PATHWARD FINANCIAL, INC.
For the period ended Mar 31, 2026. Filed May 7, 2026.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2026 · Filed May 7, 2026
CASH$76.26-0.5%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2025-12-31; filed 2026-02-05.
0000907471-26-000011
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2026-03-31; filed 2026-05-07.
0000907471-26-000025
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 83 previous paragraphs and 97 current paragraphs.
45 unchanged; 33 reworded; 17 added; 4 removed; 1 previous and 2 current paragraphs rearranged.
Tables are not compared: 6 previous and 7 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (17)
Current report
Company Highlights
Current report
•The Company's subsidiary Pathward®, N.A. announced it became Certified™ by Great Place To Work® for the fourth year in a row. This year, 88% of employees surveyed said Pathward is a Great Place To Work® – 31 points higher than the typical U.S. company. Great Place to Work® describes itself as the global authority on workplace culture, employee experience, and the leadership behaviors proven to deliver market-leading revenue, employee retention and increased innovation.
Current report
•Total revenue was $276.3 million, which was driven by a 9% increase in noninterest income. This was primarily driven by growth in card and deposit fees of 22%, refund advance and other tax fee income of 18%, and refund transfer product fees of 7%. Noninterest income represented 55% of total revenue.
Current report
•New loan originations, excluding tax services, increased from $902 million to $1.31 billion, primarily driven by the new contract announced during fiscal 2025 within consumer finance.
Current report
Tax Season
Current report
All reported numbers are for the six months ended March 31, 2026 and are compared to the same fiscal period in the prior year.
Current report
Total tax services product revenue was $95.7 million, an increase of 13% compared to the prior year. This was driven by an increase in the number of refund advances, as well as higher origination volumes and an increase in refund transfers. Total tax services product fee income increased by $10.6 million and net interest income on tax services loans increased $0.2 million. Total tax services product expense increased $0.8 million when compared to the prior year.
Current report
Provision for credit losses for the tax services portfolio decreased $4.4 million when compared to the prior year as a result of the continued work on enhancing underwriting models and data analytics capabilities.
Current report
Total tax services product income, net of losses and direct product expenses, increased 30% to $62.0 million from $47.6 million. This increase is the result of significant work to grow this business, increase market share and evolve the underwriting model.
Current report
For the 2026 tax season through March 31, 2026, the Company originated $1.87 billion in refund advance loans compared to $1.66 billion during the 2025 tax season.
Current report
Net interest income for the second quarter of fiscal 2026 was $125.1 million, a decrease of 8% compared to the same quarter in fiscal 2025, which was primarily driven by decreases in interest income of $12.8 million on the consumer finance portfolio and $4.2 million of cash and fed funds sold. Interest income on the consumer finance portfolio was impacted by the sale of a portfolio in October 2025 that was previously accounted for using a gross accounting methodology, and therefore, recorded at higher yields with offsetting entries not included in net interest income. Partially offsetting that decrease, interest income from commercial finance loans and leases increased $8.4 million over that same period.
Current report
For the six months ended March 31, 2026, net interest income was $244.5 million, a decrease of 7% compared to the same period in the prior fiscal year.
Current report
For the six months ended March 31, 2026, NIM was 6.78%, a decrease of 46 basis points from 7.24% compared to the same period in the prior fiscal year.
Current report
The Company recognized a provision for credit losses of $48.8 million for the six months ended March 31, 2026, compared to $53.9 million for the comparable period in the prior fiscal year. The decrease was primarily due to decreases in provision for credit losses in the consumer finance portfolio of $12.2 million and tax services portfolio of $4.4 million, partially offset by an increase in the commercial finance portfolio of $11.6 million. The Company recognized net charge-offs of $3.6 million for the six months ended March 31, 2026, compared to net charge-offs of $22.6 million for the six months ended March 31, 2025. Net charge-offs attributable to the commercial finance portfolio and the consumer finance portfolio for the six months ended March 31, 2026 were $13.2 million and $2.6 million, respectively, while net recoveries of $12.2 million were recognized in the tax services portfolio. Net charge-offs attributable to the commercial finance portfolio and the consumer finance portfolio were $14.9 million and $14.0 million, respectively, for the same six months of the prior year, while net recoveries of $6.3 million were recognized in the tax services portfolio.
Current report
Fiscal 2026 second quarter noninterest income increased 9% to $151.2 million, compared to $138.5 million for the same period of the prior year. The increase was driven by increases in refund advance and other tax fee income, card and deposit fees, and refund transfer product fees, partially offset by decreases in secondary market revenue and rental income. Secondary market revenue in the prior year period was elevated by the gain from a portfolio sale within working capital. That gain was partially offset by a loss on sale of securities and a loss on divestiture that were also recognized in the prior year period.
