Pathward Financial, Inc. · NASDAQ:CASH
Pathward Financial — Q2 FY2021 Earnings Presentation
33 slides from Pathward Financial's earnings presentation, Apr 27, 2021
Slide 1: Quarterly Investor Update Second Quarter Fiscal Year 2021
Q U A R T E R LY I N V E S T O R U P D AT E SECOND QUARTER FISCAL YEAR 2021
Slide 2: Forward-Looking Statements
F O R W A R D - L O O K I N G S TAT E M E N T S 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 word
Slide 3: We Are a Financial Enablement Company
WE ARE A FINANCIAL ENABLEMENT COMPANY We work with innovators to increase financial availability, choice, and opportunity for all. We strive to remove barriers that traditional institutions put in the way of financial access, and promote economic mobility by providing responsible, secure, high quali
Slide 4: Differentiated Business Lines with Significant Growth Opportunities
D I F F E R E N T I AT E D B U S I N E S S L I N E S W I T H S I G N I F I C A N T GROW TH OPPORTUNITIES BANKING AS A SERVICE 47% (“BaaS”) Noninterest Income as a percent of Total Revenue in LTM ending March 31, 2021 P AY M E N T S TA X S E R V I C E S Enables fintechs, finservs, and Enables tax pre
Slide 5: Second Quarter Business Highlights & Key Strategic Initiatives
SECOND QUARTER BUSINESS HIGHLIGHTS & KEY S T R AT E G I C I N I T I AT I V E S ✓ ✓ ✓ INCREASE PERCENTAGE IMPROVE OPERATING OPTIMIZE INTEREST- OF FUNDING FROM CORE EARNING ASSET MIX EFFICIENCIES DEPOSITS Executing large, national programs Focus on commercial finance business Efficiency ratio 63.1% le
Slide 6: Fee Income Drives Profitability
F E E I N C O M E D R I V E S P R O F I TA B I L I T Y SECOND QUARTER ENDED MARCH 31, 2021 IN COME STATE ME N T ($ in thousands, except per share data) 2Q21 1Q21 2 Q2 0 Net interest income 73,850 65,999 67,737 Provision for credit losses 30,290 6,089 37,296 Payments card & deposit fees 29,875 22,564
Slide 7: Selected Balance Sheet Highlights
SELECTED BALANCE SHEET HIGHLIGHTS SECOND QUARTER ENDED MARCH 31, 2021 BALAN CE SHE E T PERIOD ENDING AVERAGE ($ in thousands) 2Q21 1Q21 2Q20 2Q21 2Q20 Cash and cash equivalents 3,724,242 1,586,451 108,733 4,187,558 196,754 Loans and leases (HFI) 3,657,531 3,448,675 3,618,924 4,120,555 4,195,772 Allo
Slide 8: Diversified Earning Asset Portfolio
DIVERSIFIED EARNING ASSET PORTFOLIO QUARTERLY AVERAGE EARNING ASSET MIX At the Quarter Ended % in charts represent % of total interest earning assets March 31, 2021 March 31, 2020 ($ in thousands) 2Q21 2Q20 Y/Y Δ COMMERCIAL FINANCE 2,505,922 2,026,347 24% 25% Term lending 891,414 725,581 23% Asset-b
Slide 9: Environmental, Social, and Governance (ESG)
E N V I R O N M E N TA L , S O C I A L , A N D G O V E R N A N G E ( “ E S G ” ) Our mission, financial inclusion for all®, is about equal access to financial opportunity and is inherently ESG oriented. Every day, our team members work to help individuals and organizations improve their economic sta
Slide 10: Financial Inclusion: Paycheck Protection Program
FINANCIAL INCLUSION E N A B L I N G B U S I N E S S E S T H R O U G H T H E P AYC H E C K P R OT E C T I O N P R O G R A M THROUGH ROUNDS 1 & 2 AS OF MARCH 31, 2021 more than more than 1,012 $574K $300M 18,000 LOANS AVERAGE LOAN FUNDED AMOUNT IN RELIEF EMPLOYEE JOBS 69% 59% 31% of loans were for of
Slide 11: Banking as a Service
BANKING AS A SERVICE 11 QUARTERLY INVESTOR UPDATE | SECOND QUARTER FISCAL YEAR 2021 | NASDAQ: CASH
Slide 12: Payments Business Solutions
