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Pathward Financial, Inc. Announces Results for 2024 Fiscal First Quarter

Pathward Financial, Inc. (“Pathward Financial” or the “Company”) (Nasdaq: CASH) reported net income of $27.7 million, or $1.06 per share, for the three months ended December 31, 2023, compared to net income of $27.8 million, or $0.98 per share, for the three months ended December 31, 2022. For the fiscal quarter ended December 31, 2022, the Company recognized adjusted net income of $23.2 million, or $0.81 per share, when adjusting for the gain on sale of names and trademarks, expenses related to rebranding efforts and separation expense. See non-GAAP reconciliation table below.

CEO Brett Pharr said, “We are very pleased with our results in the first quarter and have started off the year by laying the groundwork to deliver on our strategic goals for the year – building Banking as a Service ("BaaS") into a one stop shop for our partners and smart growth in Commercial Finance to help ensure appropriate yields for the financial environment. We delivered net interest income growth of 31% compared to the prior year’s quarter and continue to be in a strong liquidity position. Looking forward, we have a healthy BaaS pipeline and are aiming to add recurring fee revenue that will drive sustainable net income.”

Company Highlights

  • On January 16, 2024, the Company announced a multi-year extension with an a long-standing partner that allows for collaboration on product innovation and expanded product offerings for a range of programs in market and under development.

Financial Highlights for the 2024 Fiscal First Quarter

  • Total revenue for the first quarter was $162.8 million, an increase of $13.0 million, or 9%, compared to the same quarter in fiscal 2023, driven by an increase in net interest income, partially offset by a decrease in noninterest income.
  • Net interest margin ("NIM") increased 61 basis points to 6.23% for the first quarter from 5.62% during the same period last year, primarily driven by increased yields and an improved earning asset mix from the continued optimization of the portfolio. When including contractual, rate-related processing expense, NIM would have been 4.71% in the fiscal 2024 first quarter compared to 4.68% during the fiscal 2023 first quarter. See non-GAAP reconciliation table below.
  • Total gross loans and leases at December 31, 2023 increased $916.6 million to $4.43 billion compared to December 31, 2022 and increased $60.2 million when compared to September 30, 2023. The increase compared to the prior year quarter was primarily due to growth in the commercial, consumer, and warehouse finance loan portfolios. The primary driver for the sequential increase was growth in seasonal consumer finance loans related to a tax partnership.
  • During the 2024 fiscal first quarter, the Company repurchased 232,588 shares of common stock at an average share price of $47.25. An additional 342,300 shares of common stock were repurchased at an average price of $51.01 in January 2024 through January 19, 2024. As of January 19, 2024, there were 8,091,548 shares available for repurchase under the current common stock share repurchase programs.
  • The Company is reiterating fiscal year 2024 GAAP earnings per diluted share guidance of $6.20 to $6.70. See Outlook section below.

Net Interest Income

Net interest income for the first quarter of fiscal 2024 was $110.0 million, an increase of 31% from the same quarter in fiscal 2023. The increase was mainly attributable to increased yields, higher interest-earning asset balances and an improved earning asset mix.

The Company’s average interest-earning assets for the first quarter of fiscal 2024 increased by $1.10 billion to $7.03 billion compared to the same quarter in fiscal 2023, primarily due to growth in loans and leases and an increase in cash balances, partially offset by a decrease in total investment security balances. The first quarter average outstanding balance of loans and leases increased $1.01 billion compared to the same quarter of the prior fiscal year, primarily due to an increase in commercial, consumer, and warehouse finance portfolios.

Fiscal 2024 first quarter NIM increased to 6.23% from 5.62% in the first fiscal quarter of last year. When including contractual, rate-related processing expense, NIM would have been 4.71% in the fiscal 2024 first quarter compared to 4.68% during the fiscal 2023 first quarter. See non-GAAP reconciliation table below. The overall reported tax-equivalent yield (“TEY”) on average earning asset yields increased 87 basis points to 6.57% compared to the prior year quarter, driven by an increase in loan and lease, investment securities and cash yields. The yield on the loan and lease portfolio was 8.33% compared to 7.70% for the comparable period last year and the TEY on the securities portfolio was 3.15% compared to 2.76% over that same period.

The Company's cost of funds for all deposits and borrowings averaged 0.35% during the fiscal 2024 first quarter, as compared to 0.07% during the prior year quarter. The Company's overall cost of deposits was 0.21% in the fiscal first quarter of 2024, as compared to 0.01% during the prior year quarter. When including contractual, rate-related processing expense, the Company's overall cost of deposits was 1.84% in the fiscal 2024 first quarter, as compared to 1.00% during the prior year quarter. See non-GAAP reconciliation table below.

Noninterest Income

Fiscal 2024 first quarter noninterest income decreased 20% to $52.8 million, compared to $65.8 million for the same period of the prior year. The decrease was primarily attributable to the $10.0 million gain on sale of trademarks recognized during the prior year period, along with a decrease in card and deposit fees. The period-over-period decrease was partially offset by increases in gain on sale of other, other income, and rental income. The increase in gain on sale of other was driven by a $2.5 million gain related to an investment in the Pathward Venture Capital business.

The decrease in card and deposit fee income was primarily related to servicing fee income on off-balance sheet deposits, which totaled $5.1 million during the 2024 fiscal first quarter, as compared to $7.8 million for the fiscal quarter ended September 30, 2023 and $12.9 million for the same period of the prior year. The decrease in servicing fee income was due to a reduction in off-balance sheet deposits that the Company manages at other banks.

Noninterest Expense

Noninterest expense increased 14% to $119.3 million for the fiscal 2024 first quarter, from $105.1 million for the same quarter last year. The increase was primarily attributable to increases in card processing expense, compensation and benefits expense, other expense, operating lease equipment depreciation, and occupancy and equipment expense. The period-over-period increase was partially offset by a decrease in legal and consulting expense.

The card processing expense increase was due to rate-related agreements with BaaS partners. The amount of expense paid under those agreements is based on an agreed upon rate index that varies depending on the deposit levels, floor rates, market conditions, and other performance conditions. Generally, this rate index is based on a percentage of the Effective Federal Funds Rate ("EFFR") and reprices immediately upon a change in the EFFR. Approximately 53% of the deposit portfolio was subject to these rate-related processing expenses during the fiscal 2024 first quarter. For the fiscal quarter ended December 31, 2023, contractual, rate-related processing expenses were $26.8 million, as compared to $22.5 million for the fiscal quarter ended September 30, 2023, and $14.0 million for the fiscal quarter ended December 31, 2022.

Income Tax Expense

The Company recorded income tax expense of $5.7 million, representing an effective tax rate of 17.0%, for the fiscal 2024 first quarter, compared to $6.6 million, representing an effective tax rate of 18.8%, for the first quarter last fiscal year. The current quarter decrease in income tax expense compared to the prior year quarter was primarily due to an increase in investment tax credits recognized ratably.

