Pathward Financial, Inc. · NASDAQ:CASH
Pathward Financial — Q1 2024 Earnings Presentation
34 slides from Pathward Financial's earnings presentation, Jan 24, 2024
Slide 1: Quarterly Investor Update, First Quarter Fiscal Year 2024
QUARTERLY INVESTOR UPDATE F I R S T 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 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: Q1 FY 2024 Highlights
Q1 FY 2024 HIGHLIGHTS Net Income Diluted Earnings Per Share $27.7 million in net income; largely flat compared to Q1 $1.06 in diluted earnings per share; an increase of 8% compared FY 2023 to Q1 FY 2023 Net Interest Margin Return Metrics Net interest margin (“NIM”) of 6.23%; Adjusted NIM1 of Return
Slide 4: Significant Growth in Loans and Leases
SIGNIFICANT GROWTH IN LOANS AND LEASES • Growth in nearly every loan category • Strong pipeline in structured finance • Credit quality is steady with NPL ratio improving 38bps sequentially • Focused on smart balance sheet growth to further expand NIM 4 Pathward Financial, Inc. (Nasdaq: CASH) | Quart
Slide 5: Banking as a Service Performance Is Strong
BANKING AS A SERVICE PERFORMANCE IS STRONG • Signed agreements with three new partners and extended an agreement with another partner during the first quarter of fiscal 2024 • Pipeline is healthy • Deposit base matches well with asset side of the balance sheet 5 Pathward Financial, Inc. (Nasdaq: CAS
Slide 6: Net Interest Income Continues to Scale
NET INTEREST INCOME CONTINUES TO SCALE ($ IN MILLIONS, EXCEPT PER SHARE DATA) Net Interest Income Noninterest Income1 Noninterest Expenses +31% +14% -20% $110.0 $65.8 $119.3 $105.1 $84.1 $52.8 Q1 2023 Q1 2024 Q1 2023 Q1 2024 Q1 2023 Q1 2024 Net Income Attributable to Parent1 Earnings per Diluted Sha
Slide 7: Total Managed Deposits Remain Strong
TOTAL MANAGED DEPOSITS Period ending ($ in millions) 0% $8,017.5 $8,015.1 $1,079.0 $2,228.4 TOTAL DEPOSITS REMAIN STRONG Average Q1 off balance sheet deposits of $379 $6,936.1 million, $1.1 billion at quarter end $5,789.1 Decrease in off balance sheet deposits primarily the result of growth in l
Slide 8: Total Loans and Leases Increased from Q1 2023
TOTAL LOANS AND LEASES Period ending ($ in millions) +26% $4,419.4 TOTAL LOANS AND LEASES $3,504.1 INCREASED FROM Q1 2023 Growth primarily driven by Term Lending, Insurance Premium Finance and SBA/USDA Nonperforming loans and leases of 0.88% compared to 1.26% at September 30, 2023 Annualized a
Slide 9: Strong Balance Sheet Allows for Return of Capital to Shareholders
STRONG BALANCE SHEET ALLOWS FOR RETURN OF CAPITAL TO SHAREHOLDERS Liquidity Sources Share Repurchases ($ in millions) 232,588 $672 $875 $245 $3,807 $37 $899 $1,079 Q1 2024 1 Off Balance Sheet Deposits Unpledged Investment Securities Fed Discount Window Funds Cash and Cash Equivalents FHLB Borrowing
Slide 10: Maintaining FY 2024 Guidance at $6.20 to $6.70 Earnings per Diluted Share
MAINTAINING FY 2024 GUIDANCE1 AT $6.20 TO $6.70 EARNINGS PER DILUTED SHARE GUIDANCE INCLUDES THE FOLLOWING ASSUMPTIONS: 1 2 3 Revenue shift in favor of Net interest margin and Effective income tax rate interest income adjusted net interest in the range of 16-20% margin to expand vs. FY 2023 1 Inform
