パスワード・フィナンシャル（CASH）2026年度第4四半期決算説明会：2027年度EPSガイダンスを再確認

Pathward Financial（NASDAQ: CASH）は、商業金融収入の増加、カードおよび預金手数料の改善、ならびに継続的な融資成長を背景に2026年度を締めくくりました。投資家の関心は引き続き信用品質に集中した一方、経営陣は2027年度の希薄化後EPS見通しを9.50ドル〜10.00ドルで据え置きました。

主要なポイント

• 2026年度の純利益は1億7,570万ドル（希薄化後1株当たり8.14ドル）となりました。平均資産利益率（ROA）は2.30%、平均有形株主資本利益率（ROTE）は32.9%に達しました。
• 9月30日時点の貸付金およびリース資産は9%増加しました。年間融資実行額は、主にクレジットスポンサーシップの拡大により、前年の13億ドルから22億ドルに増加しました。
• 第4四半期の調整後純金利マージンは、収益資産構成の改善と融資のリプライシングに支えられ、5.51%に向上しました。
• 不良貸付金およびリース資産の比率は前期比で5.61%に上昇しました。四半期の純貸倒損失額は5,200万ドルで、これには商業金融に関連する2,030万ドルが含まれます。
• 経営陣は、追加の金利変更がないこと、実効税率が18%〜22%であること、および流通市場からの四半期収益が500万ドル〜700万ドルであることを前提に、2027年度の希薄化後EPS見通し9.50ドル〜10.00ドルを再確認しました。
• Pathwardは、単一のパートナーによる収益割合が5%を超えていないことを説明し、パートナー基盤の分散が進んでいることを強調しました。

主要財務データ

事業および営業業績

商業金融は四半期の純金利収入で600万ドル近い増加をもたらしました。通期では、主にストラクチャード・ファイナンスが寄与し、商業金融の受取利息は約3,000万ドル増加しました。

第4四半期の非金利収入は2桁の成長を記録しました。カードおよび預金手数料収入は800万ドル近く増加し、その増加分の多くは中核の決済事業によるものでした。

9月30日時点のPathwardの貸借対照表上の預金はわずかに減少したものの、平均保管預金は前年比で4億ドル以上増加しました。同社は、実効フェデラルファンド金利に連動した保管預金から手数料収入を得ています。

Pathwardは、ストラクチャード・ファイナンス、タームローン、SBA（米中小企業庁）およびUSDA（米農務省）融資、ならびに運転資金向け動産担保融資（ABL）の拡大を継続しました。また、同社はSBA 7(a)融資プログラムにおいてトップ20の貸手に浮上しました。

融資実行額増加の主な推進要因はクレジットスポンサーシップでした。経営陣は、今回の高い融資実行水準について、最近追加・拡大されたパートナープログラムに基づく新たなランレートを示すものであると述べました。

Pathwardは、H&R Blockとの長年にわたるパートナーシップを7月中旬まで更新しました。また、同社は以前発表したClairとの契約更新についても改めて言及しました。経営陣は、新規パートナーの獲得と既存パートナーにおける製品採用の広がりの双方が、引き続き成長をもたらしていると説明しました。

営業費用は、法務コストおよびコンサルティング費用の減少がプラスに寄与した一方、店舗・ビル関連費用やソフトウェア費用の増加によって一部相殺されました。Pathwardは、テクノロジー、リスク管理、コンプライアンス、人材、プロセスに対して、ターゲットを絞った支出を継続する計画です。

業績見通し（ガイダンス）

Pathwardは2027年度の希薄化後EPS見通し9.50ドル〜10.00ドルを再確認しました。この見通しは以下を前提としています：

• 当該会計年度中に追加の金利変更がないこと。
• 実効税率が18%〜22%であること。
• 四半期ごとの流通市場からの収益が500万ドル〜700万ドルであること。
• 自社株買いが予定されていること。

経営陣は、2027年度の投資が12月四半期から開始されると見込んでいます。第1四半期の採用活動により年度の早い段階で人件費・福利厚生費のランレートが上昇する見通しである一方、コンサルティング支出は上半期を通じてやや高めの水準が続く見込みです。

同社は、不良貸付金の解消が進むにつれ、2027年度中に信用コストが正常化すると予想しています。経営陣は、新規融資の構成にもよりますが、商業金融における正常化された過去の貸倒引当金比率を約120〜130ベーシスポイント（bp）と特定しました。現在の状況に基づき、今後の引当金繰入は信用状況の更なる悪化ではなく、主に融資の成長によって推進される見通しです。

