Pathward also provides financial institutions the ability to offer merchant services to business clients.
Previous report
•Total gross loans and leases at June 30, 2024 increased $539.7 million to $4.61 billion compared to June 30, 2023 and increased $203.2 million when compared to March 31, 2024. The increase compared to the prior year quarter was due to growth across the commercial finance, consumer finance, and warehouse finance loan portfolios, partially offset by a slight reduction in the seasonal tax services portfolio. The primary driver for the sequential increase was growth in the commercial and warehouse finance loan portfolios, partially offset by a reductionin the consumer finance and seasonal tax services loan portfolios.
Previous report
Tax Season
Previous report
For the nine months ended June 30, 2024, total tax services product revenue was $82.0 million, an increase of 3% compared to the same period of the prior year. The increase in revenue was primarily driven by an increase in refund advance fee income, partially offset by decreases in net interest income and refund transfer product fees. Provision for credit losses for the tax services portfolio decreased $9.5 million for the nine months ended June 30, 2024 when compared to the same period of the prior year, due to improvements in data analytics, underwriting and monitoring.
Previous report
Total tax services product income, net of losses and direct product expenses, increased 33% to $47.1 million from $35.3 million, when comparing the first nine months of fiscal 2024 to the same period of the prior fiscal year.
Previous report
The Company recorded net income of $134.8 million, or $5.27 per diluted share, for the nine months ended June 30, 2024, compared to net income of $127.7 million, or $4.62 per diluted share, for the nine months ended June 30, 2023.
Previous report
For the nine months ended June 30, 2024, NIM was 6.33%, an increase of 35 basis points from 5.98% compared to the same period in the prior fiscal year.
Previous report
The Company recognized a provision for credit loss of $41.8 million for the nine months ended June 30, 2024, compared to $48.3 million for the comparable period in the prior fiscal year. The period-over-period decrease in provision for credit losses was primarily due to a decrease in provision for credit losses in the tax services portfolio of $9.5 million, partially offset by increases in the commercial finance portfolio of $1.4 million, the consumer finance portfolio of $0.8 million and unfunded commitment reserves of $0.8 million. The Company recognized net charge-offs of $11.0 million for the nine months ended June 30, 2024, compared to net charge-offs of $12.4 million for the same period of the prior year. Net charge-offs attributable to the commercial finance portfolio and consumer finance portfolio for the nine months ended June 30, 2024, were $16.2 million and $0.1 million, respectively, while net recoveries of $5.4 million were recognized in the tax services portfolio. Net charge-offs attributable to the commercial finance and consumer finance portfolios for the same period of the prior year were $10.5 million and $2.2 million, respectively, while net recoveries of $0.3 million was recognized in the tax services portfolio.
Previous report
Fiscal 2024 third quarter noninterest income decreased 3% to $65.9 million, compared to $67.7 million for the same period of the prior year. The decreasewas primarily driven by a decrease in card and deposit fees. The period-over-period decrease was partially offset by an increase in gain on sale of other and tax services product fees.
Previous report
Noninterest income for the nine months ended June 30, 2024 decreased to $247.6 million from $260.5 million for the same period of the prior year. The period-over-period decrease was primarily driven by a decrease in card and deposit fees and the gain on sale of trademarks recognized in the prior period, partially offset by increases in gain on sale of other, tax services product fees, other income, and rental income.
Previous report
Noninterest expense for thenine months ended June 30, 2024 increased to $383.4 million from $346.8 million for the same period of the prior year. The period-over-period increase was primarily driven by an increase in card processing expense and compensation and benefits expense.