The Company originated $12.2 million in renewable energy leases during the fiscal 2024 first quarter, resulting in $4.4 million in total net investment tax credits. During the first quarter of fiscal 2023, the Company originated $11.4 million in renewable energy leases resulting in $3.1 million in total net investment tax credits. Investment tax credits related to renewable energy leases are recognized ratably based on income throughout each fiscal year.

Outlook

The following forward-looking statements reflect the Company’s expectations as of the date of this release and are subject to substantial uncertainty. The Company's results may be materially affected by many factors, such as changes in economic conditions and customer demand, changes in interest rates, adverse developments in the financial services industry generally, inflation, competition, and other factors detailed below under “Forward-looking Statements.”

The Company is reiterating fiscal year 2024 GAAP earnings per diluted share guidance of $6.20 to $6.70. As part of this guidance, the Company is reiterating its annual effective tax rate in fiscal year 2024 to a range between 16% and 20%.

Investments, Loans and Leases

(Dollars in thousands)

December 31, 2023

 

September 30, 2023

 

June 30, 2023

 

March 31, 2023

 

December 31, 2022

Total investments

$

1,886,021

 

 

$

1,840,819

 

 

$

1,951,996

 

 

$

1,864,276

 

 

$

1,888,343

 

 

 

 

 

 

 

 

 

 

 

Loans held for sale

 

 

 

 

 

 

 

 

 

Term lending

 

2,500

 

 

 

 

 

 

3,000

 

 

 

 

 

 

 

Lease financing

 

778

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumer Finance

 

66,240

 

 

 

77,779

 

 

 

84,351

 

 

 

24,780

 

 

 

17,148

 

Total loans held for sale

 

69,518

 

 

 

77,779

 

 

 

87,351

 

 

 

24,780

 

 

 

17,148

 

 

 

 

 

 

 

 

 

 

 

Term lending

 

1,452,274

 

 

 

1,308,133

 

 

 

1,253,841

 

 

 

1,235,453

 

 

 

1,160,100

 

Asset-based lending

 

379,681

 

 

 

382,371

 

 

 

373,160

 

 

 

377,965

 

 

 

359,516

 

Factoring

 

335,953

 

 

 

358,344

 

 

 

351,133

 

 

 

338,884

 

 

 

338,594

 

Lease financing

 

188,889

 

 

 

183,392

 

 

 

201,996

 

 

 

170,645

 

 

 

189,868

 

Insurance premium finance

 

671,035

 

 

 

800,077

 

 

 

666,265

 

 

 

437,700

 

 

 

436,977

 

SBA/USDA

 

546,048

 

 

 

524,750

 

 

 

422,389

 

 

 

405,612

 

 

 

357,084

 

Other commercial finance

 

160,628

 

 

 

166,091

 

 

 

171,954

 

 

 

166,402

 

 

 

164,734

 

Commercial finance

 

3,734,508

 

 

 

3,723,158

 

 

 

3,440,738

 

 

 

3,132,661

 

 

 

3,006,873

 

Consumer finance

 

301,510

 

 

 

254,416

 

 

 

200,121

 

 

 

148,648

 

 

 

186,930

 

Tax services

 

33,435

 

 

 

5,192

 

 

 

47,194

 

 

 

61,553

 

 

 

30,364

 

Warehouse finance

 

349,911

 

 

 

376,915

 

 

 

380,458

 

 

 

377,036

 

 

 

279,899

 

Total loans and leases

 

4,419,364

 

 

 

4,359,681

 

 

 

4,068,511

 

 

 

3,719,898

 

 

 

3,504,066

 

Net deferred loan origination costs

 

6,917

 

 

 

6,435

 

 

 

4,388

 

 

 

5,718

 

 

 

5,664

 

Total gross loans and leases

 

4,426,281

 

 

 

4,366,116

 

 

 

4,072,899

 

 

 

3,725,616

 

 

 

3,509,730

 

Allowance for credit losses

 

(53,785

)

 

 

(49,705

)

 

 

(81,916

)

 

 

(84,304

)

 

 

(52,592

)

Total loans and leases, net

$

4,372,496

 

 

$

4,316,411

 

 

$

3,990,983

 

 

$

3,641,312

 

 

$

3,457,138

 

The Company's investment security balances at December 31, 2023 totaled $1.89 billion, as compared to $1.84 billion at September 30, 2023 and $1.89 billion at December 31, 2022.

Total gross loans and leases totaled $4.43 billion at December 31, 2023, as compared to $4.37 billion at September 30, 2023 and $3.51 billion at December 31, 2022. The primary drivers for the sequential increase were an increase in consumer finance loans, seasonal tax services loans, and commercial finance loans. This was partially offset by a decrease in warehouse finance loans. The year-over-year increase was due to increases in commercial finance, consumer finance, warehouse finance, and seasonal tax services loans.

Commercial finance loans, which comprised 85% of the Company's loan and lease portfolio, totaled $3.73 billion at December 31, 2023, reflecting an increase of $11.4 million from September 30, 2023 and an increase of $727.6 million, or 24%, from December 31, 2022. The sequential increase in commercial finance loans was primarily driven by a $144.1 million increase in the term lending portfolio and a $21.3 million increase in the SBA/USDA portfolio, partially offset by a $129.0 million decrease in the insurance premium finance portfolio. The increase in commercial finance loans when comparing the current period to the same period of the prior year was primarily driven by increases in the term lending, insurance premium finance, SBA/USDA, and asset-based lending portfolios, partially offset by reductions in the factoring and other commercial finance portfolios.

Asset Quality

The Company’s allowance for credit losses ("ACL") totaled $53.8 million at December 31, 2023, an increase compared to $49.7 million at September 30, 2023 and an increase compared to $52.6 million at December 31, 2022. The increase in the ACL at December 31, 2023, when compared to September 30, 2023, was primarily due to a $2.0 million increase in the allowance related to the consumer finance portfolio and a $1.6 million increase in the allowance related to the commercial finance portfolio.

The $1.2 million year-over-year increase in the ACL was primarily driven by a $1.5 million increase in the allowance related to the consumer finance portfolio and a $0.1 million increase in the allowance related to the warehouse finance portfolio, partially offset by a $0.3 million decrease in the allowance related to the commercial finance portfolio and a $0.1 million decrease in the allowance related to the seasonal tax services portfolio. The year-over-year increase in the allowance related to the consumer finance portfolio was primarily attributable to seasonal activity and loan growth in the portfolio.

The following table presents the Company's ACL as a percentage of its total loans and leases.

