Executive Summary

Q3 FY25 preliminary results were resilient amid restatement work: diluted EPS $1.81 vs $1.78 YoY (+2%), total revenue $195.8M (+4% YoY), and NIM expanded to 7.43% (adjusted NIM 5.98%) driven by balance sheet optimization .
The quarter beat S&P Global consensus on EPS ($1.81 vs $1.67) and revenue ($195.8M vs $185.1M); Q2 and Q1 also posted EPS beats. Management reaffirmed strategic execution despite elevated compliance/tech spend and rising NPLs from episodic items, with net charge-offs contained .
Guidance: FY25 GAAP EPS raised at the low end to $7.50–$7.80 (from $7.40–$7.80), FY26 introduced at $8.25–$8.75; assumptions include one rate cut in FY25 Q4, none in FY26, and effective tax rates of 16–20% (FY25) and 18–22% (FY26), with buybacks included (preliminary pending restatement) .
Near-term stock catalysts: restatement filing timeline, credit normalization of the three idiosyncratic NPLs, durability of adjusted NIM, and execution on growing Partner Solutions (including acquiring sponsorship with Checkout.com) and credit sponsorship opportunities .

What Went Well and What Went Wrong

What Went Well
- Margin resilience and mix: NIM rose to 7.43% and adjusted NIM to 5.98% (both up QoQ and YoY) on improved earning asset mix and optimization .
- Fee growth and pipeline: Noninterest income +11% YoY, with secondary market revenue and card/deposit fees higher; “acquiring” posted triple-digit YTD growth and a multi-year Checkout.com acquiring sponsorship deal was signed post-quarter, supporting sustainable fee income .
- Capital return and liquidity: Repurchased ~604K shares at $74.49; YTD ~1.9M. Liquidity “almost $2.7B” and well-capitalized status maintained .
What Went Wrong
- Asset quality optic: NPL ratio rose to 1.49% (from 0.88% in Q2), driven by three episodic loans; management emphasized collateral coverage and focus on net charge-offs (which remained modest) .
- Elevated expenses: Noninterest expense +11% YoY on legal/consulting, occupancy/equipment (tech investment), and card processing, with higher legal/consulting expected in Q4 before tapering in FY26 .
- Restatement overhang: Preliminary results pending restatement; accounting change reduces 2022–23 income, boosts 2024, with a more muted impact thereafter; completion remains a gating factor for full normalization .

Financial Results

Metric	Q1 2025	Q2 2025	Q3 2025
Total Revenue ($M)	$173.5	$262.9	$195.8
Diluted EPS ($)	$1.29	$3.11	$1.81
Net Interest Income ($M)	$116.1	$124.3	$122.3
Noninterest Income ($M)	$57.4	$138.5	$73.4
Noninterest Expense ($M)	$123.6	$142.5	$139.3
Provision for Credit Losses ($M)	$12.0	$29.9	$9.3
Net Charge-offs ($M)	$8.6	$0.1	$6.1
Net Interest Margin (%)	6.84%	6.50%	7.43%
Adjusted NIM (%)	5.41%	5.09%	5.98%

YoY snapshots (Q3 2025 vs Q3 2024):

Revenue: $195.8M vs ~$188.6M (+4%), driven by noninterest income growth .
EPS: $1.81 vs $1.78 (+2%) .
NIM: 7.43% vs 7.26% (+17 bps); adjusted NIM 5.98% vs 5.76% (+22 bps) .

Segment/portfolio mix (loans & leases, $M):

Category	Q3 2024	Q2 2025	Q3 2025
Term lending	1,533.7	1,766.4	2,003.7
Asset-based lending	473.3	542.5	610.9
Factoring	350.7	224.5	241.0
Lease financing	155.0	134.9	134.2
SBA/USDA	563.7	701.7	674.9
Consumer finance	253.4	246.2	226.4
Tax services	43.2	56.0	37.4
Warehouse finance	450.0	643.1	664.1
Total loans & leases	4,609.7	4,470.1	4,745.9

Selected KPIs:

KPI	Q1 2025	Q2 2025	Q3 2025
NPLs / Total Loans	0.76%	0.88%	1.49%
Nonperforming Assets / Total Assets	0.49%	0.59%	1.03%
ACL / Total Loans	1.07%	1.75%	2.23%
Servicing Fee Income on Custodial Deposits ($M)	$4.5	$6.5	$7.9
Custodial Deposits at Other Banks (EOP, $M)	$840.5	$1,116.6	$430.7
Shares Repurchased (k)	701.9	575.8	603.8

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
GAAP EPS	FY2025	$7.40–$7.80 (no rate cuts; ETR 17–21%; includes buybacks)	$7.50–$7.80 (assumes one rate cut in FY25 Q4; ETR 16–20%; includes buybacks)	Raised lower bound
GAAP EPS	FY2026	—	$8.25–$8.75 (assumes no rate cuts; ETR 18–22%; includes buybacks)	Introduced

