Pathward Financial, Inc. · NASDAQ:CASH
Pathward Financial — Debt Investor Presentation (September 2022)
39 slides from Pathward Financial's debt investor presentation, Sep 26, 2022
Slide 1: Subordinated Notes Offering Presentation September 2022
SUBORDINATED NOTES OFFERING PRESENTATION SEPTEMBER 2022 Pathward Financial, Inc. (Nasdaq: CASH) 1
Slide 2: Legal Disclaimer
LEGAL DISCLAIMER 2 This Confidential Subordinated Note Investor Presentation (this “Confidential Investor Presentation”) is confidential and does not constitute or form part of any offer to sell, or a solicitation of an offer to purchase, any securities of Pathward Financial, Inc. or any of its affi
Slide 3: Forward Looking Statements
FORWARD LOOKING STATEMENTS 3 This Confidential Investor Presentation and any accompanying oral presentation may contain “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 i
Slide 4: Presenters
PRESENTERS 4 BRETT PHARR GLEN HERRICK Chief Executive Officer and Director • Brett Pharr is the Chief Executive Officer of Pathward Financial, Inc. • Prior to being appointed to his current role in October 2021, Brett was Co-President and Chief Operating Officer since June 2020 and Executive Vice Pr
Slide 5: Investment Highlights
INVESTMENT HIGHLIGHTS 5 High Quality and Diversified Earning Assets Consistent and Well-Diversified Non-Interest Income Streams Stable, Low-Cost, Long-Duration Deposit Funding Strong Capital and Liquidity Position Proven Executive Leadership and Board Pathward Financial, Inc. (Nasdaq: CASH) Discipli
Slide 6: Company Overview
COMPANY OVERVIEW 6Pathward Financial, Inc. (Nasdaq: CASH) Headquarters: Sioux Falls, SD Branch Count: 1 Tier 1 Leverage Ratio: 8.2% Market Cap¹: $948M Banking-As-A-Service Commercial Finance Core Business Lines Pathward Serves as Hub of the BaaS Ecosystem Regulatory/Compliance Oversight OCC Primary
Slide 7: History of Pathward Financial
HISTORY OF PATHWARD FINANCIAL 7 Founded in 1954 as First Federal Savings Bank of the Midwest Since inception, dedicated to financial empowerment while developing our franchise and generating shareholder value Headquartered in South Dakota, offices in Arizona, Michigan, Kentucky, Tennessee, and Penns
Slide 8: Optimize Interest-Earning Assets, Deposits and Operating Efficiencies
Optimize Interest-Earning Assets Optimize Deposits Optimize Operating Efficiencies Efficiency ratio of 62.84% compared to 61.75% as of June 30, 2021.1 • Drive long-term simplification and optimization of existing business platforms. • Exiting two tax partner relationships, driving simplification and
Slide 9: Summary Balance Sheet Metrics
SUMMARY BALANCE SHEET METRICS Total Net Loans ($B) Pathward Financial, Inc. (Nasdaq: CASH) 9 Total Deposits ($B) Total Assets ($B) Total Equity ($B) $1.6 $1.7 $2.1 $2.5 $4.0 $5.2 $5.8 $6.2 $6.1 $6.7 $6.7 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 3Q22 $0.3 $0.4 $0.5 $0.7 $0.9 $1.3 $2.9 $3.8 $
Slide 10: Compelling Profitability