 

As of the Period Ended

(Unaudited)

December 31, 2023

September 30, 2023

June 30, 2023

March 31, 2023

December 31, 2022

Commercial finance

1.30

%

1.26

%

1.35

%

1.53

%

1.62

%

Consumer finance

1.45

%

0.92

%

0.92

%

1.99

%

1.54

%

Tax services

1.51

%

0.04

%

70.20

%

53.77

%

2.01

%

Warehouse finance

0.10

%

0.10

%

0.10

%

0.10

%

0.10

%

Total loans and leases

1.22

%

1.14

%

2.01

%

2.27

%

1.50

%

Total loans and leases excluding tax services

1.21

%

1.14

%

1.21

%

1.40

%

1.50

%

The Company's ACL as a percentage of total loans and leases increased to 1.22% at December 31, 2023 from 1.14% at September 30, 2023. The increase in the total loans and leases coverage ratio was primarily driven by an increase in the consumer finance portfolio due to seasonal activity and an increase in the seasonal tax services portfolio. The Company expects to continue to diligently monitor the ACL and adjust as necessary in future periods to maintain an appropriate and supportable level.

Activity in the allowance for credit losses for the periods presented was as follows.

(Unaudited)

Three Months Ended

(Dollars in thousands)

December 31, 2023

September 30, 2023

December 31, 2022

Beginning balance

$

49,705

 

$

81,916

 

$

45,947

 

Provision (reversal of) - tax services loans

 

1,356

 

 

2,945

 

 

1,637

 

Provision (reversal of) - all other loans and leases

 

8,210

 

 

6,124

 

 

8,226

 

Charge-offs - tax services loans

 

(1,145

)

 

(36,606

)

 

(1,731

)

Charge-offs - all other loans and leases

 

(5,725

)

 

(6,227

)

 

(2,708

)

Recoveries - tax services loans

 

294

 

 

531

 

 

698

 

Recoveries - all other loans and leases

 

1,090

 

 

1,022

 

 

523

 

Ending balance

$

53,785

 

$

49,705

 

$

52,592

 

The Company recognized a provision for credit losses of $9.9 million for the quarter ended December 31, 2023, compared to $9.8 million for the comparable period in the prior fiscal year. Net charge-offs were $5.5 million for the quarter ended December 31, 2023, compared to $3.2 million for the quarter ended December 31, 2022. Net charge-offs attributable to the commercial finance, tax services, and consumer finance portfolios for the current quarter were $4.6 million, $0.8 million, and $0.1 million, respectively. Net charge-offs attributable to the commercial finance, tax services, and consumer finance portfolios for the same quarter of the prior year were $2.0 million, $1.0 million, and $0.2 million, respectively.

The Company's past due loans and leases were as follows for the periods presented.

As of December 31, 2023

Accruing and Nonaccruing Loans and Leases

 

Nonperforming Loans and Leases

(Dollars in thousands)

30-59 Days Past Due

 

60-89 Days Past Due

 

> 89 Days Past Due

 

Total Past Due

 

Current

 

Total Loans and Leases Receivable

 

> 89 Days Past Due and Accruing

 

Nonaccrual Balance

 

Total

Loans held for sale

$

1,173

 

$

786

 

$

661

 

$

2,620

 

$

66,898

 

$

69,518

 

$

661

 

$

 

$

661

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial finance

 

33,406

 

 

8,341

 

 

20,854

 

 

62,601

 

 

3,671,907

 

 

3,734,508

 

 

7,977

 

 

28,099

 

 

36,076

Consumer finance

 

4,258

 

 

3,345

 

 

2,859

 

 

10,462

 

 

291,048

 

 

301,510

 

 

2,859

 

 

 

 

2,859

Tax services

 

 

 

 

 

 

 

 

 

33,435

 

 

33,435

 

 

 

 

 

 

Warehouse finance

 

 

 

 

 

 

 

 

 

349,911

 

 

349,911

 

 

 

 

 

 

Total loans and leases held for investment

 

37,664

 

 

11,686

 

 

23,713

 

 

73,063

 

 

4,346,301

 

 

4,419,364

 

 

10,836

 

 

28,099

 

 

38,935

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total loans and leases

$

38,837

 

$

12,472

 

$

24,374

 

$

75,683

 

$

4,413,199

 

$

4,488,882

 

$

11,497

 

$

28,099

 

$

39,596

As of September 30, 2023

Accruing and Nonaccruing Loans and Leases

 

Nonperforming Loans and Leases

(Dollars in thousands)

30-59 Days Past Due

 

60-89 Days Past Due

 

> 89 Days Past Due

 

Total Past Due

 

Current

 

Total Loans and Leases Receivable

 

> 89 Days Past Due and Accruing

 

Nonaccrual Balance

 

Total

Loans held for sale

$

626

 

$

549

 

$

306

 

$

1,481

 

$

76,298

 

$

77,779

 

$

306

 

$

 

$

306

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial finance

 

23,434

 

 

9,143

 

 

20,352

 

 

52,929

 

 

3,670,229

 

 

3,723,158

 

 

11,242

 

 

37,372

 

 

48,614

Consumer finance

 

2,992

 

 

2,425

 

 

2,210

 

 

7,627

 

 

246,789

 

 

254,416

 

 

2,210

 

 

 

 

2,210

Tax services

 

 

 

 

 

5,082

 

 

5,082

 

 

110

 

 

5,192

 

 

5,082

 

 

 

 

5,082

Warehouse finance

 

 

 

 

 

 

 

 

 

376,915

 

 

376,915

 

 

 

 

 

 

Total loans and leases held for investment

 

26,426

 

 

11,568

 

 

27,644

 

 

65,638

 

 

4,294,043

 

 

4,359,681

 

 

18,534

 

 

37,372

 

 

55,906

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total loans and leases

$

27,052

 

$

12,117

 

$

27,950

 

$

67,119

 

$

4,370,341

 

$

4,437,460

 

$

18,840

 

$

37,372

 

$

56,212

The Company's nonperforming assets at December 31, 2023 were $42.4 million, representing 0.53% of total assets, compared to $58.0 million, or 0.77% of total assets at September 30, 2023 and $45.0 million, or 0.68% of total assets at December 31, 2022.

The decrease in the nonperforming assets as a percentage of total assets at December 31, 2023 compared to September 30, 2023, was primarily driven by a workout of a previously announced relationship within the commercial finance portfolio. When comparing the current period to the same period of the prior year, the decrease in nonperforming assets was primarily due to a decrease in nonperforming loans in the commercial finance portfolio, partially offset by a slight increase in nonperforming loans in the consumer finance portfolio.

The Company's nonperforming loans and leases at December 31, 2023, were $39.6 million, representing 0.88% of total gross loans and leases, compared to $56.2 million, or 1.26% of total gross loans and leases at September 30, 2023 and $40.9 million, or 1.16% of total gross loans and leases at December 31, 2022.

