Pathward Financial Q1 2026 Pathward Financial Inc Earnings Call | AllMind AI Earnings | AllMind AI
Q1 2026 Pathward Financial Inc Earnings Call
During the presentation, all participants will be in a listen-only mode. Following the prepared remarks, we will conduct a question and answer session. As a reminder, this conference call is being recorded. I would like to turn the conference call over to Derby show and Phil, senior Vice President Chief of Staff and investor relations. Please go ahead.
Thank you, operator and welcome.
With me today are password, Financial CEO, Brett, Farr and CFO. Greg, cigarette who will discuss our operating and financial results. For the first quarter of fiscal year 2026 after which, we will take your questions.
Additional information, including the earnings release the investor presentation. That accompanies our prepared remarks and supplemental slides may be found on our website at password financial.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 the company undertakes. No, obligation to update any forward-looking statements.
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 and anticipated results to differ materially from 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 assist you in understanding the company's results and performance Trends, particularly in competitive analysis, reconciliations for such non-gaap measures are included in the earnings release and the appendix of the investor presentation.
Finally all time periods referenced. Our 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. Farr our CEO.
Thanks RV and welcome everyone to our earnings conference call.
We kicked off the year in a position of strength and overall, we are pleased with the financial results. The team achieved in the quarter.
I want to take a moment to talk about what we do, how we do it and why we believe password is uniquely positioned as a leader in this space.
Whether you are an investor analyst or another member of the financial Community, you likely have an understanding of how a Traditional Bank works.
Banks take deposits from individuals or corporations lend, those deposits and move money.
And this password is no different where we differ is how we do those things.
Where we differ, as we work with partners and facilitate payments through issuing sponsorship, Merchant acquiring sponsorship independent ATM, sponsorship, Consumer Credit sponsorship and digital payments. Assisting them with the moving of significant amounts of money relative to our size Across the Nation.
In issuing sponsorship, we move money and facilitate payments via products, such as prepaid cards, gift cards, Loyalty cards, payroll cards, and general purpose, reloadable cards.
with over 20 years of experience in payments facilitation passwords value, proposition Is Anchored in 4, principal pillars
Our leadership is seasons, and has deep expertise, and payments and sponsorships.
Second, our combination of people processes and operating structure delivers, a streamlined approach to Banking and provides reliable and sustainable, partner programs.
Third, we deliver partnership with a commitment that enables our partners success.
And lastly, a consultative governance approach rooted in our stable risk and compliance infrastructure. That helps Partners manage a regulatory framework, that is often complex and difficult to manage.
Second, we hold deposits.
where we differ is that generally, our issuing Partnerships provide password with stable deposits,
As 1 of the most mature and experienced sponsor Banks, we work with our partners, to help them grow and scale and co-create solutions that facilitate innovation.
Because of our differences, we are able to generate significant fee income.
This leads us to Lending.
Brett Pharr: Via products such as prepaid cards, gift cards, loyalty cards, payroll cards, and general-purpose reloadable cards. With over 20 years of experience in payments facilitation, Pathward's value proposition is anchored in four principal pillars. Our leadership is seasoned and has deep expertise in payments and sponsorship. Second, our combination of people, processes, and operating structure delivers a streamlined approach to banking and provides reliable and sustainable partner programs. Third, we deliver partnership with a commitment that enables our partners' success. And lastly, a consultative governance approach rooted in our stable risk and compliance infrastructure that helps partners manage a regulatory framework that is often complex and difficult to manage. Second, we hold deposits. Where we differ is that generally our issuing partnerships provide Pathward with stable deposits.
Brett Pharr: Via products such as prepaid cards, gift cards, loyalty cards, payroll cards, and general-purpose reloadable cards. With over 20 years of experience in payments facilitation, Pathward's value proposition is anchored in four principal pillars. Our leadership is seasoned and has deep expertise in payments and sponsorship. Second, our combination of people, processes, and operating structure delivers a streamlined approach to banking and provides reliable and sustainable partner programs. Third, we deliver partnership with a commitment that enables our partners' success. Lastly, a consultative governance approach rooted in our stable risk and compliance infrastructure that helps partners manage a regulatory framework that is often complex and difficult to manage. Second, we hold deposits. Where we differ is that generally our issuing partnerships provide Pathward with stable deposits.
Speaker #1: Products such as prepaid cards, gift cards, loyalty cards, payroll cards, and general-purpose reloadable cards. With over 20 years of experience in payments facilitation, Pathward's value proposition is anchored in four principal pillars.
Like other Banks, we lend our deposits. However, we specialize in working with businesses that for a multitude of reasons, may not be able to work with or borrow from a Traditional Bank.
Speaker #1: Our leadership is seasoned and has deep expertise in payments and sponsorship. Second, our combination of people, processes, and operating structure delivers a streamlined approach to banking and provides reliable and sustainable partner programs.
We provide lending products that help these businesses access funds. They need to launch operate and grow.
In some cases, we are also working through Partners to originate commercial Finance Loans.
Password, strengths help us deliver on our purpose of financial inclusion.
Speaker #1: Third, we deliver partnership with a commitment that enables our partners' success. And lastly, a consultative governance approach rooted in our stable risk and compliance infrastructure that helps partners manage a regulatory framework that is often complex and difficult to manage.
Our Partnerships offer Financial Solutions that help individuals and businesses who are underserved underrepresented or even unbanked.
Records role in fulfilling the needs of these individuals and companies both expands and increases.
Speaker #1: Second, we hold deposits. Where we differ is that generally our issuing partnerships provide Pathward with stable deposits. As one of the most mature and experienced sponsor banks, we work with our partners to help them grow and scale, and co-create solutions that facilitate innovation.
While at a high level, we operate the same as the Traditional Bank.
Brett Pharr: As one of the most mature and experienced sponsor banks, we work with our partners to help them grow and scale and co-create solutions that facilitate innovation. Because of our differences, we are able to generate significant fee income. This leads us to lending. Like other banks, we lend our deposits. However, we specialize in working with businesses that, for a multitude of reasons, may not be able to work with or borrow from a traditional bank. We provide lending products that help these businesses access funds they need to launch, operate, and grow. In some cases, we are also working through partners to originate commercial finance loans. Pathward's strengths help us deliver on our purpose of financial inclusion. Our partnerships offer financial solutions that help individuals and businesses who are underserved, underrepresented, or even unbanked.
As one of the most mature and experienced sponsor banks, we work with our partners to help them grow and scale and co-create solutions that facilitate innovation. Because of our differences, we are able to generate significant fee income. This leads us to lending. Like other banks, we lend our deposits. However, we specialize in working with businesses that, for a multitude of reasons, may not be able to work with or borrow from a traditional bank. We provide lending products that help these businesses access funds they need to launch, operate, and grow. In some cases, we are also working through partners to originate commercial finance loans. Pathward's strengths help us deliver on our purpose of financial inclusion. Our partnerships offer financial solutions that help individuals and businesses who are underserved, underrepresented, or even unbanked.
Speaker #1: Because of our differences, we are able to generate significant fee income. This leads us to lending. Like other banks, we lend our deposits. However, we specialize in working with businesses that, for a multitude of reasons, may not be able to work with or borrow from a traditional bank.
We believe it is our unique value, propositions Partnerships and position in the marketplace. That allows us to help a greater variety of consumers and businesses as well as generate results that we believe exceed those of a Traditional Bank.
This is characterized by discipline, balance sheet, optimization and fee income, working together to generate positive performance.
Speaker #1: We provide lending products that help these businesses access the funds they need to launch, operate, and grow. In some cases, we are also working through partners to originate commercial finance loans.
Last year, our return on average assets was over 2%, our return, on average tangible Equity was over 38%, and roughly 40% of our Revenue came from non-interest income.
Our business model. Optimizes our long-term strategy being The Trusted platform. That enables our partners to thrive.
Speaker #1: PATHWARD's strengths help us deliver on our purpose of financial inclusion. Our partnerships offer financial solutions that help individuals and businesses who are underserved, underrepresented, or even unbanked.
Our 2026 goals are off to a great start.
As part of our commitment to the client experience, we announced the roll out of an evolved operating model last month.
Speaker #1: Additionally, as our world grows increasingly dependent on and reliant upon digital-first or digital-only solutions, Pathward's role in fulfilling the needs of these individuals and companies both expands and increases.
Brett Pharr: Additionally, as our world grows increasingly dependent and reliant upon digital-first or digital-only solutions, Pathward's role in fulfilling the needs of these individuals and companies both expands and increases. While at a high level, we operate the same as a traditional bank, we believe it is our unique value propositions, partnerships, and position in the marketplace that allows us to help a greater variety of consumers and businesses, as well as generate results that we believe exceed those of a traditional bank. This is characterized by disciplined balance sheet optimization and fee income working together to generate positive performance. Last year, our return on average assets was over 2%. Our return on average tangible equity was over 38%, and roughly 40% of our revenue came from non-interest income. Our business model optimizes our long-term strategy, being the trusted platform that enables our partners to thrive.