Reworded paragraphs (42)
Previous wording
You can identify forward-looking statements by words such as “may,” “hope,” “will,” “should,” “expect,” “plan,” “anticipate,” “intend,” “believe,” “estimate,” “predict,” “potential,” “continue,” “could,” “future,” "target," or the negative of those terms, or other words of similar meaning or similar expressions. You should carefully read statements that contain these words because they discuss our future expectations or state other “forward-looking” information. These forward-looking statements are based on information currently available to us and assumptions about future events, and include statements with respect to the Company’s beliefs, expectations, estimates, and intentions, which are subject to significant risks and uncertainties, and are subject to change based on various factors, some of which are beyond the Company’s control. Such risks, uncertainties and other factors may cause our actual growth, results of operations, financial condition, cash flows, performance and business prospects and opportunities to differ materially from those expressed in, or implied by, these forward-looking statements. Such statements address, among others, the following subjects: future operating results including our performance expectations; progress on key strategic initiatives; expected results of our partnerships; impacts of our improved data analytics, underwriting, and monitoring processes; expected nonperforming loan resolutions and net charge-off rates; the performance of our securities portfolio; future effective tax rate; 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 their related impacts on macroeconomic conditions, customer behavior, funding costs and loan and securities portfolios; changes in tax laws; the strength of the United States' economy, and the local economies in which the Company operates; adverse developments i…
Excerpt shortened here; the source contains the full paragraph.
Current wording
You can identify forward-looking statements by words such as “may,” “hope,” “will,” “should,” “expect,” “plan,” “anticipate,” “intend,” “believe,” “estimate,” “predict,” “potential,” “continue,” “could,” “future,” "target," or the negative of those terms, or other words of similar meaning or similar expressions. You should carefully read statements that contain these words because they discuss our future expectations or state other “forward-looking” information. These forward-looking statements are based on information currently available to us and assumptions about future events, and include statements with respect to the Company’s beliefs, expectations, estimates, and intentions, which are subject to significant risks and uncertainties, and are subject to change based on various factors, some of which are beyond the Company’s control. Such risks, uncertainties and other factors may cause our actual growth, results of operations, financial condition, cash flows, performance and business prospects and opportunities to differ materially from those expressed in, or implied by, these forward-looking statements. Such statements address, among others, the following subjects: future operating results including our performance expectations; progress on key strategic initiatives; expected results of our partnerships; impacts of our improved data analytics, underwriting, and monitoring processes; expected nonperforming loan resolutions and net charge-off rates; the performance of our securities portfolio; future effective tax rate; 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 federal funds rate, and their related impacts on macroeconomic conditions, customer behavior, funding costs and loan and securities portfolios; changes in tax laws; the strength of the United States' economy, and the local economies in which the Company operates; adverse developmen…
Excerpt shortened here; the source contains the full paragraph.
Previous wording
The following discussion focuses on the consolidated financial condition of the Company at June 30, 2024, compared to September 30, 2023, and the consolidated results of operations for the three and nine months ended June 30, 2024 and 2023. This discussion should be read in conjunction with the Company’s consolidated financial statements, and notes thereto, for the fiscal year ended September 30, 2023 and the related management's discussion and analysis of financial condition and results of operations contained in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2023.
Current wording
The following discussion focuses on the consolidated financial condition of the Company at December 31, 2024, compared to September 30, 2024, and the consolidated results of operations for the three months ended December 31, 2024 and 2023. This discussion should be read in conjunction with the Company’s consolidated financial statements, and notes thereto, for the fiscal year ended September 30, 2024 and the related management's discussion and analysis of financial condition and results of operations contained in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2024.
Previous wording
Financial Highlights for the 2024 Fiscal Third Quarter
Current wording
Financial Highlights for the 2025 Fiscal First Quarter
Previous wording
•Total revenue for the third quarter was $176.7 million, an increase of $11.5 million, or 7%, compared to the same quarter in fiscal 2023, driven by an increase in net interest income, partially offset by a reduction in noninterest income.
Current wording
•Total revenue for the first quarter was $173.5 million, an increase of $10.7 million, or 7%, compared to the same quarter in fiscal 2024, driven by an increase in both net interest income and noninterest income.
Previous wording
•Net interest margin ("NIM") increased 38 basis points to 6.56% for the third quarter from 6.18% during the same period of last year, primarily driven by increased yields on earning assets and an improved earning asset mix from the continued optimization of the portfolio.
Current wording
•Net interest margin ("NIM") increased 61 basis points to 6.84% for the first quarter from 6.23% during the same period of last year, primarily driven by increased yields and balances in the loan and lease portfolio and an improved earnings asset mix from the continued balance sheet optimization.
Previous wording
•During the 2024 fiscal third quarter, the Company repurchased 286,920 shares of common stock at an average share price of $52.24.