The Company has various portfolios of consumer lending and tax services loans that present unique risks that are statistically managed. Due to the unique risks associated with these portfolios, the Company monitors other credit quality indicators in their evaluation of the appropriateness of the allowance for credit losses on these portfolios, and as such, these loans are not included in the asset classification table below. The Company's loans and leases held for investment by asset classification were as follows for the periods presented.

 

Asset Classification

(Dollars in thousands)

Pass

Watch

Special Mention

Substandard

Doubtful

Total

As of December 31, 2023

 

 

 

 

 

 

Commercial finance

$

2,895,451

$

544,287

$

86,942

$

197,682

$

10,146

$

3,734,508

Warehouse finance

 

349,911

 

 

 

 

 

349,911

Total loans and leases

$

3,245,362

$

544,287

$

86,942

$

197,682

$

10,146

$

4,084,419

 

 

Asset Classification

(Dollars in thousands)

Pass

Watch

Special Mention

Substandard

Doubtful

Total

As of September 30, 2023

 

Commercial finance

$

2,845,587

$

559,112

$

102,111

$

208,193

$

8,155

$

3,723,158

Warehouse finance

 

376,915

 

 

 

 

 

376,915

Total loans and leases

$

3,222,502

$

559,112

$

102,111

$

208,193

$

8,155

$

4,100,073

Deposits, Borrowings and Other Liabilities

Total average deposits for the fiscal 2024 first quarter increased by $921.5 million to $6.56 billion compared to the same period in fiscal 2023. The increase in average deposits was primarily due to increases in noninterest bearing deposits, wholesale deposits, and money market deposits partially offset by a decrease in savings deposits and time deposits.

The average balance of total deposits and interest-bearing liabilities was $6.71 billion for the three-month period ended December 31, 2023, compared to $5.70 billion for the same period in the prior fiscal year, representing an increase of 18%.

Total end-of-period deposits increased 20% to $6.94 billion at December 31, 2023, compared to $5.79 billion at December 31, 2022. The increase in end-of-period deposits was primarily driven by increases in noninterest-bearing deposits of $969.7 million, wholesale deposits of $136.0 million, and money market deposits of $51.4 million, partially offset by decreases in savings deposits of $8.2 million and time deposits of $2.0 million.

As of December 31, 2023, the Company had $837.6 million in deposits related to government stimulus programs. Of the total amount of government stimulus program deposits, $334.5 million are on activated cards while $503.1 million are on inactivated cards. During the remainder of fiscal year 2024, these deposit balances are expected to decline by approximately $310 million as the Company actively returns unclaimed balances to the U.S. Treasury.

As of December 31, 2023, the Company managed $1.1 billion of customer deposits at other banks in its capacity as custodian. These deposits provide the Company with excess deposits that can earn servicing fee income, typically reflective of the EFFR.

Regulatory Capital

The Company and its subsidiary Pathward®, N.A. (the "Bank") remained above the federal regulatory minimum capital requirements at December 31, 2023, and continued to be classified as well-capitalized, and in good standing with the regulatory agencies. Regulatory capital ratios of the Company and the Bank are stated in the table below. Regulatory capital is not affected by the unrealized loss on accumulated other comprehensive income (“AOCI”). The securities portfolio is primarily comprised of amortizing securities that should provide consistent cash flow. The Company does not intend to sell these securities, or recognize the unrealized losses on its income statement, to fund future loan growth.

The tables below include certain non-GAAP financial measures that are used by investors, analysts and bank regulatory agencies to assess the capital position of financial services companies. Management reviews these measures along with other measures of capital as part of its financial analysis.

As of the Periods Indicated

December 31, 2023(1)

 

September 30, 2023

 

June 30,

2023

 

March 31,

2023

 

December 31,

2022

Company

 

 

 

 

 

 

 

 

 

Tier 1 leverage capital ratio

7.96

%

 

8.11

%

 

8.40

%

 

7.53

%

 

8.37

%

Common equity Tier 1 capital ratio

11.43

%

 

11.25

%

 

11.52

%

 

12.05

%

 

12.31

%

Tier 1 capital ratio

11.69

%

 

11.50

%

 

11.79

%

 

12.35

%

 

12.63

%

Total capital ratio

13.12

%

 

12.84

%

 

13.45

%

 

14.06

%

 

14.29

%

Bank

 

 

 

 

 

 

 

 

 

Tier 1 leverage ratio

8.15

%

 

8.32

%

 

8.67

%

 

7.79

%

 

8.68

%

Common equity Tier 1 capital ratio

11.97

%

 

11.81

%

 

12.17

%

 

12.77

%

 

13.09

%

Tier 1 capital ratio

11.97

%

 

11.81

%

 

12.17

%

 

12.77

%

 

13.09

%

Total capital ratio

13.01

%

 

12.76

%

 

13.42

%

 

14.03

%

 

14.29

%

(1) December 31, 2023 percentages are preliminary pending completion and filing of the Company's regulatory reports. Regulatory capital ratios for periods presented reflect the Company's election of the five-year CECL transition for regulatory capital purposes.

The following table provides the non-GAAP financial measures used to compute certain of the ratios included in the table above, as well as a reconciliation of such non-GAAP financial measures to the most directly comparable financial measure in accordance with GAAP:

 

Standardized Approach(1)

As of the Periods Indicated

 

(Dollars in thousands)

December 31,

2023

 

September 30,

2023

 

June 30,

2023

 

March 31,

2023

 

December 31,

2022

Total stockholders' equity

$

729,282

 

 

$

650,625

 

 

$

677,721

 

 

$

673,244

 

 

$

659,133

 

Adjustments:

 

 

 

 

 

 

 

 

 

LESS: Goodwill, net of associated deferred tax liabilities

 

297,283

 

 

 

297,679

 

 

 

298,092

 

 

 

298,390

 

 

 

298,788

 

LESS: Certain other intangible assets

 

20,093

 

 

 

21,228

 

 

 

22,372

 

 

 

23,553

 

 

 

25,053

 

LESS: Net deferred tax assets from operating loss and tax credit carry-forwards

 

20,253

 

 

 

19,679

 

 

 

12,157

 

 

 

13,219

 

 

 

16,641

 

LESS: Net unrealized (losses) on available for sale securities

 

(187,901

)

 

 

(254,294

)

 

 

(207,358

)

 

 

(186,796

)

 

 

(200,597

)

LESS: Noncontrolling interest

 

(510

)

 

 

(1,005

)

 

 

(631

)

 

 

(551

)

 

 

(207

)

ADD: Adoption of Accounting Standards Update 2016-13

 

1,345

 

 

 

2,017

 

 

 

2,017

 

 

 

2,017

 

 

 

2,017

 

Common Equity Tier 1(1)

 

581,409

 

 

 

569,355

 

 

 

555,106

 

 

 

527,446

 

 

 

521,472

 

Long-term borrowings and other instruments qualifying as Tier 1

 

13,661

 

 