Notes: Guidance preliminary and pending restatement completion .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q1 & Q2 FY25)	Current Period (Q3 FY25)	Trend
Technology/AI	Investing in tech; adjusted NIM methodology update; originations yield 9.45% (Q1). Neutral rate sensitivity; redeploying $190M and ~$200M securities roll-off for margin stability (Q2) .	AI for efficiency and oversight; no near-term P&L impact; tech investments continue (elevated occupancy/tech expense) .	Building capabilities; opex near-term headwind
Partner Solutions / Pipeline	Extended two large PS contracts; 12% more tax offices; BaaS disruption driving inbound interest (Q1/Q2) .	11 YTD product expansion contracts; signed Checkout.com acquiring sponsorship post-quarter; acquiring rev up triple-digits YTD .	Strengthening pipeline and monetization
Credit Sponsorship	New marketplace lending partner signed post-Q2; waterfall protections emphasized (Q2) .	Seeing additional opportunities; lever for sustainable fee income and balance sheet optionality .	Expanding
Asset Quality	Metrics stable/in-range; seasonal tax ACL dynamics (Q1/Q2) .	NPL uptick from three episodic loans (one fraud, collateralized); focus on NCOs; ACL 2.23% .	Watch episodic cases; structurally controlled via collateral
Capital Returns	Accelerated buybacks in Q1; targeted 80–90% payout of NI for year (Q2) .	603.8K shares repurchased; YTD ~1.9M; expect to continue, mindful of price and capital accretion .	Continuing, moderated pace next year
Restatement/accounting	Ongoing; EPS guide reiterated in Q1; revised in Q2 (7.40–7.80) .	Accounting change lowers 2022–23 income, raises 2024; muted thereafter; preliminary FY25/FY26 guides reiterated .	Late-stage remediation

Management Commentary

“We continue to see strong originations within commercial finance at solid yields... funds generated were almost $1 billion, and we were able to accomplish redeployment in a shorter time frame.”
“This year, Pathward contracted for 11 opportunities to expand products... acquiring has experienced triple-digit revenue growth YTD. After the quarter closed, we signed a multi-year deal with Checkout.com for acquiring sponsorship.”
“Net interest margin in the quarter was 7.43%, and adjusted NIM... 5.98%... both expanded vs last year and vs March quarter.”
“Increase in non-performing loans was driven by three loans... one related to fraud but well collateralized... other two expected to return to accrual or recoveries.”
“For FY2025, preliminary EPS range of $7.50–$7.80... FY2026 $8.25–$8.75... preliminary pending outcome of our restatement.”

Q&A Highlights

Restatement progress and P&L effects: Management in “middle to later innings” working through 13 quarters and a super 10-K; accounting methodology lowers 2022–23, lifts 2024, with muted effect thereafter .
Credit quality: NPL increase is episodic, collateralized; no portfolio/systemic deterioration; focus remains on net charge-offs given collateral recoveries .
AI strategy: Focus on internal efficiencies and full-file oversight for partner compliance; no near-term P&L impact expected .
Crypto exposure: Provide USD access devices for crypto wallets (on/off-ramps); evaluating broader use cases, with early adoption likely B2B/international (not core focus) .
Capital return outlook: Continued repurchases with more muted cadence next year; remain opportunistic while accreting capital .

Estimates Context

EPS and revenue vs S&P Global consensus

Metric	Q1 2025	Q2 2025	Q3 2025
Diluted EPS – Actual ($)	1.29	3.11	1.81
Diluted EPS – Consensus ($)	1.24*	2.78*	1.67*
Revenue – Actual ($M)	173.5	262.9	195.8
Revenue – Consensus ($M)	173.27*	259.27*	185.05*

Q3 FY25: EPS beat (+$0.14); revenue beat (+$10.8M). Q2 and Q1 also posted EPS beats; revenue outperformed consensus using company-reported “total revenue.” Note S&P Global reported “actual” revenue classification may differ from company’s “total revenue” presentation .
Values retrieved from S&P Global.*

Key Takeaways for Investors

Margin durability and mix: Adjusted NIM expanded to 5.98% despite rate volatility; redeployment and loan yields (9.55% on new commercial originations) should support margin into FY26 absent adverse shocks .
Fee income flywheel: Strong Partner Solutions pipeline (11 YTD expansions) and acquiring (Checkout.com sponsorship) point to sustained noninterest income growth and revenue diversification .
Credit normalization path: Elevated NPLs tied to three episodic credits with collateral coverage; watch NCO trajectory (Q3 net charge-offs $6.1M) and ACL at 2.23% as leading indicators .
Capital return intact with discipline: ~1.9M shares repurchased YTD; management to balance repurchases with capital accretion and valuation .
Guidance risk-balanced: FY25 EPS $7.50–$7.80 and FY26 $8.25–$8.75 remain preliminary pending restatement; tax-rate and rate-cut assumptions embedded .
Trading setup: Potential positive inflection on restatement completion and clarity; near-term volatility around asset quality optics and expense normalization may present entry points .
Monitor operating levers: Servicing fees linked to EFFR and card processing expenses (rate-indexed) create sensitivity to Fed path; management cites near-neutral positioning to overnight rate changes .

Appendix: Additional Details and Data Points

Tax Solutions: YTD (9M) tax product revenue +16% to $95.2M; total tax product income net +27% to $59.8M; provision in tax services down $0.5M YTD on underwriting/data improvements .
Contractual rate-related processing expense: $25.1M in Q3 vs $28.4M in Q2 and $27.6M in Q3’24; ~62% of deposit portfolio subject to these agreements .
Liquidity and deposits: EOP deposits down 7% YoY to $6.01B; managed $430.7M of custodial deposits at other banks at 6/30/25; available liquidity nearly $2.7B .

All Q3 FY25 results are preliminary pending the company’s restatement process .

PATHWARD FINANCIAL, INC. (CASH)·Q3 2025 Earnings Summary