Pathward Financial, Inc. · NASDAQ:CASH
Pathward Financial — Q3 2024 Earnings Presentation
35 slides from Pathward Financial's earnings presentation, Jul 24, 2024
Slide 1: Quarterly Investor Update Third Quarter Fiscal Year 2024
QUARTERLY INVESTOR UPDATE T H I R D Q UA R T E R F I S C A L Y E A R 2 0 2 4
Slide 2: Forward Looking Statements
FORWARD LOOKING STATEMENTS This investor update and our comments during the investor conference call contain “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 Ac
Slide 3: Q3 FY 2024 Highlights
Q3 FY 2024 HIGHLIGHTS Net Income Diluted Earnings Per Share $41.8 million in net income; a decrease of 7% compared $1.66 in diluted earnings per share; a decrease of 1% compared to Q3 FY 2023 to Q3 FY 2023 Net Interest Margin Return Metrics2 Net interest margin (“NIM”) of 6.56% compared to 6.18% FY
Slide 4: Strong Results in Asset Optimization
STRONG RESULTS IN ASSET OPTIMIZATION • Robust pipeline in working capital and government guaranteed loans • Continued focus on optimizing assets and underwriting loans that have the highest risk adjusted returns • Implemented new technology system that will create efficiencies • Solid originations i
Slide 5: Pathward's Value Propositions Make Us a Trusted Partner
PATHWARD’S VALUE PROPOSITIONS MAKE US A TRUSTED PARTNER • Experience • Operational excellence • Build strong partnerships • Mature risk and compliance infrastructure 5 Pathward Financial, Inc. (Nasdaq: CASH) | Quarterly Investor Presentation
Slide 6: Trusted Platform That Enables Our Partners to Thrive
TRUSTED PLATFORM THAT ENABLES OUR PARTNERS TO THRIVE Right sized balance sheet with optimized asset mix Technology to facilitate evolution and scalability People and culture are important assets Mature risk and compliance framework 6 Pathward Financial, Inc. (Nasdaq: CASH) | Quarterly Investor Prese
Slide 7: Net Interest Income Drives Growth in EPS
NET INTEREST INCOME DRIVES GROWTH IN EPS ($ IN MILLIONS, EXCEPT PER SHARE DATA) Net Interest Income Noninterest Income Noninterest Expense +14% -3% +8% $110.9 $67.7 $65.9 $123.7 $97.5 $114.6 Q3 2023 Q3 2024 Q3 2023 Q3 2024 Q3 2023 Q3 2024 Net Income Attributable to Parent Earnings per Diluted Share
Slide 8: Deposits: Deposit Base Higher to Support Asset Growth
1 DEPOSITS Period ending ($ in millions) 2% $6,307.0 $6,431.5 DEPOSIT BASE HIGHER TO SUPPORT ASSET GROWTH Average Q3FY24 off-balance sheet custodial deposits held in custody at program banks of $645 million compared to $1.18 billion during the prior year period. $353 million of off-balance sheet
Slide 9: Total Loans and Leases Increased from Q3 2023
TOTAL LOANS AND LEASES Period ending ($ in millions) +13% $4,612.6 $4,072.9 TOTAL LOANS AND LEASES INCREASED FROM Q3 2023 Growth primarily driven by SBA/USDA, renewable energy and working capital Nonperforming loans and leases of 0.96% compared to 0.93% at June 30, 2023 Annualized adjusted net
Slide 10: Strong Balance Sheet Allows for Return of Capital to Shareholders
STRONG BALANCE SHEET ALLOWS FOR RETURN OF CAPITAL TO SHAREHOLDERS Liquidity Sources Share Repurchases ($ in millions) 1,283,693 $353 $299 $229 $38 $575 $2,474 286,920 $980 Q3 2024 Q3 2024 YTD Off Balance Sheet Custodial Deposits 1 FHLB Borrowing Capacity Cash and Cash Equivalents Fed Discount Window
Slide 11: Guidance
GUIDANCE Fiscal 2024 Fiscal 2025 $6.40 - $6.60 EPS $7.00 - $7.50 EPS Earning asset yields increase 25 bps rate cut in Sept 2024 Effective tax rate 14-18% % % Effective tax rate 18-22% Core card fee income to follow historical Includes expected share repurchases seasonal patterns 1 Information on thi
Slide 12: Q&A
Q&A 12 Pathward Financial, Inc. (Nasdaq: CASH) | Quarterly Investor Presentation
Slide 13: Investment Highlights
