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PF

PATHWARD FINANCIAL, INC. (CASH)·Q4 2025 Earnings Summary

Executive Summary

  • Q4 2025 delivered solid top-line and margin performance: revenue $186.7M (+4% YoY) and diluted EPS $1.69 (+26% YoY); NIM expanded to 7.46% and adjusted NIM to 6.04% on continued balance sheet optimization .
  • Consensus vs. actual: EPS beat ($1.69 vs. $1.375*), while revenue modestly missed ($186.7M vs. $197.2M*); Q3 was a double beat and Q2 was EPS beat/revenue miss (see Estimates Context) .
  • Credit metrics tightened sequentially: NPLs rose to $99.1M (2.05% of loans), NPAs to $101.7M (1.42% of assets), while ACL ratio fell to 1.14% as consumer finance allowance released with portfolio move to held-for-sale .
  • Strategic actions: moved >50% of consumer finance HFI to HFS; sale closed Oct 3; repurchased ~181k shares at $82.95 avg; reiterated FY26 EPS guide $8.25–$8.75 with 18–22% tax rate and no rate cuts; expect lower custodial deposit fees with EIP run-off .
  • Potential stock catalysts: consistent EPS beats, FY26 guide reiteration, expanding partner pipeline (Trustly, Stripe, Upstart, Greenlight) vs. near-term NPL normalization and lower fee income from custodial deposits .

What Went Well and What Went Wrong

What Went Well

  • Noninterest income rose 13% YoY to $58.8M, buoyed by secondary market revenue, card/deposit fees, and other income; management targets $5–$7M secondary market revenue run-rate going forward .
  • NIM expanded 14 bps YoY to 7.46%; adjusted NIM (including rate-related card expenses) increased to 6.04% (from 5.91%) on improved earning asset mix and optimization .
  • New strategic partnerships and pipeline depth: Trustly pay-by-bank, Stripe merchant acquiring sponsorship, Upstart marketplace lending (held-for-sale, ~30-day hold with indemnities), and post-quarter signing with Greenlight; “trusted platform” strategy reiterated .

What Went Wrong

  • NPLs/NPAs increased sequentially (NPLs: $99.1M, 2.05% of loans; NPAs: $101.7M, 1.42% of assets), driven by commercial finance credits and seasonal tax services; management expects collateral-driven resolutions over coming quarters .
  • Legal/consulting expenses elevated (restatement-related ~$2M in Q4), and securities optimization led to $6M loss to enhance liquidity ($70M) .
  • Servicing fee income on off-balance sheet custodial deposits declined YoY and sequentially ($2.6M vs. $3.2M YoY; vs. $7.9M in Q3) due to lower EFFR rates and lower average custodial balances; management expects lower custodial balances/fees ahead .

Financial Results

Core Metrics by Quarter

MetricQ2 2025Q3 2025Q4 2025
Revenue ($USD Millions)$262.9 $195.8 $186.7
Diluted EPS ($USD)$3.11 $1.81 $1.69
Net Interest Margin (%)6.50% 7.43% 7.46%
Adjusted NIM (%)5.09% 5.98% 6.04%
Noninterest Income ($USD Millions)$138.5 $73.4 $58.8
Noninterest Expense ($USD Millions)$142.5 $139.3 $144.8

Year-over-Year Q4 2025 reference points

Q4 MetricYoY Change
Revenue+$7.2M, +4%
NIM+14 bps to 7.46%
Adjusted NIM+13 bps to 6.04%
Noninterest Income+13% to $58.8M
Noninterest Expense+9% to $144.8M
Diluted EPS+26% to $1.69

Segment and Portfolio Composition

Business Line (Loans/Leases, $USD Millions)Q4 2024Q3 2025Q4 2025Q4 2025 Quarterly Yield
Equipment Finance (lease + term)$759.3 $743.6 $690.4 7.63%
Working Capital (ABL + factoring)$834.2 $851.9 $810.8 12.05%
Structured Finance (SBA/USDA + term + other)$1,512.9 $2,066.9 $2,231.4 7.17%
Consumer Finance$248.8 $226.4 $93.3 26.27%
Warehouse Finance$517.8 $664.1 $645.2 9.38%

KPIs and Balance Sheet

KPIQ2 2025Q3 2025Q4 2025
Nonperforming Loans ($USD Millions)$39.8; 0.88% of loans $71.3; 1.49% $99.1; 2.05%
Nonperforming Assets ($USD Millions)$41.6; 0.59% of assets $74.7; 1.03% $101.7; 1.42%
ACL / Total Loans and Leases (%)1.75% 2.23% 1.14%
Deposits (End of Period, $USD Billions)$5.82 $6.01 $5.89
Off-balance Custodial Deposits ($USD Millions)$1,120.0 $430.7 $210.5
Servicing Fee Income on Custodials ($USD Millions)$6.5 $7.9 $2.6
Share Repurchases (Shares; Avg Price)575,804 @ $78.11 603,780 @ $74.49 180,740 @ $82.95