Current report
Noninterest income for the six months ended March 31, 2026 increased to $204.9 million from $195.9 million for the same period of the prior year.
Current report
Noninterest expense for the six months ended March 31, 2026 decreased to $270.7 million from $276.0 million for the same period of the prior year.
Removed paragraphs (4)
Previous report
•Total revenue for the first quarter was $173.1 million. Net interest income on commercial finance loans increased $9.2 million reflecting the ongoing balance sheet optimization strategy.
Previous report
•New loan originations during the quarter increased from $1.38 billion to $1.89 billion, driven by increases in consumer and commercial finance. The increase in consumer loan originations was primarily due to the new contract announced during fiscal 2025 and growth with current partners.
Previous report
Net interest income for the first quarter of fiscal 2026 was $119.3 million, which was a decrease of 5% compared to the same quarter in fiscal 2025.
Previous report
Fiscal 2026 first quarter noninterest income decreased 6% to $53.8 million, compared to $57.4 million for the same period of the prior year. The decrease in noninterest income when comparing the current period to the same period of the prior year was primarily driven by decreases in rental income, other income, and gain on sale of other, partially offset by an increase in card and deposit fee income. Additionally, during the prior year period, the Company recognized a $16.4 million gain on divestiture which was almost completely offset by a loss on sale of securities of $15.7 million.
Reworded paragraphs (33)
Previous wording
You can identify forward-looking statements by words such as “may,” “hope,” “will,” “should,” “expect,” “plan,” “anticipate,” “intend,” “believe,” “estimate,” “predict,” “potential,” “continue,” “could,” “future,” "target," or the negative of those terms, or other words of similar meaning or similar expressions. You should carefully read statements that contain these words because they discuss our future expectations or state other “forward-looking” information. These forward-looking statements are based on information currently available to us and assumptions about future events, and include statements with respect to the Company’s beliefs, expectations, estimates, and intentions, which are subject to significant risks and uncertainties, and are subject to change based on various factors, some of which are beyond the Company’s control. Such risks, uncertainties and other factors may cause our actual growth, results of operations, financial condition, cash flows, performance and business prospects and opportunities to differ materially from those expressed in, or implied by, these forward-looking statements. Such statements address, among others, the following subjects: future operating results, including our performance expectations; progress on key strategic initiatives; expected results of our partnerships; impacts of our improved data analytics, underwriting, and monitoring processes; expected nonperforming loan resolutions and net charge-off rates; the performance of our securities portfolio; the impact of card balances related to government stimulus programs; customer retention; loan and other product demand; new products and services; credit quality; the level of net charge-offs and the adequacy of the allowance for credit losses; and technology. The following factors, among others, could cause the Company's financial performance and results of operations to differ materially from the expectations, estimates, and intentions expressed in such forward-looking statements: maintaining our executive management team; expected growth opportunities may not be realized or may take longer to realize than expected; our ability to successfully implement measures designed to reduce expenses and increase efficiencies; changes in trade, monetary, and fiscal policies and laws, including actual changes in interest rates and the Fed Funds rate and changes in international trade policies, tariffs and treaties affecting imports and exports, and their related impacts on macroeconomic conditions, customer behavior, funding costs and loan and securities portfolios; changes in tax laws; trade disputes, barriers to trade or the emergence of trade restrictions; the strength of the United States' economy, and the local economies in which the Company operates; adverse developments in the financial services industry generally such as bank failures, responsive measures to mitigate and manage such developments, related supervisory and regulatory actions and costs, and r…
Excerpt shortened here; the source contains the full paragraph.
