Pathward Financial, Inc. Announces Results for Fourth Quarter and Fiscal Year 2026

SIOUX FALLS, S.D.--(BUSINESS WIRE)--Pathward Financial, Inc. (“Pathward Financial,” "Pathward," or the “Company” (Nasdaq: CASH), a U.S.-based financial holding company driven by its purpose to power financial inclusion for all, today reported its unaudited results for the fourth quarter and the fiscal year ended September 30, 2026. The Company reported net income of $38.6 million, or earnings per diluted share of $1.85, for the three months ended September 30, 2026, compared to net income of $38.8 million, or earnings per diluted share of $1.69, for the three months ended September 30, 2025.

For fiscal year 2026 ("fiscal 2026"), the Company reported net income of $175.7 million, or earnings per diluted share of $8.14, compared to net income of $185.9 million, or earnings per diluted share of $7.87, for fiscal year 2025 ("fiscal 2025"). The Company also recognized return on average assets and return on average tangible equity of 2.30% and 32.89%, respectively, compared to 2.46% and 38.75%, respectively, for the prior-year period.

Chief Executive Officer Brett Pharr said, "Fiscal 2026 was another important year of execution for Pathward. We successfully advanced the strategic priorities we set out to accomplish last year, and this was no small feat. We had some major wins across each area, and are very proud of the results the team delivered. While we continue to track and manage some of the credit items we mentioned last quarter, all other areas of the business yielded positive results. We extended contracts with partners, grew noninterest income, and grew net interest income in commercial finance."

Financial Highlights for the Fourth Quarter of Fiscal 2026

All highlights are compared to the same fiscal quarter in the prior-year period.

• Interest income from commercial finance loans increased by $5.6 million, driven by strong originations within structured finance.
• Total noninterest income increased 12%, or $6.8 million, primarily due to a strong increase in card and deposit fee income.
• Noninterest expense decreased 10% as a result of disciplined expense management while the Company continued to make strategic investments across people, processes, and technology in order to execute on its long-term strategy.
• New loan originations nearly doubled from $1.3 billion to $2.2 billion, primarily driven by increased credit sponsorship loan originations resulting from a new contract announced during fiscal 2025, as well as growth with current partners.
• The Company repurchased 281,562 shares of common stock at an average share price of $88.75. As of September 30, 2026, there were 2,845,617 shares available for repurchase under the current common stock share repurchase program. 

Net Interest Income

Net interest income for the fourth quarter of fiscal 2026 was $117.6 million, a decrease of 8% compared to the fourth quarter of fiscal 2025. The decrease was attributable to an $11.1 million reduction in interest income from the credit sponsorship portfolio and a $3.3 million reduction in interest income from the warehouse finance portfolio. Interest income on the credit sponsorship portfolio was impacted by the sale of a portfolio in October 2025 that was previously accounted for using a gross accounting methodology, and therefore, recorded at higher yields with offsetting entries not included in net interest income. These decreases were partially offset by a $5.6 million increase in interest income from commercial finance loans and leases, driven by strong originations within structured finance.

The Company’s average interest-earning assets for the fourth quarter of fiscal 2026 increased by $69.9 million to $6.87 billion compared to the same quarter in fiscal 2025 due to increases in the average outstanding balances in total loans and leases and cash and fed funds sold. The increase was partially offset by a decrease in the average outstanding balance of total investments. The fourth quarter average outstanding balance of loans and leases increased $196.8 million compared to the same quarter of the prior fiscal year due to an increase in the commercial finance portfolio, partially offset by decreases in the credit sponsorship and warehouse finance portfolios.

Fiscal 2026 fourth quarter net interest margin ("NIM") decreased to 6.79% from 7.46% in the fourth quarter of fiscal 2025 primarily due to the aforementioned sale of the credit sponsorship portfolio in October 2025. When including contractual, rate-related processing expense associated with deposits on the Company's balance sheet and excluding the gross interest income on credit sponsorship loans, adjusted NIM was 5.51% in the fiscal 2026 fourth quarter compared to 5.43% during the fiscal 2025 fourth quarter. See non-GAAP reconciliation table at the end of the press release. The overall reported tax-equivalent yield (“TEY”) on average interest-earning assets decreased 69 basis points to 6.87% compared to the prior-year quarter. The yield on the loan and lease portfolio was 8.23% compared to 9.25% for the comparable period last year and the TEY on the securities portfolio was 2.98% compared to 3.06% over that same period. The decreases in the TEY on average interest-earning assets and the yield on the loan and lease portfolio were also primarily driven by the aforementioned sale of the credit sponsorship portfolio.