INVESTMENT HIGHLIGHTS RECORD OF STRONG EXCESS CAPITAL EXPERIENCED LEADER IN 1 EARNINGS GROWTH AND 2 GENERATING BUSINESS 3 FAST-GROWING BANKING PROFITABILITY ABOVE ENABLES ONGOING RETURN AS A SERVICE (BAAS) BANKING INDUSTRY OF VALUE TO SECTOR, WITH DIVERSIFIED AVERAGES SHAREHOLDERS PORTFOLIO OF HIGH-
Slide 14: Record of Strong Earnings Growth & Profitability
RECORD OF STRONG EARNINGS GROWTH & PROFITABILITY1 Return on Average Assets2 Return on Average Tangible Equity2 ROAA inclusive of one-time items 2.33% 2.33% 2.20% ROATE inclusive of one-time items 48.32% 47.30% 1.88% 1.74% 1.55% 35.42% 1.45% 28.66% 30.25% 22.34% 21.87% 2019 2020 2021 2022 2023 YTD24
Slide 15: Ongoing Return of Capital to Shareholders
TRACK RECORD OF STRONG EARNINGS GROWTH AND RIGHT-SIZED BALANCE SHEET ENABLES ONGOING RETURN OF CAPITAL Capital Returned to Shareholders RETURN OF CAPITAL TO SHAREHOLDERS Pathward’s track record of profitability, combined with its commitment to maintaining the size of its balance sheet, enables the
Slide 16: 2024 Tax Season Update
2024 TAX SEASON UPDATE TAX SERVICES ECONOMICS Nine Months Ended ($ in millions) June 30, 2023 June 30, 2024 % Change Net interest income (expense) 2.89 0.28 (90)% • Total tax product revenue increased 3% through the nine months ended June 30, 2024 compared to the Refund Advance product income 37.69
Slide 17: Cost of Deposits
COST OF DEPOSITS 5.33% COST OF DEPOSITS During the 2024 fiscal third quarter, approximately 57% of the deposit balances were subject to variable card processing expenses, derived from contractual agreements with certain BaaS partners tied to a rate index, typically the Effective 2.16% Fed Funds Ra
Slide 18: Diversified Noninterest Income Streams
FYTD 2024 REVENUE BREAKDOWN DIVERSIFIED NONINTEREST INCOME STREAMS Net interest Noninterest income income 58% 42% Noninterest income represents 42% of fiscal year- to-date total revenue. Majority of noninterest income fees are generated by the Company’s BaaS business line. Other major items incl
Slide 19: Loan Portfolio
AVERAGE LOANS AND YIELDS ($B) 8.31% 8.33% 8.33% 8.43% 8.56% $4.5 $4.9 $4.5 LOAN PORTFOLIO $4.3 $3.9 Remain focused on smart growth in the Commercial Finance loan portfolio. Commercial Finance balances grew $419 million, or 12%, from the third quarter of the prior year. 3Q23 4Q23 1Q24 2Q24 3Q24 3
Slide 20: Equipment Finance
EQUIPMENT FINANCE COMMERCIAL FINANCE 7.16% 18% Q3 2024 Quarterly Yield1 Of Loan Portfolio Loan and lease financing to provide access to needed equipment ($ in millions) Business Line Balance Sheet Category 3Q23 2Q24 3Q24 Focus on equipment critical to business operations Lease financing $187.8 $
Slide 21: Working Capital Finance
WORKING CAPITAL FINANCE COMMERCIAL FINANCE 13.24% 18% Q3 2024 Quarterly Yield Of Loan Portfolio • Provides working capital for companies to meet short- term operational requirements ($ in millions) Business Line Balance Sheet Category 3Q23 2Q24 3Q24 • Primarily variable rate loans with majority of f
Slide 22: Insurance Premium Finance
INSURANCE PREMIUM FINANCE COMMERCIAL FINANCE 8.59% 13% Q3 2024 Quarterly Yield Of Loan Portfolio • Typically, short-term financing to facilitate the purchase of property, casualty, and liability insurance ($ in millions) policies Business Line Balance Sheet Category 3Q23 2Q24 3Q24 Insurance Premium
Slide 23: Structured Finance
STRUCTURED FINANCE COMMERCIAL FINANCE 6.36% 30% Q3 2024 Quarterly Yield Of Loan Portfolio • Funding small and midsized businesses, including rural borrowers ($ in millions) Business Line Balance Sheet Category 3Q23 2Q24 3Q24 • SBA, USDA, and conventional loans with fixed or Guaranteed portion of US
Slide 24: Consumer