Additionally, as our world grows increasingly dependent and reliant upon digital-first or digital-only solutions, Pathward's role in fulfilling the needs of these individuals and companies both expands and increases. While at a high level, we operate the same as a traditional bank, we believe it is our unique value propositions, partnerships, and position in the marketplace that allows us to help a greater variety of consumers and businesses, as well as generate results that we believe exceed those of a traditional bank. This is characterized by disciplined balance sheet optimization and fee income working together to generate positive performance. Last year, our return on average assets was over 2%. Our return on average tangible equity was over 38%, and roughly 40% of our revenue came from non-interest income. Our business model optimizes our long-term strategy, being the trusted platform that enables our partners to thrive.
We firmly believe this model better aligns with our partners by supporting their growth and scalability and creating a more seamless experience.
Each of the respective leaders have strong relevant industry backgrounds and a solid commitment to password culture.
Speaker #1: While, at a high level, we operate the same as the traditional bank, we believe it is our unique value propositions—partnerships and position in the marketplace—that allow us to help a greater variety of consumers and businesses, as well as generate results that we believe exceed those of a traditional bank.
We believe this decision ultimately positions, our clients for greater success and revenue, enablement, and the company for increased Innovation and growth.
Building upon the progress we've made over the last few years. We believe Revenue growth will come from 3 main areas during the fiscal year.
Speaker #1: This is characterized by disciplined balance sheet optimization and fee income working together to generate positive performance. Last year, our return on average assets was over 2%.
It's important to note that we have prioritized areas that are not dependent on growing, our balance sheet in order to grow Revenue.
Speaker #1: Our return on average tangible equity was over 38%, and roughly 40% of our revenue came from non-interest income. Our business model optimizes our long-term strategy, being the trusted platform that enables our partners to thrive.
First, we have additional capacity, to optimize the balance sheet through the continued rotation, from Securities to loans. Increasing net, interest income, without growing the overall asset size.
As we continue to optimize, we are also looking at the yields of each asset and we intend to continue to favor areas where we believe we have a competitive advantage to deliver a higher risk-adjusted return or optionality.
Speaker #1: Our 2026 goals are off to a great start. As part of our commitment to the client experience, we announced the rollout of an evolved operating model last month.
Brett Pharr: Our 2026 goals are off to a great start. As part of our commitment to the client experience, we announced the rollout of an evolved operating model last month. We firmly believe this model better aligns with our partners by supporting their growth and scalability, and creating a more seamless experience. Each of the respective leaders has strong, relevant industry backgrounds and a solid commitment to Pathward's culture. We believe this decision ultimately positions our clients for greater success and revenue enablement, and the company for increased innovation and growth. Building upon the progress we have made over the last few years, we believe revenue growth will come from three main areas during the fiscal year. It's important to note that we have prioritized areas that are not dependent on growing our balance sheet in order to grow revenue.
Our 2026 goals are off to a great start. As part of our commitment to the client experience, we announced the rollout of an evolved operating model last month. We firmly believe this model better aligns with our partners by supporting their growth and scalability, and creating a more seamless experience. Each of the respective leaders has strong, relevant industry backgrounds and a solid commitment to Pathward's culture. We believe this decision ultimately positions our clients for greater success and revenue enablement, and the company for increased innovation and growth. Building upon the progress we have made over the last few years, we believe revenue growth will come from three main areas during the fiscal year. It's important to note that we have prioritized areas that are not dependent on growing our balance sheet in order to grow revenue.
this leads to the secondary of Revenue, growth fee income, from balance sheet, velocity
Speaker #1: We firmly believe this model better aligns with our partners by supporting their growth and scalability, and creating a more seamless experience. Each of the respective leaders has strong, relevant industry backgrounds and a solid commitment to Pathward's culture.
Our business model supports the ability to originate and sell loans, thereby generating additional Revenue.
By utilizing velocity for both commercial and Consumer loans. Our balance sheet can remain steady while generating both interest income and non-interest income for the business.
Speaker #1: We believe this decision ultimately positions our clients for greater success and revenue enablement, and the company for increased innovation and growth. Building upon the progress we've made over the last few years, we believe revenue growth will come from three main areas during the fiscal year.
Finally, the 2025 we announced multiple contracts for products. Such as merchant acquiring sponsorship, which has little impact to the balance sheet it generates non-interest income.
Money movement. Specifically, issuing sponsorship was how password entered into sponsored Banking and is still the core of our business.
Speaker #1: It's important to note that we have prioritized areas that are not dependent on growing our balance sheet in order to grow revenue. First, we have additional capacity to optimize the balance sheet through the continued rotation from securities to loans, increasing net interest income without growing the overall asset size.
Brett Pharr: First, we have additional capacity to optimize the balance sheet through the continued rotation from securities to loans, increasing net interest income without growing the overall asset size. As we continue to optimize, we are also looking at the yields of each asset, and we intend to continue to favor areas where we believe we have a competitive advantage to deliver a higher risk-adjusted return or optionality. This leads to the second area of revenue growth: fee income from balance sheet velocity. Our business model supports the ability to originate and sell loans, thereby generating additional revenue. By utilizing velocity for both commercial and consumer loans, our balance sheet can remain steady while generating both interest income and non-interest income for the business. Finally, in 2025, we announced multiple contracts for products such as merchant acquiring sponsorship, which has little impact to the balance sheet yet generates non-interest income.
First, we have additional capacity to optimize the balance sheet through the continued rotation from securities to loans, increasing net interest income without growing the overall asset size. As we continue to optimize, we are also looking at the yields of each asset, and we intend to continue to favor areas where we believe we have a competitive advantage to deliver a higher risk-adjusted return or optionality. This leads to the second area of revenue growth: fee income from balance sheet velocity. Our business model supports the ability to originate and sell loans, thereby generating additional revenue. By utilizing velocity for both commercial and consumer loans, our balance sheet can remain steady while generating both interest income and non-interest income for the business. Finally, in 2025, we announced multiple contracts for products such as merchant acquiring sponsorship, which has little impact to the balance sheet yet generates non-interest income.
With our partner searching for a bank that can provide multiple products outside of issuing offering multi-threaded Solutions across a breadth of banking needs is an important differentiation.
Finally tax season has begun and we are 1 Step Ahead with over 11% more enrolled tax offices than at this point last year.
Speaker #1: As we continue to optimize, we are also looking at the yields of each asset, and we intend to continue to favor areas where we believe we have a competitive advantage to deliver a higher risk-adjusted return or optionality.
We do look forward to a number of possible benefits.
First, I have to do with the change in tax code for 2025.
we believe this change has the potential to drive more consumers into the Tax, Preparation offices that we serve
Speaker #1: This leads to the second area of revenue growth: fee income from balance sheet velocity. Our business model supports the ability to originate and sell loans, thereby generating additional revenue.
second, we exited last year's season with renewed agreements across all of our tax software partners,
Speaker #1: By utilizing velocity for both commercial and consumer loans, our balance sheet can remain steady while generating both interest income and non-interest income for the business.
And finally, we continue to make technology improvements throughout the year for greater efficiencies when compared to years past and look forward to reaping those benefits in 2026.
Speaker #1: Finally, in 2025, we announced multiple contracts for products such as merchant acquiring sponsorship, which has little impact to the balance sheet, yet generates non-interest income.
As an industry leader, in tax related, Financial products. We pride ourselves, and offering 1 of the most comprehensive product mixes in the tax industry, including products and services, like refund transfers, refund advances, Errol loans and facilitating refunds on prepaid cards.
Speaker #1: Money movement, specifically issuing sponsorship, was how Pathward entered into sponsor banking and is still the core of our business. But with our partners searching for a bank that can provide multiple products outside of issuing, offering multi-threaded solutions across a breadth of banking needs is an important differentiator.
Brett Pharr: Money movement, specifically issuing sponsorship, was how Pathward entered into sponsor banking and is still the core of our business. With our partners searching for a bank that can provide multiple products outside of issuing, offering multi-threaded solutions across a breadth of banking needs is an important differentiator. Finally, tax season has begun, and we are one step ahead with over 11% more enrolled tax offices than at this point last year. We do look forward to a number of possible benefits. First, that has to do with the change in tax code for 2025. We believe this change has the potential to drive more consumers into the tax preparation offices that we serve. Second, we exited last year's season with renewed agreements across all of our tax software partners.
Money movement, specifically issuing sponsorship, was how Pathward entered into sponsor banking and is still the core of our business. With our partners searching for a bank that can provide multiple products outside of issuing, offering multi-threaded solutions across a breadth of banking needs is an important differentiator. Finally, tax season has begun, and we are one step ahead with over 11% more enrolled tax offices than at this point last year. We do look forward to a number of possible benefits. First, that has to do with the change in tax code for 2025. We believe this change has the potential to drive more consumers into the tax preparation offices that we serve. Second, we exited last year's season with renewed agreements across all of our tax software partners.
We feel confident that we will be able to deliver on our goals and look forward to providing a more robust tax update. Next quarter.
Now, I'd like to turn it over to Greg who will take you through the financials.
Thank you, Brett.
Speaker #1: Finally, tax season has begun, and we are one step ahead with over 11% more enrolled tax offices than at this point last year. We do look forward to a number of possible benefits.
We were pleased with our results in the quarter, which are marked by solid growth in our Core Business, growing interest income and Commercial Finance with a lower provision.