P AY M E N T S B U S I N E S S S O L U T I O N S ENABLING FINTECHS AND FINSERVS THROUGH BaaS P AY M E N T S B U S I N E S S E S P R O V I D E P R I M A R Y S O U R C E O F D E P O S I T S GENERATES STABLE, LOW-COST CORE DEPOSITS AND RECURRING FEE INCOME DEPOSIT GENERATORS FEE INCOME DRIVERS • Leadin
Slide 13: Payments Business Update
P AY M E N T S B U S I N E S S U P D AT E Payments Card and Deposit Fee Income Breakout • Selected as the prepaid debit card issuer for Economic Impact Second Quarter Fiscal 2021 Payments as Treasury’s financial agent. 9% – Disbursed $24.15 billion for the three rounds of EIP on 16.5 million Bank- i
Slide 14: Tax Season Update
TA X S E A S O N U P D AT E 2 0 2 1 Refund advances (“RAs”) and refund-transfers (“RTs”) leverage BaaS infrastructure and are core to MetaBank’s mission, as they allow consumers quicker access to their money. • RA originations of $1.79 billion compared to $1.33 billion in the 2020 tax season. – 2021
Slide 15: Meta Ventures
M E TA V E N T U R E S | E S TA B L I S H E D 2 0 1 7 Formed for the purpose of making strategic minority equity investments¹ in companies or funds in the fintech and financial services industries that are aligned with our mission of financial inclusion for all® and are potential MetaBank customers.
Slide 16: Commercial Finance & Legacy Community Bank Portfolio
C O M M E R C I A L F I N A N C E & L E G A CY COMMUNIT Y BANK PORTFOLIO 16 QUARTERLY INVESTOR UPDATE | SECOND QUARTER FISCAL YEAR 2021 | NASDAQ: CASH
Slide 17: Commercial Finance Loan and Lease Portfolio
C O M M E RC I AL F I N AN C E LOAN AN D L E ASE P O RT FO L I O TERM LENDING. Collateralized conventional term loans and notes receivable, $263.5M Small ticket weighted average life of 53 months. Exposure is concentrated in solar/alternative equipment financing energy, most of which are constructio
Slide 18: Distribution of Commercial Finance Portfolio by Industry
DISTRIBUTION OF COMMERCIAL FINANCE PORTFOLIO BY INDUSTRY¹ $ in millions $- $100 $200 $300 $400 $500 Manufacturing Utilities Transportation and Warehousing Wholesale Trade Finance and Insurance Health Care and Social Assistance Construction Admin and Support and Waste Mgmt and Remediation Services Mi
Slide 19: Commercial Finance Mix
COMMERCIAL FINANCE MIX¹ MANUFACTURING UTILITIES Total Exposure $446.0 million % of Total² 11.6% Total Exposure $442.0 million % of Total² 11.5% • Limited exposure to single borrowers • 98% of Utilities exposure is to Solar Electric Power Generation, • Diversified across multiple subsectors – greates
Slide 20: Solar/Alternative Energy
S O L A R / A LT E R N AT I V E E N E R G Y TAX ADVANTAGES IN RENEWABLE ENERGY PORTFOLIO ADVANTAGES OF RENEWABLE ENERGY LENDING RENEWABLE ENERGY INVESTMENT TAX CREDIT (ITC) PERMANENT DEBT FINANCING • The solar and fuel cell ITC is an important federal policy mechanism • MetaBank provides permanent d
Slide 21: Legacy Community Bank Portfolio Breakdown
LEGACY COMMUNIT Y BANK PORTFOLIO BREAKDOWN AS OF MARCH 31, 2021 | SERVICED BY CENTR AL BANK Outstanding ($ in millions) Balance % of Total¹ Commercial Real Estate $324.3 8.4% Commercial Operating 11.3 0.3% During the quarter sold $103 million of community bank loans that were classified as held for
Slide 22: Legacy Community Bank Hotel Portfolio
L E G ACY C O M M U N I T Y B A N K | H OT E L P O R T FO L I O AS OF MARCH 31, 2021 | SERVICED BY CENTR AL BANK $191.4 million outstanding, total exposure of $194.4 million including unfunded commitments • $15.7 million related to construction. $185.0 million in commercial real estate and $6.4 mill
