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 Partner Solutions and Commercial Finance business lines. These strategic business lines provide support to individuals and businesses.
Financial Highlights – 2026 Fiscal First Quarter
Total revenue for the first quarter was $173.1 million. Interest income on commercial finance loans increased $9.2 million reflecting the ongoing balance sheet optimization strategy. New loan originations during the quarter increased from $1.38 billion to $1.89 billion, driven by increases in consumer and commercial finance. The increase in consumer loan originations was primarily due to the new contract announced during fiscal 2025 and growth with current partners.
Annualized return on average assets was 1.87% and return on average tangible equity was 26.72%, both improvements over the prior year period. The company repurchased 651,804 shares of common stock at an average share price of $72.07. As of December 31, 2025, there were 4,286,012 shares available for repurchase under the current common stock share repurchase program.
Net Interest Income
In the first quarter of fiscal 2026, net interest income declined 5% year-over-year to $119.3 million. Average interest-earning assets increased by $75.8 million to $6.81 billion, driven mainly by higher average loan and lease balances, particularly in commercial finance, warehouse finance, and tax services, partly offset by lower securities investments and a decline in consumer finance balances.
Net interest margin (NIM) decreased to 6.95% from 7.38% a year earlier, while the tax-equivalent yield on average interest-earning assets fell by 50 basis points to 7.07%. Loan and lease yields declined to 8.56% from 9.55%, and securities yields edged down slightly. These declines were primarily due to the October 2025 sale of more than half of the held-for-sale consumer finance portfolio, which had previously boosted yields.
The cost of funds improved, with average deposit and borrowing costs falling to 0.12% from 0.20% year-over-year. Overall deposit costs also declined, reflecting lower funding expenses despite adjustments for contractual processing costs.
Noninterest Income & Noninterest Expense
In the first quarter of fiscal 2026, noninterest income declined 6% year-over-year to $53.8 million, mainly due to lower rental income, other income, and gains on asset sales, partly offset by higher card and deposit fee income. The prior-year quarter also included a one-time divestiture gain that distorted comparisons.
Servicing fee income on custodial deposits fell year-over-year because of lower rates following reductions in the Effective Federal Funds Rate, though it increased sequentially due to higher average deposit balances at partner banks.
Noninterest expense remained relatively flat at $127.2 million, slightly below the prior year. Lower card processing, other expenses, and equipment depreciation were mostly offset by higher compensation, building and software, and legal and consulting costs. Card processing expenses declined as rate-related costs tied to the Effective Federal Funds Rate decreased.
Asset Quality
The Company’s allowance for credit losses (ACL) totaled $58.8 million at December 31, 2025, an increase compared to $53.3 million at September 30, 2025 and a decrease compared to $74.3 million at December 31, 2024. The increase in the ACL at December 31, 2025, when compared to September 30, 2025, was primarily due to a $2.6 million increase in the allowance related to the consumer finance portfolio, a $1.9 million increase in the allowance related to the commercial finance portfolio, and a $1.1 million increase in the allowance related to the tax services portfolio.
The $15.5 million year-over-year decrease in the ACL was primarily driven by the decrease in the allowance related to the consumer finance portfolio of $21.3 million, partially offset by a $5.5 million increase in the allowance related to the commercial finance portfolio.
Deposits, Borrowings and Other Liabilities
The average balance of total deposits and interest-bearing liabilities was $6.31 billion for the three-month period ended December 31, 2025, compared to $6.25 billion for the same period in the prior fiscal year. Total average deposits for the fiscal 2026 first quarter increased by $92.6 million to $6.17 billion compared to the same period in fiscal 2025. The increase in average deposits was primarily due to an increase in noninterest-bearing deposits, partially offset by a decrease in wholesale deposits.
Total end-of-period deposits decreased 3% to $6.35 billion at December 31, 2025, from $6.52 billion at December 31, 2024. The decrease in end-of-period deposits was primarily driven by a decrease in noninterest-bearing deposits of $205.8 million, partially offset by an increase in money market deposits of $31.9 million. As of December 31, 2025, the Company managed $1.05 billion of customer deposits at other banks in its capacity as custodian. These deposits provide the Company with the ability to earn servicing fee income, typically reflective of the EFFR. The sequential quarter increase of $835.5 million in these customer deposits held at other banks reflects normal seasonal patterns during the first quarter of the fiscal year.