有価証券ポートフォリオは、時間の経過とともに約8億ドル〜10億ドルに落ち着く見込みです。経営陣は、2027年度における約1億4,000万ドル〜1億5,000万ドルの元本回収分の大半が貸付金ポートフォリオへと振り向けられると予想していますが、金利低下局面における保護として限定的な有価証券の購入を行う可能性もあります。

リスクと注視すべき分野

信用品質は依然として短期的な最大の懸念事項です。不良貸付金およびリース資産比率は5.61%に上昇し、貸倒償却額も高水準にとどまりました。経営陣は、これらの問題はポートフォリオ全体の悪化を示すものではなく、再生可能エネルギープロジェクトなど、以前から議論されていた案件に集中していると述べました。

一部の再生可能エネルギープロジェクトは、完成および売却前に追加の資金調達を必要としています。それらの建設用アドバンス（未完成プロジェクト向け資金貸付）は対象プロジェクトが売却されるまで非未収計上（ノン・アクルーアル）状態にとどまるため、解決プロセス中は報告される不良資産が高水準に維持される可能性があります。

金利の上昇は、資本コストを増加させ追加の自己資本を要することから、再生可能エネルギープロジェクトの経済性を変化させる可能性があります。それにもかかわらず経営陣は、プロジェクトの収益性からみて、構造を見直すことで実行可能な取引を進めることができるのが一般的であると述べました。

同社はまた、契約に基づく取扱高連動型のインセンティブ支払いが四半期をまたいでズレ込むことがあり、通期の支払いは比較的安定しているものの、カードおよび預金手数料収入に変動を生じさせる可能性があると指摘しました。

アナリスト質疑応答のハイライト

経営陣は、Pathwardの成長パイプラインがクレジットスポンサーシップ、組み込み型金融（エンベデッド・ファイナンス）、カード発行（イシュイング）、加盟店開拓（アクワイアリング）、その他のパートナー主導型製品に及んでいると述べました。新しい発行プログラムは一般にオンボーディングや立ち上げに時間を要するため、既存のパートナーが短期的な収益成長の最大の源泉であり続けると予想されています。

競合上の立ち位置について、ブレット・ファーCEOは、競合他社が再現するのに最も困難な能力として「組織風土（カルチャー）」を挙げました。同氏は、銀行インフラの運営とプログラム管理には異なる運用カルチャーが必要であり、完全な垂直統合を困難にしていると主張しました。

変動金利適用の融資組成が増加したことを受け、Pathwardは現在、ややアセットセンシティブ（金利上昇感応的）な状態となっています。グレゴリー・シグリストCFOは、25ベーシスポイント（bp）の利上げにより、通期の税引前利益が約200万ドルまたはそれ以上増加する可能性があると試算しましたが、経営陣は時間の経過とともに貸借対照表が中立に戻ると想定しています。

経営陣は、伝統的な企業借り手が代替資金調達を模索するため、景気減速局面によって運転資金および動産担保融資（ABL）の機会が拡大する可能性があると述べました。また、パートナー基盤が分散しており、単一パートナーからの収益が5%を超えていないこともあり、パートナーが独自の銀行免許を取得することによる実質的な脅威はないと述べました。

決算説明会スクリプト全文

決算説明会の完全なトランスクリプト

経営陣による説明

Operator

Thank you. Ladies and gentlemen, thank you for standing by and welcome to Pathward Financial's Fourth Quarter 2026 Investor Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the conference call over to Darby Schoenfeld, Senior Vice President, Chief of Staff and Investor Relations. Please go ahead.

Darby Schoenfeld

Thank you, Operator, and welcome. With me today are Pathward Financial CEO Brett Pharr and CFO Gregory Sigrist, who will discuss our operating and financial results for the fourth quarter and full fiscal year of 2026, after which we will take your questions. Additional information, including the earnings release, the investor presentation that accompanies and supplemental slides may be found on our website at pathwardfinancial.com. As a reminder, our comments may include forward-looking statements. Those statements are subject to risks and uncertainties that could cause actual and anticipated results to differ. These statements speak only as of this date, and the company undertakes no obligation to update any forward-looking statement, except as may be required by applicable law. Please refer to the cautionary language in the earnings release, investor presentation, and in the company's filings with the Securities and Exchange Commission, including our most recent filings, for additional information covering factors that could cause actual results to differ materially from those expressed or implied in the forward-looking statements. Additionally, today we will be discussing certain non-GAAP financial measures on this conference call. References to non-GAAP measures are only provided to you to assist in understanding the company's results and additional information regarding these non-GAAP measures as well as reconciliations are included in the earnings release and the appendix of the investor presentation. All time periods referenced are fiscal quarters and fiscal years and all comparisons are to the prior year period unless otherwise noted. Now let me turn the call over to Brett Pharr, our CEO.

