패스워드 파이낸셜(CASH) 2026 회계연도 4분기 실적 컨퍼런스 콜: 2027 회계연도 EPS 가이던스 재확인

패스워드 파이낸셜(NASDAQ: CASH)은 상업 금융 수익 증가, 카드 및 예금 수수료 호조, 지속적인 대출 성장에 힘입어 2026 회계연도를 마감했다. 신용 품질이 투자자들의 주된 관심사로 남아 있는 가운데, 경영진은 2027 회계연도 희석 주당순이익(EPS) 가이던스를 9.50달러에서 10.00달러로 재확인했다.

핵심 요약

• 2026 회계연도 당기순이익은 1억 7,570만 달러(희석 주당 8.14달러)를 기록했다. 평균자산수익률은 2.30%, 평균유형자기자본이익률은 32.9%에 달했다.
• 9월 30일 기준 대출 및 리스는 9% 증가했다. 전년 대비 신규 대출 취급액은 주로 신용 공여 성장에 힘입어 13억 달러에서 22억 달러로 늘었다.
• 4분기 조정 순이자마진은 수익 자산 구성 개선과 대출 금리 재산정에 힘입어 5.51%로 개선되었다.
• 부실 대출 및 리스 비율은 전분기 대비 상승한 5.61%를 기록했다. 분기 순손실처리액은 5,200만 달러로, 이 중 2,030만 달러는 상업 금융 관련이었다.
• 경영진은 추가 금리 변동이 없고 실효 세율 18%~22%, 분기별 이차 시장 매출 500만~700만 달러를 전제로 2027 회계연도 희석 EPS 가이던스를 9.50~10.00달러로 재확인했다.
• 패스워드는 단일 파트너가 전체 매출에서 차지하는 비중이 5%를 넘지 않는다며 파트너 기반의 다변화를 강조했다.

핵심 재무 데이터

사업 및 영업 실적

상업 금융 부문은 분기 순이자이익을 거의 600만 달러 늘렸다. 연간으로는 구조화 금융의 호조에 힘입어 상업 금융 이자수익이 거의 3,000만 달러 증가했다.

비이자수익은 4분기에 두 자릿수 성장률을 기록했다. 카드 및 예금 수수료 수익은 핵심 결제 사업의 성장에 힘입어 800만 달러 가까이 증가했다.

9월 30일 기준 패스워드 재무상태표상의 예금은 소폭 감소했으나, 평균 수탁 예금은 전년 동기 대비 4억 달러 이상 증가했다. 회사는 실효연방기금금리에 연동하여 수탁 예금 수수료 수익을 창출한다.

패스워드는 구조화 금융, 기한부 대출, SBA 및 USDA 대출, 운전자금 자산기반대출을 지속적으로 확대했다. 또한 회사는 SBA 7(a) 대출 프로그램에서 상위 20개 대출 기관에 이름을 올렸다.

신규 대출 취급액 증가의 주요 동인은 신용 공여였다. 경영진은 최근 추가 및 확장된 파트너 프로그램을 기반으로 이 같은 높아진 취급액 수준이 새로운 경상 기준이 되었다고 밝혔다.

패스워드는 H&R 블록과의 오랜 파트너십을 7월 중순까지 갱신했다. 또한 이전에 발표한 클레어와의 파트너십 갱신도 강조했다. 경영진은 신규 파트너 확보와 기존 파트너의 제품 채택 확대 모두에서 성장이 지속되고 있다고 전했다.

영업비용은 건물 및 소프트웨어 비용 증가로 일부 상쇄되었으나 법률 및 컨설팅 비용 감소의 혜택을 입었다. 패스워드는 기술, 리스크 관리, 준법감시, 인적 자원, 프로세스 분야에 집중적인 투자를 이어갈 계획이다.

경영진 가이던스

패스워드는 2027 회계연도 희석 EPS 가이던스를 9.50~10.00달러로 재확인했다. 이 전망치는 다음 항목을 전제로 한다:

• 해당 회계연도 동안 추가 금리 변동이 없을 것.
• 실효 세율 18%~22%.
• 분기별 이차 시장 매출 500만~700만 달러.
• 예상되는 자사주 매입.