Increasing core card and deposit, C income and flat expenses.
Speaker #1: First, that has to do with the change in tax code for 2025. We believe this change has the potential to drive more consumers into the tax preparation offices that we serve.
Let me start with the sale of the Consumer Financial portfolio. We mentioned on last quarter's call, which had an impact on several income statement, line items, including an 11.9 million dollar reduction, to net interest income.
Speaker #1: Second, we exited last year's season with renewed agreements across all of our tax software partners. And finally, we continue to make technology improvements throughout the year for greater efficiencies when compared to years past, and look forward to reaping those benefits in 2026.
Brett Pharr: Finally, we continue to make technology improvements throughout the year for greater efficiencies when compared to years past and look forward to reaping those benefits in 2026. As an industry leader in tax-related financial products, we pride ourselves in offering one of the most comprehensive product mixes in the tax industry, including products and services like refund transfers, refund advances, ERO loans, and facilitating refunds on prepaid cards. We feel confident that we will be able to deliver on our goals and look forward to providing a more robust tax update next quarter. Now, I'd like to turn it over to Greg, who will take you through the financials.
Finally, we continue to make technology improvements throughout the year for greater efficiencies when compared to years past and look forward to reaping those benefits in 2026. As an industry leader in tax-related financial products, we pride ourselves in offering one of the most comprehensive product mixes in the tax industry, including products and services like refund transfers, refund advances, ERO loans, and facilitating refunds on prepaid cards. We feel confident that we will be able to deliver on our goals and look forward to providing a more robust tax update next quarter. Now, I'd like to turn it over to Greg, who will take you through the financials.
This amount is largely offset by reduced provision and lower other expenses. So while optically, it appears that these income statement line items are lower year-over-year, the net impact is quite muted.
Speaker #1: As an industry leader in tax-related financial products, we pride ourselves on offering one of the most comprehensive product mixes in the tax industry, including products and services like refund transfers, refund advances, ERO loans, and facilitating refunds on prepaid cards.
Amount while the offsetting line items were in areas that do not impact Nim.
Within net interest income contribution from commercial Finance, increased 9.2 million in the quarter due to higher balances and slightly higher yields, given our continued focus on optimization.
Speaker #1: We feel confident that we will be able to deliver on our goals, and look forward to providing a more robust tax update next quarter.
Speaker #1: Now, I'd like to turn it over to Greg, who will take you through the financials.
Provision for credit losses. Was lower than last year in part due to a recovery from a commercial finance loan that moved into non-performing during the first quarter of last year.
Speaker #2: Thank you, Brett. We were pleased with our results in the quarter, which are marked by solid growth in our core business—growing interest income and commercial finance with a lower provision, increasing core card and deposit fee income, and flat expenses.
Greg Sigrist: Thank you, Brett. We were pleased with our results in the quarter, which were marked by solid growth in our core business, growing interest income and commercial finance with a lower provision, increasing core card and deposit fee income, and flat expenses. Let me start with the sale of the consumer finance portfolio we mentioned on last quarter's call, which had an impact on several income statement line items, including an $11.9 million reduction to net interest income. This amount is largely offset by reduced provision and lower other expenses. So, while optically it appears that these income statement line items are lower year over year, the net impact is quite muted. Similarly, net interest margin has been reduced by this gross-up amount, while the offsetting line items were in areas that do not impact NIM.
Greg Sigrist: Thank you, Brett. We were pleased with our results in the quarter, which were marked by solid growth in our core business, growing interest income and commercial finance with a lower provision, increasing core card and deposit fee income, and flat expenses. Let me start with the sale of the consumer finance portfolio we mentioned on last quarter's call, which had an impact on several income statement line items, including an $11.9 million reduction to net interest income. This amount is largely offset by reduced provision and lower other expenses. While optically it appears that these income statement line items are lower year over year, the net impact is quite muted. Similarly, net interest margin has been reduced by this gross-up amount, while the offsetting line items were in areas that do not impact NIM.
Given our approach to Collateral management and monitoring. We are often able to work out or resolve loans that have moved into non-performing status recovering most. If not all of the funds,
it may take us a few quarters.
Speaker #2: Let me start with the sale of the consumer finance portfolio we mentioned on last quarter's call, which had an impact on several income statement line items, including an $11.9 million reduction to net interest income.
But this is why we focus more on annualized. Net charge offs than non-performing loan volumes. I highlight this. Because, as we have mentioned previously,
this is the nature of our business and an example of why we are comfortable with our credit trends,
Speaker #2: This amount is largely offset by reduced provision and lower other expenses. So, while optically it appears that these income statement line items are lower year over year, the net impact is quite muted.
We reported solid results and non-interest income particularly in core card and deposit fees.
If you remove the impact of servicing fees on custodial deposits, which decreased as expected, by about a million dollars, we saw good growth in that line.
Speaker #2: Similarly, net interest margin has been reduced by this gross-up amount, while the offsetting line items were in areas that do not impact NIM.
This reflects some of the new partners we announced in fiscal 2025, beginning to show up in our Revenue numbers.
Speaker #2: Within net interest income, contribution from commercial finance increased $9.2 million in the quarter due to higher balances and slightly higher yields, given our continued focus on optimization.
Greg Sigrist: Within net interest income, contribution from commercial finance increased $9.2 million in the quarter due to higher balances and slightly higher yields, given our continued focus on optimization. Provision for credit losses was lower than last year, in part due to a recovery from a commercial finance loan that moved into non-performing during Q1 of last year. Given our approach to collateral management and monitoring, we are often able to work out or resolve loans that have moved into non-performing status, recovering most, if not all, of the funds. It may take us a few quarters, but this is why we focus more on annualized net charge-offs than non-performing loan volumes. I highlight this because, as we have mentioned previously, this is the nature of our business and an example of why we are comfortable with our credit trends.
Within net interest income, contribution from commercial finance increased $9.2 million in the quarter due to higher balances and slightly higher yields, given our continued focus on optimization. Provision for credit losses was lower than last year, in part due to a recovery from a commercial finance loan that moved into non-performing during Q1 of last year. Given our approach to collateral management and monitoring, we are often able to work out or resolve loans that have moved into non-performing status, recovering most, if not all, of the funds. It may take us a few quarters, but this is why we focus more on annualized net charge-offs than non-performing loan volumes. I highlight this because, as we have mentioned previously, this is the nature of our business and an example of why we are comfortable with our credit trends.
Due to the government shutdown. We felt just shy of our goal range for secondary Market revenues, but we believe this is just a timing impact, and we expect to make that up in subsequent quarters.
Finally.
Speaker #2: Provision for credit losses was lower than last year, in part due to a recovery from a commercial finance loan that moved into non-performing during the first quarter of last year.
We saw a decrease in rental income due to lower balances and operating leases. However, this is largely offset and non-interest expenses. In the form of lower operating lease equipment depreciation.
Speaker #2: Given our approach to collateral management and monitoring, we are often able to work out or resolve loans that have moved into non-performing status, recovering most, if not all, of the funds.
Non-interest expenses were well-managed during the quarter. Coming in slightly better when compared to last year.
We saw lower rate related card processing fees primarily due to a lower rate environment.
Speaker #2: It may take us a few quarters, but this is why we focus more on annualized net charge-offs than non-performing loan volumes. I highlight this because, as we have mentioned previously, this is the nature of our business and an example of why we are comfortable with our credit trends.
This led to net income of 35.2 million and earnings per diluted share of 1.57 cents.
Showing significant increases of 17% and 28% respectively when compared to last year.
In addition.
Speaker #2: We reported solid results in non-interest income, particularly in core card and deposit fees. If you remove the impact of servicing fees on custodial deposits, which decreased as expected by about $1 million, we saw good growth in that line.
Greg Sigrist: We reported solid results in non-interest income, particularly in core card and deposit fees. If you remove the impact of servicing fees on custodial deposits, which decreased, as expected, by about $1 million, we saw good growth in that line. This reflects some of the new partners we announced in fiscal 2025 beginning to show up in our revenue numbers. Due to the government shutdown, we fell just shy of our goal range for secondary market revenues, but we believe this is just a timing impact, and we expect to make that up in subsequent quarters. Finally, we saw a decrease in rental income due to lower balances and operating leases. However, this is largely offset in non-interest expenses in the form of lower operating lease equipment depreciation. Non-interest expenses were well managed during the quarter, coming in slightly better when compared to last year.
We reported solid results in non-interest income, particularly in core card and deposit fees. If you remove the impact of servicing fees on custodial deposits, which decreased, as expected, by about $1 million, we saw good growth in that line. This reflects some of the new partners we announced in fiscal 2025 beginning to show up in our revenue numbers. Due to the government shutdown, we fell just shy of our goal range for secondary market revenues, but we believe this is just a timing impact, and we expect to make that up in subsequent quarters. Finally, we saw a decrease in rental income due to lower balances and operating leases. However, this is largely offset in non-interest expenses in the form of lower operating lease equipment depreciation. Non-interest expenses were well managed during the quarter, coming in slightly better when compared to last year.
Annualized performance metrics were also strong for the first quarter. Keeping in mind, our normal seasonality with return on average assets at 1.87%,
And a return on average tangible Equity of 26.7%.
