Pathward Financial (NASDAQ:CASH) reported first-quarter fiscal 2026 results that management said reflect a “position of strength,” supported by growth in its core sponsor banking business, expanding commercial finance activity, and disciplined expense management. On the company’s earnings call, CEO Brett Pharr and CFO Greg Sigrist also highlighted progress on partner-driven fee income, balance sheet optimization, and early indicators for the upcoming tax season.
Business model focus: payments partnerships, stable deposits, and specialized lending
Pharr opened the call by framing Pathward as a bank that “moves money, holds deposits, and lends,” but with a differentiated model built around partner programs. He said the company facilitates payments through issuing sponsorship, merchant acquiring sponsorship, independent ATM sponsorship, consumer credit sponsorship, and digital payments. In issuing sponsorship, Pathward supports products such as prepaid, gift, loyalty, payroll, and general-purpose reloadable cards.
On deposits, Pharr said Pathward’s issuing partnerships generally provide “stable deposits,” and he emphasized the company’s role in enabling financial inclusion for underserved or unbanked consumers and businesses. On lending, he said Pathward specializes in serving businesses that may not be able to borrow from traditional banks and, in some cases, originates commercial finance loans through partners.
Operating initiatives and revenue drivers for fiscal 2026
Pharr said Pathward’s 2026 goals are “off to a great start” and highlighted the rollout of an “evolved operating model” announced the prior month, which management believes will better align with partners, improve scalability, and support innovation and growth.
Management described three primary sources of revenue growth for the fiscal year, emphasizing areas that are not dependent on expanding overall asset size:
- Balance sheet optimization: continued rotation from securities to loans to increase net interest income without growing total assets, while favoring areas with higher risk-adjusted returns or optionality.
- Fee income from balance sheet velocity: originating and selling loans to generate both interest and non-interest income while keeping the balance sheet steady.
- Non-interest income from new products: contracts announced in 2025, including merchant acquiring sponsorship, which management said generates non-interest income with limited balance sheet impact.
Pharr also pointed to the company’s multi-product approach as a differentiator, noting that money movement and issuing sponsorship remain core, but partners increasingly seek a bank that can deliver multiple banking products beyond issuing.
Tax season setup: enrollment growth and product breadth
Pharr said tax season has begun and Pathward is “one step ahead,” with more than 11% more enrolled tax offices than at the same point last year. He cited potential tailwinds from a change in the 2025 tax code that he believes could bring more consumers into tax preparation offices served by Pathward, along with renewed agreements across all tax software partners exiting last year’s season and ongoing technology improvements intended to drive efficiencies in 2026.
He described Pathward as an industry leader in tax-related financial products, with a product mix that includes refund transfers, refund advances, ERO loans, and facilitating refunds on prepaid cards. The company said it will provide a more robust tax update next quarter.
Quarterly financial results: portfolio sale effects, fee income growth, and flat expenses
Sigrist said first-quarter results included “solid growth” in the core business, increasing interest income and commercial finance, a lower provision for credit losses, growth in core card and deposit fee income, and flat expenses. He also discussed the sale of a consumer finance portfolio referenced on the prior quarter’s call, which reduced net interest income by $11.9 million. Sigrist said that reduction was “largely offset” by lower provision and lower other expenses, making the net impact “muted,” though it reduced reported net interest margin due to the accounting presentation.
Within net interest income, Sigrist said commercial finance contribution increased $9.2 million due to higher balances and slightly higher yields as the company continued its optimization strategy.
On credit, Sigrist said provision for credit losses was lower than last year partly due to a recovery tied to a commercial finance loan that moved into non-performing status in the first quarter of the prior year. He emphasized Pathward’s collateral management approach and said the company focuses more on annualized net charge-offs than non-performing loan volumes.
Non-interest income was described as strong, especially in core card and deposit fees. Excluding servicing fees on custodial deposits, which declined about $1 million as expected, Sigrist said the company saw good growth that reflected new partners announced in fiscal 2025 beginning to contribute. Secondary market revenues came in “just shy” of the company’s goal range due to the government shutdown, which management characterized as a timing impact expected to be made up in subsequent quarters.
Sigrist also noted lower rental income due to lower balances and operating leases, which he said was largely offset by lower operating lease equipment depreciation in non-interest expense. Overall non-interest expenses were slightly better than last year, helped by lower rate-related card processing fees in what he described as a lower rate environment.
Pathward reported net income of $35.2 million and earnings per diluted share of $1.57, which Sigrist said represented increases of 17% and 28%, respectively, from the prior-year quarter. Annualized first-quarter return on average assets was 1.87% and return on average tangible equity was 26.7%, compared with 1.61% and 25.5% in the year-ago quarter.
Balance sheet trends, credit metrics, and capital actions
Deposits held on the balance sheet totaled $6.4 billion at December 31, down $170 million from a year ago, which Sigrist attributed primarily to $200 million more in custodial deposits at the end of the first quarter compared to last year. Average deposits on the balance sheet were about $90 million higher than the prior-year quarter, while average custodial deposits decreased slightly.
Loans and leases were $5.0 billion at December 31 compared with $4.6 billion a year ago. Sigrist said the increase was driven by a $531 million rise in commercial finance loans, partially offset by a $148 million decline in consumer finance loans. During the quarter, Pathward originated $1.9 billion of loans—$678 million in commercial finance and $1.2 billion in consumer finance—with Sigrist citing strong consumer originations partly driven by a contract announced last year.
Non-performing loans increased slightly versus the prior quarter. Sigrist said the company continues to monitor loans discussed previously, describing them as spread across different verticals and not indicative of a systemic portfolio issue. He reiterated management’s view that historical non-performing loans do not correlate with net charge-offs given its collateralized underwriting approach. Total net charge-offs, excluding tax services loans, were 0.4% annualized. In commercial finance, net charge-offs were a net recovery for the quarter, and trailing 12-month net charge-offs were 39 basis points. The commercial finance allowance for credit loss ratio was 116 basis points, slightly improved from 118 basis points in the year-ago quarter.
Liquidity was $3.7 billion available, according to management. Pathward repurchased about 652,000 shares at an average price of $72.07, leaving 4.3 million shares available under its repurchase authorization.
For outlook, Sigrist said Pathward increased fiscal 2026 EPS guidance to a range of $8.55 to $9.05, assuming no additional rate cuts during the year, an effective tax rate of 18% to 22%, and expected share repurchases.
About Pathward Financial (NASDAQ:CASH)
Pathward Financial (NASDAQ:CASH) is a U.S.-based financial services company that operates through its wholly owned subsidiary, Pathward Bank. The company provides a range of banking and payment solutions designed for consumers, small businesses, community banks and fintech partners. Core offerings include deposit accounts, consumer and commercial lending, debit and prepaid card programs, digital banking platforms and treasury management services.
Through its banking charter, Pathward Financial delivers customizable payment solutions, including prepaid cards, payroll cards and benefit disbursement programs.