Brett Pharr

Thanks, Darby, and good evening, everyone. Thank you for joining our earnings call. We're looking forward to sharing our updates today, but I'd like to start by taking a moment to reflect on an important milestone. This quarter marks five years since my first earnings call as CEO of Pathward. Looking back, it's remarkable to reflect on everything the Pathward team has accomplished. We have navigated the challenges of COVID, rebranded the company as Pathward, expanded our executive team, and strategically reshaped our balance sheet, all while evolving our business and strengthening our position as a trusted platform that enables our partners to thrive. Through each chapter, one thing has remained constant, and that's the dedication and commitment of our employees. Our success has always been rooted in our people. Every day, talented employees across Pathward work with customers and businesses to enable financial availability, choice, and opportunity. Their unwavering commitment to true partnership is what has enabled us to adapt, execute, and continue delivering for all of our stakeholders. I'm very proud that we've continued to sustainably grow while staying true to our purpose of powering financial inclusion. That is not a coincidence. Our purpose continues to guide our strategy, and we believe that this diligent focus helps drive long-term value for our shareholders. And while I find tremendous value in times of reflection, I'm even more excited about what lies ahead. We have a strong foundation, a team that embodies our values and is committed to success, as well as a clear strategy to guide us forward. With that, let me spend a few minutes on our strategy. Then I'll provide a quick update on credit before turning the call over to Greg. Fiscal 2026 was another important year of execution for Pathward. They successfully advanced their strategic priorities we set out to accomplish last year, and this was by no means a small feat. We had some major wins across each area, starting with maintaining an optimized balance sheet. Commercial finance growth combined with reductions in our lower yielding securities portfolio reflects our disciplined approach while remaining cognizant of our balance sheet capacity. We deployed capital where we believed to provide us with optionality or generated strong risk adjusted returns. We made significant inroads in the Small Business Administration loan market, moving up within the top 20 SBA 7A program lenders in the country. We continue to make investments in technology, risk, and compliance. We believe these continued investments will allow our partners, both present and future, to deliver with confidence as they leverage our expertise, infrastructure, and collaborative support. The world is only moving faster, and we are proud to enable our partners by offering a broad suite of capabilities. Furthermore, we are very proud to have been recognized by a few different organizations throughout the year for our standout workforce and culture. We believe part of our success can be attributed to our Talent Anywhere approach. Through this talent strategy, we have been very successful in expanding our reach beyond local candidates as a remote-enabled employer and strengthening our ability to meet the evolving needs of our business. The last strategic priority is the client experience. We believe our partners see the value in Pathward's platform and our ability to grow alongside them. Last quarter, we announced that we had renewed our relationship with Clair, a company that has empowered workforce management and payroll platforms to offer early access to earned wages to employees at no cost to employers. This quarter, we are pleased to announce that we've renewed our contract with longstanding partner H&R Block, extending our relationship through mid-July. H&R Block has been a leader in the tax preparation industry for more than 70 years with a deep commitment to their clients, associates, and community. We are excited to continue to support them. We still see significant opportunity in our pipeline with both new and existing partners to build on this momentum by expanding the products and capabilities we deliver. As we look ahead to fiscal 2027, our strategy will remain consistent. We believe the continuity in our strategy reflects the confidence that we have, both in the direction of the business and the progress we have made throughout fiscal 2026. Our focus is now on continuing to execute against these areas and building momentum across the organization. Importantly, we believe our diversified mix of partners, products, and capabilities remains a key differentiator of Pathward. We are not dependent on a single partner, industry, or market, which we believe delivers a resilient business model while providing multiple avenues for growth. Our broad suite of solutions allows us to create opportunities, deepen relationships, and deliver value. As a result, we believe we are well positioned to capitalize on the opportunities in front of us. We continue to work through the renewable energy projects that we mentioned last quarter and still believe we have line of sight to bringing them to completion. While we made significant progress during the quarter, these things take time. We will continue to provide transparency in connection with these credit items. Additionally, we continue to believe that these events are not indicative of a broader systemic issue within the portfolio. Aside from credit, we are very pleased with the results of the year. Now I'd like to turn it over to Greg, who will take you through the details of our financials and fiscal year 2027 guidance.