Current wording
You can identify forward-looking statements by words such as “may,” “hope,” “will,” “should,” “expect,” “plan,” “anticipate,” “intend,” “believe,” “estimate,” “predict,” “potential,” “continue,” “could,” “future,” "target," or the negative of those terms, or other words of similar meaning or similar expressions. You should carefully read statements that contain these words because they discuss our future expectations or state other “forward-looking” information. These forward-looking statements are based on information currently available to us and assumptions about future events, and include statements with respect to the Company’s beliefs, expectations, estimates, and intentions, which are subject to significant risks and uncertainties, and are subject to change based on various factors, some of which are beyond the Company’s control. Such risks, uncertainties and other factors may cause our actual growth, results of operations, financial condition, cash flows, performance and business prospects and opportunities to differ materially from those expressed in, or implied by, these forward-looking statements. Such statements address, among others, the following subjects: future operating results, including our performance expectations; progress on key strategic initiatives; expected results of our partnerships; impacts of our improved data analytics, underwriting, and monitoring processes; expected nonperforming loan resolutions and net charge-off rates; the performance of our securities portfolio; the impact of card balances related to government stimulus programs; customer retention; loan and other product demand; new products and services; credit quality; the level of net charge-offs and the adequacy of the allowance for credit losses; and technology, including impacts of technology investments. The following factors, among others, could cause the Company's financial performance and results of operations to differ materially from the expectations, estimates, and intentions expressed in such forward-looking statements: maintaining our executive management team; expected growth opportunities may not be realized or may take longer to realize than expected; our ability to successfully implement measures designed to reduce expenses and increase efficiencies; changes in trade, monetary, and fiscal policies and laws, including actual changes in interest rates and the Fed Funds rate and changes in international trade policies, tariffs and treaties affecting imports and exports, and their related impacts on macroeconomic conditions, customer behavior, funding costs and loan and securities portfolios; changes in tax laws; trade disputes, barriers to trade or the emergence of trade restrictions; the strength of the United States' economy, and the local economies in which the Company operates; adverse developments in the financial services industry generally such as bank failures, responsive measures to mitigate and manage such developments, related superv…
Excerpt shortened here; the source contains the full paragraph.
Previous wording
The following discussion focuses on the consolidated financial condition of the Company at December 31, 2025, compared to September 30, 2025, and the consolidated results of operations for the three months ended December 31, 2025 and 2024. This discussion should be read in conjunction with the Company’s consolidated financial statements, and notes thereto, for the fiscal year ended September 30, 2025 and the related management's discussion and analysis of financial condition and results of operations contained in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2025.
Current wording
The following discussion focuses on the consolidated financial condition of the Company at March 31, 2026, compared to September 30, 2025, and the consolidated results of operations for the three and six months ended March 31, 2026 and 2025. This discussion should be read in conjunction with the Company’s consolidated financial statements, and notes thereto, for the fiscal year ended September 30, 2025 and the related management's discussion and analysis of financial condition and results of operations contained in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2025.
Previous wording
Financial Highlights for the 2026 Fiscal First Quarter
Current wording
Financial Highlights for the 2026 Fiscal Second Quarter
Previous wording
•Annualized return on average assets was 1.87% and return on average tangible equity was 26.72%, both improvements over the prior year period.
Current wording
•Annualized return on average assets was 3.56% and return on average tangible equity was 54.41%.
Previous wording
•The Company repurchased 651,804 shares of common stock at an average share price of $72.07. As of December 31, 2025, there were 4,286,012 shares available for repurchase under the current common stock share repurchase program.
Current wording
•The Company repurchased 855,201 shares of common stock at an average share price of $84.15. As of March 31, 2026, there were 3,430,811 shares available for repurchase under the current common stock share repurchase program.
Previous wording
At December 31, 2025, the Company’s total assets increased to $7.56 billion compared to $7.17 billion at September 30, 2025, primarily due to growth of $317.9 million in loans and leases and $210.6 million in cash and cash equivalents, partially offset by reductions of $91.5 million in loans held for sale, $18.7 million in other assets and $17.8 million in debt securities AFS.
Current wording
At March 31, 2026, the Company’s total assets decreased to $7.11 billion compared to $7.17 billion at September 30, 2025, primarily due to reductions of $126.3 million in loans held for sale, $56.5 million in debt securities AFS, $55.3 million in other assets, and an increase of $45.0 million in allowance for credit losses, partially offset by growth of $202.3 million in loans and leases and $37.0 million in cash and cash equivalents.
Previous wording
Total cash and cash equivalents were $331.2 million at December 31, 2025, increasing from $120.6 million at September 30, 2025. The Company maintains its cash investments primarily in interest-bearing overnight deposits with the FHLB of Des Moines and the FRB. At December 31, 2025, the Company did not have any federal funds sold.
Current wording
Total cash and cash equivalents were $157.6 million at March 31, 2026, increasing from $120.6 million at September 30, 2025. The Company maintains its cash investments primarily in interest-bearing overnight deposits with the FHLB of Des Moines and the FRB. At March 31, 2026, the Company did not have any federal funds sold.
Previous wording
The Company's investment security balances at December 31, 2025 totaled $1.34 billion, as compared to $1.36 billion at September 30, 2025, due to maturities and principal pay downs. The Company’s portfolio of securities customarily consists primarily of MBS, which have expected lives much shorter than the stated final maturity, non-bank qualified obligations of states and political subdivisions, which mature in approximately 15 years or less, and other tax exempt municipal mortgage related pass through securities which have average lives much shorter than their stated final maturities. During the three months ended December 31, 2025, the Company made no purchases of investment securities.