Speaker #2: This reflects some of the new partners we announced in fiscal 2025, beginning to show up in our revenue numbers. Due to the government shutdown, we fell just shy of our goal range for secondary market revenues, but we believe this is just a timing impact, and we expect to make that up in subsequent quarters.
Compared to 1.61% and 25.5% respectively during the same quarter last year.
Deposit sells on the company's balance sheet at December 31st totaled. 6.4 billion.
Which is a 170 million decrease versus a year ago.
Speaker #2: Finally, we saw a decrease in rental income due to lower balances and operating leases. However, this is largely offset in non-interest expenses in the form of lower operating lease equipment depreciation.
This was primarily driven by having 200 million dollars, more in custodial deposits at the end of the first quarter when compared to last year.
Averaged deposits on the company's balance sheet. During the quarter were around higher than last year's quarter.
Speaker #2: Non-interest expenses were well managed during the quarter, coming in slightly better when compared to last year. We saw lower rate-related card processing fees, primarily due to a lower rate environment.
Average custodial deposits during the quarter decreased slightly when compared to last year.
Greg Sigrist: We saw lower rate-related card processing fees, primarily due to a lower rate environment. This led to net income of $35.2 million and earnings per diluted share of $1.57, showing significant increases of 17% and 28%, respectively, when compared to last year. In addition, annualized performance metrics were also strong for the first quarter, keeping in mind our normal seasonality, with return on average assets of 1.87% and a return on average tangible equity of 26.7%, compared to 1.61% and 25.5%, respectively, during the same quarter last year. Deposits held on the company's balance sheet at 31 December totaled $6.4 billion, which was a $170 million decrease versus a year ago. This was primarily driven by having $200 million more in custodial deposits at the end of the first quarter when compared to last year.
We saw lower rate-related card processing fees, primarily due to a lower rate environment. This led to net income of $35.2 million and earnings per diluted share of $1.57, showing significant increases of 17% and 28%, respectively, when compared to last year. In addition, annualized performance metrics were also strong for the first quarter, keeping in mind our normal seasonality, with return on average assets of 1.87% and a return on average tangible equity of 26.7%, compared to 1.61% and 25.5%, respectively, during the same quarter last year. Deposits held on the company's balance sheet at 31 December totaled $6.4 billion, which was a $170 million decrease versus a year ago. This was primarily driven by having $200 million more in custodial deposits at the end of the first quarter when compared to last year.
During the quarter, we saw favorable deposit balances at multiple partners due to a strong holiday season and continued partner growth.
Speaker #2: This led to net income of $35.2 million and earnings per diluted share of $1.57, showing significant increases of 17% and 28%, respectively, when compared to last year.
Loans, and leases at December 31st were 5 billion dollars compared to 4.6 billion dollars last year.
Speaker #2: In addition, annualized performance metrics were also strong for the first quarter. Keeping in mind our normal seasonality, with return on average assets of 1.87% and a return on average tangible equity of 26.7%, compared to 1.61% and 25.5%, respectively, during the same quarter last year.
The primary driver of the increase was a 531 million increase in commercial Finance Loans. Partially offset by a 148 million. Decrease in Consumer Finance Loans,
Additionally during the quarter. We originated 1.9 billion dollars in loans with 678 million in commercial finance and 1.2 billion dollars in Consumer Finance.
We are quite pleased by the growth in consumer originations, which was driven in part, by the new contract we announced last year.
Speaker #2: Deposits held on the company's balance sheet at December 31st totaled $6.4 billion, which was a $170 million decrease versus a year ago. This was primarily driven by having $200 million more in custodial deposits at the end of the first quarter when compared to last year.
This loan production is the engine behind our balance sheet, optimization strategy, which includes balance sheet velocity.
Speaker #2: Average deposits on the company's balance sheet during the quarter were around $90 million higher than last year's quarter. Average custodial deposits during the quarter decreased slightly when compared to last year.
Greg Sigrist: Average deposits on the company's balance sheet during the quarter were around $90 million higher than last year's quarter. Average custodial deposits during the quarter decreased slightly when compared to last year. During the quarter, we saw favorable deposit balances at multiple partners due to a strong holiday season and continued partner growth. Loans and leases at 31 December were $5 billion, compared to $4.6 billion last year. The primary driver of the increase was a $531 million increase in commercial finance loans, partially offset by a $148 million decrease in consumer finance loans. Additionally, during the quarter, we originated $1.9 billion in loans, with $678 million in commercial finance and $1.2 billion in consumer finance. We are quite pleased by the growth in consumer originations, which was driven in part by the new contract we announced last year.
Average deposits on the company's balance sheet during the quarter were around $90 million higher than last year's quarter. Average custodial deposits during the quarter decreased slightly when compared to last year. During the quarter, we saw favorable deposit balances at multiple partners due to a strong holiday season and continued partner growth. Loans and leases at 31 December were $5 billion, compared to $4.6 billion last year. The primary driver of the increase was a $531 million increase in commercial finance loans, partially offset by a $148 million decrease in consumer finance loans. Additionally, during the quarter, we originated $1.9 billion in loans, with $678 million in commercial finance and $1.2 billion in consumer finance. We are quite pleased by the growth in consumer originations, which was driven in part by the new contract we announced last year.
Our non-performing loans picked up slightly when compared to last quarter. We continue to monitor loans, we discussed on the prior quarter earnings call. As we indicated, then these loans are in different verticals and we do not believe represent the systemic portfolio issue.
We can continue to believe that there is a passport to resolving these loans in due course over the next several quarters.
Speaker #2: During the quarter, we saw favorable deposit balances at multiple partners due to a strong holiday season and continued partner growth. Loans and leases at December 31st were $5 billion.
To reiterate an additional point. We made last quarter when you compare our historic npls to knossos, we do not believe there's a correlation between them.
As I mentioned earlier, because we take a collateralized approach to underwriting and Credit Management.
Speaker #2: Compared to $4.6 billion last year. The primary driver of the increase was a $531 million increase in commercial finance loans, partially offset by a $148 million decrease in consumer finance loans.
We generally focus on our annualized, net charge offs. Since we have risk mitigation techniques designed to address past due and non-performing loans and built into our lending process.
This quarter is a good example of what we are describing.
Speaker #2: Additionally, during the quarter, we originated $1.9 billion in loans, with $678 million in commercial finance and $1.2 billion in consumer finance. We are quite pleased by the growth in consumer originations, which was driven in part by the new contract we announced last year.
Our total knossos as a percentage of average loans 1, excluding Tax Services loans was 2 bits on an annualized basis.
Are at 39 basis points.
Speaker #2: This loan production is the engine behind our balance sheet optimization strategy, which includes balance sheet velocity. Our non-performing loans ticked up slightly when compared to last quarter.
Greg Sigrist: This loan production is the engine behind our balance sheet optimization strategy, which includes balance sheet velocity. Our non-performing loans ticked up slightly when compared to last quarter. We continue to monitor loans we discussed on the prior quarter earnings call. As we indicated then, these loans are in different verticals, and we do not believe represent a systemic portfolio issue. We continue to believe that there is a path forward to resolving these loans in due course over the next several quarters. To reiterate an additional point we made last quarter, when you compare our historic NPLs to NCOs, we do not believe there is a correlation between them.
This loan production is the engine behind our balance sheet optimization strategy, which includes balance sheet velocity. Our non-performing loans ticked up slightly when compared to last quarter. We continue to monitor loans we discussed on the prior quarter earnings call. As we indicated then, these loans are in different verticals, and we do not believe represent a systemic portfolio issue. We continue to believe that there is a path forward to resolving these loans in due course over the next several quarters. To reiterate an additional point we made last quarter, when you compare our historic NPLs to NCOs, we do not believe there is a correlation between them.
Our allowance for credit loss, ratio on Commercial financials 116 basis points in the quarter, a slight Improvement when compared to 118 basis points for the same quarter last year.
Speaker #2: We continue to monitor loans we discussed on the prior quarter earnings call. As we indicated then, these loans are in different verticals, and we do not believe they represent a systemic portfolio issue.
Our liquidity remains strong with 3.7 billion dollars available and we're extremely pleased with our position at this point in the year.
Speaker #2: We continue to believe that there is a path forward to resolving these loans in due course over the next several quarters. To reiterate, this is an additional point we made last quarter.
During the quarter. We repurchased approximately 652,000 shares at an average price of 72.7.
This leaves 4.3 million shares still available for repurchase under the current stock repurchase program.
Speaker #2: When you compare our historic NPLs to NCOs, we do not believe there is a correlation between them. As I mentioned earlier, because we take a collateralized approach to underwriting and credit management, we generally focus on our annualized net charge-offs since we have risk mitigation techniques designed to address past due and non-performing loans built into our lending process.
Greg Sigrist: As I mentioned earlier, because we take a collateralized approach to underwriting and credit management, we generally focus on our annualized net charge-offs since we have risk mitigation techniques designed to address past due and non-performing loans built into our lending process. This quarter is a good example of what we are describing. Our total NCOs as a percentage of average loans, when excluding tax services loans, was 2/5 on an annualized basis. In commercial finance, our net charge-offs were actually a net recovery for the quarter, and our trailing 12-month net charge-offs are at 39 basis points. Our allowance for credit losses ratio on commercial finance was 116 basis points in the quarter, a slight improvement when compared to 118 basis points for the same quarter last year. Our liquidity remained strong with $3.7 billion available, and we're extremely pleased with our position at this point in the year.