Current wording
•During the 2025 fiscal first quarter, the Company repurchased 701,860 shares of common stock at an average share price of $74.05. As of December 31, 2024, there were 6,298,140 shares available for repurchase under the current common stock share repurchase program.
Previous wording
At June 30, 2024, the Company’s total assets decreased slightly to $7.53 billion compared to $7.54 billion at September 30, 2023, primarily due to reductions of $78.8 million in securities AFS, $76.7 million in cash and cash equivalents, and $48.4 million in loans held for sale, partially offset by growth of $246.4 million in loans and leases.
Current wording
At December 31, 2024, the Company’s total assets increased slightly to $7.62 billion compared to $7.55 billion at September 30, 2024, primarily due to growth of $487.5 million in loans and leases, $439.1 million in cash and cash equivalents, and $48.6 million in other assets, partially offset by reductions of $616.2 million in loans held for sale, $261.1 million in securities AFS, and $13.0 million in goodwill and intangible assets.
Previous wording
Total cash and cash equivalents were $298.9 million at June 30, 2024, decreasing from $375.6 million at September 30, 2023. The Company maintains its cash investments primarily in interest-bearing overnight deposits with the FHLB of Des Moines and the FRB. At June 30, 2024, the Company did not have any federal funds sold.
Current wording
Total cash and cash equivalents were $597.4 million at December 31, 2024, increasing from $158.3 million at September 30, 2024. The increase is primarily due to the proceeds from the sale of the commercial insurance premium finance business, net transaction costs, and the sale of debt securities AFS, partially offset by the repayment of short-term borrowings during the three months ended December 31, 2024. The Company maintains its cash investments primarily in interest-bearing overnight deposits with the FHLB of Des Moines and the FRB. At December 31, 2024, the Company did not have any federal funds sold.
Previous wording
The total investment portfolio decreased $81.3 million, or 4%, to $1.76 billion at June 30, 2024, compared to $1.84 billion at September 30, 2023. The Company’s portfolio of securities customarily consists primarily of MBS, which have expected lives much shorter than the stated final maturity, non-bank qualified obligations of states and political subdivisions, which mature in approximately 15 years or less, and other tax exempt municipal mortgage related pass through securities which have average lives much shorter than their stated final maturities. During the nine months ended June 30, 2024, the Company made no purchases of investment securities.
Current wording
The Company's investment security balances at December 31, 2024 totaled $1.51 billion, as compared to $1.77 billion at September 30, 2024. The decrease is primarily due to $160.1 million of debt securities AFS sold by the Bank during the three months ended December 31, 2024. The Company’s portfolio of securities customarily consists primarily of MBS, which have expected lives much shorter than the stated final maturity, non-bank qualified obligations of states and political subdivisions, which mature in approximately 15 years or less, and other tax exempt municipal mortgage related pass through securities which have average lives much shorter than their stated final maturities. During the three months ended December 31, 2024, the Company made $1.2 million of purchases of investment securities.
Previous wording
Through the Bank, the Company owns stock in the FHLB due to the Bank’s membership and participation in this banking system as well as stock in the FRB. The FHLB requires a level of stock investment based on a pre-determined formula. The Company’s investment in these stocks was $24.4 million at June 30, 2024 and $28.2 million at September 30, 2023, as redemptions were partially offset by purchases of FHLB membership stock during the nine months ended June 30, 2024.
Current wording
Through the Bank, the Company owns stock in the FHLB due to the Bank’s membership and participation in this banking system as well as stock in the FRB. The FHLB requires a level of stock investment based on a pre-determined formula. The Company’s investment in these stocks was $24.5 million at December 31, 2024 and $36.0 million at September 30, 2024, as redemptions were partially offset by purchases of FHLB membership stock during the three months ended December 31, 2024.
Previous wording
Loans held for sale at June 30, 2024 totaled $29.4 million, decreasing from $77.8 million at September 30, 2023. This decrease was primarily driven by a reduction in consumer credit products held for sale at June 30, 2024 compared to September 30, 2023.
Current wording
Loans held for sale at December 31, 2024 totaled $72.6 million, decreasing from $688.9 million at September 30, 2024. This decrease was primarily driven by the sale of the commercial insurance premium finance loans and a reduction in SBA/USDA held for sale, partially offset by growth in consumer credit products held for sale at December 31, 2024 compared to September 30, 2024.