Gregory Sigrist

Thank you, Brett. We were pleased with the performance during the quarter as our core businesses delivered solid results. Starting with the balance sheet, our Treasury-led model continues to deliver with growth of nearly $6 million in net interest income from our commercial finance business. We also delivered double-digit percentage growth in non-interest income, primarily due to an increase of almost $8 million in card and deposit fee income, the majority of which was driven by growth in the core payments business. Non-interest expense improved in the quarter as a result of disciplined expense management with lower legal and consulting expense. This is partially offset by building and software expense. Additionally, we will continue to make targeted investments in our people, processes, and technology to facilitate evolution and scalability. Aside from the credit items Brett discussed, we are pleased with our full year results and equally important, how our teams delivered them. Their focus, collaboration, and consistent execution throughout the year drove strong performance across the business. Interest income growth in commercial finance was nearly $30 million, driven primarily by an increase in structured finance. Solid partner growth combined with disciplined expense management led to full year net income of $175.7 million or $8.14 of diluted earnings per share. With that, our return metrics remain strong, with a 230 basis point return on average assets and a 32.9% return on average tangible equity. We believe that these results reflect the quality of our business model, discipline of our teams, and consistent execution, not to mention our capacity to generate earnings and to create capital to cover events as they arise. We believe this continues to differentiate Pathward and provide a strong foundation as we enter fiscal 2027. While deposits held on the company's balance sheet at September 30th experienced a modest decrease versus a year ago, we held more than $400 million more in average custodial deposits. As a reminder, we do earn fee income on custodial deposits that is tied to the effective Fed funds rate. Average partner deposits were strong in the quarter, giving us the ability to generate additional servicing fee income. Loans and leases at September 30th grew 9%. We continue to be successful in growing structured finance, term lending, and SBA and USDA loans, as well as working capital asset-based lending. Adjusted net interest margin improved to 551 basis points in the fourth quarter as we continue to improve our earning asset mix and see the benefit of repricing. Year-over-year loan originations increased from $1.3 billion to $2.2 billion, driven primarily by significant growth in our credit sponsorship business from both a new contract signed last year and expansion with current partners. Regarding credit, the non-performing loans and lease ratio did increase modestly to 5.61% sequentially. While there are always normal flows in and out, the increase was largely attributable to additional work being done to bring certain credits to completion. Net charge-offs were $52 million in the quarter, of which $20.3 million was associated with commercial finance portfolio. We continue to expect credit to normalize in 2027 as we work down our non-performing loans. The strength of our balance sheet, along with our earnings and capital accretion power, allows for return of capital to shareholders. As of September 30th, our liquidity was $3.1 billion, and during the quarter, we were able to repurchase approximately 282,000 shares at an average share price of $88.75. For a total of over 2 million shares, for the year. This leaves 2.8 million shares still available for repurchase under the current stock repurchase program. We are reiterating our fiscal year 2027 guidance range of $9.50 to $10 per share, which includes the following assumptions: No additional rate changes during the year. An effective tax rate of 18 to 22%. Expected secondary market revenues between $5 million to $7 million per quarter, and includes expected share repurchases. Lastly, a comment on expenses. As we have said, we will continue to invest in people, processes, and technology. In prior years, that has largely shown up as an investment ramping throughout the year. For fiscal 2027, we expect those investments to begin in the December quarter. This will manifest as additional hirings in the first quarter that will increase the compensation and benefits run rate earlier in the year, but will still hold the normal seasonal pattern. Similarly, we will continue to use consultants with modestly elevated spend in the first half of the year. This concludes our prepared remarks. Operator, please open the line for questions.

Operator

We will now begin the question and answer session. [Operator Instructions] Your first question comes from Tim Switzer with KBW. Tim, your line is now open. Please go ahead.

質疑応答

Timothy Switzer

Hey, Tim. Sounds like good progress on the partnership side, now it's on H&R Block and Clair and some other ones recently. I'm curious on, you know, where do you think the new partners will be coming from, specific industries and is it more on the credit sponsorship side, embedded finance? You know, the card and debit business. We'd love to get an update there.

Brett Pharr

Yes, so I, I think there's a variety of ways. It's pretty broad. One of the things we could emphasize is our diversified business model and product set. And so it's all of the above we're seeing. And we've said it before, a lot come from potential new partners. And also, an awful lot of our increase in revenue comes from existing partners. But there's not one that I would single out and say that it is a higher percentage of it. This is all about the breadth and depth of our offerings. And our partners really want understand that and be a part of it.

Timothy Switzer

Okay. Um, and do you guys feel like there's any areas right now we need to invest a little bit more in to keep up with the competition in the BaaS and embedded finance space? Where are you directing most of your investment dollars right now?