Slide 11: 2024 Outlook
2024 OUTLOOK Healthy pipeline in BaaS Maintaining focus on risk Continued balance sheet adjusted returns optimization Continue to invest in technology Delivering on strategy puts Tax season has kicked off with and human capital in pursuit of company in good position more independent tax delivering 2
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% 2.20% ROATE inclusive of one-time items 48.32% 1.88% 1.74% 1.55% 35.42% 1.45% 1.46% 33.95% 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: 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 L E V E R AG E HIG HE R -R ET URN AS SE TS D E P OSIT B AS E • Improved yield on earning assets to 6.5
Slide 17: Summary Financial Results
SUMMARY FINANCIAL RESULTS First Quar ter Ended December 31, 2023 INCOME STATEMENT For the quarter ended ($ in thousands, except per share data) 1Q23 4Q23 1Q24 Net interest income $84,057 $104,934 $110,036 Provision for credit losses 9,776 9,042 9,890 Total noninterest income 65,777 56,051 52,761 Tot
Slide 18: Balance Sheet Highlights
BALANCE SHEET HIGHLIGHTS First Quar ter Ended December 31, 2023 BALANCE SHEET Period ending ($ in thousands) 1Q23 4Q23 1Q24 Cash and cash equivalents $369,169 $375,580 $671,630 Investments 1,888,343 1,840,819 1,886,021 Loans held for sale 17,148 77,779 69,518 Loans and leases (HFI) 3,509,730 4,366,1
Slide 19: Deposit Breakdown
DEPOSIT BREAKDOWN Noninterest Bearing 94.4% DEPOSITS Deposits Interest Bearing Non- Time Deposits Time Deposits 5.5% Pathward’s BaaS business generates fee income and stable deposits. 0.1% Ability to attract and maintain these deposits provides a powerful competitive advantage. Noninterest-bea
Slide 20: Cost of Deposits
COST OF DEPOSITS 5.33% COST OF DEPOSITS During the 2024 fiscal first quarter, approximately 53% of the deposit balances were subject to 3.08% variable card processing expenses, derived from contractual agreements with certain BaaS partners tied to a rate index, typically the Effective 1.84% Fed Fu
Slide 21: Diversified Noninterest Income Streams
FYTD 2024 REVENUE BREAKDOWN DIVERSIFIED NONINTEREST Net interest INCOME STREAMS income 68% Noninterest income represents 32% of fiscal year- Noninterest income to-date total revenue. 32% Majority of noninterest income fees are generated by the Company’s BaaS business line. Other major items incl
Slide 22: Loan Portfolio
AVERAGE LOANS AND YIELDS ($B) 8.47% 8.31% 8.33% 8.33% 7.70% $4.5 $3.5 $4.0 $3.9 $4.3 LOAN PORTFOLIO Remain focused on smart growth in the Commercial Finance loan portfolio. Commercial Finance balances grew 24% from the first quarter of the prior year. 1Q23 2Q23 3Q23 4Q23 1Q24 Sequential quarter
Slide 23: 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 24: Loan Portfolio Interest Rate Sensitivity
TOTAL LOAN AND LEASE PORTFOLIO PRICING ATTRIBUTES1 LOAN PORTFOLIO INTEREST 43% 20% RATE SENSITIVITY As of December 31, 2023, $1.7B, or 37% of loans 37% and leases contained floating or variable interest rates. Of these, $0.9B are tied to Fed Funds or Fixed Rate > 1 Year Prime, with the remaining t
Slide 25: Interest Rate Risk Management