Previous wording
Total gross loans and leases totaled $4.61 billion at June 30, 2024, as compared to $4.37 billion at September 30, 2023. The increase was due to growth in the commercial finance, seasonal tax services, and warehouse finance loan portfolios, partially offset by a reduction in the consumer loan portfolio. See Note 4 to the “Notes to Condensed Consolidated Financial Statements” of this Quarterly Report on Form 10-Q.
Current wording
Total gross loans and leases totaled $4.56 billion at December 31, 2024, as compared to $4.08 billion at September 30, 2024. The increase was due to growth across all loan portfolios. See Note 5. Loans and Leases, Net to the “Notes to Condensed Consolidated Financial Statements” of this Quarterly Report on Form 10-Q.
Previous wording
Commercial finance loans, which comprised 84% of the Company's loan and lease portfolio, totaled $3.86 billion at June 30, 2024, reflecting an increase of $137.0 million from September 30, 2023. The increase in commercial finance loans was primarily driven by a $225.6 million increase in the term lending portfolio and a $90.9 million increase in the asset-based lending portfolio, partially offset by a $183.0 million decrease in the insurance premium finance portfolio.
Current wording
Commercial finance loans, which comprised 79% of the Company's loan and lease portfolio, totaled $3.62 billion at December 31, 2024, reflecting an increase of $321.0 million, 10%, from September 30, 2024. The increase was primarily driven by increases of $180.9 million in term lending and $136.4 million in asset-based lending.
Previous wording
Total end-of-period deposits decreased 2% to $6.43 billion at June 30, 2024, compared to $6.59 billion at September 30, 2023, primarily driven by decreases in noninterest-bearing deposits of $176.3 million and money market deposits of $15.4 million, partially offset by an increase in wholesale deposits of $37.4 million.
Current wording
Total end-of-period deposits increased 11% to $6.52 billion at December 31, 2024, compared to $5.88 billion at September 30, 2024, primarily driven by an increase in noninterest-bearing deposits of $666.8 million, partially offset by a decrease in wholesale deposits of $25.0 million.
Previous wording
As of June 30, 2024, the Company had $575.7 million in deposits related to government stimulus programs. Of the total amount of government stimulus program deposits, $236.9 million are on activated cards while $338.8 million are on inactivated cards. During the remainder of fiscal year 2024, the inactive deposit balances are expected to decline by approximately $180 million as the Company actively returns unclaimed balances to the U.S. Treasury.
Current wording
As of December 31, 2024, the Company had $416.1 million in deposits related to government stimulus programs.
Previous wording
The Company's total borrowings decreased $13.6 million from $46.9 million at September 30, 2023 to $33.3 million at June 30, 2024, primarily driven by a decrease in short-term borrowings of $13.0 million.
Current wording
The Company's total borrowings decreased from $410.4 million at September 30, 2024 to $33.4 million at December 31, 2024, primarily driven by a decrease in short-term borrowings of $377.0 million as the Company used the increase in total deposits to fund loans and leases and investment balances. The Company's short-term borrowings fluctuate on a daily basis due to the nature of a portion of its noninterest-bearing deposit base.
Previous wording
At June 30, 2024, the Company’s stockholders’ equity totaled $765.2 million, an increase of $114.6 million, from $650.6 million at September 30, 2023. The increase was primarily attributable to an increase in accumulated other comprehensive income and retained earnings. The Company and Bank remained above the federal regulatory minimum capital requirements at June 30, 2024, and continued to be classified as well-capitalized, and in good standing with the regulatory agencies. See “Liquidity and Capital Resources” for further information.
Current wording
At December 31, 2024, the Company’s stockholders’ equity totaled $776.4 million, a decrease of $63.2 million, from $839.6 million at September 30, 2024. The decrease was primarily attributable to an increase in accumulated other comprehensive loss and a decrease in retained earnings. The Company and Bank remained above the federal regulatory minimum capital requirements at December 31, 2024, and continued to be classified as well-capitalized, and in good standing with the regulatory agencies. See “Liquidity and Capital Resources” for further information.