Current wording
The Company's investment security balances at March 31, 2026 totaled $1.30 billion, as compared to $1.36 billion at September 30, 2025, due to principal pay downs. The Company’s portfolio of securities customarily consists primarily of MBS, which have expected lives much shorter than the stated final maturity, non-bank qualified obligations of states and political subdivisions, which mature in approximately 15 years or less, and other tax exempt municipal mortgage related pass through securities which have average lives much shorter than their stated final maturities. During the six months ended March 31, 2026, the Company made no purchases of investment securities.
Previous wording
Through the Bank, the Company owns stock in the FHLB due to the Bank’s membership and participation in this banking system as well as stock in the FRB. The FHLB requires a level of stock investment based on a pre-determined formula. The Company’s investment in these stocks was $24.3 million at December 31, 2025 and $24.7 million at September 30, 2025, as redemptions were partially offset by purchases of FHLB membership stock during the three months ended December 31, 2025.
Current wording
Through the Bank, the Company owns stock in the FHLB due to the Bank’s membership and participation in this banking system as well as stock in the FRB. The FHLB requires a level of stock investment based on a pre-determined formula. The Company’s investment in these stocks was $25.5 million at March 31, 2026 and $24.7 million at September 30, 2025, as purchases of FHLB membership stock were partially offset by redemptions during the six months ended March 31, 2026.
Previous wording
Loans held for sale at December 31, 2025 totaled $88.0 million, decreasing from $179.4 million at September 30, 2025. This decrease was primarily driven by the sale of more than half of the held for sale consumer finance portfolio in October 2025, partially offset by an increase in SBA/USDA loans held for sale at December 31, 2025 compared to September 30, 2025.
Current wording
Loans held for sale at March 31, 2026 totaled $53.1 million, decreasing from $179.4 million at September 30, 2025. This decrease was primarily driven by the sale of the consumer finance portfolio in October 2025, partially offset by an increase in SBA/USDA loans held for sale at March 31, 2026 compared to September 30, 2025.
Previous wording
Total gross loans and leases totaled $4.98 billion at December 31, 2025, as compared to $4.66 billion at September 30, 2025. The increase was due to increases in the commercial finance, seasonal tax services, and seasonal consumer finance portfolios, partially offset by a slight decrease in the warehouse finance portfolio. See Note 4. Loans and Leases, Net to the “Notes to Condensed Consolidated Financial Statements” of this Quarterly Report on Form 10-Q.
Current wording
Total gross loans and leases totaled $4.87 billion at March 31, 2026, as compared to $4.66 billion at September 30, 2025. The increase was due to growth in the commercial finance and seasonal tax services portfolios, partially offset by a decrease in the consumer finance portfolio due to the aforementioned loan sale within that portfolio in October 2025, as well as a decrease in the warehouse finance portfolio. See Note 4. Loans and Leases, Net to the “Notes to Condensed Consolidated Financial Statements” of this Quarterly Report on Form 10-Q.
Previous wording
Commercial finance loans, which comprised 83% of the Company's loan and lease portfolio, totaled $4.15 billion at December 31, 2025, reflecting an increase of $223.2 million, or 6%, from September 30, 2025. The increase was primarily driven by increases of $204.2 million in term lending and $36.1 million in asset-based lending, partially offset by decreases in lease financing, other commercial finance, and factoring.
Current wording
Commercial finance loans, which comprised 84% of the Company's loan and lease portfolio, totaled $4.11 billion at March 31, 2026, reflecting an increase of $188.6 million, or 5%, from September 30, 2025. The increase was primarily driven by an increase of $199.3 million in term lending and $67.0 million in asset-based lending, partially offset by a decrease of $76.2 million in other commercial finance. These changes are primarily the result of the Company's efforts to optimize the balance sheet.
Previous wording
Total end-of-period deposits increased 8% to $6.35 billion at December 31, 2025, compared to $5.89 billion at September 30, 2025, primarily driven by increases in noninterest-bearing deposits of $458.6 million and in money market deposits of $5.9 million, partially offset by a decrease in savings deposits of $1.4 million.
Current wording
Total end-of-period deposits decreased 1% to $5.85 billion at March 31, 2026, from $5.89 billion at September 30, 2025, primarily driven by a decrease in noninterest-bearing deposits of $89.8 million, partially offset by an increase in interest-bearing checking of $46.7 million.
Previous wording
The Company's total borrowings decreased from $42.5 million at September 30, 2025 to $33.5 million at December 31, 2025, primarily driven by a decrease in short-term borrowings of $9.0 million as the Company used total deposits to fund loans and leases and investment balances. The Company's short-term borrowings fluctuate on a daily basis due to the nature of a portion of its noninterest-bearing deposit base.
