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PF

PATHWARD FINANCIAL, INC. (CASH)·Q1 2025 Earnings Summary

Executive Summary

  • EPS $1.29 and net income $31.4M; total revenue $173.5M, up 7% YoY, driven by higher net interest income and gains on loan sales; NIM expanded to 6.84% (adjusted NIM 5.41%) on balance sheet optimization .
  • Strong loan growth sequentially (+$487.5M to $4.56B), led by warehouse, working capital, and renewable energy; commercial finance now $3.62B (79% of portfolio) while insurance premium finance is fully exited .
  • FY2025 EPS guidance raised/affirmed to $7.25–$7.75, assuming no rate cuts; effective tax rate 18–22%; expected share repurchases; NIM to exceed FY2024 as optimization continues .
  • Capital return accelerated: 701,860 shares repurchased at $74.05 average; liquidity ~$4.0B; off-balance custodial deposits seasonally higher at $840.5M .

What Went Well and What Went Wrong

What Went Well

  • Net interest income rose 6% YoY to $116.1M; NIM/adjusted NIM expanded to 6.84%/5.41% on improved earning-asset mix and higher loan yields (loan yield 8.78% vs. 8.33% LY) .
  • Strategic repositioning: sale of insurance premium finance (+$16.4M pre-tax gain) and securities sale loss (−$15.7M) largely neutralized income statement while freeing capacity to redeploy into higher-ROA assets; CEO: “another large step toward optimizing our balance sheet” .
  • Partner Solutions momentum: two top partner contracts extended (2 yrs and 5 yrs); 12% more enrolled tax offices heading into tax season; CFO reiterated FY25 EPS, NIM tailwinds from optimization .

What Went Wrong

  • Card and deposit fee income declined due to lower custodial servicing fees after EFFR reductions ($4.5M vs. $5.1M LY); noninterest income mix pressured by rate backdrop .
  • Provision and net charge-offs increased (PCL $12.0M; NCOs $8.6M) vs. prior year; though credit metrics remain stable/improving per management .
  • Ongoing contractual rate-related card processing expenses remain meaningful ($25.6M Q1), with continued pricing pressure in partner economics given rate environment .

Financial Results

MetricQ1 2024Q4 2024Q1 2025
Total Revenue ($M)$162.8 $167.9 $173.5
Net Interest Income ($M)$110.0 $115.9 $116.1
Noninterest Income ($M)$52.8 $52.0 $57.4
Noninterest Expense ($M)$119.3 $129.9 $123.6
Net Income ($M)$27.7 $33.6 $31.4
Diluted EPS ($)$1.06 $1.35 $1.29
NIM (%)6.23% 6.66% 6.84%
Adjusted NIM (%)4.71% 5.15% 5.41%
Cost of Deposits (%)0.21% 0.07% 0.05%

Segment loan balance breakdown (end of period):

Segment ($M)Q1 2024Q4 2024Q1 2025
Equipment Finance (Total)$917.7 $759.3 $768.3
Working Capital Finance (Total)$715.7 $834.2 $972.8
Structured Finance (Total)$1,264.4 $1,512.9 $1,698.2
Consumer Finance$301.5 $248.8 $280.0
Warehouse Finance$349.9 $517.8 $624.3

Key KPIs:

KPIQ1 2024Q1 2025
ROAA (%)1.46% 1.69%
ROATE (%)33.95% 25.65%
NPLs / Total Loans (%)0.88% 0.76%
NPAs / Total Assets (%)0.53% 0.49%
Adjusted Annualized NCOs / Adjusted Avg Loans (%)0.41% 0.70%
Cost of Deposits (%)0.21% 0.05%
Adjusted Cost of Deposits (%)1.84% 1.63%
Off-Balance Custodial Deposits (EOP, $M)$1,079 $840.5

Balance sheet and liquidity:

MetricQ1 2024Q4 2024Q1 2025
Deposits (EOP, $M)$6,936.1 $5,875.1 $6,519.0
Loans & Leases (Gross, $M)$4,426.3 $4,075.2 $4,562.7
Investment Securities (EOP, $M)$1,886.0 $1,774.3 $1,512.1
Liquidity Sources (Total, $M)$3,807 $—$4,027

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
GAAP EPSFY2025$7.10–$7.60 (Oct-23) $7.25–$7.75 (Jan-21) Raised
Effective Tax RateFY202518–22% (Oct-23) 18–22% (Jan-21) Maintained
NIMFY2025Exceed FY2024 (Oct-23) Exceed FY2024 (Jan-21) Maintained
Rate AssumptionsFY2025Two cuts baked in (Q4 guide) No rate cuts assumed (Q1 guide) Updated assumption
Share RepurchasesFY2025Included (Q4 guide) Included; 701,860 shares repurchased in Q1 Executing

