Release Date: April 22, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Pathward Financial Inc (CASH, Financial) reported earnings of $3.11 per share for the March quarter, representing a year-over-year growth of 21%.
- Non-interest income grew by 7% and net interest income by 5% compared to the same quarter last year.
- The company expanded its quarterly net interest margin and adjusted net interest margin, with a net interest margin of 6.50% for the quarter.
- Pathward Financial Inc (CASH) revised its fiscal 2025 guidance to $7.40 to $7.80 earnings per diluted share, reflecting strong performance expectations.
- The company successfully operated with over 42,000 independent tax offices, setting a new record and contributing to a 17% growth in total tax services revenues.
Negative Points
- The company experienced a slight decrease in custodial deposits held at partner banks, from $1.2 billion a year ago to $1.1 billion.
- Total deposit balances declined year-over-year, primarily due to the return of EIP deposits to the treasury department and fewer wholesale deposits.
- Expenses in the quarter grew by $2.1 million from the prior year, reflecting a 1% increase, partly due to investments in technology infrastructure.
- The company reported a loss on the sale of securities, which partially offset higher secondary market revenues from loan sales.
- Despite strong performance, the company acknowledged that future growth in the tax business might not match the current year's pace.
Q & A Highlights
Q: How scalable is the tax business, and can you continue to grow independent tax offices at a good pace?
A: Brett Pharr, CEO, explained that the tax business has been improving operational effectiveness and market share over the past few years. While they had a strong year due to higher refunds, they expect continued success, albeit not at the same growth rate as this year.
Q: What are your thoughts on the commercial finance business given the current macroeconomic uncertainty?
A: Brett Pharr, CEO, noted that despite the uncertainty, they are not seeing any deterioration in credit quality. They are observing more transactions that would have been done by traditional C&I, indicating potential tightening. The working capital group tends to perform well in downturns, and they remain optimistic about future growth.
Q: Are there plans to further accelerate the buyback program given the focus on balance sheet optimization?
A: Brett Pharr, CEO, stated that they aim to maintain a Tier 1 leverage ratio closer to 10% and can achieve this without slowing down buybacks. They plan to keep buybacks in the 80% to 90% range for the rest of the year, leveraging their strong profitability.
Q: Have you seen any changes in payment activity or behavior since liberation day?
A: Brett Pharr, CEO, reported no significant changes in payment activity. Their business primarily involves essential purchases like groceries and gas, which remain stable regardless of economic conditions.
Q: Can you provide more details on the new partnership to originate loans through a marketplace?
A: Brett Pharr, CEO, mentioned that the partnership involves online consumer term loans ranging from six months to five years, targeting near prime/subprime markets. They have confidence in their underwriting models and expect no issues.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