Current wording
The Company's total borrowings increased from $42.5 million at September 30, 2025 to $59.5 million at March 31, 2026, driven by an increase in short-term borrowings of $17.0 million. The Company's short-term borrowings fluctuate on a daily basis due to the nature of a portion of its noninterest-bearing deposit base.
Previous wording
At December 31, 2025, the Company’s stockholders’ equity totaled $853.7 million, a decrease of $3.7 million, from $857.5 million at September 30, 2025. The decrease was primarily attributable to a decrease in retained earnings, partially offset by a decrease in accumulated other comprehensive loss. The Company and Bank remained above the federal regulatory minimum capital requirements at December 31, 2025, and continued to be classified as well-capitalized, and in good standing with the regulatory agencies. See “Liquidity and Capital Resources” for further information.
Current wording
At March 31, 2026, the Company’s stockholders’ equity totaled $850.7 million, a decrease of $6.8 million, from $857.5 million at September 30, 2025. The decrease was primarily attributable to a decrease in retained earnings, partially offset by an increase in additional paid-in capital and a decrease in accumulated other comprehensive loss. The Company and Bank remained above the federal regulatory minimum capital requirements at March 31, 2026, and continued to be classified as well-capitalized, and in good standing with the regulatory agencies. See “Liquidity and Capital Resources” for further information.
Previous wording
As of December 31, 2025, the Company managed $1.05 billion of customer deposits at other banks in its capacity as custodian. These deposits provide the Company with the ability to earn servicing fee income, typically reflective of the EFFR.
Current wording
As of March 31, 2026, the Company managed $1.07 billion of customer deposits at other banks in its capacity as custodian. These deposits provide the Company with the ability to earn servicing fee income, typically reflective of the EFFR.
Previous wording
The Company reported net income of $35.2 million, or $1.57 per diluted share, for the three months ended December 31, 2025, compared to net income of $30.0 million, or $1.23 per diluted share, for the three months ended December 31, 2024.
Current wording
The Company reported net income of $72.9 million, or $3.35 per diluted share, for the three months ended March 31, 2026, compared to net income of $75.0 million, or $3.14 per diluted share, for the three months ended March 31, 2025.
Previous wording
The Company’s average interest-earning assets for the first quarter of fiscal 2026 increased by $75.8 million to $6.81 billion compared to the same quarter in fiscal 2025, primarilydue to increases in average outstanding balances in total loan and lease balances partially offset by decreases in securities investment balances. The first quarter average outstanding balance of loans and leases increased $353.7 million compared to the same quarter of the prior fiscal year, due to increases in the commercial finance, warehouse finance, and tax services portfolios, partially offset by a decrease in the consumer finance portfolio.
Current wording
The Company’s average interest-earning assets for the second quarter of fiscal 2026 decreased by $107.4 million to $7.65 billion compared to the same quarter in fiscal 2025, due to decreases in the average outstanding balances in cash and fed funds sold and total investments securities. The decrease was partially offset by an increase in the average outstanding balance of total loans and leases. These results are expected as the Company continues to shift the balance sheet toward higher returning assets. The second quarter average outstanding balance of loans and leases increased $437.9 million compared to the same quarter of the prior fiscal year, due to increases in the commercial finance and tax services portfolios, partially offset by decreases in the consumer finance and warehouse finance portfolios.
Previous wording
Fiscal 2026 first quarter NIM decreased to 6.95% from 7.38% in the first fiscal quarter of 2025. The overall reported tax-equivalent yield (“TEY”) on average interest-earning assets decreased 50 basis points to 7.07% compared to the prior year quarter. The yield on the loan and lease portfolio was 8.56% compared to 9.55% for the comparable period last year and the TEY on the securities portfolio was 3.05% compared to 3.10% over that same period. The decreases in NIM, the TEY on average interest-earning assets, and the yield on the loan and lease portfolio was primarily driven by the sale of more than half of the held for sale consumer finance portfolio in October 2025 that was accounted for using a gross accounting methodology, and therefore, recorded at higher yields with offsetting entries not included in net interest income.
Current wording
Fiscal 2026 second quarter NIM decreased to 6.63% from 7.12% in the second fiscal quarter of 2025 primarily due to the aforementioned sale of the consumer finance portfolio in October 2025. The overall reported tax-equivalent yield (“TEY”) on average interest-earning assets decreased 48 basis points to 6.95% compared to the prior year quarter. The yield on the loan and lease portfolio was 8.43% compared to 9.54% for the comparable period last year and the TEY on the securities portfolio was 3.06% compared to 3.11% over that same period. The decreases in the TEY on average interest-earning assets and the yield on the loan and lease portfolio were also primarily driven by the aforementioned sale of the consumer finance portfolio.