Previous wording
Noninterest-bearing Checking Deposits. The Company may hold negative balances associated with cardholder programs in the BaaS business line that are included within noninterest-bearing deposits on the Company's Condensed Consolidated Statements of Financial Condition. Negative balances can relate to any of the following payments functions:
Current wording
Noninterest-bearing Checking Deposits. The Company may hold negative balances associated with cardholder programs in the Partner Solutions business line that are included within noninterest-bearing deposits on the Company's Condensed Consolidated Statements of Financial Condition. Negative balances can relate to any of the following payments functions:
Previous wording
The Company meets the Right of Set off criteria in ASC 210-20, Balance Sheet - Offsetting, for all payments negative deposit balances with the exception of DDA overdrafts. The following table summarizes the Company's negative deposit balances within the BaaS business line:
Current wording
The Company meets the Right of Set off criteria in ASC 210-20, Balance Sheet - Offsetting, for all payments negative deposit balances with the exception of DDA overdrafts. The following table summarizes the Company's negative deposit balances within the Partner Solutions business line:
Previous wording
As of June 30, 2024, the Company managed $352.8 million of customer deposits at other banks in its capacity as custodian. These deposits provide the Company with excess deposits that can earn servicing fee income, typically reflective of the EFFR.
Current wording
As of December 31, 2024, the Company managed $840.5 million 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.
Previous wording
The following table presents, for the periods indicated, the Company’s 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 rates. The balances presented in the table below are calculated on a daily average balance. Tax-equivalent adjustments have been made in yields on interest-bearing assets and NIM. Nonaccruing loans and leases have been included in the table as loans or leases carrying a zero yield.
Current wording
The following table presents, for the periods indicated, the Company’s 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 rates. The balances presented in the table below are calculated on a daily average basis. Tax-equivalent adjustments have been made in yields on interest-bearing assets and NIM. Nonaccruing loans and leases have been included in the table as loans or leases carrying a zero yield.
Previous wording
(1) Tax rate used to arrive at the TEY for the nine months ended June 30, 2024 and 2023 was 21%.
Current wording
(1) Tax rate used to arrive at the TEY for the three months ended December 31, 2024 and 2023 was 21%.
Previous wording
The Company recorded net income of $41.8 million, or $1.66 per diluted share, for the three months ended June 30, 2024, compared to net income of $45.1 million, or $1.68 per diluted share, for the three months ended June 30, 2023.
Current wording
The Company recorded net income of $31.4 million, or $1.29 per diluted share, for the three months ended December 31, 2024, compared to net income of $27.7 million, or $1.06 per diluted share, for the three months ended December 31, 2023.
Previous wording
Net interest income for the third quarter of fiscal 2024 was $110.9 million, an increase of 14% from the same quarter in fiscal 2023. The increase was mainly attributable to increased yields, higher average interest-earning asset balances and an improved earning asset mix. For the nine months ended June 30, 2024, net interest income was $339.2 million, an increase of 20%, from $282.9 million compared to the same period in the prior fiscal year.
Current wording
Net interest income for the first quarter of fiscal 2025 was $116.1 million, an increase of 6% 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.
Previous wording
The Company’s average interest-earning assets for the third quarter of fiscal 2024 increased by $475.1 million to $6.80 billion compared to the same quarter in fiscal 2023, due to growth in loans and leases, partially offset by a decrease in total investment security balances and a decrease in cash balances. The third quarter average outstanding balance of loans and leases increased $587.4 million compared to the same quarter of the prior fiscal year, due to an increase across all loan portfolios.
Current wording
The Company’s average interest-earning assets for the first quarter of fiscal 2025 decreased by $296.0 million to $6.74 billion compared to the same quarter in fiscal 2024, due to decreases in average outstanding balances of total investments and interest earning cash balances, partially offset by an increase in total loan and lease balances. The first quarter average outstanding balance of loans and leases increased $107.6 million compared to the same quarter of the prior fiscal year, primarily due to increases in warehouse finance and tax services loans, partially offset by decreases in commercial finance and consumer finance loans. 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, partially offset by an increase in term lending, asset-based lending, and SBA/USDA loans.
Previous wording
Fiscal 2024 third quarter NIM increased to 6.56% from 6.18% in the third fiscal quarter of last year. The overall reported tax-equivalent yield (“TEY”) on average earning asset yields increased 44 basis points to 6.75% compared to the prior year quarter, driven by an improved earning asset mix. The yield on the loan and lease portfolio was 8.56% compared to 8.31% for the comparable period last year and the TEY on the securities portfolio was 3.16% compared to 2.96% over that same period.