As I mentioned earlier, because we take a collateralized approach to underwriting and credit management, we generally focus on our annualized net charge-offs since we have risk mitigation techniques designed to address past due and non-performing loans built into our lending process. This quarter is a good example of what we are describing. Our total NCOs as a percentage of average loans, when excluding tax services loans, was 2/5 on an annualized basis. In commercial finance, our net charge-offs were actually a net recovery for the quarter, and our trailing 12-month net charge-offs are at 39 basis points. Our allowance for credit losses ratio on commercial finance was 116 basis points in the quarter, a slight improvement when compared to 118 basis points for the same quarter last year. Our liquidity remained strong with $3.7 billion available, and we're extremely pleased with our position at this point in the year.
We are increasing our fiscal year 2026 guidance to an EPS range of 8.555 to $95, which includes the following assumptions.
No additional rate Cuts during the year.
An effective tax rate of 18 to 22%.
And expected share repurchases.
This concludes our prepared. Remarks operator, please open the line for questions.
Speaker #2: This quarter is a good example of what we are describing. Our total NCOs as a percentage of average loans, when excluding tax services loans, was two basis points on an annualized basis.
Speaker #2: In commercial finance, our net charge-offs were actually a net recovery for the quarter, and our trailing 12-month net charge-offs are at 39 basis points.
Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star, followed by 1 on your telephone keypad. If for any reason at all, you would like to remove that question. Please. Press star. Followed by 2 again to ask a question. Please press star 1
Speaker #2: Our allowance for credit loss ratio on commercial finance was 116 basis points in the quarter, a slight improvement compared to 118 basis points for the same quarter last year.
The first question comes from Tim Switzer with KBW, you may proceed.
Hey, good afternoon. Thank you for taking my question.
Hey, Tim. Hey, Tim
Speaker #2: Our liquidity remained strong with $3.7 billion available, and we're extremely pleased with our position at this point in the year. During the quarter, we repurchased approximately 652,000 shares at an average price of $72.07.
um, first 1 I have is
Greg Sigrist: During the quarter, we repurchased approximately 652,000 shares at an average price of $72.07. This leaves 4.3 million shares still available for repurchase under the current stock repurchase program. We are increasing our fiscal year 2026 guidance to an EPS range of $8.55 to $9.05, which includes the following assumptions: no additional rate cuts during the year, an effective tax rate of 18% to 22%, and expected share repurchases. This concludes our preparatory remarks. Operator, please open the line for questions.
During the quarter, we repurchased approximately 652,000 shares at an average price of $72.07. This leaves 4.3 million shares still available for repurchase under the current stock repurchase program. We are increasing our fiscal year 2026 guidance to an EPS range of $8.55-$9.05, which includes the following assumptions: no additional rate cuts during the year, an effective tax rate of 18%-22%, and expected share repurchases. This concludes our preparatory remarks. Operator, please open the line for questions.
on the Nintendo directory, a lot of moving Parts, this quarter, which makes sense and I think you guys did a good job of laying it out. Um, but you know, if, if we think about the adjusted Nim
Speaker #2: This leaves 4.3 million shares still available for repurchase under the current stock repurchase program. We are increasing our fiscal year 2026 guidance to an EPS range of $8.55 to $9.05, which includes the following assumptions.
Um, what what is the right way to think about the jumping off points?
For Q2. And then how do we think about this to directory over the course of the year?
um, within your guide assuming no rate cuts
Speaker #2: No additional rate cuts during the year, an effective tax rate of 18% to 22%, and expected share repurchases. This concludes our prepared remarks. Operator, please open the line for questions.
Yeah, let me give you a couple of data points. First 10, that might help frame the conversation. I, I think what's giving it, um,
you know, bit bit harder to look at. This quarter is obviously the the gross up we've had on the Consumer loans which are part of that account.
Speaker #2: questions. Thank you.
Operator: Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star followed by one on your telephone keypad. If for any reason at all you would like to remove that question, please press star followed by two. Again, to ask a question, please press star one. The first question comes from Tim Switzer with KBW. You may proceed.
Operator: Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star followed by one on your telephone keypad. If for any reason at all you would like to remove that question, please press star followed by two. Again, to ask a question, please press star one. The first question comes from Tim Switzer with KBW. You may proceed.
Speaker #1: We will now begin the question-and-answer session. If you would like to ask a question, please press star, followed by one on your telephone keypad.
Even though the offset someplace else. So if you strip out all of the uh the impact of the net income and that in that interest income related to the gross stuff, HFI Consumer loans,
Speaker #1: If, for any reason at all, you would like to remove that question, please press star followed by two. Again, to ask a question, please press star one.
You would have had an adjusted them of 5, uh 5.11 percent of a year ago.
Last quarter would have been 5.31%.
Speaker #1: The first question comes from Tim Switzer with KBW. You may.
And this quarter would have been 5.49%.
Speaker #2: Hey, good afternoon. Thanks for taking my question.
um, so I can you can tell those linked quarter end prior year where the trajectory has been up
[Analyst] (KBW): Hey, good afternoon. Thanks for taking my question.
Tim Switzer: Hey, good afternoon. Thanks for taking my question.
Speaker #3: Hey, Tim.
Greg Sigrist: Hey, Tim.
Greg Sigrist: Hey, Tim.
Speaker #4: Hey,
[Analyst] (KBW): Hey, Tim. First one I have is on the NIM trajectory. A lot of moving parts this quarter, which makes sense, and I think you guys did a good job of laying it out. But if we think about the adjusted NIM, what is the right way to think about the jumping-off point for Q2? And then how do we think about this trajectory over the course of the year within your guide, assuming no rate cuts?
Tim Switzer: Hey, Tim. First one I have is on the NIM trajectory. A lot of moving parts this quarter, which makes sense, and I think you guys did a good job of laying it out. If we think about the adjusted NIM, what is the right way to think about the jumping-off point for Q2? Then how do we think about this trajectory over the course of the year within your guide, assuming no rate cuts?
Speaker #4: Tim, the first one I have.
Speaker #2: Is on the NIM trajectory. A lot of moving parts this quarter, which makes sense. And I think, as you did, a good job of laying it out.
Speaker #2: But if we think about the adjusted NIM, what is the right way to think about the jumping-off point for Q2? And then how do we think about the trajectory over the course of the year within your guide, assuming no rate...
Speaker #2: cuts? Yeah.
Greg Sigrist: Yeah. Let me give you a couple of data points first, Tim, that might help frame the conversation. I think what's given it a bit harder to look at this quarter is obviously the gross-up we've had on the consumer loans, which are part of that calc, even though the offset's someplace else. So if you strip out all of the impact of the net income and net interest income related to the gross-up HFI consumer loans, you would have had an adjusted NIM of 5.11% a year ago. Last quarter would have been 5.31%, and this quarter would have been 5.49%. So you can tell both link quarter and prior year where the trajectory has been up. As it relates to just interest rate sensitivity in the portfolio, though, the story remains the same, candidly.
Greg Sigrist: Yeah. Let me give you a couple of data points first, Tim, that might help frame the conversation. I think what's given it a bit harder to look at this quarter is obviously the gross-up we've had on the consumer loans, which are part of that calc, even though the offset's someplace else. If you strip out all of the impact of the net income and net interest income related to the gross-up HFI consumer loans, you would have had an adjusted NIM of 5.11% a year ago. Last quarter would have been 5.31%, and this quarter would have been 5.49%. You can tell both link quarter and prior year where the trajectory has been up. As it relates to just interest rate sensitivity in the portfolio, though, the story remains the same, candidly.
Speaker #3: Let me give you a couple of data points first, Tim, that might help frame the conversation. I think what's made it a bit harder to look at this quarter is obviously the gross-up we've had on the consumer loans, which are part of that calc.
um, as it relates to just interest rates. Since you see in the portfolio though, the story Remains the Same candidly, uh, every incremental, 25 basis point overnight rate. Cut continues to have a very dim minimum impact on us. Um, we are still very sensitive to the middle part of the curve, which means that with the steepening we've seen, or over the last 4 to 6 weeks and just where the the Outlook is the 4 curfew that 531 is the launch point for the second quarter. And again, as long as the macroeconomic environment stays, you know, muted and middle part of the curve is elevated, we still have some Tailwind. So I think we're we're flat out from that point.
Speaker #3: Even though the offset is someplace else. So, if you strip out all of the impact on net income and net interest income related to the gross-up HFI consumer loans, you would have had an adjusted NIM of 5.11% a year ago.
Okay, got it. Very helpful. Um and I appreciate all the color you provided on the credit Outlook and the charge offs, are you able to quantify what that recovery was um, that you recorded this quarter um, within the that charge of
Speaker #3: Last quarter would have been 5.31%, and this quarter would have been 5.49%. So you can tell both linked quarter and prior year, the trajectory has been up.