COMPELLING PROFITABILITY ROATCE (%)³ Pathward Financial, Inc. (Nasdaq: CASH) 10 Efficiency Ratio (%)³ ROAA (%) Total Net Income ($M) 1.90% 1.13% 1.12% 1.55% 1.45% 1.74% 2.45% 2017 2018 2019 2020 2021 YTD22¹ 31.4% 24.0% 19.5% 25.7% 24.2% 29.8% 40.1% 2017 2018 2019 2020 2021 YTD22¹ 75% 72% 68% 64% 62%
Slide 11: NIM Supported by Consistently Low Cost of Funds
NIM SUPPORTED BY CONSISTENTLY LOW COST OF FUNDS Yield, Cost and Net Interest Margin Pathward Financial, Inc. (Nasdaq: CASH) 11 Net Interest Income ($M) Average Interest Earning Assets ($B) $3.6 $4.2 $5.4 $6.3 $7.3 $6.1 2017 2018 2019 2020 2021 3Q22 $93.2 $130.5 $264.2 $259.0 $279.0 $288.6 2017 2018
Slide 12: Quarterly Average Earning Asset Mix
Quarterly Average Earning Asset Mix % in charts represent % of total interest earning assetsAt the Quarter Ended JUN 30, 2021 JUN 30, 2022 ($ in thousands) 3 Q 2 1 3 Q 2 2 Y/Y Δ COMMERCIAL FINANCE 2,586,527 2,947,903 14% Term lending 920,279 1,047,764 14% Asset-based lending 263,237 402,506 53% Fact
Slide 13: Overview of Loan Portfolio
OVERVIEW OF LOAN PORTFOLIO 13 ($ in millions) Business Line Balance Sheet Category 3Q21 2Q22 3Q22 MRQ Yield Commercial Finance Commercial Finance Guaranteed portion of US govt SBA/USDA loans SBA/USDA 71.9 61.7 59.4 Unguaranteed portion of US govt SBA/USDA loans SBA/USDA 48.6 109.5 135.0 Paycheck Pro
Slide 14: Commercial Finance Industry Concentrations
COMMERCIAL FINANCE INDUSTRY CONCENTRATIONS1 14 1 Distribution by NAICS codes; excludes certain joint ventures; calculated based on aggregate principal amount of commercial finance loans and leases; includes operating lease rental equipment of $222.0M Pathward Financial, Inc. (Nasdaq: CASH) 1Total re
Slide 15: Key Credit Metrics
$2.8 $7.0 $3.4 $11.4 $4.2 0.32% 0.77% 0.37% 1.25% 0.46% 3Q21 4Q21 1Q22 2Q22 3Q22 Period Ended Adj. NCOs Adj. NCOs / Adj. Average Loans Adjusted Net Charge-Offs (“NCOs”)¹ Excludes Tax Services NCOs and Related Seasonal Average Loans ($ in millions) KEY CREDIT METRICS • Annualized adjusted net charge-
Slide 16: Securities Portfolio Overview
1 Includes securities with ratings of AA or better, unrated securities backed by US government agencies (GNMA, SBA, etc.), and unrated securities issued by government-sponsored enterprises (FNMA, FHLMC, etc.) Note: Periods reflect Pathward Financial fiscal year ending September 30 Pathward Financial
Slide 17: BaaS Capabilities Generate Low-Cost Deposits and Revenue
$- $20.0 $40.0 $60.0 $80.0 $100.0 $120.0 3Q21 2Q22 3Q22 Payments Tax Services Consumer Lending BaaS CAPABILITIES GENERATE LOW-COST DEPOSITS AND REVENUE 17 BaaS revenue Average Payments Deposits* ($ in billions) 36% 58% 32% % of Total Revenue ($ in millions) *Deposit balances includes stimulus-relate
Slide 18: Diversified Noninterest Income Streams
DIVERSIFIED NONINTEREST INCOME STREAMS Noninterest Income ($M)² Pathward Financial, Inc. (Nasdaq: CASH) 18 YTD22 Revenue Breakdown² YTD22 Noninterest Income Breakdown $172 $185 $223 $240 $271 $291 2017 2018 2019 2020 2021 YTD22¹ . 1 YTD22 is annualized. Annualization excludes one time gain on sale o
