Slide 1: Quarterly Investor Update Second Quarter Fiscal Year 2024
QUARTERLY INVESTOR UPDATE S E C O N 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: Q2 FY 2024 Highlights
Q2 FY 2024 HIGHLIGHTS Net Income Diluted Earnings Per Share $65.3 million in net income; an increase of 19% $2.56 in diluted earnings per share; an increase of 29% compared compared to Q2 FY 2023 to Q2 FY 2023 Net Interest Margin Return Metrics2 Net interest margin (“NIM”) of 6.23%; Adjusted NIM1 of
Slide 4: Tax Services Pre-Tax Income Increased 24% in First Six Months of 2024 vs. 2023
TAX SERVICES PRE-TAX INCOME INCREASED 24% IN FIRST SIX MONTHS OF 2024 VS. 2023 REFUND ADVANCE FEE INCOME GREW 12% 6 MONTHS ENDED REFUND ADVANCE ORIGINATIONS INCREASED MARCH 31, 2024 ALMOST $100 MILLION DECREASED PROVISION DUE TO IMPROVEMENTS IN DATA ANALYTICS, UNDERWRITING AND MONITORING 4 Pathward
Slide 5: Focus on Risk Adjusted Returns to Optimize Loans and Leases
FOCUS ON RISK ADJUSTED RETURNS TO OPTIMIZE LOANS AND LEASES • Asset classes built to perform through cycles • Strong foundation of specialized and unique risk mitigation techniques • Added over $650 million in loans and leases when compared to the same quarter last year • Focused on adding assets wi
Slide 6: Banking as a Service Has Opportunity for Growth
BANKING AS A SERVICE HAS OPPORTUNITY FOR GROWTH • Believe Pathward’s strong Risk and Compliance capability is an advantage • Continue to build on and invest in our people, risk culture, strong processes and technology to adapt and grow with the demands of the business • Trusted partner for companies
Slide 7: Net Interest Income Drives Growth in EPS
NET INTEREST INCOME DRIVES GROWTH IN EPS ($ IN MILLIONS, EXCEPT PER SHARE DATA) Net Interest Income Noninterest Income Noninterest Expenses +17% +2% +10% $118.3 $127.0 $128.9 $140.4 $101.4 $127.1 Q2 2023 Q2 2024 Q2 2023 Q2 2024 Q2 2023 Q2 2024 Net Income Attributable to Parent Earnings per Diluted S
Slide 8: Deposit Base Higher to Support Asset Growth
1 DEPOSITS Period ending ($ in millions) 8% $6,368.3 $5,902.7 DEPOSIT BASE HIGHER TO SUPPORT ASSET GROWTH Average Q2 off balance sheet deposits of $783 million, $1.2 billion at quarter end Continue to return unclaimed EIP balances to the U.S. Treasury Q2 2023 Q2 2024 8 Pathward Financial, Inc. (
Slide 9: Total Loans and Leases Increased from Q2 2023
TOTAL LOANS AND LEASES Period ending ($ in millions) +18% $4,409.4 $3,725.6 TOTAL LOANS AND LEASES INCREASED FROM Q2 2023 Growth primarily driven by Term Lending, Insurance Premium Finance and SBA/USDA Nonperforming loans and leases of 0.78% compared to 0.88% at December 31, 2023 Annualized ad
Slide 10: Strong Balance Sheet Allows for Return of Capital to Shareholders
STRONG BALANCE SHEET ALLOWS FOR RETURN OF CAPITAL TO SHAREHOLDERS Liquidity Sources Share Repurchases ($ in millions) 996,773 $348 $875 $231 764,185 $36 $3,591 $1,190 $911 Q2 2024 Q2 2024 YTD 1 Off Balance Sheet Deposits Unpledged Investment Securities Fed Discount Window Funds Cash and Cash Equival
Slide 11: Q&A
Q&A 11 Pathward Financial, Inc. (Nasdaq: CASH) | Quarterly Investor Presentation
Slide 12: Investment Highlights
INVESTMENT HIGHLIGHTS RECORD OF STRONG EXCESS CAPITAL EXPERIENCED LEADER IN 1 EARNINGS GROWTH AND 2 GENERATING BUSINESS 3 FAST-GROWING BANKING PROFITABILITY ABOVE ENABLES ONGOING RETURN AS A SERVICE (BAAS) BANKING INDUSTRY OF VALUE TO SECTOR, WITH DIVERSIFIED AVERAGES SHAREHOLDERS PORTFOLIO OF HIGH-
Slide 13: Record of Strong Earnings Growth & Profitability
RECORD OF STRONG EARNINGS GROWTH & PROFITABILITY1 Return on Average Assets2 Return on Average Tangible Equity2 ROAA inclusive of one-time items 2.33% 2.35% 2.20% ROATE inclusive of one-time items 51.09% 48.32% 1.88% 1.74% 1.55% 35.42% 1.45% 28.66% 30.25% 22.34% 21.87% 2019 2020 2021 2022 2023 YTD24