Current wording
Fiscal 2025 first quarter NIM increased to 6.84% from 6.23% in the first fiscal quarter of 2024. The overall reported tax-equivalent yield (“TEY”) on average interest-earning assets increased 47 basis points to 7.04% compared to the prior year quarter, driven by an improved earning asset mix. The yield on the loan and lease portfolio was 8.78% compared to 8.33% for the comparable period last year and the TEY on the securities portfolio was 3.10% compared to 3.15% over that same period.
Previous wording
The Company's cost of funds for all deposits and borrowings averaged 0.20% during the fiscal 2024 third quarter, as compared to 0.13% during the prior year quarter. The Company's overall cost of deposits was 0.11% in the fiscal third quarter of 2024, as compared to 0.01% during the prior year quarter.
Current wording
The Company's cost of funds for all deposits and borrowings averaged 0.20% during the fiscal 2025 first quarter, as compared to 0.35% during the prior year quarter. The Company's overall cost of deposits was 0.05% in the fiscal first quarter of 2025, as compared to 0.21% during the prior year quarter.
Previous wording
The Company recognized a provision for credit loss of $5.9 million for the three months ended June 30, 2024, compared to $1.8 million for the comparable period in the prior fiscal year. The period-over-period increase in provision for credit losses was primarily due to an increase in provision for credit losses in the commercial finance portfolio of $6.5 million, partially offset by a decrease of $3.1 million in the tax services portfolio. The Company recognized net charge-offs of $6.6 million for the quarter ended June 30, 2024, compared to net charge-offs of $4.2 million for the quarter ended June 30, 2023. Net charge-offs attributable to the commercial finance portfolio for the current quarter were $7.0 million, while net recoveries of $0.4 million were recognized in the tax services portfolio. Net charge-offs attributable to the consumer finance portfolio for the current quarter were insignificant. Net charge-offs attributable to the commercial finance and consumer finance portfolios for the same quarter of the prior year were $2.6 million and $1.9 million, respectively, while a net recovery of $0.3 million was recognized in the tax services portfolio.
Current wording
The Company recognized a provision for credit losses of $12.0 million for the quarter ended December 31, 2024, compared to $9.9 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 $1.9 million, the consumer finance portfolio of $0.7 million, and the warehouse finance portfolio of $0.1 million, partially offset by a decrease of $0.1 million in provision for credit losses tax services portfolio. The Company recognized net charge-offs of $8.6 million for the quarter ended December 31, 2024, compared to net charge-offs of $5.5 million for the quarter ended December 31, 2023. Net charge-offs attributable to the commercial finance and seasonal tax services portfolios for the current quarter were $8.1 million and $0.5 million, respectively. Net charge-offs attributable to the commercial finance, tax services, and consumer finance portfolios for the same quarter of the prior year were $4.6 million, $0.8 million, and $0.1 million, respectively.
Previous wording
The period-over-period decrease in card and deposit fee income was primarily related to lower servicing fee income due to a reduction in custodial deposits. Servicing fee income totaled $8.6 million during the 2024 fiscal third quarter, compared to$14.6 million for the same period of the prior year.
Current wording
The period-over-period decrease in card and deposit fee income was primarily related to lower servicing fee income due to a reduction in rates following reductions in the EFFR. Servicing fee income on custodial deposits totaled $4.5 million during the 2025 fiscal first quarter, compared to $5.1 million for the same period of the prior year. For the fiscal quarter ended September 30, 2024, servicing fee income on custodial deposits totaled $3.2 million.
Previous wording
Noninterest expense increased 8% to $123.7 million for the fiscal 2024 third quarter, from $114.6 million for the same quarter last year. The increasewas primarily attributable to increases in card processing expense, other expense and compensation and benefits. The period-over-period increase was partially offset by a decrease in impairment expense.
Current wording
Noninterest expense increased 4% to $123.6 million for the fiscal 2025 first quarter, from $119.3 million for the same quarter last year. The increasewas primarily attributable to increases in compensation and benefits, operating lease depreciation, occupancy and equipment expense, other expense, and legal and consulting expense. The period-over-period increase was partially offset by decreases in card processing expense.