Slide 23: Asset Quality, Interest Rate Risk, & Capital
A S S E T Q U A L I T Y, I N T E R E ST R AT E R I S K , & C A P I TA L 23 QUARTERLY INVESTOR UPDATE | SECOND QUARTER FISCAL YEAR 2021 | NASDAQ: CASH
Slide 24: Asset Quality
ASSET QUALIT Y Nonperforming Assets (“NPAs”) Adjusted Net Charge-Offs (“NCOs”)¹ Excludes Tax Services NCOs and Related Seasonal Average Loans 0.79% 0.73% 0.67% 0.64% $ in millions $ in millions 0.48% 0.63% 0.55% 0.44% 0.44% $56.1 $53.2 0.24% $48.0 $46.7 $39.4 $4.9 $5.5 $2.2 $3.8 $3.8 2Q20 3Q20 4Q20
Slide 25: Asset Quality: Active COVID-19 Loan and Lease Modifications and Deferrals
ASSET QUALIT Y ACTIVE COVID-19 LOAN AND LEASE MODIFICATIONS AND DEFERRALS Well-diversified portfolio with very modest exposures to the March 31, 2021 December 31, 2020 industries most impacted by the pandemic. COUNT $ BALANCE COUNT $ BALANCE AREAS OF CREDIT FOCUS 70 $64.5 138 $75.2 Hospitality 11 40
Slide 26: Interest Rate Risk Management
I N T E R E S T R AT E R I S K M A N A G E M E N T MARCH 31, 2021 12-MONTH INTEREST RATE SENSITIVITY FROM BASE NET INTEREST INCOME • Lower for longer rate environment -- focus is on reducing wholesale funding and redeploying deposits 65% and assets into positive carry opportunities. 50% • Interest r
Slide 27: Capital and Sources of Liquidity
C A P I TA L A N D S O U R C E S O F L I Q U I D I T Y R E G U L AT O R Y C A P I TA L A S O F M A R C H 3 1 , 2 0 2 1 At March 31, 2021¹ Meta Financial Group, Inc. MetaBank, N.A. Tier 1 Leverage 4.75% 5.47% CAPITAL RATIO TRENDS Tier 1 Leverage – EIP-adjusted² N/A 7.39% Common Equity Tier 1 11.24% 1
Slide 28: Appendix
APPENDIX 28 QUARTERLY INVESTOR UPDATE | SECOND QUARTER FISCAL YEAR 2021 | NASDAQ: CASH
Slide 29: Non-GAAP Reconciliations: EIP-Related Adjustments
N O N - G A A P R E C O N C I L I AT I O N S E I P - R E L AT E D A D J U S T M E N T S ($ in millions) THREE MONTHS ENDED NET INTEREST MARGIN MARCH 31, 2021 DECEMBER 31, 2020 SEPTEMBER 30, 2020 JUNE 30, 2020 Average interest-earning assets 9,768,242 5,636,445 6,806,366 7,608,616 Net interest income
Slide 30: Non-GAAP Reconciliations: EIP-Related Capital Adjustments
N O N - G A A P R E C O N C I L I AT I O N S E I P - R E L AT E D C A P I TA L A D J U S T M E N T S ($ in millions) METABANK TIER 1 LEVERAGE MARCH 31, 2020 DECEMBER 31, 2020 SEPTEMBER 30, 2020 JUNE 30, 2020 Total stockholder's equity $ 934,010 $ 912,143 $ 933,430 $ 923,520 LESS: Goodwill, net of as
Slide 31: Financial Measure Reconciliations
F I N A N C I A L M E A S U R E R E C O N C I L I AT I O N S Efficiency Ratio For the last twelve months ended ($ in thousands) Mar 31, 2021 Dec 31, 2020 Sep 30, 2020 Jun 30, 2020 Mar 31, 2020 Noninterest Expense - GAAP 320,070 315,828 319,051 314,911 316,138 Net Interest Income 266,499 260,386 259,
Slide 32: Warehouse Finance
WA R E H O U S E F I N A N C E Total Exposure $332.5 million % of Total¹ 8.6% All Loan/Collateral Cash Flows Asset-backed warehouse lines of credit used to support strategic initiatives. • Lines are primarily secured by consumer receivables, whereby Meta is in a senior, secured position as the first
Slide 33: Indirect Consumer Credit Programs
INDIRECT CONSUMER CREDIT PROGR AMS Total Exposure $104.8 million % of Total¹ 2.7% Consumer Payments Consumer credit programs with marketplace lenders offer Meta a Principal, Interest, Fees risk adjusted return, protected by certain layers of credit support and balance sheet flexibility. Programs are