 

13,661

 

 

 

13,661

 

 

 

13,661

 

 

 

13,661

 

Tier 1 minority interest not included in common equity Tier 1 capital

 

(410

)

 

 

(826

)

 

 

(454

)

 

 

(404

)

 

 

(138

)

Total Tier 1 capital

 

594,660

 

 

 

582,190

 

 

 

568,313

 

 

 

540,703

 

 

 

534,995

 

Allowance for credit losses

 

53,037

 

 

 

47,960

 

 

 

60,489

 

 

 

55,058

 

 

 

50,853

 

Subordinated debentures, net of issuance costs

 

19,617

 

 

 

19,591

 

 

 

19,566

 

 

 

19,540

 

 

 

19,521

 

Total capital

$

667,314

 

 

$

649,741

 

 

$

648,368

 

 

$

615,301

 

 

$

650,369

 

(1) Capital ratios were determined using the Basel III capital rules that became effective on January 1, 2015. Basel III revised the definition of capital, increased minimum capital ratios, and introduced a minimum CET1 ratio; those changes were fully phased in through the end of calendar year 2021.

The following table provides a reconciliation of tangible common equity and tangible common equity excluding AOCI, each of which is used in calculating tangible book value data, to Total Stockholders' Equity. Each of tangible common equity and tangible common equity excluding AOCI is a non-GAAP financial measure that is commonly used within the banking industry.

As of the Periods Indicated

 

(Dollars in thousands)

December 31,

2023

 

September 30,

2023

 

June 30,

2023

 

March 31,

2023

 

December 31,

2022

Total stockholders' equity

$

729,282

 

 

$

650,625

 

 

$

677,721

 

 

$

673,244

 

 

$

659,133

 

Less: Goodwill

 

309,505

 

 

 

309,505

 

 

 

309,505

 

 

 

309,505

 

 

 

309,505

 

Less: Intangible assets

 

19,736

 

 

 

20,720

 

 

 

21,830

 

 

 

22,998

 

 

 

24,433

 

Tangible common equity

 

400,041

 

 

 

320,400

 

 

 

346,386

 

 

 

340,741

 

 

 

325,195

 

Less: AOCI

 

(188,433

)

 

 

(255,443

)

 

 

(207,896

)

 

 

(187,829

)

 

 

(201,690

)

Tangible common equity excluding AOCI

$

588,474

 

 

$

575,843

 

 

$

554,282

 

 

$

528,570

 

 

$

526,885

 

Conference Call

The Company will host a conference call and earnings webcast with a corresponding presentation at 4:00 p.m. Central Time (5:00 p.m. Eastern Time) on Wednesday, January 24, 2024. The live webcast of the call can be accessed from Pathward’s Investor Relations website at www.pathwardfinancial.com. Telephone participants may access the conference call by dialing 1-833-470-1428 approximately 10 minutes prior to start time and reference access code 388353.

The Quarterly Investor Update slide presentation prepared for use in connection with the Company's conference call and earnings webcast is available under the Presentations link in the Investor Relations - Events & Presentations section of the Company's website at www.pathwardfinancial.com. A webcast replay will also be archived at www.pathwardfinancial.com for one year.

Upcoming Investor Events

  • KBW Winter Financial Services Conference, Feb. 14-16, 2024 | Boca Raton, FL
  • Piper Sandler 2024 Western Financial Services Conference, Feb. 28-Mar. 1, 2024 | Las Vegas, NV
  • Raymond James 2024 Institutional Investors Conference, Mar. 3-6, 2024 | Orlando, FL

About Pathward Financial, Inc.

Pathward Financial, Inc. (Nasdaq: CASH) is a U.S.-based financial holding company driven by its purpose to power financial inclusion for all. Through our subsidiary, Pathward®, N.A., we strive to increase financial availability, choice, and opportunity across our Banking as a Service and Commercial Finance business lines. These strategic business lines provide end-to-end support to individuals and businesses. Learn more at www.pathwardfinancial.com.

Forward-Looking Statements

The Company and the Bank may from time to time make written or oral “forward-looking statements,” including statements contained in this press release, the Company’s filings with the Securities and Exchange Commission ("SEC"), the Company’s reports to stockholders, and in other communications by the Company and the Bank, 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 words such as “may,” “hope,” “will,” “should,” “expect,” “plan,” “anticipate,” “intend,” “believe,” “estimate,” “predict,” “potential,” “continue,” “could,” “future,” "target," or the negative of those terms, or other words of similar meaning or similar expressions. You should carefully read statements that contain these words because they discuss our future expectations or state other “forward-looking” information. These forward-looking statements are based on information currently available to us and assumptions about future events, and include statements with respect to the Company’s beliefs, expectations, estimates, and intentions, which are subject to significant risks and uncertainties, and are subject to change based on various factors, some of which are beyond the Company’s control. Such risks, uncertainties and other factors may cause our actual growth, results of operations, financial condition, cash flows, performance and business prospects and opportunities to differ materially from those expressed in, or implied by, these forward-looking statements. Such statements address, among others, the following subjects: future operating results including our earnings per diluted share guidance, annual effective tax rate and related performance expectations; progress on key strategic initiatives; expected results of our partnerships; our goals regarding the addition of recurring revenue and related expected performance impacts; expected nonperforming loan resolutions and net charge off rates; the performance of our securities portfolio; the impact of card balances related to government stimulus programs; customer retention; loan and other product demand; new products and services; credit quality; the level of net charge-offs and the adequacy of the allowance for credit losses; and technology. The following factors, among others, could cause the Company's financial performance and results of operations to differ materially from the expectations, estimates, and intentions expressed in such forward-looking statements: maintaining our executive management team; expected growth opportunities may not be realized or may take longer to realize than expected; the potential adverse effects of unusual and infrequently occurring events, including the impact on financial markets from geopolitical conflicts such as the military conflicts in Ukraine and the Middle East, weather-related disasters, or public health events, such as the COVID-19 pandemic, and any governmental or societal responses thereto; our ability to achieve brand recognition for the Bank equal to or greater than we enjoyed for MetaBank; our ability to successfully implement measures designed to reduce expenses and increase efficiencies; changes in trade, monetary, and fiscal policies and laws, including actual changes in interest rates and the Fed Funds rate, and their related impacts on macroeconomic conditions, customer behavior, funding costs and loan and securities portfolios; changes in tax laws; the strength of the United States' economy and the local economies in which the Company operates; adverse developments in the financial services industry generally such as bank failures, responsive measures to mitigate and manage such developments, related supervisory and regulatory actions and costs, and related impacts on customer behavior; inflation, market, and monetary fluctuations; our liquidity and capital positions, including the sufficiency of our liquidity; the timely and efficient development of new products and services offered by the Company or its strategic partners, as well as risks (including reputational and litigation) attendant thereto, and the perceived overall value and acceptance of these products and services by users; the Bank's ability to maintain its Durbin Amendment exemption; the risks of dealing with or utilizing third parties, including, in connection with the Company’s prepaid card and tax refund advance businesses, the risk of reduced volume of refund advance loans as a result of reduced customer demand for or usage of the Bank's strategic partners’ refund advance products; our relationship with, and any actions which may be initiated by, our regulators; changes in financial services laws and regulations, including laws and regulations relating to the tax refund industry and the insurance premium finance industry; technological changes, including, but not limited to, the protection of our electronic systems and information; the impact of acquisitions and divestitures; litigation risk; the growth of the Company’s business, as well as expenses related thereto; continued maintenance by the Bank of its status as a well-capitalized institution; changes in consumer spending and saving habits; losses from fraudulent or illegal activity; technological risks and developments and cyber threats, attacks, or events; and the success of the Company at maintaining its high quality asset level and managing and collecting assets of borrowers in default should problem assets increase.