Brett Pharr

Greg, I'll get you to talk about this a little bit, but I mean, we've said for a while that we've been in our run rate investing in technology and enhancing the infrastructure and the backbone.

Gregory Sigrist

Anything you want to add to that? No, I think that's right. I mean, it's more just staying contemporary with their clients to really help them support their own, you know, endeavors. And as I said in my prepared remarks, we also invest on the risk and compliance side because with the onboarding we've done and just the increase in the volumes today and in the future, we just want to make sure that stays, you know, state of the art and stays at the strength that we've had historically. So that's just an area we want to make sure we stay ahead of.

Timothy Switzer

Okay. That's helpful. And I want to ask a few on the credit side here. With the charge-offs this quarter, and I guess in the last few, which were – some of them were in the renewable energy space, were there any specific verticals or industries that these are concentrated in this quarter?

Brett Pharr

No, none specific that we would call out. Um, and, you know, a lot of this is related to transactions that we've already talked about before as we work through the process. Um, so there's not anything new or any new kind of asset classes that we would bring to the table and say we're seeing things here.

Gregory Sigrist

Yes, and Tim, I think the key point there with Frederick, yes, I think the key point which you really touched on though is that the elevated charge-offs and frankly still the NPL and the NPL ratio, it's concentrated in the credits we've already talked about. And I think importantly, we're making resolutions. You saw the past dues have declined. That's important to see too, and we've not seen any evidence that it's going to be if there's any other issues spreading across the portfolios.

Timothy Switzer

Okay. I mean, I guess with the charge-off this quarter, we still see NPAs staying around the same level. Should we expect further charge-offs? Starting next year what, you know, what kind of assumptions should we have.

Brett Pharr

Keep in mind, and we talked last time about a number of um the projects that we were going to take over and have to lead to completion. That means you fund the projects and then eventually complete them, get them producing, and then you sell them. Well, for the existing portfolio, when you fund some of that construction, those dollars go into non-accrual until you sell the product.

Gregory Sigrist

Yes, but specifically on charge off the ten, you have to separate and differentiate the charge offs from when you take and how that kind of dovetails with the lifecycle Brett just mentioned, right? The charge offs you're seeing a result of, you know, specific reserves that we've taken in prior quarters, and you have to differentiate that against our ongoing credit cost of, you know, credit, right? Which is what we provision for. You know, we talked about last quarter. We see credit normalizing into 2027 and what that really means is the cost of credit which is our credit provisioning is getting I feel it's going to migrate back to our historic levels. The charge offs are a bit more episodic and they're tied to the idiosyncratic loans that we've talked about over the last year, frankly, but it's a byproduct of just the natural progress of working through some of those.

Timothy Switzer

Okay, all right. My last one here, and Greg, you just touched on this, but what kind of provision expense expectations are embedded within your guidance for 27?

Gregory Sigrist

Yes, I touched on it last quarter too, and where I said we would normalize back to kind of the historic run rate. And I think I said this last quarter too. What that really means is if you focus solely on the commercial finance portfolio, the historic ACL ratio has been, you can see it in the deck, it's in there, but it could be down roughly 120 to 130 basis points is probably a normalized level. I think that's the starting point. And then anything up or below that's really just going to be a more of a function of the mix of new production. What you saw this quarter, frankly, the provisioning in the quarter is really just provisioning for new, you know, for new for loan growth. Upon what that mix was. And that's the way I kind of see next year playing out is more akin to that 120 to 130 basis point range.

Timothy Switzer

Okay, since you're already near those levels, it seems like the provision going forward to be more for loan growth rather than credit deterioration.

Gregory Sigrist

Based upon the facts we have right now, that's exactly the way we're feeling about it.

Timothy Switzer

All right. Good to hear. Thanks for taking all my questions.

Operator

Thank you. Your next question from the line of Joseph Yanchunis with Raymond James. Your line is now open. Please go ahead.

Joseph Yanchunis

I'm doing well. So new originations, you know, increased pretty meaningfully this quarter, you know, largely driven by credit sponsorship and you'd reference growth with existing partners. How much of that growth represents a new normalized run rate versus potentially some acceleration-specific programs? I'm just kind of curious what you're seeing in the pipeline today that gives you confidence in that continued growth.

Gregory Sigrist

Yeah, I believe that really represents the new run rate based upon the programs and the partners we've announced and onboarded. And I think, you know, we tend to ramp into those programs more rapidly than an issuing partner or acquiring is pretty rapid, too. But I think that's the new normal. And from here, it's really just growth in partner programs and then growth in the partner base.