The Company's cost of funds for all deposits and borrowings averaged 0.08% during the fiscal 2026 fourth quarter, as compared to 0.09% during the prior-year quarter. The Company's cost of deposits was 0.01% in the fourth quarter of fiscal 2026, as compared to 0.02% during the prior-year quarter. When including contractual, rate-related processing expense associated with deposits on the Company's balance sheet, the Company's adjusted cost of deposits was 1.40% in the fiscal 2026 fourth quarter, a decrease from 1.58% during the prior-year quarter primarily reflecting a lower rate environment. See non-GAAP reconciliation table at the end of the press release.

Noninterest Income

Fiscal 2026 fourth quarter noninterest income increased 12% to $65.6 million, compared to $58.8 million for the same period of the prior year. The increase was driven by increases in card and deposit fees and secondary market revenue, partially offset by decreases in rental income and gain on sale of other. Card and deposit fees excluding servicing fee income on custodial deposits increased $6.4 million, as contracts signed last year are generating growth.

Servicing fee income on custodial deposits totaled $6.1 million during the 2026 fiscal fourth quarter, as compared to $7.5 million for the fiscal quarter ended June 30, 2026 and $2.6 million for the same period of the prior year.

Noninterest Expense

Noninterest expense decreased 10% to $129.7 million in the fourth quarter of fiscal 2026, compared to $144.8 million for the same quarter last year. The decrease was attributable to lower legal and consulting expense, partially offset by an increase in building and software expense. The Company continues to make targeted investments in our people, processes and technology.

Card processing expense is primarily driven by rate-related agreements with Payments Sponsorship relationships and subject to 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 67% of the deposit portfolio was subject to these rate-related processing expenses during the fiscal 2026 fourth quarter. For the fiscal quarter ended September 30, 2026, contractual, rate-related processing expense was $23.0 million, as compared to $23.3 million for the fiscal quarter ended June 30, 2026, and $24.9 million for the fiscal quarter ended September 30, 2025.

Income Tax Expense

The Company recorded an income tax expense of $4.4 million, representing an effective tax rate of 10.1% for the fiscal 2026 fourth quarter, compared to an income tax expense of $9.3 million, representing an effective tax rate of 19.2%, for the fourth quarter last fiscal year. The decrease in income tax expense compared to the prior-year quarter was primarily driven by lower pre-tax income and the impact of a life insurance surrender recognized in the prior-year quarter.

The Company originated $45.3 million in renewable energy leases during the fiscal 2026 fourth quarter, resulting in $13.4 million in total net investment tax credits. During the fourth quarter of fiscal 2025, the Company originated $82.1 million in renewable energy leases resulting in $15.8 million in total net investment tax credits. For fiscal 2026, the Company originated $78.2 million in renewable energy leases, compared to $95.5 million for the comparable prior-year period.

The Company's investment security balances at September 30, 2026 totaled $1.19 billion, compared to $1.25 billion at June 30, 2026 and $1.36 billion at September 30, 2025. The year-over-year decrease was primarily related to normal paydown activity.

Total gross loans and leases totaled $5.08 billion at September 30, 2026, as compared to $5.11 billion at June 30, 2026 and $4.66 billion at September 30, 2025. The drivers for the sequential quarter decrease were declines in the warehouse finance portfolio and the seasonal decrease in the tax services portfolio, partially offset by growth in the commercial finance and credit sponsorship portfolios. The year-over-year increase was primarily attributable to growth in the commercial finance portfolio, partially offset by a decrease in the warehouse finance portfolio.

Commercial finance loans, which comprised 87% of the Company's loan and lease portfolio, totaled $4.44 billion at September 30, 2026, reflecting an increase of $118.2 million, or 3%, from June 30, 2026 and an increase of $517.0 million, or 13%, from September 30, 2025. The sequential quarter increase in the commercial finance portfolio was driven by a $124.2 million increase in term lending and a $10.1 million increase in lease financing. The year-over-year increase was driven by an increase of $488.6 million in term lending, an increase of $103.9 million in asset-based lending, and an increase of $50.1 million in SBA/USDA, partially offset by declines of $103.4 million in other commercial finance loans and $18.6 million in lease financing. These changes are primarily the result of the Company's efforts to maintain an optimized balance sheet.

