Pathward Financial, Inc. · NASDAQ:CASH
Pathward Financial — Q1 2023 Earnings Presentation
25 slides from Pathward Financial's earnings presentation, Jan 25, 2023
Slide 1: Quarterly Investor Update
Quarterly Investor Update F I R S T 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: Leading the way to financial access is the heart of our business
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 Experienced leader in fast-growing Banking 3 as a Service (BaaS) sector, with diversified portfolio of high-quality fi
Slide 6: Record of Strong Earnings Growth and Profitability
Record of Strong Earnings Growth and Profitability1 Return on Average Assets2 Return on Average Tangible Equity2 ROATE inclusive of one-time items 35.42% 35.51% ROAA inclusive of one-time items 2.20% 1.88% 30.25% 29.55% 28.66% 1.74% 1.71% 1.55% 1.45% 1.42% 22.34% 21.87% 1.12% 16.78% 2018 2019 2020 2
Slide 7: Return of Capital to Shareholders
Return of Capital Generation of Excess Capital Enables Ongoing to Shareholders Return of Value to Shareholders Capital Returned to Shareholders HI G HL IG HT S Pathward’s track record of profitability, combined with its commitment to maintaining the size of its balance sheet, $448.2M TOTAL SHARE REP
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 VE 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 a
Slide 9: Fiscal Year 2023 Earnings Guidance
Fiscal Year 2023 Earnings Guidance % (Earnings per share amounts) Prior Updated Change2 Diluted earnings per share - GAAP $5.25 - $5.75 $5.55 - $5.95 5% Less: Net extraordinary items, net of tax1 $0.15 $0.15 Diluted earnings per share - Adjusted $5.10 - $5.60 $5.40 - $5.85 5% 1 Includes gain on sale
Slide 10: Summary Financial Results
Summary Financial Results First Quar ter Ended December 31, 2022 INCOME STATEMENT ($ in thousands, except per share data) 1Q22 4Q22 1Q23 Net interest income 71,613 79,760 84,057 Provision for credit losses 186 (2,648) 9,776 Total noninterest income 86,591 43,456 65,777 Total noninterest expense 82,4
Slide 11: Balance Sheet Highlights
Balance Sheet Highlights First Quar ter Ended December 31, 2022 BALANCE SHEET PERIOD ENDING ($ in thousands) 1Q22 4Q22 1Q23 Cash and cash equivalents 1,230,100 388,038 369,169 Investments 1,833,733 1,924,551 1,888,343 Loans held for sale 36,182 21,071 17,148 Loans and leases (HFI) 3,684,261 3,536,30
Slide 12: Low-cost Deposits
Low-cost Deposit Breakdown Deposits Non Interest Bearing 96.37% Deposits Interest Bearing Non- HI G HL IG HT S Time Deposits Pathward’s BaaS business generates fee income and Time Deposits low-cost deposits leading to high levels of noninterest- 3.51% bearing deposits (96% of total deposits). 0.12%
Slide 13: Low-cost Deposits: Cost of Deposits
Low-cost Cost of Deposits Deposits 3.65% HI G HL IG HT S Pathward is benefitting from the deposit optimization 2.22% strategy that included transitioning away from higher cost interest-bearing wholesale deposits in favor of growing 1.99% BaaS deposits. 1.03% 0.99% As of December 31, 2022, approximat
Slide 14: Diversified Noninterest Income Streams
Diversified FY23 Revenue Breakdown1 Noninterest Income Streams Net interest income 60% Noninterest HI G HL IG HT S income 40% 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 maj
Slide 15: Overview of Loan Portfolio
Overview of Loan Portfolio MRQ ($ in millions) Business Line Balance Sheet Category 1Q22 4Q22 1Q23 Yield % of Total Structured Finance Guaranteed portion of US govt SBA/USDA loans SBA/USDA 44.6 194.9 196.0 Unguaranteed portion of US govt SBA/USDA loans SBA/USDA 101.1 150.8 152.3 Paycheck Protection
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 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 17: Loan Portfolio Interest Rate Sensitivity
Total Loan and Lease Portfolio Loan Portfolio Pricing Attributes1 Interest Rate 49% Sensitivity 16% HI G HL IG HT S 35% As of December 31, 2022, $1.2B, or 35% of loans and Fixed Rate > 1 Year leases contained floating or variable interest rates. Of Fixed Rate < 1 Year these, $0.9B are tied to Fed Fu
Slide 18: Interest Rate Risk Management
Interest Rate Risk Management December 31, 2022 Earning Asset Pricing Attributes1 • Data presented on this page is reflective of the company’s asset mix at a point in time and calculated for regulatory purposes. Future rate changes would impact a multitude of variables beyond the company’s 61% Fixed
Slide 19: Asset Quality
Asset Quality Nonperforming Assets (“NPAs”) Adjusted Net Charge-Offs (“NCOs”)1 ($ in millions) Excludes Tax Services NCOs and Related Seasonal Average Loans ($ in millions) 1.25% 0.68% 0.68% 0.71% 0.58% 0.56% 0.63% 0.48% 0.61% 0.46% 0.40% 0.46% 0.45% 0.25% $11.4 0.37% $44.3 $38.3 $45.0 $26.8 $30.9 $
Slide 20: Capital and Sources of Liquidity
Capital and Sources of Liquidity Regulatory Capital as of December 31, 2022 Tier 1 Leverage Ratio Pathward Pathward, At December 31, 2022¹ Financial, Inc. N.A. Tier 1 Leverage 8.37% 8.68% 8.52% 8.23% 8.22% 8.10% 8.19% 8.37% 8.68% Common Equity Tier 1 12.31% 13.09% 7.39% 7.79% 6.80% Tier 1 Capital 12
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 ($ in thousands, except per share data) 1Q22 4Q22 1Q23 Net income - GAAP 61,324 23.420 27,842 Less: Gain on sale of trademarks 50,000 - 10,000 Add: Rebranding Expenses 3 6,899 3,737 Add: Separation rela
Slide 23: Non-GAAP Reconciliation
Non-GAAP Reconciliation Adjusted Annualized NCOs and Adjusted Loans and Leases For the quarter ended ($ in thousands) Dec 31, 2021 Mar 31, 2022 Jun 30, 2022 Sep 30, 2022 Dec 31, 2022 Net Charge-offs 1,129 11,226 12,198 26,664 3,217 Less: Tax services net charge-offs (2,313) (183) 7,992 22,594 1,033
Slide 24: Non-GAAP Reconciliation
Non-GAAP Reconciliation Efficiency Ratio For the last twelve months ended ($ in thousands) Dec 31, 2021 Mar 31, 2022 Jun 30, 2022 Sep 30, 2022 Dec 31, 2022 Noninterest Expense - GAAP 353,544 360,733 375,860 385,275 407,899 Net Interest Income 284,605 294,555 298,231 307,324 319,768 Noninterest Incom
Slide 25: 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 Construction Mining, Quarrying, and Oil and