Slide 1: Quarterly Investor Update
Quarterly Investor Update S E C O N D Q UA R T E R FISCAL YEAR 2023 Pathward Financial, Inc. (Nasdaq: CASH) | Quarterly Investor Presentation
Slide 2: Forward Looking Statements
FORWARD LOOKING STATEMENTS This investor update contains “forward-looking statements” which are made in good faith by Pathward Financial, Inc.TM (the “Company”) pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. You can identify forward-looking statemen
Slide 3: Pathward is at the Hub of the Financial Ecosystem
Pathward is at the Hub of the Financial Ecosystem Banking as a Service Commercial Finance Generates low-cost (BaaS) Powering Utilizes low-cost funding via partner Financial deposits1 to operate a Inclusion for relationships collateralized lending platform providing high Earns recurring fee income Al
Slide 4: BaaS Operates Through a Diverse Network of Partners and Four Solutions
BaaS Operates Through a Diverse Network of Partners and Four Solutions • Issuing - one of the leading debit and prepaid card issuers in the country • Tax - offer refund transfers and refund advances • Payment - offer merchant acquiring and money movement, acting as the sponsor bank • Credit - give p
Slide 5: Recent Banking Industry Events May Provide Opportunities for Pathward
Recent Banking Industry Events May Provide Opportunities for Pathward Deposits, on and off-balance sheet, totaled almost $8 billion at quarter end Companies are seeking a stable, established partner like Pathward Ensure deals fit with Pathward’s purpose, risk profile and return aspirations 5 Pathwar
Slide 6: Commercial Finance Offers Financing Primarily to Small- and Medium-Sized Businesses
Commercial Finance Offers Financing Primarily to Small- and Medium-Sized Businesses • Operate in a unique position between traditional banks and finance companies • Portfolio is diversified and structured to provide opportunity regardless of the economic cycle • Higher yields are primarily due to hu
Slide 7: Annual Net Charge-Off Rates Remain Stable Over Time
Annual Net Charge-Off Rates Remain Stable Over Time December 31st Commercial Finance Loan Balances ($ in millions) Pathward Acquires Crestmark 3,500 1.0 $3,007 0.9 3,000 $2,798 0.8 2,500 $2,423 0.7 $1,995 0.6 2,000 $1,618 0.5 1,500 0.4 1,000 $934 0.3 $702 $521 $582 0.2 500 $428 $326 $350 $224 0.1 $1
Slide 8: Total Loans and Leases Increased from Q1 2023
Total Loans and Leases Increased from Q1 2023 Total Loans and Leases 6% $3,725.6 • Linked quarter increase driven by growth in $3,509.7 Commercial Finance and Warehouse Finance • Roughly flat to Q2 2022 • Credit quality remains strong • Nonperforming loans and leases of 0.76% are lower than Q1 2023
Slide 9: Second Quarter Results Driven by NIM Expansion and Growth in Noninterest Income
Second Quarter Results Driven by NIM Expansion and Growth in Noninterest Income Net Interest Income Total Net Interest Margin Noninterest Income ($ in millions) ($ in millions) +21% +132 bps +16% $101.4 6.12% $127.0 $109.8 $83.8 4.80% Q2 2022 Q2 2023 Q2 2022 Q2 2023 Q2 2022 Q2 2023 9 Pathward Financ
Slide 10: Total Deposit Base Remains Strong
Total Deposit Base Remains Strong $7.9B in Total Deposits1 Off Balance Sheet On Balance Sheet $7.9 $7.1 $7.2 $5.9 $5.9 $5.5 $5.0 $4.4 $4.3 $3.2 $2.4 $1.7 $1.3 $1.4 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2Q23 10 Pathward Financial, Inc. (Nasdaq: CASH) | Quarterly Investor Presentation 1(De
Slide 11: Balance Sheet is Strong With Over $4 Billion in Available Liquidity
Pathward’s Balance Sheet is Strong With Over $4 Billion in Available Liquidity ($ in millions) Unsecured Funding and Other Wholesale Funding Options Cash and Cash Equivalents $600 $433 Fed Discount Window Funds $195 Unpledged Investment Securities $85 FHLB Borrowing Capacity $755 $1,963 Off Balance