Joseph Yanchunis

That's great to hear. Um and then Brett, you know, having completed five years of earnings calls for Pathward and congratulations for that, I was hoping you could talk a little bit about the next five years. And what do you think the themes will be in the BaaS space and, you know, how do you expect consolidation in the regulatory environment will play out?

Brett Pharr

Well, so I think it's a broad set of things are there. Obviously there's lots and continual change in all kinds of payments products. I mean, if you think about where we were five years ago and the products that we offered and provided and then what we offer today is vastly different. And I think five years from now, there will be a lot more of things that are, let's say, not just issuing and interchange related. Uh and that's going to continue to advance. Some of which are the products we're already doing, some of which are products that we don't even know about or that are coming. We've got to let all that play out. We've got to let AI play out. That's going to have a material impact on our industry. I think it's going to be more on the customer front end ultimately and how that shows up. So that's going to be a big part of think of five years out. And I think we're in a period of time where some are looking at vertical integration. We're going to see if that's right or wrong, and I'm not sure. I think there are pros and cons to that, and so I think we'll watch that play out. That won't be five years, that'll be two years, and we'll watch as that plays out. You know, very optimistic always been about third party delivery and about people being creative, innovative, entrepreneurial, upfront with the customer, and then us providing the infrastructure. The backbone behind the customer service is obviously wrapped in risk and compliance. And I just think that's a fabulous business model for whatever is coming. So excited about the future and you know, we lead based on what our partners lead into. And so we watch them and what they're doing. Then we help sort for them to do that and often co-create and I think we'll keep doing that.

Joseph Yanchunis

You mentioned the budget and your answer then, I've been on the past probably five, six, seven calls with you guys. With more fintech, chartered and banks, you mentioned the Bertel integration, your answer there, and I believe this question has come up on the past probably five or six earnings calls with you guys. With more fintechs considering their own charters and more banks building BaaS capabilities, the hardest aspect for a competitor to replicate? You know, do you think it's the regulatory infrastructure, product breadth, technology, or just the relationships?

Brett Pharr

It's the culture. Culture matters and there is a distinct reason that banks do banking, and our program managers do what they do. And by the way, you can't hire culture. You have to spend a lot of time creating it. And I think the best business model has worked because the banks had the bank culture and the program managers had the program manager culture. I think we've already had in the past household names that you know that tried vertical integration and failed. Now some of them as we go forward, we'll figure it out. Some of them have narrow based charters that can let him do some things, and so it won't be quite as hard, but the full, the vertical integrated model, I think it's hard to get up every day and have a culture that meets the needs of a banking infrastructure in the background and all the things you need on the front end as a program manager. And as I said, you can't hire that.

Gregory Sigrist

That's a good point.

Joseph Yanchunis

And one more for me here to bring Greg kind of back in the fold. The securities portfolio continues to wind down. Now it's under $1.2 billion. You have about another $150 million cash flowing in fiscal 2027.

Gregory Sigrist

Where would you like to see the portfolio settle out? You know, we still keep it there largely as a reservoir of liquidity just in case we need it. You know, it's pledged. We borrow against it. That's part of, you know, how we fund tax season. But the reality is, I think we can let that run down to the $800 million to perhaps a billion dollar range, and it'll settle out there. You know, we're in that environment, though, where rates are. Said, historically, we'll take that $140 or $150 million of principal off the portfolio and reinvest it back into the loan book. The reality is, though, there's probably a benefit for us to buy a few securities along the way, just to give us, you know, in the event there is a down rate scenario, a bit of coverage on the OCI front. I wouldn't say it's going it's going to be a lot, but I would say there might be a little bit there. But that's still, in my view, we're going to normalize around that $800 million to a billion.

Joseph Yanchunis

All right, great. Well, thank you for taking my questions.

Gregory Sigrist

Thanks, Joe.

Operator

Your next question from the line of Manuel Navas with Piper Sandler. Your line is now open. Please go ahead.

Manuel Navas

With this higher rate environment, can you kind of talk through – and also you had a NIM rebound this quarter. Can you just kind of talk through what are some of the expectations from the September hike? How a potential December hike could impact your EPS trajectory. And also maybe touch on is this how this could show up potentially down the road in credit?

