Pathward Financial, Inc. · NASDAQ:CASH
Pathward Financial — Q4 FY2022 Earnings Presentation
25 slides from Pathward Financial's earnings presentation, October 2022
Slide 1: Quarterly Investor Update
Quarterly Investor Update F O U R T H Q UA R T E R & FISCAL YEAR END 2022 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 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,” “hop
Slide 3: Leading the Way to Financial Access
AT PATHWARD, LEADING THE WAY TO FINANCIAL ACCESS IS THE HEART OF OUR BUSINESS. Since our founding, we have worked to advance financial inclusion. We seek out diverse partners, including fintechs, affinity groups, government agencies, and other banks and work with them to identify markets where peopl
Slide 4: Pathward's Unique Business Model
Pathward’s Unique Business Model Pathward’s resilient model secures low-cost funding1 via BaaS payments relationships, earns an outsized proportion of consistent payment fees, and operates a collateralized lending platform that outperforms in down-cycles Funding Income BaaS Payments BaaS Payments As
Slide 5: Why Invest?
Why 1 Record of strong earnings growth and profitability above banking industry averages Invest? Excess capital generating business enables 2 ongoing return of value to shareholders Leader in fast-growing Banking as a Service 3 (BaaS) sector, with diversified portfolio of high-quality financial part
Slide 6: Record of Strong Earnings Growth and Profitability
Record of Strong Earnings Growth and Profitability Return on Average Assets Return on Average Tangible Equity ROATE inclusive of one-time items 35.42% ROAA inclusive of one-time items 2.20% 30.25% 1.88% 28.66% 1.74% 1.55% 1.45% 22.34% 21.87% 1.13% 1.12% 17.63% 16.78% 2017 2018 2019 2020 2021 2022 20
Slide 7: Return of Capital to Shareholders $422.8M
Return of Capital Generation of Excess Capital Enables Ongoing to Shareholders Return of Value to Shareholders Capital Returned to Shareholders HI G HL I G HT S Pathward’s track record of profitability and strong earnings growth, combined with its commitment to $422.8M TOTAL SHARE REPURCHASES $27.3M
Slide 8: 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 • Efficiency ratio of 64.09%
Slide 9: Earnings Guidance
Earnings Guidance Fiscal Year 2022 Fiscal Year 2023 % (Earnings per share amounts) (Actuals) (Guidance) Change2 Diluted earnings per share - GAAP $5.26 $5.25 - $5.75 5% Less: Net extraordinary items, net of tax1 $0.77 $0.15 Diluted earnings per share - Adjusted $4.49 $5.10 - $5.60 19% 1 Includes gai
Slide 10: Summary Financial Results
Summary Financial Results Four th Quar ter Ended September 30, 2022 INCOME STATEMENT ($ in thousands, except per share data) 4Q21 3Q22 4Q22 Net interest income 70,667 72,151 79,760 Provision for credit losses 8,775 (1,302) (2,648) Total noninterest income 49,542 53,994 43,456 Total noninterest expen
Slide 11: Balance Sheet Highlights
Balance Sheet Highlights Four th Quar ter Ended September 30, 2022 BALANCE SHEET PERIOD ENDING ($ in thousands) 4Q21 3Q22 4Q22 Cash and cash equivalents 314,019 157,260 388,038 Investments 1,921,568 2,000,400 1,924,551 Loans held for sale 56,194 67,571 21,071 Loans and leases (HFI) 3,609,563 3,688,5
Slide 12: Deposit Growth
Deposit Growth Deposit Breakdown Non Interest 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- 3.60% bearing deposits (96% of total deposits). 0.13% Th
Slide 13: Low-cost Deposits
Low-cost Cost of Deposits Deposits HI G HL I G HT S 2.22% 2.18% 1.99% Pathward is benefitting from the deposit optimization strategy that included transitioning away from higher cost interest-bearing wholesale deposits in favor of growing 1.03% BaaS deposits. 0.91% As of September 30, 2022, approxim
Slide 14: Diversified Noninterest Income Streams