Previous wording
The card processing expense increase was due to rate-related agreements with 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 is based on a percentage of the Effective Federal Funds Rate ("EFFR") and reprices immediately upon a change in the EFFR. Approximately 57% of the deposit portfolio was subject to these rate-related processing expenses during the 2024 fiscal third quarter. For the fiscal quarter ended June 30, 2024, contractual, rate-related processing expenses were $27.6 million, as compared to $30.1 million for the fiscal quarter ended March 31, 2024 and $20.5 million for the fiscal quarter ended June 30, 2023.
Current wording
The card processing expense decrease was due to 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 60% of the deposit portfolio was subject to these rate-related processing expenses during the fiscal 2025 first quarter. For the fiscal quarter ended December 31, 2024, contractual, rate-related processing expenses were $25.6 million, as compared to $26.3 million for the fiscal quarter ended September 30, 2024 and $26.8 million for the fiscal quarter ended December 31, 2023.
Previous wording
The Company recorded income tax expense of $5.1 million, representing an effective tax rate of 10.9%, for the fiscal 2024 third quarter, compared to $3.2 million, representing an effective tax rate of 6.6%, for the third quarter last fiscal year. The current quarter increase in income tax expense compared to the prior year quarter was primarily due to a decrease in investment tax credits recognized ratably when compared to the prior year quarter.
Current wording
The Company recorded income tax expense of $6.3 million, representing an effective tax rate of 16.6%, for the fiscal 2025 first quarter, compared to an income tax expense of $5.7 million, representing an effective tax rate of 17.0%, for the first quarter last fiscal year. The current quarter increase in income tax expense compared to the prior year quarter was primarily due to an increase in income and a decrease in investment tax credits.
Previous wording
The Company originated $4.3 million in renewable energy leases during the fiscal 2024 third quarter, resulting in $1.2 million in total net investment tax credits. During the third quarter of fiscal 2023, the Company originated $21.4 million in renewable energy leases resulting in $5.8 million in total net investment tax credits. For the nine months ended June 30, 2024, the Company originated $42.4 million in renewable energy leases, compared to $50.9 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.
Current wording
The Company originated $9.3 million in renewable energy leases during the fiscal 2025 first quarter, resulting in $3.2 million in total net investment tax credits. During the first quarter of fiscal 2024, the Company originated $12.2 million in renewable energy leases resulting in $4.4 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.
Previous wording
Loans and leases, or portions thereof, are generally charged-off when collection of principal becomes doubtful. Typically, this is associated with a delay or shortfall in payments of 210 days or more for insurance premium finance, 120 days or more for consumer credit products and leases, and 90 days or more for commercial finance loans. Action is taken to charge off ERO loans if such loans have not been collected by the end of June and refund advance loans if such loans have not been collected by the end of the calendar year. The Company individually evaluates loans and leases that do not share similar risk characteristics with other financial assets, which generally means loans and leases identified as modifications or loans and leases on nonaccrual status.
Current wording
Loans and leases, or portions thereof, are generally charged-off when collection of principal becomes doubtful. Typically, this is associated with a delay or shortfall in payments of 120 days or more for consumer credit products and leases and 90 days or more for commercial finance loans. Action is taken to charge off ERO loans if such loans have not been collected by the end of June and refund advance loans if such loans have not been collected by the end of the calendar year. The Company individually evaluates loans and leases that do not share similar risk characteristics with other financial assets, which generally means loans and leases identified as modifications or loans and leases on nonaccrual status.
Previous wording
The Company's nonperforming assets at June 30, 2024 were $46.3 million, representing 0.61% of total assets, compared to $58.0 million, or 0.77% of total assets at September 30, 2023. The decrease in the nonperforming assets as a percentage of total assets at June 30, 2024 compared to September 30, 2023, was primarily driven by a decrease in nonperforming loans in the tax services portfolio and commercial finance portfolio, partially offset by an increase in the consumer finance portfolio.
Current wording
The Company's nonperforming assets at December 31, 2024 were $37.5 million, representing 0.49% of total assets, compared to $43.0 million, or 0.57% of total assets at September 30, 2024. The decrease in the nonperforming assets as a percentage of total assets at December 31, 2024 compared to September 30, 2024, was primarily driven by a decrease in nonperforming loans in the seasonal tax services and consumer finance portfolios, partially offset by an increase in nonperforming loans in the commercial finance portfolio.