INTEREST RATE RISK MANAGEMENT DECEMBER 31, 2023 Earning Asset Pricing Attributes1 • Data presented on this page is reflective of the Company’s asset mix at a point in time and calculated for regulatory purposes. Future rate changes would impact a multitude of variables beyond the Company’s 53% Fixed
Slide 26: Asset Quality
ASSET QUALITY Nonperforming Assets (“NPAs”) Adjusted Net Charge-Offs (“NCOs”)1 ($ in millions) Excludes Tax Services NCOs and Related Seasonal Average Loans ($ in millions) 0.77% 0.68% 0.61% 0.68% 0.55% 0.53% 0.49% 0.50% 0.44% 0.46% 0.46% 0.47% $58.0 $6.0 0.46% 0.41% $45.0 $40.8 $42.4 0.25% $30.1 $4
Slide 27: Capital and Sources of Liquidity
CAPITAL AND SOURCES OF LIQUIDITY Regulatory Capital as of December 31, 2023 Tier 1 Leverage Ratio Pathward Pathward, At December 31, 2023¹ Financial, Inc. N.A. Tier 1 Leverage 7.96% 8.15% 8.37% 8.68% 8.40% 8.67% 8.11% 8.32% 7.96% 8.15% Common Equity Tier 1 11.43% 11.97% 7.53% 7.79% Tier 1 Capital 11
Slide 28: Appendix
iL APPENDIX
Slide 29: Non-GAAP Reconciliation: Adjusted Net Income and EPS
NON-GAAP RECONCILIATION Adjusted Net Income and Adjusted Earnings Per Share For the quarter ended For the year ended ($ in thousands, except per share data) 1Q23 2022 2023 Net income - GAAP 27,842 156,386 163,615 Less: Gain on sale of trademarks 10,000 50,000 10,000 Less: Loss on disposal of certain
Slide 30: Non-GAAP Reconciliation: Adjusted Annualized NCOs
NON-GAAP RECONCILIATION Adjusted Annualized NCOs and Adjusted Loans and Leases For the quarter ended ($ in thousands) Dec 31, 2022 Mar 31, 2023 Jun 30, 2023 Sep 30, 2023 Dec 31, 2023 Net charge-offs 3,217 4,975 4,218 41,280 5,486 Less: Tax services net charge-offs (recoveries) 1,033 (1,064) (266) 36
Slide 31: Non-GAAP Reconciliation: Efficiency Ratio
NON-GAAP RECONCILIATION Efficiency Ratio For the last twelve months ended ($ in thousands) Dec 31, 2022 Mar 31, 2023 Jun 30, 2023 Sep 30, 2023 Dec 31, 2023 Noninterest expense – GAAP 407,899 431,875 449,803 464,975 479,190 Net interest income 319,768 337,373 362,687 387,861 413,840 Noninterest incom
Slide 32: Non-GAAP Reconciliation: Net Interest Margin and Cost of Deposits
NON-GAAP RECONCILIATION Net Interest Margin and Cost of Deposits For the Quarter Ended ($ in thousands) Dec-20 Mar-21 Jun-21 Sep-21 Dec-21 Mar-22 Jun-22 Sep-22 Dec-22 Mar-23 Jun-23 Sep-23 Dec-23 Average interest earning assets 5,636,444 9,768,242 7,316,820 6,438,572 6,183,646 7,082,417 6,082,329 6,0
Slide 33: Overview of Loan Portfolio
OVERVIEW OF LOAN PORTFOLIO MRQ % of ($ in millions) Business Line Balance Sheet Category 1Q23 4Q23 1Q24 Yield Total Structured Finance Guaranteed portion of US govt SBA/USDA loans SBA/USDA 204.8 342.6 356.0 Unguaranteed portion of US govt SBA/USDA loans SBA/USDA 152.3 182.3 190.1 Renewable energy de
Slide 34: Commercial Finance Concentrations by Industry
COMMERCIAL FINANCE CONCENTRATIONS BY INDUSTRY1 $ in millions Manufacturing $648 Finance and Insurance $602 Utilities $596 Transportation and Warehousing $442 Other Services (except Public Administration) $358 Mining, Quarrying, and Oil and Gas Extraction $253 Wholesale Trade $248 Health Care and Soc