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
EPS (diluted)FY 2026$8.25–$8.75 $8.25–$8.75 Maintained
Effective Tax RateFY 202618%–22% 18%–22% Maintained
Rate AssumptionsFY 2026No rate cuts No rate cuts Maintained
Share RepurchasesFY 2026Included Included Maintained
CommentaryFY 2026—Sale of majority HFI consumer portfolio will pressure pre-tax income and NIM in FY26, but guide reiterated New qualitative detail

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 & Q3)Current Period (Q4)Trend
AI/technology initiativesInvest in tech to scale Partner Solutions; acquiring product with triple-digit YTD growth; preliminary FY26 EPS guide introduced Continued tech investment embedded in run-rate; guidance reiterated; focus on scalability and client experience Improving
Partner pipeline & productsNew Checkout.com deal; strong pipeline; 11 contracts YTD Added Trustly (pay-by-bank), Stripe (acquiring), Upstart (personal loans, held-for-sale, indemnities), Greenlight (card issuing) Expanding
Regulatory/legal/restatementElevated legal/consulting expected back half (Q3); preliminary restatement disclosures ~$2M restatement cost in Q4; continued elevated legal/consulting, tapering into FY26 Easing post-FY26
Credit & NPLsNPLs increased in Q3 due to 3 episodic loans; collateral-managed approach emphasized NPLs higher; management expects resolutions in next 1–3 quarters; annual NCOs within historic range Normalizing
Custodial deposits & feesQ2 servicing fees: $6.5M; Q3: $7.9M Q4 servicing fees down to $2.6M; expect lower balances/fees going forward (EIP run-down) Declining
Share repurchases~1.9M YTD in Q3; capital generation supports buybacks ~181k in Q4; buyback payout ratio expected to revert to 80–90% range in FY26 Stable/Resuming

Management Commentary

  • CEO Brett Pharr: “We…delivered on the strategy we laid out for fiscal 2025… generating both net income and earnings per diluted share growth… remaining the trusted platform that enables our partners to thrive.” .
  • CFO Greg Sigrist on portfolio actions and liquidity: “We surrendered some… life insurance policies… and further optimized the securities portfolio… loss of almost $6 million and… ~$70 million of liquidity to redeploy… Legal and consulting was elevated… ~$2 million [restatement].” .
  • CFO on FY26: “The sale of the majority of our held-for-investment consumer portfolio will put downward pressure on both pre-tax income and our net interest margin in 2026. However… we are still reiterating… EPS range of $8.25 to $8.75…” .
  • CEO on partnerships: agreements with Trustly (pay-by-bank), Stripe (acquiring sponsorship), Upstart (AI lending marketplace, personal loans), and post-quarter Greenlight (family finance/teen issuing) .

Q&A Highlights

  • Upstart program mechanics: similar to marketplace lending with credit indemnification; loans originate as held-for-sale; typical hold period 30 days or less .
  • Secondary market revenue: upside in Q4 was “opportunistic”; target remains ~$5–$7M/quarter .
  • NPLs: roughly half of quarter-end NPLs from three loans (well collateralized); management expects resolution over next 1–3 quarters .
  • Buybacks: payout ratio expected to revert to ~80–90% in FY26 as capital accretes .
  • Custodial deposit fees: balances and fees expected lower ahead due to EIP run-down .
  • Tax services outlook: solid season with mid-single-digit growth expectation embedded in FY26 range; supportive tax law changes .

Estimates Context

MetricQ2 2025Q3 2025Q4 2025
Actual Revenue ($USD Millions)$262.9 $195.8 $186.7
Revenue Consensus Mean ($USD Millions)$259.3*$185.1*$197.2*
Actual Diluted EPS ($USD)$3.11 $1.81 $1.69
Primary EPS Consensus Mean ($USD)$2.78*$1.67*$1.375*
Revenue – # of Estimates3*2*1*
EPS – # of Estimates3*2*2*
  • Q2: EPS beat; revenue miss. Q3: EPS beat; revenue beat. Q4: EPS beat; revenue miss.
  • Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Margin resiliency and optimization persist: NIM/adjusted NIM expanded YoY despite lower custodial fee tailwinds; sustained focus on high risk-adjusted returns and optionality supports spreads .
  • Commercial finance growth and renewable energy expansion underpin term lending; warehouse finance remains robust; mix shift away from consumer finance reduces allowance intensity and smooths earnings volatility .
  • Near-term credit normalization: elevated NPLs appear episodic with strong collateral; watch for subsequent quarters to confirm resolution and limited impact on NCOs .
  • Fee income trend risk: custodial deposit servicing fees likely lower into FY26 with EIP run-down; watch card processing/servicing dynamics tied to EFFR .
  • Capital deployment: ongoing buybacks (target 80–90% payout in FY26) and ~$2.3B liquidity provide flexibility to absorb credit normalization and fund growth .
  • Guide intact: FY26 EPS $8.25–$8.75 reiterated despite expected NIM/pre-tax pressure from consumer portfolio sale; monitor execution on partner ramp and secondary market optionality .
  • Trading lens: consistent EPS beats and durable NIM are supportive; vigilance on credit headlines and fee-income trajectory needed; partnership wins (Stripe/Trustly/Upstart/Greenlight) are potential re-rating catalysts .