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024, Q4 2024)Current Period (Q1 2025)Trend
Balance sheet optimizationPlan to sell insurance premium finance; rotate to higher-ROA assets Completed sale; securities remix at opportunistic losses; redeploy into higher-yielding assets Executed; ongoing redeployment
Rate environment/NIMExpect NIM > FY2024; slope tailwind; Q4 guide assumed cuts Higher-for-longer tailwind; adjusted NIM focus; no rate cuts assumed More favorable assumptions
Partner Solutions pipelineMultiple partner extensions; H&R Block extension to 2027 in Q4 Two top partner extensions; pipeline “full”; pricing pressure on processing fees Momentum continues; pricing scrutiny
Renewable energy lendingGrowing SBA/USDA; construction loans; optionality Strategic partnership; strong originations; acknowledges potential political shifts but sees durable demand (battery/storage, AI power) Continued growth focus
Credit sponsorshipOpportunity from BaaS disruption; waterfall protection Record Q1 originations; growth from partner bank missteps; optionality Accelerating
Working capital financeCountercyclical strengths; distribution improvements driving growth Growth mainly from distribution focus; strong risk-adjusted returns Strengthening
Liquidity/securities~$2.1B liquidity (Q4); portfolio rolls down gradually ~$4.0B liquidity; ~$250M securities roll-down next 12 months Improved liquidity outlook

Management Commentary

  • CEO Brett Pharr: “This move was another large step toward optimizing our balance sheet…put those funds into higher yielding assets or those with optionality.” .
  • CFO Greg Sigrist: “Net interest margin of 6.84% and adjusted net interest margin of 5.41% expanded…due to a mix shift to higher-yielding assets as well as an increase in yields across our lending businesses.” .
  • CEO Brett Pharr on rate tailwinds: “Higher for longer…is good for us…we also look at our tax season…we think it’s going to be a great year” .
  • CFO Greg Sigrist on capital redeployment: sold ~$175M par securities “at a loss that largely offset the gain…repay outstanding short-term borrowings…the remainder used to fund loans or shifted to custodial deposits” .

Q&A Highlights

  • Renewable energy growth: Management expects continued growth; potential political impacts acknowledged but sees durable infrastructure needs (battery storage, AI power) .
  • Rate path and guidance: Higher-for-longer is a tailwind; Q1 guide assumes no rate cuts vs. Q4 guide with cuts; guidance sensitivity to curve slope noted .
  • Partner economics: Continued pressure on contractual rate-related processing fees; offset via transaction fee structures; pipeline remains strong with extensions and new partners .
  • Credit metrics: Charge-offs ticked up but remain within normal ranges; overall metrics “either stable or improving” .
  • Securities/asset remix: Opportunistic; portfolio roll-down (~$250M in 12 months); focus on adding duration and redeploying into higher risk-adjusted return verticals .

Estimates Context

  • Wall Street consensus (S&P Global) for Q1 2025 EPS and revenue was unavailable at time of writing due to SPGI request limits. As a result, we cannot classify a beat/miss versus consensus. Values retrieved from S&P Global were unavailable at this time.
  • Actuals: EPS $1.29, Revenue $173.5M .

Key Takeaways for Investors

  • Balance sheet optimization is delivering: NIM expansion and revenue growth as capital redeploys from lower-yield assets into higher-ROA lending verticals; expect continued NIM strength in FY2025 .
  • Secular growth vectors intact: Renewable energy, SBA/USDA, working capital, and warehouse finance portfolios are scaling with optionality (loan sales) that support ROA and fee income .
  • Partner Solutions is a multi-year catalyst: pipeline strong with recent extensions; watch pricing dynamics on processing fees as rate environment evolves .
  • Credit quality broadly stable: Increased provisioning supports growth and mix; NPL/NPAs improved YoY; adjusted NCOs elevated vs. LY but within expectations .
  • Capital return and liquidity: Accelerated buybacks and ~$4.0B liquidity provide flexibility to fund growth and support EPS trajectory; securities roll-down adds capacity .
  • Near-term trading lens: With no consensus benchmark available, focus on NIM trajectory, loan growth momentum (especially working capital/warehouse/renewables), and Partner Solutions announcement flow as potential stock catalysts .
  • Medium-term thesis: Asset cap (Durbin) necessitates productivity and velocity; management’s emphasis on optionality (loan sales, sponsorship) plus technology investments positions for durable ROA and diversified fees .
Notes: 
- All figures cited are from company filings/press releases/transcripts, with citations per table cell and bullet. 
- Where S&P Global consensus was requested but unavailable, we explicitly noted unavailability.