Slide 14: Strong Earnings Growth and Right-Sized Balance Sheet Enable Return of Capital
TRACK RECORD OF STRONG EARNINGS GROWTH AND RIGHT-SIZED BALANCE SHEET ENABLES ONGOING RETURN OF CAPITAL Capital Returned to Shareholders RETURN OF CAPITAL TO SHAREHOLDERS Pathward’s track record of profitability, combined with its commitment to maintaining the size of its balance sheet, enables the
Slide 15: Summary Financial Results
SUMMARY FINANCIAL RESULTS Second Quar ter Ended March 31, 2024 INCOME STATEMENT For the quarter ended ($ in thousands, except per share data) 2Q23 1Q24 2Q24 Net interest income $101,405 $110,036 $118,301 Provision for credit losses 36,763 9,890 26,052 Total noninterest income 127,038 52,761 128,945
Slide 16: Balance Sheet Highlights
BALANCE SHEET HIGHLIGHTS Second Quar ter Ended March 31, 2024 BALANCE SHEET Period ending ($ in thousands) 2Q23 1Q24 2Q24 Cash and cash equivalents $432,598 $671,630 $347,888 Investments 1,864,276 1,886,021 1,814,140 Loans held for sale 24,780 69,518 25,946 Loans and leases (HFI) 3,725,616 4,426,281
Slide 17: 2024 Tax Season Update
2024 TAX SEASON UPDATE TAX SERVICES ECONOMICS Six Months Ended ($ in millions) March 31, 2023 March 31, 2024 % Change Net interest income (expense) 2.86 0.22 (92)% • Total tax product revenue increased 1% through the six months ended March 31, 2024 compared to the Refund Advance product income 38.61
Slide 18: Deposit Breakdown
DEPOSIT BREAKDOWN DEPOSITS Pathward’s BaaS business generates fee income and stable deposits. 94.4% Ability to attract and maintain these deposits provides a powerful competitive advantage. Noninterest-bearing deposits as a percentage of total deposits has increased from 54% in 4Q18 to 94% as
Slide 19: Cost of Deposits
COST OF DEPOSITS 5.33% COST OF DEPOSITS During the 2024 fiscal second quarter, 3.87% approximately 56% 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 Fed Funds R
Slide 20: Diversified Noninterest Income Streams
FYTD 2024 REVENUE BREAKDOWN DIVERSIFIED NONINTEREST INCOME STREAMS Noninterest Net interest income income 44% 56% Noninterest income represents 44% 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 21: Loan Portfolio
AVERAGE LOANS AND YIELDS ($B) 8.47% 8.31% 8.33% 8.33% 8.43% $4.5 $4.9 LOAN PORTFOLIO $4.3 $4.0 $3.9 Remain focused on smart growth in the Commercial Finance loan portfolio. Commercial Finance balances grew $523 million, or 17%, from the second quarter of the prior year. 2Q23 3Q23 4Q23 1Q24 2Q24
Slide 22: Equipment Finance
EQUIPMENT FINANCE COMMERCIAL FINANCE 6.82% 20% Q2 2024 Quarterly Yield1 Of Loan Portfolio Loan and lease financing to provide access to needed equipment ($ in millions) Business Line Balance Sheet Category 2Q23 1Q24 2Q24 Focus on equipment critical to business operations Lease financing $153.6 $
Slide 23: Working Capital Finance
WORKING CAPITAL FINANCE COMMERCIAL FINANCE 14.19% 17% Q2 2024 Quarterly Yield Of Loan Portfolio • Provides working capital for companies to meet short- term operational requirements ($ in millions) Business Line Balance Sheet Category 2Q23 1Q24 2Q24 • Primarily variable rate loans with majority of f
Slide 24: Insurance Premium Finance
INSURANCE PREMIUM FINANCE COMMERCIAL FINANCE 7.54% 12% Q2 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 2Q23 1Q24 2Q24 Insurance Premium
Slide 25: Structured Finance
STRUCTURED FINANCE COMMERCIAL FINANCE 6.11% 30% Q2 2024 Quarterly Yield Of Loan Portfolio • Funding small and midsized businesses, including rural borrowers ($ in millions) Business Line Balance Sheet Category 2Q23 1Q24 2Q24 • SBA, USDA, and conventional loans with fixed or Guaranteed portion of US