Slide 19: Overview of Deposit Portfolio
OVERVIEW OF DEPOSIT PORTFOLIO 19Pathward Financial, Inc. (Nasdaq: CASH) Highlights Core Deposit Breakdown Cost of Deposits Deposit Breakdown 96.66% 3.17% 0.17% Non Interest Bearing Deposits Interest Bearing Non-Time Deposits Time Deposits 98.7% 98.6% 99.0% 99.8% 99.9% 3Q21 4Q21 1Q22 2Q22 3Q22 0.13%
Slide 20: Interest Rate Risk Management
-10% 5% 20% 35% -100 +100 +200 +300 Parallel Shock Ramp 1 Fixed rate securities, loans and leases are shown for contractual periods. -2,000 0 2,000 4,000 Month 1-12 Month 13-36 Month 37-60 Month 61-180 V o lu m e ( $ M M ) Period Variance Total Assets Total Liabilities INTEREST RATE RISK MANAGEMENT
Slide 21: Capital and Sources of Liquidity
6.85% 7.67% 7.39% 6.80% 8.23% 7.83% 8.69% 8.52% 7.79% 8.22% 3Q21 4Q21 1Q22 2Q22 3Q22 CAPITAL AND SOURCES OF LIQUIDITY REGULATORY CAPITAL AS OF JUNE 30, 2022 Minimum Requirement to be Well-Capitalized under Prompt Corrective Action Provisions Pathward Financial, Inc. Pathward, N.A. Capital Ratio Tren
Slide 22: Pro Forma Capital Structure
PRO FORMA CAPITAL STRUCTURE 22Pathward Financial, Inc. (Nasdaq: CASH) Note: For illustrative purposes, assumes $20 million of new subordinated debt less 1.50% spread and $100k of other expenses; assumes 100% of proceeds are included in calculation of leverage assets and assumes 50% risk-weighting Co
Slide 23: Double Leverage and Interest Coverage
DOUBLE LEVERAGE AND INTEREST COVERAGE 23Pathward Financial, Inc. (Nasdaq: CASH) 1 3Q22 is annualized Note: For illustrative purposes, assumes $20 million of new subordinated debt less 1.50% spread and $100k of other expenses; assumes $14.7M in equity downstreamed to the Bank; illustratively assumes
Slide 24: Appendix
APPENDIX 24Pathward Financial, Inc. (Nasdaq: CASH)
Slide 25: Summary Financial Results Third Quarter Ended June 30, 2022
SUMMARY FINANCIAL RESULTS THIRD QUARTER ENDED JUNE 30, 2022 25 1 Amounts presented are used in the two-class earnings per common share calculation. INCOME STATEMENT ($ in thousands, except per share data) 3Q21 2Q22 3Q22 Net interest income 68,475 83,800 72,151 Provision for credit losses 4,612 32,30
Slide 26: Balance Sheet Highlights Third Quarter Ended June 30, 2022
BALANCE SHEET HIGHLIGHTS THIRD QUARTER ENDED JUNE 30, 2022 26 BALANCE SHEET PERIOD ENDING ($ in thousands) 3Q21 2Q22 3Q22 Cash and cash equivalents 720,243 237,680 157,260 Investments 1,981,852 2,090,765 2,000,400 Loans held for sale 87,905 31,410 67,571 Loans and leases (HFI)1 3,496,670 3,730,190 3
Slide 27: Management Overview
MANAGEMENT OVERVIEW 27 Brett Pharr Chief Executive Officer and Director Glen Herrick EVP and Chief Financial Officer Charles Ingram EVP and Chief Technology & Product Officer Sonja Theisen EVP, Governance, Risk, & Compliance Executive Leadership Team Douglas J. Hajek Chair of the Board Elizabeth G.