The foregoing list of factors is not exclusive. We caution you not to place undue reliance on these forward-looking statements. The forward-looking statements included in this press release speak only as of the date hereof. Additional discussions of factors affecting the Company’s business and prospects are reflected under the caption “Risk Factors” and in other sections of the Company’s Annual Report on Form 10-K for the Company’s fiscal year ended September 30, 2023, and in other filings made with the SEC. The Company expressly disclaims any intent or obligation to update, revise or clarify any forward-looking statements, whether written or oral, that may be made from time to time by or on behalf of the Company or its subsidiaries, whether as a result of new information, changed circumstances, or future events or for any other reason.

Condensed Consolidated Statements of Financial Condition (Unaudited)

 

(Dollars in Thousands, Except Share Data)

December 31, 2023

 

September 30, 2023

 

June 30, 2023

 

March 31, 2023

 

December 31, 2022

ASSETS

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

$

671,630

 

 

$

375,580

 

 

$

515,271

 

 

$

432,598

 

 

$

369,169

 

Securities available for sale, at fair value

 

1,850,581

 

 

 

1,804,228

 

 

 

1,914,271

 

 

 

1,825,563

 

 

 

1,847,778

 

Securities held to maturity, at amortized cost

 

35,440

 

 

 

36,591

 

 

 

37,725

 

 

 

38,713

 

 

 

40,565

 

Federal Reserve Bank and Federal Home Loan Bank Stock, at cost

 

23,694

 

 

 

28,210

 

 

 

30,890

 

 

 

29,387

 

 

 

28,812

 

Loans held for sale

 

69,518

 

 

 

77,779

 

 

 

87,351

 

 

 

24,780

 

 

 

17,148

 

Loans and leases

 

4,426,281

 

 

 

4,366,116

 

 

 

4,072,899

 

 

 

3,725,616

 

 

 

3,509,730

 

Allowance for credit losses

 

(53,785

)

 

 

(49,705

)

 

 

(81,916

)

 

 

(84,304

)

 

 

(52,592

)

Accrued interest receivable

 

27,080

 

 

 

23,282

 

 

 

22,332

 

 

 

22,434

 

 

 

20,170

 

Premises, furniture, and equipment, net

 

38,270

 

 

 

39,160

 

 

 

38,601

 

 

 

39,735

 

 

 

41,029

 

Rental equipment, net

 

228,916

 

 

 

211,750

 

 

 

224,212

 

 

 

210,844

 

 

 

231,129

 

Goodwill and intangible assets

 

329,241

 

 

 

330,225

 

 

 

331,335

 

 

 

332,503

 

 

 

333,938

 

Other assets

 

280,571

 

 

 

292,327

 

 

 

265,654

 

 

 

270,387

 

 

 

272,349

 

Total assets

$

7,927,437

 

 

$

7,535,543

 

 

$

7,458,625

 

 

$

6,868,256

 

 

$

6,659,225

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

 

 

 

 

Deposits

 

6,936,055

 

 

 

6,589,182

 

 

 

6,306,976

 

 

 

5,902,696

 

 

 

5,789,132

 

Short-term borrowings

 

 

 

 

13,000

 

 

 

230,000

 

 

 

43,000

 

 

 

 

Long-term borrowings

 

33,614

 

 

 

33,873

 

 

 

34,178

 

 

 

34,543

 

 

 

34,977

 

Accrued expenses and other liabilities

 

228,486

 

 

 

248,863

 

 

 

209,750

 

 

 

214,773

 

 

 

175,983

 

Total liabilities

 

7,198,155

 

 

 

6,884,918

 

 

 

6,780,904

 

 

 

6,195,012

 

 

 

6,000,092

 

 

 

 

 

 

 

 

 

 

 

STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

Preferred stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock, $.01 par value

 

260

 

 

 

262

 

 

 

266

 

 

 

271

 

 

 

282

 

Common stock, Nonvoting, $.01 par value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional paid-in capital

 

629,737

 

 

 

628,500

 

 

 

625,825

 

 

 

623,250

 

 

 

620,681

 

Retained earnings

 

293,463

 

 

 

278,655

 

 

 

267,100

 

 

 

245,046

 

 

 

246,891

 

Accumulated other comprehensive loss

 

(188,433

)

 

 

(255,443

)

 

 

(207,896

)

 

 

(187,829

)

 

 

(201,690

)

Treasury stock, at cost

 

(5,235

)

 

 

(344

)

 

 

(6,943

)

 

 

(6,943

)

 

 

(6,824

)

Total equity attributable to parent

 

729,792

 

 

 

651,630

 

 

 

678,352

 

 

 

673,795

 

 

 

659,340

 

Noncontrolling interest

 

(510

)

 

 

(1,005

)

 

 

(631

)

 

 

(551

)

 

 

(207

)

Total stockholders’ equity

 

729,282

 

 

 

650,625

 

 

 

677,721

 

 

 

673,244

 

 

 

659,133

 

Total liabilities and stockholders’ equity

$

7,927,437

 

 

$

7,535,543

 

 

$

7,458,625

 

 

$

6,868,256

 

 

$

6,659,225

 

Condensed Consolidated Statements of Operations (Unaudited)

 

 

Three Months Ended

(Dollars in Thousands, Except Share and Per Share Data)

December 31, 2023

 

September 30, 2023

 

December 31, 2022

Interest and dividend income:

 

 

 

 

 

Loans and leases, including fees

$

94,963

 

$

90,085

 

 

$

68,396

Mortgage-backed securities

 

10,049

 

 

10,225

 

 

 

10,412

Other investments

 

10,886

 

 

9,332

 

 

 

6,252

 

 

115,898

 

 

109,642

 

 

 

85,060

Interest expense:

 

 

 

 

 

Deposits

 

3,526

 

 

1,954

 

 

 

142

FHLB advances and other borrowings

 

2,336

 

 