Gregory Sigrist

Let me tackle the first one first, then I may hand off to Brett so we can do a little tag team here. But I'll break it down maybe just broadly on the adjusted net interest margin, how I think about headwinds, tailwinds there. And you touched on the September hike, the possibility of a December hike. But more broadly, we have been fairly neutral from an asset liability perspective. So each 25 basis point rate cut or increase has been pretty close to, pretty negligible. The balance of 2026 did shift a little bit of new production toward floating rate loans, particularly tied to prime. So that's put us at a moment in time at a slightly asset sensitive position. So from this point, if we have a 25 basis point raise in December or the next meeting, perhaps $2 million pre-tax, maybe a little bit more for the full year. But I point out at this point in time because a lot of that new production came from the uh the renewable space, from the infrastructure space, and it's in the construction loans. And I think we're probably at a high water market where those are going to be. So over time, as that portfolio comes down, and also the Treasury teams looking over the next, you know, notifying timeline. But I think we'll get the assets back to neutral, you know, certainly over the next couple of years. I don't think there's a long term trend. I think it's a short term trend, but it's a trend that's helpful at this point in time, just given where the rate environment's going. I think the other tailwind, though, we've talked about this consistently, is just the middle part of the curve. You know, roughly 35% of the of the book and new production is fixed rate loans, which price off of the three to five year part of the curve. And with the curve, you know, five year had, you know, touched 5% and backed off a little bit. You think about the loan portfolio, which is currently book yielding around 3% and you assume that we're taking $100 or $150 million and and recycling that's a pretty large tailwind for us as we continue to do that. Not to mention the fixed rate loans in the book that are continuing to reprice because some of those still came on pre 2022, which has been really great. You're obviously over time going to have some offsets. You know, cost of deposits will go up a little bit, but it's going to be more than offset with the rate environment. Did that make sense? I'll assume yes, because you might be on mute.

Brett Pharr

I'll hand it over to Brett. Yeah, I think the other part of your question is really is what does higher rates for longer mean from a credit perspective or an economic standpoint? You've got to remember our asset-based lending and working capital portfolio actually benefits during that time because the commercial traditional C&I borrower that was at a high level that bank now is even being either pushed out of the bank or cannot get credit and so then they start looking for alternatives and that's where we step in and actually during higher rate and economic stressed environments where we get the better quality credit in the asset based lending and working capital portfolio. So I only see that kind of. It's kind of a dark view, but I only see that as a positive. When the economy slows down, we'll pick up more opportunities in that space. Higher interest rates do have an impact in the energy infrastructure portfolio because you have to use a higher capital cost. It impacts the value of the tax equity throughout the life cycle of the project, so more equity will have to come in. But these projects have such high rate of return that the incremental impact of the interest rates is not going to stop the projects. I'll just reframe the capitalization that goes in up front. So I don't expect there to be much there. The, you know, the consumer loan originations, um, you know, our partners are operating in a space that's not the credit. Uh, and as I often say, these people are always in a recession. Uh, and so the interest rate costs are not going to be very material in that space. And they may be repaying it with benefits payments rather than income payments, but they'll repay it anyway because of where they live and the and you know, the part of the economy that you're in. So, I'm not worried about an economic downturn. I actually think our credit. are built for those kinds of things they assume an economic downturn.

Manuel Navas

Is there a sort of a certain level of rate increases that you think would start impacting the demand for your product, your partner's origination levels, and where it would impact some credit. Is it like 100 basis points from here? Just trying to ballpark that.

Brett Pharr

Yeah, I mean, you know, let's suppose that prime goes up 200 basis points, that is going to slow down, um, commercial business. And that is exactly where we would excel in the working capital and the asset-based lending. And as I said, the 200 basis point increase in rates in the the alternative energy electricity infrastructure arena, it will change the economics, but because they're so rich, there will still be valid projects. You'll just structure them differently. So I don't expect that we will be impacted by a slowdown in that regard. In fact, in some ways we might be positively impacted by it.

Manuel Navas

Okay, that's helpful. I appreciate that. Just about thoughts on your partner population. Do you have a sense of any that are actively pursuing national security?

Brett Pharr

The national charters? We have had conversations where a small subset of them have talked about it and may be pursuing it. But it's one of things you gotta remember. If you're a private equity firm, is very difficult to become a bank holding company. And so there's an awful lot of them that are in that category. And it may be an exception here or there, but there's not any circumstance where we're having any kind of material threat from a partner because of it.

Gregory Sigrist

And part of that is just the lack of concentrations in that partner base in the first place.

Manuel Navas

That was going to be another question. I appreciate that, your commentary that you're not dependent on any one customer. Do you have a sense for at some sort of metric that you can track that? What's like your top three, top five, top 10, uh, partners.

Brett Pharr

Yes, so let me give you this number. No partner represents more than 5% of Pathward revenue.

Manuel Navas

Okay, I appreciate that. Is um one thing, one area that's been uh quite strong is that is the card. It kind of bounces around quarter to quarter, but there's very solid year-over-year growth. How should I think about that fee line over the next year?