Previous wording
The Company's cost of funds for all deposits and borrowings averaged 0.12% during the fiscal 2026 first quarter, as compared to 0.20% during the prior year quarter. The Company's overall cost of deposits was 0.01% in the fiscal first quarter of 2026, as compared to 0.05% during the prior year quarter.
Current wording
The Company's cost of funds for all deposits and borrowings averaged 0.33% during the fiscal 2026 second quarter, as compared to 0.32% during the prior year quarter. The Company's overall cost of deposits was 0.25% in the fiscal second quarter of 2026, as compared to 0.23% during the prior year quarter.
Previous wording
The Company recognized a provision for credit losses of $3.2 million for the quarter ended December 31, 2025, compared to provision for credit losses of $18.7 million for the comparable period in the prior fiscal year. The period-over-period decrease in provision for credit losses was primarily due to decreases in provision for credit losses in the commercial finance portfolio of $7.4 million, consumer finance portfolio of $5.3 million, and the tax services portfolio of $2.7 million. The commercial finance decrease in provision for credit losses was primarily driven by net recoveries recognized during the current period as compared to net charge-offs recognized in the prior year period. The consumer finance decrease in provision for credit losses was primarily driven by a reduction in loan balances stemming from the aforementioned consumer finance portfolio sale in October 2025. The decrease in the tax services portfolio provision for credit losses was driven by net recoveries recognized during the current period as compared to net charge-offs recognized during the prior year period. The Company recognized net recoveries of $2.2 million for the quarter ended December 31, 2025, compared to net charge-offs of $16.3 million for the quarter ended December 31, 2024. Net recoveries attributable to the seasonal tax services and commercial finance portfolios for the quarter ended December 31, 2025 were $2.5 million and $1.3 million, respectively, while net charge-offs of $1.5 million were recognized in the consumer finance portfolio. Net charge-offs attributable to the commercial finance, consumer finance, and tax services portfolios for the same quarter of the prior year were $8.1 million, $7.7 million, and $0.5 million, respectively.
Current wording
The Company recognized a provision for credit losses of $45.6 million for the quarter ended March 31, 2026, compared to $35.3 million for the comparable period in the prior fiscal year. The year-over-year increase was primarily due to increases in the commercial finance portfolio of $19.0 million, partially offset by decreases in the consumer finance portfolio of $6.9 million and the tax services portfolio of $1.7 million. The Company recognized net charge-offs of $5.8 million for the quarter ended March 31, 2026, compared to net charge-offs of $6.4 million for the quarter ended March 31, 2025. Net charge-offs attributable to the commercial finance portfolio and consumer finance portfolio were $14.5 million and $1.1 million, respectively, while net recoveries of $9.7 million were recognized in the seasonal tax services portfolio. Net charge-offs attributable to the commercial finance portfolio and consumer finance portfolio for the same quarter of the prior year were $6.9 million and $6.3 million, respectively, while net recoveries of $6.8 million were recognized in the tax services portfolio.
Previous wording
Servicing fee income on custodial deposits totaled $3.4 million during the 2026 fiscal first quarter, compared to $4.5 million for the same period of the prior year. For the fiscal quarter ended September 30, 2025, servicing fee income on custodial deposits totaled $2.6 million. The year-over-year decrease in servicing fee income on custodial deposit balances held at partner banks was due to a reduction in rates following reductions in the EFFR. The sequential quarter increase in servicing fee income on custodial deposit balances held at partner banks was due to higher quarterly average deposits balances held at partner banks.
Current wording
Servicing fee income on custodial deposits totaled $7.8 million during the 2026 fiscal second quarter, as compared to$6.5 million for the same period of the prior year. The year-over-year increase in servicing fee income on custodial deposit balances held at Program Banks was due to higher quarterly average deposits balances held at Program Banks.
Previous wording
Noninterest expense was $127.2 million for the fiscal 2026 first quarter, as compared to $127.8 million for the same quarter last year. The marginal decrease was primarily attributable to reductions in card processing expense, other expense, and operating and lease equipment depreciation, partially offset by increases in compensation and benefits, building and software, and legal and consulting expense.
Current wording
Noninterest expense decreased 3% to $143.5 million in the second quarter of fiscal 2026, compared to $148.2 million for the same quarter last year. The decrease was primarily attributable to reductions in card processing and other expense, partially offset by increases in compensation and benefits and building and software expense.
Previous wording
Card processing expense is primarily driven by rate-related agreements with Partner Solutions relationships. The amount of expense paid under those agreements is based on an agreed upon rate index that varies depending on the deposit levels, floor rates, market conditions, and other performance conditions. Generally, this rate index is based on a percentage of the EFFR and reprices immediately upon a change in the EFFR. Approximately 66% of the deposit portfolio was subject to these rate-related processing expenses during the fiscal 2026 first quarter. For the fiscal quarter ended December 31, 2025, contractual, rate-related processing expenses were $23.8 million, as compared to $24.9 million for the fiscal quarter ended September 30, 2025 and $25.6 million for the fiscal quarter ended December 31, 2024.