9.64% 6% Q3 2024 Quarterly Yield Of Loan Portfolio CONSUMER ($ in millions) Business Line Balance Sheet Category 3Q23 2Q24 3Q24 Consumer Consumer finance $200.1 $267.0 $253.3 • Consumer credit programs with marketplace lenders TOTAL $200.1 $267.0 $253.3 offer Pathward a risk adjusted return • Protec
Slide 25: Warehouse
10.47% 10% Q3 2024 Quarterly Yield Of Loan Portfolio WAREHOUSE ($ in millions) Business Line Balance Sheet Category 3Q23 2Q24 3Q24 Warehouse Warehouse finance $380.4 $394.8 $450.0 • Asset-backed warehouse lines of credit used to TOTAL $380.4 $394.8 $450.0 support strategic initiatives • Lines are pr
Slide 26: Loan Portfolio Interest Rate Sensitivity
TOTAL LOAN AND LEASE PORTFOLIO PRICING ATTRIBUTES1 LOAN PORTFOLIO INTEREST 17% 35% RATE SENSITIVITY 48% As of June 30, 2024, $2.2B, or 48% of loans and leases contained floating or variable interest rates. Of these, $1.3B are tied to Fed Funds or Prime, Fixed Rate > 1 Year with the remaining tied
Slide 27: Interest Rate Risk Management
INTEREST RATE RISK MANAGEMENT JUNE 30, 2024 Earning Asset Pricing Attributes1 • Data presented on this page is reflective of the Company’s asset mix at a point in time and calculated for regulatory purposes. Future rate 49% Fixed Rate > 1 Year changes would impact a multitude of variables beyond the
Slide 28: Asset Quality
ASSET QUALITY Nonperforming Assets (“NPAs”) Adjusted Net Charge-Offs (“NCOs”)1 ($ in millions) Excludes Tax Services NCOs and Related Seasonal Average Loans ($ in millions) 0.77% 0.61% 0.55% 0.53% 0.50% 0.63% 0.49% 0.50% 0.46% 0.45% 0.47% 0.49% $58.0 $40.8 $42.4 $46.3 0.46% 0.43% $37.2 0.41% $7.0 $4
Slide 29: Capital and Sources of Liquidity
CAPITAL AND SOURCES OF LIQUIDITY Regulatory Capital as of June 30, 2024 Tier 1 Leverage Ratio Pathward Pathward, At June 30, 2024¹ Financial, Inc. N.A. 9.13% 9.36% Tier 1 Leverage 9.13% 9.36% 8.40% 8.67% 8.11% 8.32% 7.96% 8.15% 7.75% 7.92% Common Equity Tier 1 12.44% 13.02% Tier 1 Capital 12.70% 13.
Slide 30: Appendix
APPENDIX 30 Pathward Financial, Inc. (Nasdaq: CASH) | Quarterly Investor Presentation
Slide 31: Non-GAAP Reconciliation
NON-GAAP RECONCILIATION Adjusted Net Income and Adjusted Earnings Per Share For the year ended ($ in thousands, except share and per share data) 2022 Net income – GAAP a 156,386 Less: Gain on sale of trademarks 50,000 Add: Rebranding expenses 13,148 Add: Separation related expenses 5,109 Add: Income
Slide 32: Non-GAAP Reconciliation
NON-GAAP RECONCILIATION Adjusted Annualized NCOs and Adjusted Average Loans and Leases For the quarter ended ($ in thousands) Jun 30, 2023 Sep 30, 2023 Dec 31, 2023 Mar 31, 2024 Jun 30, 2024 Net charge-offs 4,218 41,280 5,486 (1,087) 6,582 Less: Tax services net charge-offs (recoveries) (266) 36,075
Slide 33: Non-GAAP Reconciliation
NON-GAAP RECONCILIATION Efficiency Ratio For the last twelve months ended ($ in thousands) Jun 30, 2023 Sep 30, 2023 Dec 31, 2023 Mar 31, 2024 Jun 30, 2024 Noninterest expense – GAAP 449,803 464,975 479,190 492,485 501,586 Net interest income 362,687 387,861 413,840 430,736 444,130 Noninterest incom
Slide 34: Non-GAAP Reconciliation
NON-GAAP RECONCILIATION Net Interest Margin and Cost of Deposits For the quarter ended ($ in thousands) Jun-21 Sep-21 Dec-21 Mar-22 Jun-22 Sep-22 Dec-22 Mar-23 Jun-23 Sep-23 Dec-23 Mar-24 Jun-24 Average interest earning assets 7,316,820 6,438,572 6,183,646 7,082,417 6,082,329 6,073,822 5,934,431 6,7
Slide 35: Commercial Finance Concentrations by Industry
COMMERCIAL FINANCE CONCENTRATIONS BY INDUSTRY1 $ in millions Manufacturing $716 Finance and Insurance $707 Utilities $676 Transportation and Warehousing $454 Other Services (except Public Administration) $287 Mining, Quarrying, and Oil and Gas Extraction $274 Wholesale Trade $256 Health Care and Soc