Previous wording
The Company's nonperforming loans and leases at June 30, 2024 were $44.6 million, representing 0.96% of total gross loans and leases, compared to $56.2 million, or 1.26% of total gross loans and leases at September 30, 2023.
Current wording
The Company's nonperforming loans and leases at December 31, 2024 were $35.2 million, representing 0.76% of total gross loans and leases, compared to $41.6 million, or 0.87% of total gross loans and leases at September 30, 2024.
Previous wording
On the basis of management’s review of its loans, leases, and other assets, at June 30, 2024, the Company had classified loans and leases of $192.5 million as substandard, $8.2 million as doubtful and none as loss. At September 30, 2023, the Company classified loans and leases of $208.2 million as substandard, $8.2 million as doubtful and none as loss.
Current wording
On the basis of management’s review of its loans, leases, and other assets, at December 31, 2024, the Company had classified loans and leases of $197.7 million as substandard, $4.8 million as doubtful and none as loss. At September 30, 2024, the Company classified loans and leases of $180.9 million as substandard, $10.3 million as doubtful and none as loss.
Previous wording
The Company's ACL totaled $79.8 million at June 30, 2024, an increase compared to $49.7 million at September 30, 2023. The increase in the ACL at June 30, 2024, when compared to September 30, 2023, was primarily due to a $28.7 million increase in the allowance related to the seasonal tax services portfolio.
Current wording
The Company's ACL totaled $49.0 million at December 31, 2024, an increase compared to $45.3 million at September 30, 2024. The increase in the ACL at December 31, 2024, when compared to September 30, 2024, was primarily due to a $2.8 million increase in the allowance related to the consumer finance portfolio due to seasonal activity and a $0.8 million increase in the allowance related to the seasonal tax services portfolio.
Previous wording
The Company's ACL as a percentage of total loans and leases increased to 1.73% at June 30, 2024 from 1.14% at September 30, 2023. The increase in the total loans and leases coverage ratio was primarily driven by both the seasonal tax services portfolio and consumer finance portfolio, partially offset by a decrease in commercial finance portfolio. The decrease in the commercial finance loan and lease coverage ratio was due to a mix shift within the portfolio with higher balances in term lending and SBA/USDA loans, which typically carry lower reserve rates.
Current wording
The Company's ACL as a percentage of total loans and leases decreased to 1.07% at December 31, 2024 from 1.11% at September 30, 2024. The decrease in the total loans and leases coverage ratio was primarily driven by the commercial finance portfolio, partially offset by an increase in the seasonal tax services portfolio and consumer finance portfolio. The increase in the tax services and consumer finance portfolios loan coverage ratios was due to seasonal activity.
Previous wording
The Company’s financial statements are prepared in accordance with GAAP. The financial information contained within these financial statements is, to a significant extent, based on approximate measures of the financial effects of transactions and events that have already occurred. Management has identified its critical accounting policies, which are those policies that, in management's view, are most important in the portrayal of our financial condition and results of operations. These policies involve complex and subjective decisions and assessments. Some of these estimates may be uncertain at the time they are made, could change from period to period, and could have a material impact on the financial statements. A discussion of the Company’s critical accounting policies and estimates can be found in the Company's Annual Report on Form 10-K for the year ended September 30, 2023. There were no significant changes to these critical accounting policies and estimates during the first nine months of fiscal 2024.
Current wording
The Company’s financial statements are prepared in accordance with GAAP. The financial information contained within these financial statements is, to a significant extent, based on approximate measures of the financial effects of transactions and events that have already occurred. Management has identified its critical accounting policies, which are those policies that, in management's view, are most important in the portrayal of our financial condition and results of operations. These policies involve complex and subjective decisions and assessments. Some of these estimates may be uncertain at the time they are made, could change from period to period, and could have a material impact on the financial statements. A discussion of the Company’s critical accounting policies and estimates can be found in the Company's Annual Report on Form 10-K for the year ended September 30, 2024. There were no significant changes to these critical accounting policies and estimates during the first three months of fiscal 2025.
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