Current wording
Card processing expense is primarily driven by rate-related agreements with Partner Solutions relationships. The amount of expense paid under those agreements is based on an agreed upon rate index that varies depending on the deposit levels, floor rates, market conditions, and other performance conditions. Generally, this rate index is based on a percentage of the EFFR and reprices immediately upon a change in the EFFR. Approximately 66% of the deposit portfolio was subject to these rate-related processing expenses during the fiscal 2026 second quarter. For the fiscal quarter ended March 31, 2026, contractual, rate-related processing expenses were $25.4 million, as compared to $28.4 million for the fiscal quarter ended March 31, 2025.
Previous wording
The Company recorded an income tax expense of $7.2 million, representing an effective tax rate of 16.9%, for the fiscal 2026 first quarter, compared to an income tax expense of $6.0 million, representing an effective tax rate of 16.6%, for the first quarter last fiscal year. The current quarter increase in income tax expense compared to the prior year quarter was primarily due to the increase in income.
Current wording
The Company recorded an income tax expense of $14.2 million, representing an effective tax rate of 16.2%, for the fiscal 2026 second quarter, compared to an income tax expense of $16.2 million, representing an effective tax rate of 17.7%, for the second quarter last fiscal year. The current quarter decrease in income tax expense compared to the prior year quarter was primarily driven by research tax credits.
Previous wording
The Company originated $19.7 million in renewable energy leases during the fiscal 2026 first quarter, resulting in $5.2 million in total net investment tax credits. During the first quarter of fiscal 2025, the Company originated $9.3 million in renewable energy leases resulting in $3.2 million in total net investment tax credits. Investment tax credits related to renewable energy leases are recognized ratably based on income throughout each fiscal year.
Current wording
The Company originated $8.0 million in renewable energy leases during the fiscal 2026 second quarter, resulting in $2.0 million in total net investment tax credits. During the second quarter of fiscal 2025, the Company originated $1.9 million in renewable energy leases resulting in $0.5 million in total net investment tax credits. For the six months ended March 31, 2026, the Company originated $27.7 million in renewable energy leases, compared to $11.2 million for the comparable prior year period. Investment tax credits related to renewable energy leases are recognized ratably based on income throughout each fiscal year.
Previous wording
The Company's nonperforming assets at December 31, 2025 were $111.5 million, representing 1.47% of total assets, compared to $101.7 million, or 1.42% of total assets at September 30, 2025. The increase in the nonperforming assets as a percentage of total assets at December 31, 2025 compared to September 30, 2025, was driven by an increase in nonperforming loans in the commercial finance portfolio, partially offset by decreases in the tax services and consumer finance portfolios.
Current wording
The Company's nonperforming assets at March 31, 2026 were $119.8 million, representing 1.68% of total assets, compared to $101.7 million, or 1.42% of total assets at September 30, 2025. The increase in the nonperforming assets as a percentage of total assets at March 31, 2026 compared to September 30, 2025, was driven by an increase in nonperforming loans in the commercial finance portfolio.
Previous wording
The Company's nonperforming loans and leases at December 31, 2025 were $109.1 million, representing 2.15% of total gross loans and leases, compared to $99.1 million, or 2.05% of total gross loans and leases at September 30, 2025.
Current wording
The Company's nonperforming loans and leases at March 31, 2026 were $117.7 million, representing 2.39% of total gross loans and leases, compared to $99.1 million, or 2.05% of total gross loans and leases at September 30, 2025.
Previous wording
On the basis of management’s review of its loans, leases, and other assets, at December 31, 2025, the Company had classified loans and leases of $286.9 million as substandard, $10.2 million as doubtful and none as loss. At September 30, 2025, the Company classified loans and leases of $244.9 million as substandard, $13.7 million as doubtful and none as loss.
Current wording
On the basis of management’s review of its loans, leases, and other assets, at March 31, 2026, the Company had classified loans and leases of $247.3 million as substandard, $18.3 million as doubtful and none as loss. At September 30, 2025, the Company classified loans and leases of $244.9 million as substandard, $13.7 million as doubtful and none as loss.
Previous wording
The Company's ACL totaled $58.8 million at December 31, 2025, an increase compared to $53.3 million at September 30, 2025. The increase in the ACL at December 31, 2025, when compared to September 30, 2025, was primarily due to a $2.6 million increase in the allowance related to the consumer finance portfolio, a $1.9 million increase in the allowance related to the commercial finance portfolio, and a $1.1 million increase in the allowance related to the tax services portfolio.