Slide 12: Reaffirming Fiscal Year 2023 Earnings Guidance
Reaffirming Fiscal Year 2023 Earnings Guidance (Earnings per share amounts) Guidance Guidance includes the following assumptions: Impact from EIP deposit balance decline in Fiscal Year Diluted earnings per share - GAAP $5.55 - $5.95 2023 Less: Net FY2023 Q1 extraordinary items, net of tax1 Feder
Slide 13: Q&A
Q&A 13 Pathward Financial, Inc. (Nasdaq: CASH) | Quarterly Investor Presentation
Slide 14: Investment Highlights
Investment 1 Record of strong earnings growth and profitability above banking industry averages Highlights Excess capital generating business enables 2 ongoing return of value to shareholders Experienced leader in fast-growing Banking 3 as a Service (BaaS) sector, with diversified portfolio of high-
Slide 15: Record of Strong Earnings Growth and Profitability
Record of Strong Earnings Growth and Profitability1 Return on Average Assets2 Return on Average Tangible Equity2 ROAA inclusive of one-time items ROATE inclusive of one-time items 50.81% 2.39% 2.20% 1.88% 35.42% 1.74% 1.55% 28.66% 30.25% 1.45% 1.12% 22.34% 21.87% 16.78% 2018 2019 2020 2021 2022 YTD2
Slide 16: Return of Capital to Shareholders
Return of Capital Track Record of Strong Earnings Growth and to Shareholders Right-Sized Balance Sheet Enables Ongoing Return of Capital Capital Returned to Shareholders HI G HL I G HT S Pathward’s track record of profitability, combined with its commitment to maintaining the size of its balance she
Slide 17: Continued Progress on Key Strategic Initiatives
Continued Progress on Key Strategic Initiatives O P T IM IZE IN T E R E ST-E ARNIN G O P T IM IZE D E P OSIT M IX , TO TARG ET O F 2X O PE R ATING P O R TFOL IO, TO E M PHASIZE M AIN TAIN A STAB LE, LOW - L E V E R AG E HIG HE R -R ET URN AS SE TS C OST D E P OSIT B AS E • Improved yield on earning
Slide 18: Summary Financial Results
Summary Financial Results Second Quar ter Ended March 31, 2023 INCOME STATEMENT ($ in thousands, except per share data) 2Q22 1Q23 2Q23 Net interest income 83,800 84,057 101,406 Provision for credit losses 32,302 9,776 36,763 Total noninterest income 109,766 65,777 127,038 Total noninterest expense 1
Slide 19: Balance Sheet Highlights
Balance Sheet Highlights Second Quar ter Ended March 31, 2023 BALANCE SHEET PERIOD ENDING ($ in thousands) 2Q22 1Q23 2Q23 Cash and cash equivalents 237,680 369,169 432,598 Investments 2,090,765 1,888,343 1,864,276 Loans held for sale 31,410 17,148 24,780 Loans and leases (HFI) 3,730,190 3,509,730 3,
Slide 20: 2023 Tax Season Update
2023 Tax Season Update Refund advances (“RAs”) and refund transfers (“RTs”) leverage Banking as a Service (“BaaS”) infrastructure and are core to Pathward’s purpose, allowing consumers quicker access to their money. • Total tax product revenue is up slightly through the six months ended March 31, 20
Slide 21: Low-cost Deposits
Low-cost Deposit Breakdown Deposits Noninterest Bearing 96.27% Deposits Interest Bearing Non- HI G HL I G HT S Time Deposits Pathward’s BaaS business generates fee income and Time Deposits low-cost deposits leading to high levels of noninterest- 3.62% bearing deposits (96% of total deposits). 0.11%
Slide 22: Low-cost Deposits: Cost of Deposits
Low-cost Cost of Deposits Deposits 4.52% HI G HL I G HT S Pathward is benefitting from the deposit optimization strategy that included transitioning away from higher cost 2.40% interest-bearing wholesale deposits in favor of growing BaaS 2.19% deposits. 2.22% 1.43% As of March 31, 2023, approximatel
Slide 23: Diversified Noninterest Income Streams