경영진은 2027 회계연도 투자가 12월 분기에 시작될 것으로 예상한다. 1분기 채용으로 인해 연초 보수 및 복리후생비 경상 비용이 증가할 것으로 보이며, 컨설팅 비용은 상반기 동안 소폭 높은 수준을 유지할 것으로 예상된다.

회사는 부실 대출이 정리됨에 따라 2027 회계연도 동안 대손 비용이 정상화될 것으로 기대한다. 경영진은 신규 취급 자산 구성에 따라 달라질 수 있지만, 상업 금융의 정상화된 과거 대손충당금 설정률을 약 120~130bp 수준으로 제시했다. 현재 여건을 감안할 때 향후 충당금 적립은 추가적인 신용 악화보다는 주로 대출 성장에 의해 주도될 전망이다.

유가증권 포트폴리오는 시간이 지남에 따라 약 8억~10억 달러 수준에서 안정을 찾을 것으로 예상된다. 경영진은 2027 회계연도 중 만기 상환되는 원금 1억 4,000만~1억 5,000만 달러가 주로 대출 포트폴리오로 재투자될 것으로 보고 있으나, 금리 하강 국면 방어를 위해 제한적인 유가증권 매입이 이루어질 수도 있다.

리스크 및 주시해야 할 분야

신용 품질은 여전히 단기적인 주요 우려 사항이다. 부실 대출 및 리스 비율은 5.61%로 상승했고, 손실처리액도 높은 수준을 유지했다. 경영진은 이러한 문제가 전반적인 포트폴리오 악화를 나타내기보다는 재생 에너지 프로젝트 등 이전에 논의된 대출 건에 집중된 것이라고 설명했다.

일부 재생 에너지 프로젝트는 완공 및 매각 전까지 추가 자금 조달이 필요하다. 해당 건설 선수금은 기초 프로젝트가 매각될 때까지 미수이자 계정으로 분류되며, 이로 인해 정리 과정에서 보고되는 부실 자산 규모가 높은 수준을 유지할 수 있다.

금리 상승은 자본 비용을 높이고 추가 자본 납입을 요구함으로써 재생 에너지 프로젝트의 경제성을 변화시킬 수 있다. 그럼에도 불구하고 경영진은 프로젝트의 수익성 덕분에 전반적으로 구조 개편을 통해 실행 가능한 거래가 진행될 수 있을 것이라고 밝혔다.

회사는 계약상 취급액 연동 인센티브 지급 시기가 분기별로 변동될 수 있어 연간 전체 지급액은 비교적 안정적이더라도 카드 및 예금 수수료 수익에 변동성이 발생할 수 있다고 덧붙였다.

애널리스트 Q&A 주요 내용

경영진은 패스워드의 성장 파이프라인이 신용 공여, 임베디드 파이낸스, 카드 발급, 가맹점 매입 및 기타 파트너 주도 상품에 걸쳐 있다고 말했다. 신규 발급 프로그램은 일반적으로 더 긴 온보딩 및 활성화 기간이 필요하기 때문에 기존 파트너가 단기 매출 성장의 가장 큰 원천으로 유지될 것으로 기대된다.

경쟁력 있는 입지에 대해 브렛 파르 CEO는 경쟁사들이 복제하기 가장 어려운 역량으로 기업 문화를 꼽았다. 그는 은행 인프라와 프로그램 관리가 서로 다른 운영 문화를 필요로 하므로 완전한 수직적 통합이 어렵다고 주장했다.

패스워드는 변동금리 대출 신규 취급이 증가함에 따라 현재 자산 민감형 상태를 약간 띠고 있다. 그레고리 시그리스트 CFO는 경영진이 시간이 지남에 따라 재무상태표가 중립 쪽으로 이동할 것으로 예상하면서도, 25bp 금리 인상이 연간 세전이익을 약 200만 달러 이상 증가시킬 수 있다고 추정했다.

경영진은 경기 둔화 상황에서 기존 상업 차주들이 대체 자금 조달을 모색함에 따라 운전자금 및 자산기반대출 부문의 기회가 확대될 수 있다고 전했다. 또한 파트너 기반이 다변화되어 있고 5% 이상의 매출을 차지하는 파트너가 없기 때문에 파트너들이 자체 은행 인가를 추진하는 데 따른 실질적인 위협은 없다고 덧붙였다.

실적 발표 컨퍼런스 콜 전문

전체 실적 발표 컨퍼런스 콜 녹취록

경영진 발표

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.

질의응답

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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