Gregory Sigrist

Yes, if I heard the question on the card fee income line, I mean, Karen, I'm going to ask you to CD off balance sheet.

Manuel Navas

Yep, that I, yes.

Gregory Sigrist

Yes. I think really what you're looking at right now is really sets the mark for going forward, and I think any variations from there are really just going to be volume based from here with the partners we're onboarding, onboarding the pace, and the like. So I think what you're seeing now, but keep in mind too, there's always seasonality in that line as we bring on deposits in the fourth quarter, spin them out in the March quarter. The quarter on the second quarter. So you're going to see the normal seasonality in that, but there's always kind of a you know, the ebb and flow, there's always a low watermark as the tide comes in and out.

Manuel Navas

And then just one kind of wrap up question on credit for me. How do you view, you have the rest of the tax services, kind of you ended that for the year, kind of the net charge-offs there. How do you kind of view that next year? I feel like you've talked in the past about how that business performed better on credit. Do you have any other kind of look back on that that you can apply for next year in your in terms of the tax services business itself.

Brett Pharr

So I think we've said that for the last several years we have continued to improve our underwriting, and that has shown up in the numbers. We'll maintain the gains that we have gotten, but I doubt we'll continue to improve at the same degree every year. So I would hope it is some better, but not as much better as it has been in past years.

Manuel Navas

Okay, I appreciate it.

Operator

Thank you. Your next question from the line of Tim Switzer with KBW. Your line is now open. Please go ahead.

Timothy Switzer

Hey, thanks for letting me back through the queue. Greg, you actually just kind of answered one of the questions I had in terms of the seasonality. Obviously, we're going to get the bump in first quarter next quarter, but has the seasonality for the rest of the quarter changed at all? Like, for example, a really strong fourth quarter, where it's typically be, you know, the down mid to high single digits, at least historically. It has growth from any individual partner or like the onboarding of new partners change that at all.

Gregory Sigrist

I think it's really the onboarding of, you know, new products and then new partners, new products and just that continued March of, you know, multi-threaded opportunities. That flattens out the seasonality a bit. I think with the prepaid card business though, you still see. You still see deposits grow in the December quarter, and then you see the fee income, core fee income in the March quarter. I think you'll always see that. But I think the continued march toward diversification of both products and partners helps to take away some of that seasonality, particularly in the fourth quarter. I think that's what you've seen when you track back, There is one nuance though. I mean, we talked about this last quarter a little bit. You know, we do receive some contractual, you know, volume based incentive payments, which can hit one quarter versus the next. And that was kind of the explanation last quarter for why when you did the year over year, fiscal 2024 was a little above, 2025 is a bit above fiscal 2026. For full year basis, we feel like we're going to get those incentive payments, but that could skew one quarter to the next. That would be the only caveat to what I just said.

Timothy Switzer

Got you. Okay, that that makes sense. Just qualitatively, are you able to kind of parse apart the acceleration we've seen year over year in fiscal 2026 on the card fees? Like how much of that is driven by new programs, new products, new partners versus, um, all older ones that were already in place in 2025.

Gregory Sigrist

I think you're always going to see for the foreseeable future. Growth year over year is still going to be driven more by existing partners. And I think when you think back over the last four to six or eight quarters, it's um a combination of just, you know, their putting on new programs, but also adding new multi-threaded products to the mix. And I think that's still, historically, that's probably been 75% to 80% of the And part of that is, you know, the new partners typically take a bit more time to onboard plus, part of which is going through the third party onboarding process, which takes some time. And we talked about how once we've gone through that process, it's a lot easier then to do multi threaded with new partners. But when I think out the next 12 months, I think it's still revenue growth still largely going to come from perhaps a bit more uplift from new products with those partners, but brand new partners typically, unless it's you know credit sponsorship, which we can get onboarded a little faster. Acquiring you can get those ramping a little faster, but if it's issuing business that typically takes longer. It's usually an uphill, part of the issuing they would have to ramp into those new programs, which really means you're talking the subsequent fiscal year before you really start to see uplift from that. But you know the partners in the pipelines have been talking about for new partner growth that is just tailwind for us, you know, exiting 2027 and going into 2028 and 2029.

Timothy Switzer

Got you. Okay. Thank you so much.

Gregory Sigrist

You're welcome, Tim. Thanks for coming back.

Operator

We have reached the end of the Q&A session. I will now turn the call back to Brett Pharr, CEO, for closing remarks.

Brett Pharr

Thank you for joining the call this evening. We hope you have a good night.

Operator

This concludes today's call. Thank you for attending. You may now disconnect.

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