Slide 26: Consumer
10.46% 7% Q2 2024 Quarterly Yield Of Loan Portfolio CONSUMER ($ in millions) Business Line Balance Sheet Category 2Q23 1Q24 2Q24 Consumer Consumer finance $148.6 $301.5 $267.0 • Consumer credit programs with marketplace lenders TOTAL $148.6 $301.5 $267.0 offer Pathward a risk adjusted return • Prote
Slide 27: Warehouse
10.12% 9% Q2 2024 Quarterly Yield Of Loan Portfolio WAREHOUSE ($ in millions) Business Line Balance Sheet Category 2Q23 1Q24 2Q24 Warehouse Warehouse finance $377.0 $349.9 $394.8 • Asset-backed warehouse lines of credit used to TOTAL $377.0 $349.9 $394.8 support strategic initiatives • Lines are pri
Slide 28: Loan Portfolio Interest Rate Sensitivity
TOTAL LOAN AND LEASE PORTFOLIO PRICING ATTRIBUTES1 LOAN PORTFOLIO INTEREST 16% 37% RATE SENSITIVITY 47% As of March 31, 2024, $1.9B, or 47% of loans and leases contained floating or variable interest rates. Of these, $1.0B are tied to Fed Funds or Prime, Fixed Rate > 1 Year with the remaining tied
Slide 29: Interest Rate Risk Management
INTEREST RATE RISK MANAGEMENT MARCH 31, 2024 Earning Asset Pricing Attributes1 • Data presented on this page is reflective of the Company’s asset mix at a point in time and calculated for regulatory purposes. Future rate 51% Fixed Rate > 1 Year changes would impact a multitude of variables beyond th
Slide 30: Asset Quality
ASSET QUALITY Nonperforming Assets (“NPAs”) Adjusted Net Charge-Offs (“NCOs”)1 ($ in millions) Excludes Tax Services NCOs and Related Seasonal Average Loans ($ in millions) 0.77% 0.55% 0.53% 0.50% 0.68% 0.44% 0.49% 0.50% 0.46% 0.45% 0.46% 0.47% $58.0 $42.4 0.46% 0.43% $40.8 $37.2 $6.0 0.41% $30.1 $4
Slide 31: Capital and Sources of Liquidity
CAPITAL AND SOURCES OF LIQUIDITY Regulatory Capital as of March 31, 2024 Tier 1 Leverage Ratio Pathward Pathward, At March 31, 2024¹ Financial, Inc. N.A. Tier 1 Leverage 7.75% 7.92% 8.40% 8.67% 8.11% 8.32% 7.96% 8.15% 7.75% 7.92% Common Equity Tier 1 12.30% 12.83% 7.53% 7.79% Tier 1 Capital 12.56% 1
Slide 32: Appendix
iL APPENDIX
Slide 33: Non-GAAP Reconciliation
NON-GAAP RECONCILIATION Adjusted Net Income and Adjusted Earnings Per Share For the year ended ($ in thousands, except share and per share data) 2022 Net income – GAAP a 156,386 Less: Gain on sale of trademarks 50,000 Less: Loss on disposal of certain mobile generators - Add: Accelerated depreciatio
Slide 34: Non-GAAP Reconciliation
NON-GAAP RECONCILIATION Adjusted Annualized NCOs and Adjusted Loans and Leases For the quarter ended ($ in thousands) Mar 31, 2023 Jun 30, 2023 Sep 30, 2023 Dec 31, 2023 Mar 31, 2024 Net charge-offs 4,975 4,218 41,280 5,486 (1,087) Less: Tax services net charge-offs (recoveries) (1,064) (266) 36,075
Slide 35: Non-GAAP Reconciliation
NON-GAAP RECONCILIATION Efficiency Ratio For the last twelve months ended ($ in thousands) Mar 31, 2023 Jun 30, 2023 Sep 30, 2023 Dec 31, 2023 Mar 31, 2024 Noninterest expense – GAAP 431,875 449,803 464,975 479,190 492,485 Net interest income 337,373 362,687 387,861 413,840 430,736 Noninterest incom
Slide 36: Non-GAAP Reconciliation
NON-GAAP RECONCILIATION Net Interest Margin and Cost of Deposits For the Quarter Ended ($ in thousands) Mar-21 Jun-21 Sep-21 Dec-21 Mar-22 Jun-22 Sep-22 Dec-22 Mar-23 Jun-23 Sep-23 Dec-23 Mar-24 Average interest earning assets 9,768,242 7,316,820 6,438,572 6,183,646 7,082,417 6,082,329 6,073,822 5,9
Slide 37: Commercial Finance Concentrations by Industry
COMMERCIAL FINANCE CONCENTRATIONS BY INDUSTRY1 $ in millions Manufacturing $675 Finance and Insurance $653 Utilities $618 Transportation and Warehousing $423 Mining, Quarrying, and Oil and Gas Extraction $250 Wholesale Trade $230 Other Services (except Public Administration) $185 Health Care and Soc