Pathward Financial, Inc.

For fiscal third quarter 2026, Pathward reported net income of $29 million and diluted EPS of $1.37. Noninterest income increased 4% versus the prior year period, and total tax product revenue grew by nearly $2 million year over year. Reported net interest margin declined to 6.59%, while adjusted net interest margin was 5.27% and was described as stable. Loans and leases at June 30 grew 8%, originations increased $760 million, liquidity was $2.7 billion, and the company repurchased about 304,000 shares at an average price of $92.18. For guidance, fiscal 2026 EPS is now expected in a range of $7.80 to $8.20, based on no additional rate changes, an effective tax rate of 16% to 18%, and expected share repurchases. Fiscal 2027 EPS guidance was introduced at $9.50 to $10.00, assuming no rate changes, an effective tax rate of 18% to 22%, secondary market revenues of $5 million to $7 million per quarter, and buybacks of around 70% to 80% of net income.

Brett Pharr emphasized that the quarter’s credit events were disappointing but appeared idiosyncratic rather than systemic. He said the company continues to broaden its product set across deposits, lending, and money movement, while investing in people, technology, risk/compliance, and client experience to support scalable growth. He was upbeat on partner demand, citing a full pipeline and the post-quarter contract extension with Clair, and he said the company is still actively involved in alternative energy but is continuously evaluating which sub-asset classes it wants to emphasize.

Greg Sigrist said the quarter’s financial performance was solid aside from credit, with higher commercial finance interest income, stronger noninterest income, and disciplined expense management. He quantified the credit impact as roughly $34 million of commercial finance provision, with about $28 million to $30 million tied to the specific reserves and CECL build, and said this was about $1 per share of pressure on guidance. He also highlighted $2.7 billion of liquidity, nearly $100 million more in average custodial deposits than a year ago, 8% loan and lease growth, and 304,000 shares repurchased at $92.18, while noting 3.1 million shares remain available under the repurchase program. On margins, he pointed to new commercial finance production of 8.99% versus a 7.42% loan book yield, plus about $150 million of securities principal rolling off over the next 12 months as tailwinds to earnings and adjusted NIM.

Analysts focused heavily on credit, especially the two commercial loans and the renewable energy nonperformers. Management said one legacy loan moved to liquidation after the expected path to completion failed, the fraud-related loan was a new issue within the quarter, and the solar-related nonperformers were tied to projects with a common developer and were not viewed as evidence of a broader portfolio problem. Questions also probed the fiscal 2027 guide, with management saying upside depends on faster partner ramp-up and stronger credit solutions volumes, while the main downside risk is unforeseen new credit issues. On capital returns, management said the 70% to 80% buyback target reflects their capital plan, not a need to hold extra capital because of credit.