Current wording
The Company's ACL totaled $98.3 million at March 31, 2026, an increase compared to $53.3 million at September 30, 2025. The increase in the ACL at March 31, 2026, when compared to September 30, 2025, was primarily due to increases of $35.3 million in the allowance related to the seasonal tax services portfolio and $9.5 million in the allowance related to the commercial finance portfolio.
Previous wording
The Company's ACL as a percentage of total loans and leases increased to 1.18% at December 31, 2025 from 1.14% at September 30, 2025 and decreased from 1.63% at December 31, 2024. The year-over-year decrease in the total loans and leases coverage ratio was primarily driven by the decrease in the ACL related to the decrease in the consumer finance portfolio due to the aforementioned loan sale within the consumer finance portfolio that occurred in October 2025.
Current wording
The Company's ACL as a percentage of total loans and leases increased to 2.02% at March 31, 2026 from 1.14% at September 30, 2025 and decreased from 2.30% at March 31, 2025. The year-over-year decrease in the total loans and leases coverage ratio was primarily driven by the decrease in the ACL related to the decrease in the consumer finance portfolio due to the aforementioned loan sale within the consumer finance portfolio in October 2025. The year-over-year decrease in the total loans and leases coverage ratio was partially offset by an increase in the ACL related to the commercial finance portfolio.
Previous wording
The Company’s financial statements are prepared in accordance with GAAP. The financial information contained within these financial statements is, to a significant extent, based on approximate measures of the financial effects of transactions and events that have already occurred. Management has identified its critical accounting policies, which are those policies that, in management's view, are most important in the portrayal of our financial condition and results of operations. These policies involve complex and subjective decisions and assessments. Some of these estimates may be uncertain at the time they are made, could change from period to period, and could have a material impact on the financial statements. A discussion of the Company’s critical accounting policies and estimates can be found in the Company's Form 10-K for the year ended September 30, 2025. There were no significant changes to these critical accounting policies and estimates during the first three months of fiscal 2026.
Current wording
The Company’s financial statements are prepared in accordance with GAAP. The financial information contained within these financial statements is, to a significant extent, based on approximate measures of the financial effects of transactions and events that have already occurred. Management has identified its critical accounting policies, which are those policies that, in management's view, are most important in the portrayal of our financial condition and results of operations. These policies involve complex and subjective decisions and assessments. Some of these estimates may be uncertain at the time they are made, could change from period to period, and could have a material impact on the financial statements. A discussion of the Company’s critical accounting policies and estimates can be found in the Company's Form 10-K for the year ended September 30, 2025. There were no significant changes to these critical accounting policies and estimates during the first six months of fiscal 2026.
Previous wording
At December 31, 2025, the Company had unfunded loan and lease commitments of $1.30 billion. Management believes that loan repayment and other sources of funds will be adequate to meet its foreseeable short- and long-term liquidity needs. The liquidity sources as of December 31, 2025 include $331.2 million in cash and cash equivalents and $1.05 billion in custodial deposits. When factoring in additional resources, such as the Federal Home Loan Bank, the Federal Reserve Discount Window and other unsecured funding and wholesale options, the Company has over $3.66 billion in total available liquidity as of December 31, 2025. Due to the characteristics of the Company's deposit portfolio, uninsured deposits remained less than 15% of total deposits during the fiscal 2026 first quarter and below the Company's available liquidity.
Current wording
At March 31, 2026, the Company had unfunded loan and lease commitments of $1.55 billion. Management believes that loan repayment and other sources of funds will be adequate to meet its foreseeable short- and long-term liquidity needs. The liquidity sources as of March 31, 2026 include $157.6 million in cash and cash equivalents and $1.07 billion in custodial deposits. When factoring in additional resources, such as the Federal Home Loan Bank, the Federal Reserve Discount Window and other unsecured funding and wholesale options, the Company has over $2.73 billion in total available liquidity as of March 31, 2026. Due to the characteristics of the Company's deposit portfolio, uninsured deposits remained less than 15% of total deposits during the fiscal 2026 second quarter and below the Company's available liquidity.
Rearranged current paragraphs (2)
Current report — wording carried from elsewhere
The Company reported net income of $108.1 million, or $4.89 per diluted share, for the six months ended March 31, 2026, compared to net income of $104.9 million, or $4.35 per diluted share, for the six months ended March 31, 2025.
Current report — wording carried from elsewhere
The Company recorded an income tax expense of $21.4 million, representing an effective tax rate of 16.5% for the six months ended March 31, 2026, compared to an income tax expense of $22.2 million, or an effective tax rate of 17.4%, for the six months ended March 31, 2025.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.