Slide 28: Executive Leadership
EXECUTIVE LEADERSHIP 28 Brett Pharr Chief Executive Officer and Director Brett Pharr is the Chief Executive Officer of Pathward Financial, Inc. Prior to being appointed to his current role in October 2021, Brett was Co-President and Chief Operating Officer since June 2020 and Executive Vice Presiden
Slide 29: Executive Leadership (Continued)
EXECUTIVE LEADERSHIP (CONTINUED) 29Pathward Financial, Inc. (Nasdaq: CASH) Charles Ingram EVP and Chief Technology & Product Officer Charles Ingram is the Executive Vice President and Chief Technology & Product Officer of Pathward Financial, Inc. Prior to being appointed to his current role in Octob
Slide 30: Board of Directors
jdw BOARD OF DIRECTORS 30Pathward Financial, Inc. (Nasdaq: CASH) Douglas J. Hajek Chair of the Board Douglas J. Hajek is Chairman of the Board of Directors of Pathward Financial, Inc. He is a lawyer concentrating in corporate and financial services matters with over thirty years of experience and pr
Slide 31: Board of Directors (Continued)
BOARD OF DIRECTORS (CONTINUED) 31Pathward Financial, Inc. (Nasdaq: CASH) Frederick V. Moore Director Frederick V. Moore is a member of the Board of Directors of Pathward Financial, Inc. Moore has served as an Executive Search Consultant with AGB Search since July 2017. He also serves on the Executiv
Slide 32: Board of Directors (Continued)
BOARD OF DIRECTORS (CONTINUED) 32Pathward Financial, Inc. (Nasdaq: CASH) Lizabeth H. Zlatkus Director Lizabeth H. Zlatkus is a member of the Board of Directors of Pathward Financial, Inc. From 1983 until her retirement in 2011, Zlatkus held various executive positions at The Hartford Financial Servi
Slide 33: Other Business Developments Third Quarter Ended June 30, 2022
OTHER BUSINESS DEVELOPMENTS THIRD QUARTER ENDED JUNE 30, 2022 33Pathward Financial, Inc. (Nasdaq: CASH) • On July 13, 2022, the Company announced it was changing its name to Pathward Financial, Inc.TM, and its bank subsidiary, MetaBank, N.A., was changing its name to PathwardTM, N.A. – Certain chang
Slide 34: 2022 Tax Season Recap
2022 TAX SEASON RECAP 34 Refund advances (“RAs”) and refund-transfers (“RTs”) leverage banking-as-a-service (“BaaS”) infrastructure and are core to our Pathward mission, as they allow consumers quicker access to their money. • RA originations of $1.83 billion compared to $1.79 billion in the 2021 ta
Slide 35: Non-GAAP Financial Measures
NON-GAAP FINANCIAL MEASURES 35 This Confidential Investor Presentation contains certain financial information determined by methods other than in accordance with generally accepted accounting principles in the United States (“GAAP”). These non-GAAP financial measures are a supplement to GAAP, which
Slide 36: Non-GAAP Reconciliation: Adjusted Net Income and EPS
NON-GAAP RECONCILIATION 36Pathward Financial, Inc. (Nasdaq: CASH) Adjusted Net Income and Adjusted Earnings Per Share For the quarter ended For the nine months ended ($ in thousands, except per share data) 3Q21 2Q22 3Q22 3Q21 3Q22 Net income to Common - GAAP 38,701 49,251 22,391 125,805 132,966 Less
Slide 37: Non-GAAP Reconciliation: Adjusted Net Charge-Offs
1 Tax Services NCOs and average loans are excluded to adjust for the cyclicality of activity related to the overall economics of the Company's tax services business line. 37 For the quarter ended ($ in thousands) Jun 30, 2021 Sep 30, 2021 Dec 31, 2021 Mar 31, 2022 Jun 30, 2022 Net Charge-offs 12,333
Slide 38: Non-GAAP Reconciliation: Efficiency Ratio
NON-GAAP RECONCILIATION 38Pathward Financial, Inc. (Nasdaq: CASH) For the last twelve months ended ($ in thousands) Jun 30, 2021 Sep 30, 2021 Dec 31, 2021 Mar 31, 2022 Jun 30, 2022 Noninterest Expense - GAAP 330,352 343,683 353,544 360,733 375,860 Net Interest Income 272,837 278,991 284,605 294,555
Slide 39: Non-GAAP Reconciliation: Return on Tangible Common Equity
NON-GAAP RECONCILIATION 39Pathward Financial, Inc. (Nasdaq: CASH) For the last twelve months ended Year to Date ($ in thousands) Sept 30, 2017 Sept 30, 2018 Sept 30, 2019 Sept 30, 2020 Sept 30, 2021 Jun 30, 2022 Amortization Expense 12,362 9,641 17,711 10,997 8,545 5,188 Intangible Impairment 10,248
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