2,754

 

 

 

861

 

 

5,862

 

 

4,708

 

 

 

1,003

 

 

 

 

 

 

Net interest income

 

110,036

 

 

104,934

 

 

 

84,057

 

 

 

 

 

 

Provision for credit loss

 

9,890

 

 

9,042

 

 

 

9,776

 

 

 

 

 

 

Net interest income after provision for credit loss

 

100,146

 

 

95,892

 

 

 

74,281

 

 

 

 

 

 

Noninterest income:

 

 

 

 

 

Refund transfer product fees

 

422

 

 

308

 

 

 

677

Refund advance fee income

 

111

 

 

(252

)

 

 

617

Card and deposit fees

 

30,750

 

 

31,233

 

 

 

37,718

Rental income

 

13,459

 

 

14,562

 

 

 

12,708

Gain on sale of trademarks

 

 

 

 

 

 

10,000

Gain on sale of other

 

2,840

 

 

2,006

 

 

 

502

Other income

 

5,179

 

 

8,194

 

 

 

3,555

Total noninterest income

 

52,761

 

 

56,051

 

 

 

65,777

 

 

 

 

 

 

Noninterest expense:

 

 

 

 

 

Compensation and benefits

 

46,652

 

 

46,352

 

 

 

43,017

Refund transfer product expense

 

192

 

 

28

 

 

 

105

Refund advance expense

 

30

 

 

(6

)

 

 

27

Card processing

 

34,584

 

 

29,549

 

 

 

22,683

Occupancy and equipment expense

 

8,848

 

 

9,274

 

 

 

8,312

Operating lease equipment depreciation

 

10,423

 

 

10,846

 

 

 

9,628

Legal and consulting

 

4,892

 

 

7,633

 

 

 

9,459

Intangible amortization

 

984

 

 

1,110

 

 

 

1,258

Impairment expense

 

 

 

 

 

 

24

Other expense

 

12,669

 

 

13,416

 

 

 

10,546

Total noninterest expense

 

119,274

 

 

118,202

 

 

 

105,059

 

 

 

 

 

 

Income before income tax expense

 

33,633

 

 

33,741

 

 

 

34,999

 

 

 

 

 

 

Income tax expense (benefit)

 

5,719

 

 

(2,672

)

 

 

6,577

 

 

 

 

 

 

Net income before noncontrolling interest

 

27,914

 

 

36,413

 

 

 

28,422

Net income attributable to noncontrolling interest

 

257

 

 

507

 

 

 

580

Net income attributable to parent

$

27,657

 

$

35,906

 

 

$

27,842

 

 

 

 

 

 

Less: Allocation of Earnings to participating securities(1)

 

220

 

 

531

 

 

 

402

Net income attributable to common shareholders(1)

 

27,437

 

 

35,374

 

 

 

27,440

Earnings per common share:

 

 

 

 

 

Basic

$

1.06

 

$

1.37

 

 

$

0.98

Diluted

$

1.06

 

$

1.36

 

 

$

0.98

Shares used in computing earnings per common share:

 

 

 

 

 

Basic

 

25,776,845

 

 

25,883,807

 

 

 

28,024,541

Diluted

 

25,801,538

 

 

25,991,449

 

 

 

28,086,823

(1) Amounts presented are used in the two-class earnings per common share calculation.

Average Balances, Interest Rates and Yields

The following table presents, for the periods indicated, the total dollar amount of interest income from average interest-earning assets and the resulting yields, as well as the interest expense on average interest-bearing liabilities, expressed both in dollars and in rates. Only the yield/rate reflects tax-equivalent adjustments. Nonaccruing loans and leases have been included in the table as loans carrying a zero yield.

Three Months Ended December 31,

2023

 

2022

(Dollars in thousands)

Average

Outstanding

Balance

 

Interest

Earned /

Paid

 

Yield /

Rate(1)

 

Average

Outstanding

Balance

 

Interest

Earned /

Paid

 

Yield /

Rate(1)

Interest-earning assets:

 

 

 

 

 

 

 

 

 

 

 

Cash and fed funds sold

$

337,975

 

$

4,103

 

 

4.83

%

 

$

226,004

 

$

1,716

 

3.01

%

Mortgage-backed securities

 

1,486,854

 

 

10,049

 

 

2.69

%

 

 

1,571,022

 

 

10,412

 

2.63

%

Tax exempt investment securities

 

136,470

 

 

930

 

 

3.43

%

 

 

154,754

 

 

980

 

3.18

%

Asset-backed securities

 

250,172

 

 

3,565

 

 

5.67

%

 

 

155,988

 

 

1,149

 

2.92

%

Other investment securities

 

284,625

 

 

2,288

 

 

3.20

%

 

 

301,738

 

 

2,407

 

3.17

%

Total investments

 

2,158,121

 

 

16,832

 

 

3.15

%

 

 

2,183,503

 

 

14,948

 

2.76

%

Commercial finance

 

3,762,910

 

 

75,345

 

 

7.97

%

 

 

3,010,868

 

 

58,100

 

7.66

%

Consumer finance

 

362,935

 

 

10,585

 

 

11.60

%

 

 

198,372

 

 

4,313

 

8.63

%

Tax services

 

28,050

 

 

(11

)

 

(0.16

) %

 

 

25,231

 

 

57

 

0.90

%

Warehouse finance

 

381,931

 

 

9,044

 

 

9.42

%

 

 

290,454

 

 

5,926

 

8.09

%

Total loans and leases

 

4,535,826

 

 

94,963

 

 

8.33

%

 

 

3,524,924

 

 

68,396

 

7.70

%

Total interest-earning assets

$

7,031,922

 

$

115,898

 

 

6.57

%

 

$

5,934,431

 

$

85,059

 

5.70

%

Noninterest-earning assets

 

543,418

 

 

 

 

 

 

589,580

 

 

 

 

Total assets

$

7,575,340

 

 

 

 

 

$

6,524,011

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing liabilities:

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing checking

$

426

 

$

 

 

0.34

%

 

$

447

 

$

 

0.33

%

Savings

 

54,783

 

 

6

 

 

0.04

%

 

 

62,607

 

 

6

 

0.04

%

Money markets

 

183,255

 

 

576

 

 

1.25

%

 

 

138,872

 

 

78

 

0.22

%

Time deposits

 

5,517

 

 

4

 

 

0.25

%

 

 

7,199

 

 

2

 

0.11

%

Wholesale deposits

 

211,281

 

 

2,940

 

 

5.54

%

 

 

5,712

 

 

56

 

3.89

%

Total interest-bearing deposits

 

455,262

 

 

3,526

 

 

3.08

%

 

 

214,837

 

 

142

 

0.26

%

Overnight fed funds purchased

 

117,153

 

 

1,656

 

 

5.62

%

 

 

24,783

 

 

244

 