Diversified FYTD 2023 Revenue Breakdown1 Noninterest Income Streams Noninterest Net interest income income 50% HI G HL I G HT S 50% Noninterest income represents 50% of fiscal year-to- date total revenue. Majority of noninterest income fees are generated by the Company’s BaaS business line. Other ma
Slide 24: Overview of Loan Portfolio
Overview of Loan Portfolio MRQ ($ in millions) Business Line Balance Sheet Category 2Q22 1Q23 2Q23 Yield % of Total Structured Finance Guaranteed portion of US govt SBA/USDA loans SBA/USDA 61.7 196.0 243.6 Unguaranteed portion of US govt SBA/USDA loans SBA/USDA 109.5 152.3 157.3 Paycheck Protection
Slide 25: Commercial Finance Attributes by Asset Class
Commercial Finance Attributes by Asset Class WO R KING C APITAL E Q U IPM E NT ST RUCTURE D IN S U R ANCE PR E M IUM F IN AN C E F IN AN C E F IN AN C E F IN AN C E • Provides working capital for new • Loan and lease financing to • Funding to small and midsized • Short-term financing to facilitate o
Slide 26: Loan Portfolio Interest Rate Sensitivity
Total Loan and Lease Portfolio Loan Portfolio Pricing Attributes1 Interest Rate 50% Sensitivity 15% HI G HL I G HT S 35% As of March 31, 2023, $1.3B, or 35% of loans and Fixed Rate > 1 Year leases contained floating or variable interest rates. Of Fixed Rate < 1 Year these, $0.8B are tied to Fed Fund
Slide 27: Interest Rate Risk Management
Interest Rate Risk Management March 31, 2023 Earning Asset Pricing Attributes1 • Data presented on this page is reflective of the company’s asset mix at a point in time and calculated for regulatory purposes. Future rate changes would impact a multitude of variables beyond the company’s 62% Fixed Ra
Slide 28: Asset Quality
Asset Quality Nonperforming Assets (“NPAs”) Adjusted Net Charge-Offs (“NCOs”)1 ($ in millions) Excludes Tax Services NCOs and Related Seasonal Average Loans ($ in millions) 1.25% 0.68% 0.71% 0.68% 0.63% 0.56% 0.68% 0.61% 0.46% 0.44% 0.46% 0.40% $11.4 0.46% 0.45% 0.25% $45.0 $6.0 $38.3 $30.9 $26.8 $3
Slide 29: Capital and Sources of Liquidity
Capital and Sources of Liquidity Regulatory Capital as of March 31, 2023 Tier 1 Leverage Ratio Pathward Pathward, At March 31, 2023¹ Financial, Inc. N.A. Tier 1 Leverage 7.53% 7.79% 8.23% 8.22% 8.10% 8.19% 8.37% 8.68% Common Equity Tier 1 12.05% 12.77% 7.79% 7.53% 7.79% 6.80% Tier 1 Capital 12.35% 1
Slide 30: Appendix
APPENDIX 30 Pathward Financial, Inc. (Nasdaq: CASH) | Quarterly Investor Presentation
Slide 31: Non-GAAP Reconciliation
Non-GAAP Reconciliation Adjusted Net Income and Adjusted Earnings Per Share For the quarter ended ($ in thousands, except per share data) 2Q22 1Q23 2Q23 Net income - GAAP 49,251 27,842 54,771 Less: Gain on sale of trademarks - 10,000 - Less: Loss on disposal of certain solar mobile generators - - (1
Slide 32: Non-GAAP Reconciliation
Non-GAAP Reconciliation Adjusted Annualized NCOs and Adjusted Loans and Leases For the quarter ended ($ in thousands) Mar 31, 2022 Jun 30, 2022 Sep 30, 2022 Dec 31, 2022 March 31, 2023 Net charge-offs 11,226 12,198 26,664 3,217 4,975 Less: Tax services net charge-offs (recoveries) (183) 7,992 22,594
Slide 33: Non-GAAP Reconciliation
Non-GAAP Reconciliation Efficiency Ratio For the last twelve months ended ($ in thousands) Mar 31, 2022 Jun 30, 2022 Sep 30, 2022 Dec 31, 2022 Mar 31, 2023 Noninterest expense – GAAP 360,733 375,860 385,275 407,899 431,875 Net interest income 294,555 298,231 307,324 319,768 337,373 Noninterest incom
Slide 34: Commercial Finance Concentrations by Industry
Commercial Finance Concentrations by Industry1 $ in millions $- $100 $200 $300 $400 Manufacturing Utilities Transportation and Warehousing Wholesale Trade Finance and Insurance Other Services (except Public Administration) Health Care and Social Assistance Mining, Quarrying, and Oil and Gas Extracti