No, I think you'll see the the chart in the earnings release, it just has more of the aggregate number. So it's it's within that role forward on the the ACL team
Gotcha. Okay. Thanks. Um
Yep. Then another, another question I had
Speaker #3: As it relates to just interest rate sensitivity in the portfolio, though, the story remains the same, candidly. An incremental 25 basis point overnight rate cut continues to have a very de minimis impact on us.
maybe a little more philosophical but there there's been a lot of discussion lately about
Greg Sigrist: Every incremental 25 basis points overnight rate cut continues to have a very de minimis impact on us. We are still very sensitive to the middle part of the curve, which means that with the steepening we've seen over the last four to six weeks and just where the outlook is, the curve is on the middle part of the curve. I think that 531 is the launch point for Q2. Again, as long as the macroeconomic environment stays muted and the middle part of the curve is elevated, we still have some tailwinds. I think we're flat to up from that point.
Every incremental 25 basis points overnight rate cut continues to have a very de minimis impact on us. We are still very sensitive to the middle part of the curve, which means that with the steepening we've seen over the last four to six weeks and just where the outlook is, the curve is on the middle part of the curve. I think that 531 is the launch point for Q2. Again, as long as the macroeconomic environment stays muted and the middle part of the curve is elevated, we still have some tailwinds. I think we're flat to up from that point.
fintechs wanting to obtain their own bank Charters. I think there is a few more or not fintechs. There are few ilc's announced earlier today.
Um,
Speaker #3: We are still very sensitive to the middle part of the curve, which means that with the steepening we've seen over the last four to six weeks, and just where the outlook is, the curve is on the middle part of the curve. I think that 5.31 is the launch point for the second quarter.
and, and most of the discussion in the bass world is
Been, you know, how it could be a threat.
Um, with Partners, no longer needing a bank sponsor. So could you respond to that and could you also make the outline and how there might be some opportunities here. Um, if any
Speaker #3: And again, as long as the macroeconomic environment stays muted and the middle part of the curve is elevated, we still have some tailwinds. So I think we're flat to up from that point.
Speaker #2: Okay, got it. Very helpful, and I appreciate all the color you provided on the credit outlook and the charge-offs. Are you able to quantify what that recovery was that you recorded this quarter within the net charge-offs?
[Analyst] (KBW): Okay. Got it. Very helpful. And I appreciate all the color you provided on the credit outlook and the charge-offs. Are you able to quantify what that recovery was that you recorded this quarter within that charge-off?
Tim Switzer: Okay. Got it. Very helpful. I appreciate all the color you provided on the credit outlook and the charge-offs. Are you able to quantify what that recovery was that you recorded this quarter within that charge-off?
Yeah. So this is Brett. How you doing Tim? Um, so I I think the way you think about this is is yeah, we're we're in a clearly a more relaxed regulatory environment as relates to getting these Chargers on.
It takes a lot of time to build the scale to be able to do the kinds of things that we do, even if you've got a lot of dollars behind you. And so, yes, there will be some of the happening. Um, but I think,
Speaker #3: No, I think you'll see the chart in the earnings release. It just has more of the aggregate numbers. So it's within that roll forward on the ACL.
Greg Sigrist: No. I think you'll see the chart in the earnings release. It just has more of the aggregate numbers. So it's within that roll forward on the ACL, Tim.
Greg Sigrist: No. I think you'll see the chart in the earnings release. It just has more of the aggregate numbers. So it's within that roll forward on the ACL, Tim.
Speaker #3: Tim. Gotcha.
[Analyst] (KBW): Gotcha. Okay. Thanks. Then another question I had, maybe a little more philosophical, but there's been a lot of discussion lately about fintechs wanting to obtain their own bank charters. I think there was a few more, or not fintechs, but there were a few ILCs announced earlier today. And most of the discussion in the background has been how it could be a threat with partners no longer needing a bank sponsor. So could you respond to that? And could you also maybe outline how there might be some opportunities here, if any?
Tim Switzer: Gotcha. Okay. Thanks. Then another question I had, maybe a little more philosophical, but there's been a lot of discussion lately about fintechs wanting to obtain their own bank charters. I think there was a few more, or not fintechs, but there were a few ILCs announced earlier today. Most of the discussion in the background has been how it could be a threat with partners no longer needing a bank sponsor. So could you respond to that? Could you also maybe outline how there might be some opportunities here, if any?
Speaker #2: Okay.
Speaker #2: Thanks. Yep. And then another question I had, maybe a little more philosophical, but there’s been a lot of discussion lately about fintechs wanting to obtain their own bank charters.
Speaker #2: I think there were a few more, or not fintechs, but there are a few ILCs announced earlier today. And most of the discussion in the BATH world has been how it could be a threat, with partners no longer needing a bank sponsor.
Speaker #2: So, could you respond to that? And could you also maybe outline how there might be some opportunities here, if any?
Speaker #3: Yeah, so as Brett—how are you doing, Tim? So, I think the way you think about this is, yeah, we're in clearly a more relaxed regulatory environment as it relates to getting these charters on.
Brett Pharr: Yeah. So this is Brett. How are you doing, Tim? So I think the way you think about this is, yeah, we're in clearly a more relaxed regulatory environment as it relates to getting these charters on. It takes a lot of time to build the scale to be able to do the kinds of things that we do, even if you've got a lot of dollars behind you. And so, yes, there will be some of that happening. But I think sort of the history longer term has been people that have bought bank charters have often given them back because they realized what they had. Now, that's not going to happen under the current administration, but it will happen under other administrations as we look forward.
Brett Pharr: Yeah. This is Brett. How are you doing, Tim? I think the way you think about this is, yeah, we're in clearly a more relaxed regulatory environment as it relates to getting these charters on. It takes a lot of time to build the scale to be able to do the kinds of things that we do, even if you've got a lot of dollars behind you. Yes, there will be some of that happening. I think the history longer term has been people that have bought bank charters have often given them back because they realized what they had. Now, that's not going to happen under the current administration, but it will happen under other administrations as we look forward.
Bank Chargers have often given them back because they realize what they had. Now that's not going to happen under the current Administration but it will happen under other administrations. As we look forward, we have some partners that have gotten those and then came to us and did additional transactions with us and talked about more because there's very narrow things they can do within those charges. Uh, and we can do a whole lot more. Don't forget, we have a multi-threaded approach with our partners, uh, and that is to offer many different kinds of products. And some of these Charters, um, are not really going to allow that to happen. So, uh, a not seeing it be, I think it's going to be a long time before it creates any competitive pressure. Uh, and I also think, uh, these things go in cycles and so just uh think about it through the cycles, the way we should think about this kind of competition.
Got it. Yeah, that all makes sense.
Speaker #3: It takes a lot of time to build the scale to be able to do the kinds of things that we do, even if you've got a lot of dollars behind you.
Um, and and sort of related to this. Um,
Speaker #3: And so yes, there will be some of that happening. But I think sort of the history, longer term, has been people that have bought bank charters have often given them back because they realize what they had.
You know, some of the fintech is going to obtain, you know, more often the custody Charter are stable coin or other digital asset companies and bright. You you gave a great overview of the business earlier and you talked about some of the opportunities. I don't think you mentioned digital assets at all is is that an area?
Speaker #3: Now, that's not going to happen under the current administration, but it will happen under other administrations as we look forward. We have some partners that have gotten those, and then came to us and did additional transactions with us and talked about more because there are very narrow things they can do within those charters.
Um, you guys want to play in and you know what kind of role do you think password complex?
Brett Pharr: We have some partners that have gotten those and then came to us and did additional transactions with us and talked about more because there's very narrow things they can do within those charters, and we can do a whole lot more. Don't forget, we have a multi-threaded approach with our partners, and that is to offer many different kinds of products. And some of these charters are not really going to allow that to happen. So, A, I'm not seeing it. B, I think it's going to be a long time before it creates any competitive pressure. And I also think these things go in cycles. And so, just think about it through the cycle, is the way we should think about this kind of competition.
We have some partners that have gotten those and then came to us and did additional transactions with us and talked about more because there's very narrow things they can do within those charters, and we can do a whole lot more. Don't forget, we have a multi-threaded approach with our partners, and that is to offer many different kinds of products. Some of these charters are not really going to allow that to happen. A, I'm not seeing it. B, I think it's going to be a long time before it creates any competitive pressure. And I also think these things go in cycles. Just think about it through the cycle, is the way we should think about this competition.
Speaker #3: And we can do a whole lot more. Don't forget, we have a multi-threaded approach with our partners, and that is to offer many different kinds of products. And some of these charters are not really going to allow that to happen.
Speaker #3: So, A, not seeing it. B, I think it's going to be a long time before it creates any competitive pressure. And I also think these things go in cycles.
Speaker #3: And so, just think about it through the cycle—is the way we should think about this kind of competition.
Yeah. So there's all kinds of things that we can do. Um, we're already doing some things in the crypto space in terms of on-boarding and off-boarding the fiat currency Etc. Uh to be clear, we don't have hold any of those digital assets today. Uh, but we're looking at all those things. Now, my, my sort of personal view is is that this is first, a B2B use case and there's a lot of cool things there and we're talking to Partners and other material players about ways we can play in that space. Um, my view right now is it'll be an additional rail among many rails and we'll continue to work on that and as our partners pull for it and as use cases come forward, um we'll engage in it because it's uh, definitely part of the future.