Asset Quality

The Company’s allowance for credit losses ("ACL") totaled $67.3 million at September 30, 2026, a decrease compared to $109.8 million at June 30, 2026 and an increase compared to $53.3 million at September 30, 2025. The sequential decrease in the ACL was due to decreases of $30.1 million, $9.0 million, and $3.2 million in the allowance related to the seasonal tax services, commercial finance, and credit sponsorship portfolios, respectively. The sequential decrease in the commercial finance portfolio was primarily driven by a reduction in specific reserves.

The $14.0 million year-over-year increase in the ACL was primarily driven by an $18.5 million increase in the allowance related to the commercial finance portfolio, partially offset by a decrease in the allowance related to the credit sponsorship portfolio of $4.4 million.

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

The Company's ACL as a percentage of total loans and leases decreased to 1.33% at September 30, 2026 from 2.15% at June 30, 2026 and increased from 1.14% at September 30, 2025. The sequential decrease in the total loans and leases coverage ratio was primarily driven by a decrease in the ACL related to the commercial finance and seasonal tax services portfolios. The year-over-year increase in the total loans and leases coverage ratio was primarily driven by an increase in the ACL related to the commercial finance portfolio.

Activity in the ACL for the periods presented was as follows.

The Company recognized a provision for credit losses of $10.3 million for the quarter ended September 30, 2026, compared to a reversal of provision of $6.4 million for the comparable period in the prior fiscal year. The year-over-year increase was primarily due to increases in the credit sponsorship portfolio of $12.0 million and commercial finance portfolio of $6.7 million, partially offset by decreases in the tax services portfolio of $1.9 million. The increase in provision expense within the credit sponsorship portfolio was due to a provision release recognized during the prior-year quarter.

The Company recognized net charge-offs of $52.0 million for the quarter ended September 30, 2026, consisting of $27.6 million in the seasonal tax services portfolio, $20.3 million in the commercial finance portfolio, and $4.1 million in the credit sponsorship portfolio. Net charge-offs were $46.2 million for the quarter ended September 30, 2025, comprised of $29.7 million, $8.9 million, and $7.5 million within the seasonal tax services, credit sponsorship, and commercial finance portfolios, respectively.

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

The Company's nonperforming assets at September 30, 2026 were $290.4 million, representing 4.00% of total assets, compared to $277.5 million, or 3.79% of total assets, at June 30, 2026 and $101.7 million, or 1.42% of total assets, at September 30, 2025.

The increase in the nonperforming assets as a percentage of total assets at September 30, 2026, compared to June 30, 2026, was primarily driven by an increase in commercial finance loans more than 89 days past due and accruing. Compared with the same period of the prior year, the increase was driven by higher nonperforming loans in the commercial finance portfolio, partially offset by lower nonperforming loans in the seasonal tax services portfolio.

The Company's nonperforming loans and leases at September 30, 2026 were $289.3 million, representing 5.61% of total gross loans and leases, compared to $275.1 million, or 5.28% of total gross loans and leases, at June 30, 2026 and $99.1 million, or 2.05% of total gross loans and leases, at September 30, 2025. The primary reason for the increase in nonperforming commercial finance loans, as compared to September 30, 2025, was related to certain renewable energy construction projects with a common developer. The Company continues to work with other parties in these projects to bring them to completion.

Deposits, Borrowings and Other Liabilities

The average balance of total deposits and interest-bearing liabilities was $6.22 billion for the quarter ended September 30, 2026, compared to $6.27 billion for the same period in the prior fiscal year. Total average deposits for the fiscal 2026 fourth quarter decreased by $42.8 million to $6.14 billion compared to the same period in fiscal 2025. The decrease in average deposits was primarily due to decreases in noninterest-bearing deposits and money market deposits.

Total end-of-period deposits decreased 3% to $5.69 billion at September 30, 2026, from $5.89 billion at September 30, 2025. The decrease in end-of-period deposits was primarily driven by a decreases in noninterest-bearing deposits of $151.6 million and $55.7 million in money market deposits, partially offset by an increase in interest-bearing checking deposits of $15.1 million.

As of September 30, 2026, the Company managed $630.0 million of customer deposits at other banks in its capacity as custodian, compared to $575.0 million as of June 30, 2026 and $210.5 million as of September 30, 2025. These deposits provide the Company with the ability to 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 September 30, 2026, 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 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.

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:

Investor Relations contact
Darby Schoenfeld, CPA
SVP, Chief of Staff & Investor Relations
877-497-7497
investorrelations@pathward.com

Media Relations contact
mediarelations@pathward.com