Diversified FY22 Revenue Breakdown1 Noninterest Income Streams Net interest Noninterest income income 56% HI G HL I G HT S 44% Noninterest income continues to represent greater than 40% of total revenue. Majority of non-interest income fees are generated by the Company’s BaaS business line. Other ma
Slide 15: Overview of Loan Portfolio
Overview of Loan Portfolio MRQ ($ in millions) Business Line Balance Sheet Category 4Q21 3Q22 4Q22 Yield % of Total Structured Finance Guaranteed portion of US govt SBA/USDA loans SBA/USDA 61.9 59.4 194.9 Unguaranteed portion of US govt SBA/USDA loans SBA/USDA 89.8 135.0 150.8 Paycheck Protection Pr
Slide 16: Commercial Finance Attributes by Asset Class
Commercial Finance Attributes by Asset Class WO R KING C APITAL E Q U IPM E NT F IN AN C E ST RUCTURE D F IN AN CE IN S U R ANCE PR E M IUM F IN AN C E F IN AN C E • Loan and lease financing to • Funding to small and midsized • Provides working capital for new provide access to needed businesses and
Slide 17: Loan Portfolio Interest Rate Sensitivity
Total Loan and Lease Portfolio Loan Portfolio Pricing Attributes1 Interest Rate 50% Sensitivity 17% HI G HL I G HT S 33% As of September 30, 2022, $1.2B, or 33% of loans Fixed Rate > 1 Year and leases contained floating or variable interest rates. Fixed Rate < 1 Year Of these, $1.0B are tied to Fed
Slide 18: Interest Rate Risk Management September 30, 2022
Interest Rate Risk Management September 30, 2022 Earning Asset Pricing Attributes1 • Data presented on this page is reflective of the company’s asset mix at a point in time and calculated for regulatory purposes. Future rate changes would impact a multitude of variables beyond the company’s 62% Fixe
Slide 19: Asset Quality
Asset Quality Nonperforming Assets (“NPAs”) Adjusted Net Charge-Offs (“NCOs”)1 ($ in millions) Excludes Tax Services NCOs and Related Seasonal Average Loans ($ in millions) 1.25% 0.92% 0.77% 0.68% 0.71% 0.58% 0.56% 0.63% 0.46% 0.50% 0.48% 0.40% $61.8 $7.0 $11.4 0.46% 0.45% $44.3 0.37% $38.3 $30.9 $2
Slide 20: Capital and Sources of Liquidity
Capital and Sources of Liquidity Regulatory Capital as of September 30, 2022 Tier 1 Leverage Ratio Pathward Pathward, At September 30, 2022¹ Financial, Inc. N.A. Tier 1 Leverage 8.10% 8.19% 8.69% 8.52% 7.67% 8.23% 8.22% 8.10% 8.19% Common Equity Tier 1 12.07% 12.55% 7.39% 7.79% 6.80% Tier 1 Capital
Slide 21: Appendix
APPENDIX 21 Pathward Financial, Inc. (Nasdaq: CASH) | Quarterly Investor Presentation
Slide 22: Non-GAAP Reconciliation
Non-GAAP Reconciliation Adjusted Net Income and Adjusted Earnings Per Share For the quarter ended For the year ended ($ in thousands, except per share data) 4Q21 3Q22 4Q22 2021 2022 Net income - GAAP 15,903 22,391 23.420 141,708 156,386 Less: Gain on sale of trademarks - - - - 50,000 Add: Rebranding
Slide 23: Non-GAAP Reconciliation
Non-GAAP Reconciliation Adjusted Annualized NCOs and Adjusted Loans and Leases For the quarter ended ($ in thousands) Sep 30, 2021 Dec 31, 2021 Mar 31, 2022 Jun 30, 2022 Sep 30, 2022 Net Charge-offs 31,753 1,129 11,226 12,198 26,664 Less: Tax services net charge-offs 24,798 (2,313) (183) 7,992 22,59
Slide 24: Non-GAAP Reconciliation
Non-GAAP Reconciliation Efficiency Ratio For the last twelve months ended ($ in thousands) Sep 30, 2021 Dec 31, 2021 Mar 31, 2022 Jun 30, 2022 Sep 30, 2022 Noninterest Expense - GAAP 343,683 353,544 360,733 375,860 385,275 Net Interest Income 278,991 284,605 294,555 298,231 307,324 Noninterest Incom
Slide 25: Commercial Finance Industry Concentrations
Commercial Finance Industry Concentrations1 $ in millions $- $100 $200 $300 $400 Manufacturing Transportation and Warehousing Utilities Wholesale Trade Health Care and Social Assistance Finance and Insurance Construction Administrative and Support and Waste Management and Remediation… Professional,