Speaker #2: Got it. Yeah, that all makes sense. And, sort of related to this, some of the fintechs going to obtain more often the custody charter are stablecoin or other digital asset companies.
[Analyst] (KBW): Got it. Yeah. That all makes sense. And sort of related to this, some of the fintechs going to obtain more often the custody charter are stablecoin or other digital asset companies. And Brett, you gave a great overview of the business earlier and talked about some of the opportunities. I don't think you mentioned digital assets at all. Is that an area you guys want to play in? And what kind of role do you think Pathward can play?
Tim Switzer: Got it. Yeah. That all makes sense. Related to this, some of the fintechs going to obtain more often the custody charter are stablecoin or other digital asset companies. Brett, you gave a great overview of the business earlier and talked about some of the opportunities. I don't think you mentioned digital assets at all. Is that an area you guys want to play in? And what kind of role do you think Pathward can play?
Great. Yeah. Um, thanks for all the color.
Yep.
Thank you. Our next question comes from Joe. Yah honest. With Raymond James, you may proceed.
Speaker #2: And Brett, you gave a great overview of the business earlier and talked about some of the opportunities. I don't think you mentioned digital assets at all.
Good afternoon.
Hey, Joe. Hey Joe.
Speaker #2: Is that an area you guys want to play in? And what kind of role do you think Pathward can play?
Speaker #3: Yeah, so there are all kinds of things that we can do. We're already doing some things in the crypto space in terms of onboarding and offboarding the fiat currency, etc.
Brett Pharr: Yeah. So there's all kinds of things that we can do. We're already doing some things in the crypto space in terms of onboarding and offboarding to fiat currency, etc. To be clear, we don't hold any of those digital assets today. But we're looking at all those things. Now, my sort of personal view is that this is first a B2B use case, and there's a lot of cool things there. And we're talking to partners and other material players about ways we can play in that space. My view right now is it'll be an additional rail among many rails, and we'll continue to work on that. And as our partners pull for it and as use cases come forward, we'll engage in it because it's definitely part of the future.
Brett Pharr: Yeah. There's all things that we can do. We're already doing some things in the crypto space in terms of onboarding and offboarding to fiat currency, etc. To be clear, we don't hold any of those digital assets today. We're looking at all those things. Now, my sort of personal view is that this is first a B2B use case, and there's a lot of cool things there. We're talking to partners and other material players about ways we can play in that space. My view right now is it'll be an additional rail among many rails, and we'll continue to work on that. As our partners pull for it and as use cases come forward, we'll engage in it because it's definitely part of the future.
So in, in your prepared remarks, you talked about, you know, a lot of the new partner announcements in 2025, and it looks like they're really just starting to impact the p&l.
You know, I I was wondering if you could unpack the amount of kind of embedded growth from this cohort of partners that hasn't yet showed up in your financials.
Speaker #3: To be clear, we don't hold any of those digital assets today. But we're looking at all those things. Now, my sort of personal view is that this is first a B2B use case.
Speaker #3: And there's a lot of cool things there. And we're talking to partners and other material players about ways we can play in that space.
Speaker #3: My view right now is it'll be an additional rail among many rails, and we'll continue to work on that. And as our partners pull for it, and as use cases come forward, we'll engage in it, because it's definitely part of the—
Speaker #3: future. Great.
[Analyst] (KBW): Great. Yeah. Thanks for all the color.
Tim Switzer: Great. Yeah. Thanks for all the color.
Speaker #2: Yeah. Thanks for all the color.
Speaker #3: Yep. Thank
Greg Sigrist: Yep.
Greg Sigrist: Yep.
Speaker #1: You. Our next question comes from Joel Yehunas with Raymond James. You may proceed.
Operator: Thank you. Our next question comes from Joe Yehunas with Raymond James. You may proceed.
Operator: Thank you. Our next question comes from Joe Yanchunis with Raymond James. You may proceed.
Speaker #2: Good
Speaker #2: afternoon. Hey,
[Analyst] (KBW): Good afternoon.
Joseph Yanchunis: Good afternoon.
Yeah. I mean I'd be happy to and as you you recall from last quarter, I mean these kind of span the gamut from you know Merchant acquiring might have been an issuing dealer to in there and 1 in the credit solution, space. And each of those has a different path to time to revenue and we're obviously uh uh on boarding all of the all the entire cohort as as rapidly as we can. And then each of those programs need to build, right? But once each of those programs is launched and live, I, I would expect contribution to a full 12-month run rate on the card fee line to be somewhere in the middle to high single digits. And that's just based on those programs. And I think, as we talked about last quarter, we are still actively working on multi-threaded approaches with many of those that we've announced to. So, that cohort alone, again, mid to high single digits. And we're seeing what we can, how we can scale from there.
Greg Sigrist: Hey, Joe.
Greg Sigrist: Hey, Joe.
Speaker #4: Hey, Joe. Joe.
[Analyst] (Raymond James): Hey, Joe.
Brett Pharr: Hey, Joe.
Yeah, Joe, this is Brett. I mean we're uh
Speaker #2: So in your prepared remarks, you talked about a lot of the new partner announcements in 2025. And it looks like they're really just starting to impact the P&L, and I was wondering if you could unpack the amount of kind of embedded growth from this cohort of partners that hasn't yet showed up in your financials.
[Analyst] (KBW): So in your prepared remarks, you talked about a lot of the new partner announcements in 2025, and it looks like they're really just starting to impact the P&L. And I was wondering if you could unpack the amount of kind of embedded growth from this cohort of partners that hasn't yet showed up in your financials?
Joseph Yanchunis: In your prepared remarks, you talked about a lot of the new partner announcements in 2025, and it looks like they're really just starting to impact the P&L. I was wondering if you could unpack the amount of kind of embedded growth from this cohort of partners that hasn't yet showed up in your financials?
Speaker #3: Yeah, I mean, I'd be happy to. And as you recall from last quarter, I mean, these kind of span the gamut—from merchant acquiring, might have been an issuing deal or two in there, and one in the credit solution space.
Greg Sigrist: Yeah. I mean, I'd be happy to. As you recall from last quarter, I mean, these kind of span the gamut from merchant acquiring, which might have been an issue in dealer two, and there, and one in the credit solutions space. Each of those has a different path to time to revenue. We're obviously onboarding all of that entire cohort as rapidly as we can. Then each of those programs need to build, right? But once each of those programs is launched and live, I would expect contribution to a full 12-month run rate on the card fee line to be somewhere in the middle to high single digits. That's just based upon those programs. I think as we talked about last quarter, we are still actively working on multi-threaded approaches with many of those that we've announced too.
Greg Sigrist: Yeah. I mean, I'd be happy to. As you recall from last quarter, I mean, these kind of span the gamut from merchant acquiring, which might have been an issue in dealer two, and there, and one in the credit solutions space. Each of those has a different path to time to revenue. We're obviously onboarding all of that entire cohort as rapidly as we can. Then each of those programs need to build, once each of those programs is launched and live, I would expect contribution to a full 12-month run rate on the card fee line to be somewhere in the middle to high single digits. That's just based upon those programs. I think as we talked about last quarter, we are still actively working on multi-threaded approaches with many of those that we've announced too.
We're getting very enthusiastic about the pull through on these partners and and others, we're talking both existing and future. Um, you know, we went through a period of time where there was some crazy pricing and structures in this particular industry and we chose to abstain uh but that's long been washed out and these things are picking up and we've we've often said to you it takes a little time for the programs to build
Speaker #3: And each of those has a different path to time to revenue. And we're obviously onboarding that entire cohort as rapidly as we can.
Uh, this quarter, you're you're seeing it and you know, we're there, there's a reason we're saying what we're saying about guidance. We're seeing it happen and we'll continue to think about that through the rest of the year. As we go on. This is uh, this is an upbeat time for us and that's what we're thinking about these partners and others were talking about.
Speaker #3: And then each of those programs need to build, right? But once each of those programs is launched and live, I would expect contribution to a full 12-month run rate on the card fee line to be somewhere in the middle to high single digits.
Perfect, again, I'm going to get to your updated guidance in a moment. I just want to kind of want to
Speaker #3: And that's just based upon those programs. And I think, as we talked about last quarter, we are still actively working on multi-threaded approaches with many of those that we've announced, too.
Speaker #3: So that cohort alone, again, mid- to high-single digits. And we're seeing how we can scale from
Greg Sigrist: So that cohort alone, again, mid to high single digits, and we're seeing how we can scale from there.
pick out some of you just said there. So you just talked about the wash out of be a rational pricing and you're starting to see some normalization from Partners. What is your current partner pipeline look like today and and should we expect a similar number of announcements?
That cohort alone, again, mid to high single digits, and we're seeing how we can scale from there.
you know, in the calendar year, perfectly your head
Speaker #3: there. Yeah.