3.91

%

Subordinated debentures

 

19,600

 

 

357

 

 

7.24

%

 

 

19,593

 

 

357

 

7.22

%

Other borrowings

 

14,178

 

 

323

 

 

9.07

%

 

 

15,817

 

 

260

 

6.53

%

Total borrowings

 

150,931

 

 

2,336

 

 

6.16

%

 

 

60,193

 

 

861

 

5.67

%

Total interest-bearing liabilities

 

606,193

 

 

5,862

 

 

3.85

%

 

 

275,030

 

 

1,003

 

1.45

%

Noninterest-bearing deposits

 

6,102,928

 

 

 

 

%

 

 

5,421,821

 

 

 

%

Total deposits and interest-bearing liabilities

$

6,709,121

 

$

5,862

 

 

0.35

%

 

$

5,696,851

 

$

1,003

 

0.07

%

Other noninterest-bearing liabilities

 

210,468

 

 

 

 

 

 

178,789

 

 

 

 

Total liabilities

 

6,919,589

 

 

 

 

 

 

5,875,640

 

 

 

 

Shareholders' equity

 

655,751

 

 

 

 

 

 

648,371

 

 

 

 

Total liabilities and shareholders' equity

$

7,575,340

 

 

 

 

 

$

6,524,011

 

 

 

 

Net interest income and net interest rate spread including noninterest-bearing deposits

 

 

$

110,036

 

 

6.22

%

 

 

 

$

84,057

 

5.63

%

 

 

 

 

 

 

 

 

 

 

 

 

Net interest margin

 

 

 

 

6.23

%

 

 

 

 

 

5.62

%

Tax-equivalent effect

 

 

 

 

0.01

%

 

 

 

 

 

0.02

%

Net interest margin, tax-equivalent(2)

 

 

 

 

6.24

%

 

 

 

 

 

5.64

%

(1) Tax rate used to arrive at the TEY for the three months ended December 31, 2023 and 2022 was 21%.

(2) Net interest margin expressed on a fully-taxable-equivalent basis ("net interest margin, tax-equivalent") is a non-GAAP financial measure. The tax-equivalent adjustment to net interest income recognizes the estimated income tax savings when comparing taxable and tax-exempt assets and adjusting for federal and state exemption of interest income. The Company believes that it is a standard practice in the banking industry to present net interest margin expressed on a fully taxable equivalent basis and, accordingly, believes the presentation of this non-GAAP financial measure may be useful for peer comparison purposes.

Selected Financial Information

 

As of and For the Three Months Ended

December 31,

2023

 

September 30,

2023

 

June 30,

2023

 

March 31,

2023

 

December 31,

2022

Equity to total assets

 

9.20

%

 

 

8.63

%

 

 

9.09

%

 

 

9.80

%

 

 

9.90

%

Book value per common share outstanding

$

28.06

 

 

$

24.85

 

 

$

25.54

 

 

$

24.88

 

 

$

23.36

 

Tangible book value per common share outstanding

$

15.39

 

 

$

12.24

 

 

$

13.05

 

 

$

12.59

 

 

$

11.53

 

Tangible book value per common share outstanding excluding AOCI

$

22.64

 

 

$

21.99

 

 

$

20.89

 

 

$

19.54

 

 

$

18.68

 

Common shares outstanding

 

25,988,230

 

 

 

26,183,583

 

 

 

26,539,272

 

 

 

27,055,727

 

 

 

28,211,239

 

Nonperforming assets to total assets

 

0.53

%

 

 

0.77

%

 

 

0.55

%

 

 

0.44

%

 

 

0.68

%

Nonperforming loans and leases to total loans and leases

 

0.88

%

 

 

1.26

%

 

 

0.93

%

 

 

0.76

%

 

 

1.16

%

Net interest margin

 

6.23

%

 

 

6.19

%

 

 

6.18

%

 

 

6.12

%

 

 

5.62

%

Net interest margin, tax-equivalent

 

6.24

%

 

 

6.21

%

 

 

6.20

%

 

 

6.14

%

 

 

5.64

%

Return on average assets

 

1.46

%

 

 

1.97

%

 

 

2.61

%

 

 

2.99

%

 

 

1.71

%

Return on average equity

 

16.87

%

 

 

21.12

%

 

 

26.26

%

 

 

32.68

%

 

 

17.18

%

Full-time equivalent employees

 

1,218

 

 

 

1,193

 

 

 

1,186

 

 

 

1,164

 

 

 

1,150

 

Non-GAAP Reconciliations

 

Adjusted Net Income and Adjusted Earnings Per Share

At and For the Three Months Ended

(Dollars in Thousands, Except Share and Per Share Data)

December 31, 2022

Net Income - GAAP

$

27,842

Less: Gain on sale of trademarks

 

10,000

Add: Rebranding expenses

 

3,737

Add: Separation related expenses

 

11

Add: Income tax effect resulting from the above listed items

 

1,575

Adjusted net income

$

23,165

Less: Adjusted allocation of earnings to participating securities

 

335

Adjusted Net income attributable to common shareholders

 

22,830

Weighted average diluted common shares outstanding

 

28,086,823

Adjusted earnings per common share - diluted

$

0.81

Net Interest Margin and Cost of Deposits

At and For the Three Months Ended

(Dollars in thousands)

December 31, 2023

September 30, 2023

December 31, 2022

Average interest earning assets

$

7,031,922

 

$

6,724,185

 

$

5,934,431

 

Net interest income

$

110,036

 

$

104,935

 

$

84,057

 

Net interest margin

 

6.23

%

 

6.19

%

 

5.62

%

Quarterly average total deposits

$

6,558,190

 

$

6,204,934

 

$

5,636,658

 

Deposit interest expense

$

3,526

 

$

1,954

 

$

142

 

Cost of deposits

 

0.21

%

 

0.12

%

 

0.01

%

 

 

 

 

Adjusted Net Interest Margin and Adjusted Cost of Deposits

 

 

 

Average interest earning assets

$

7,031,922

 

$

6,724,185

 

$

5,934,431

 

Net interest income

 

110,036

 

 

104,935

 

 

84,057

 

Less: Contractual, rate-related processing expense

 

26,793

 

 

22,473

 

 

13,985

 

Adjusted net interest income

$

83,243

 

$

82,462

 

$

70,072

 

Adjusted net interest margin

 

4.71

%

 

4.87

%

 

4.68

%

Average total deposits

$

6,558,190

 

$

6,204,934

 

$

5,636,658

 

Deposit interest expense

 

3,526

 

 

1,954

 

 

142

 

Add: Contractual, rate-related processing expense

 

26,793

 

 

22,473

 

 

13,985

 

Adjusted deposit expense

$

30,319

 

$

24,427

 

$

14,128

 

Adjusted cost of deposits

 

1.84

%

 

1.56

%

 

1.00

%

 

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