Brett Pharr: Yeah. And Joe, it's Brett. I mean, we're getting very enthusiastic about the pull-through on these partners and others we're talking to, both existing and future. We went through a period of time where there was some crazy pricing and structures in this particular industry, and we chose to abstain. But that's long been washed out, and these things are picking up. And we've often said to you, it takes a little time for the programs to build. This quarter, you're seeing it. And there's a reason we're saying what we're saying about guidance. We're seeing it happen. And we'll continue to think about that through the rest of the year as we go on. This is an upbeat time for us, and that's why we're thinking about these partners and others that we're talking about.
Brett Pharr: Yeah. Joe, it's Brett. We're getting very enthusiastic about the pull-through on these partners and others we're talking to, both existing and future. We went through a period of time where there was some crazy pricing and structures in this particular industry, and we chose to abstain. But that's long been washed out, and these things are picking up. We've often said to you, it takes a little time for the programs to build. This quarter, you're seeing it. There's a reason we're saying what we're saying about guidance. We're seeing it happen. We'll continue to think about that through the rest of the year as we go on. This is an upbeat time for us, and that's why we're thinking about these partners and others that we're talking about.
Speaker #2: And Joe, this is Brett. I mean, we're getting very enthusiastic about the pull-through on these partners and others we're talking to, both existing and future.
Speaker #2: We went through a period of time where there was some crazy pricing and structures in this particular industry, and we chose to abstain. But that's long been washed out.
Speaker #2: And these things are picking up. And we've often said to you, it takes a little time for the programs to build. This quarter, you're seeing it.
Speaker #2: And there's a reason we're saying what we're saying about guidance. We're seeing it happen. And we'll continue to think about that through the on.
The part of your first part of your question is easy to answer is the pipeline's. Never been more full, we're very excited about it, Etc. Um, you don't know until they're done, right? So as we can and we kind of publicly agree to talk about it publicly, we will let you know about those things. But, uh, this is, I mean, these kinds of things are only increasing, not decreasing. And there's been a lot of sense that has been brought into this Marketplace. So we're going to get lots of swings at it and we're winning some of those swings and we're going to keep going so pipeline is as big as it's ever been.
That's great to hear.
Speaker #2: This is an upbeat time for the rest of the year as we go up. And that's why we're thinking about these partners and others we're talking about.
and then,
Kind of going back to your guys. So you raised the midpoint by a pretty substantial amount.
Speaker #4: Perfect. And I'm going to get to your updated guidance in a moment. I just kind of wanted to pick at something you just said there.
[Analyst] (KBW): Perfect. And I'm going to get to your updated guidance in a moment. I just kind of wanted to pick out something you just said there. So you just talked about the washout of irrational pricing, and you're starting to see some normalization from partners. What does your current partner pipeline look like today? And should we expect a similar number of announcements in the calendar year or fiscal year ahead?
Joseph Yanchunis: Perfect. I'm going to get to your updated guidance in a moment. I just wanted to pick out something you just said there. You just talked about the washout of irrational pricing, and you're starting to see some normalization from partners. What does your current partner pipeline look like today? Should we expect a similar number of announcements in the calendar year or fiscal year ahead?
Can you help us think of the puts and takes, you know, in relation to the updated Outlook and what we need to happen for you to reach the top end versus the bottom end of the new ranges?
Speaker #4: So you just talked about the washout of the irrational pricing, and you're starting to see some normalization from partners. What does your current partner pipeline look like today?
I think part of it is, we've talked about these new partners that have come on, and we're seeing the benefits.
Speaker #4: And should we expect a similar number of announcements in the calendar year or fiscal year ahead?
Speaker #3: I mean, the first part of your question is easy to answer. The pipeline's never been more full. We're very excited about it, etc.
Brett Pharr: I mean, your first part of your question is easy to answer. The pipeline's never been more full. We're very excited about it, etc. You don't know until they're done, right? So as we can, and we kind of publicly agree to talk about it publicly, we will let you know about those things. But I mean, these kinds of things are only increasing, not decreasing. And there's been a lot of sense that has been brought into this marketplace. So we're going to get lots of swings at it, and we're winning some of those swings, and we're going to keep going. So pipeline is as big as it's ever been.
Brett Pharr: I mean, your first part of your question is easy to answer. The pipeline's never been more full. We're very excited about it, etc. You don't know until they're done, as we can, and we kind of publicly agree to talk about it publicly, we will let you know about those things. These things are only increasing, not decreasing. There's been a lot of sense that has been brought into this marketplace. We're going to get lots of swings at it, and we're winning some of those swings, and we're going to keep going. Pipeline is as big as it's ever been.
Speaker #3: You don't know until they're done, right? So, as we can and we kind of publicly agree to talk about it publicly, we will let you know about those things.
But as you begin working with a new partner, um, you kind of learn. What's the trajectory you have sort of a funnel of opportunity and some get to the higher end of it? Some of them get to the lower. We are now confident on that funnel to do what we did. And so as we go through the course of the year and we continue to monitor those new partners coming on and feel solid that they're actually going to happen. It's not just a hope.
Speaker #3: But this is—I mean, these kinds of things are only increasing, not decreasing. And there's been a lot of sense that has been brought into this marketplace.
Speaker #3: So we're going to get lots of swings at it. And we're winning some of those swings. And we're going to keep going. So pipeline is as big as it's ever been.
Speaker #4: That's great to hear.
[Analyst] (KBW): That's great to hear. Then kind of going back to your guide, so you raised the midpoint by a pretty substantial amount. Can you help us think of the puts and takes in relation to the updated outlook and what would need to happen for you to reach the top end versus the bottom end of the new ranges?
Joseph Yanchunis: That's great to hear. Then going back to your guide, so you raised the midpoint by a pretty substantial amount. Can you help us think of the puts and takes in relation to the updated outlook and what would need to happen for you to reach the top end versus the bottom end of the new ranges?
Speaker #2: And then, kind of going back to your guide, so you raised the midpoint by a pretty substantial amount. Can you help us think of the puts and takes in relation to the updated outlook?
Speaker #2: And what would need to happen for you to reach the top end versus the bottom end of the new ranges?
We'll continue to talk about where we are in that photo. Yeah. And I think the other thing is tax season too, right. I mean, as we think about our guide, we we clearly think to a multitude of, uh, different scenarios across our businesses. And I think Brett kicked through some of the positives on the tax business, uh, here heading into taxes in here, and we're really enthusiastic about it, but I agree with Brad. I mean, the 2 factors that are going to push us to the higher end of that guide 1 is the timing on. Just the pull through on those Partners. We talked about the ones we've already announced, the other is going to be the success of the tax season. We we're really enthusiastic about it, but until you get into tax season, you start to see the numbers, you know, you've got a temper expectations, a little bit but we're really really enthusiastic heading into it.
Speaker #3: I think part of it is, we've talked about these new partners that have come on, and we're seeing the benefits. But as you begin working with a new partner, you kind of learn what the trajectory is.
Brett Pharr: I think part of it is we've talked about these new partners that have come on, and we're seeing the benefits. But as you begin working with a new partner, you kind of learn what's the trajectory. You have sort of a funnel of opportunity, and some get to the higher end of it, some get to the lower end. We are now confident on that funnel to do what we did. And so as we go through the course of the year and we continue to monitor those new partners coming on and feel solid that it's actually going to happen, it's not just a hope, we'll continue to talk about where we are in that funnel.
Brett Pharr: I think part of it is we've talked about these new partners that have come on, and we're seeing the benefits. As you begin working with a new partner, you learn what's the trajectory. You have a funnel of opportunity, and some get to the higher end of it, some get to the lower end. We are now confident on that funnel to do what we did. As we go through the course of the year and we continue to monitor those new partners coming on and feel solid that it's actually going to happen, it's not just a hope, we'll continue to talk about where we are in that funnel.
Speaker #3: You have sort of a funnel of opportunity, and some get to the higher end of it, some get to the lower end. We are now confident on that funnel to do what we did.
Yeah, 1 other thing. Don't miss the uh, secondary Market income topic this time, the government shutdown. Uh, slowed us down a little bit. I think this was in Greg's comments. Uh, and you know, we expect that to come right back through because that was a temporary thing. Uh, and so we had that to look forward to as well and that's a part of what we're saying. Yep.
Speaker #3: And so, as we go through the course of the year and we continue to monitor those new partners coming on, and feel solid that they're actually going to happen—it's not just a hope—we'll continue to talk about where
so it sounds like the 2 biggest swing factors are you know somewhat out of your control with depending on Partner ramp and you know the uh volume that goes through the tax offices is is that fair to say
Speaker #3: We are in that funnel. Yeah.
Speaker #4: And I think the other thing is tax season too, right? I mean, as we think about our guide, we clearly think to a multitude of different scenarios across our businesses.
Greg Sigrist: Yeah. And I think the other thing is tax season too, right? I mean, as we think about our guide, we clearly think to a multitude of different scenarios across our businesses. And I think Brett picked through some of the positives on the tax business heading into tax season here, and we're really enthusiastic about it. But I agree with Brett. I mean, the two factors that are going to push us to the higher end of that guide, one is the timing on just the pull-through on those partners we talked about, the ones we've already announced. The other is going to be the success of the tax season. We're really enthusiastic about it, but until you get into tax season and you start to see the numbers, you've got to temper expectations a little bit. But we're really, really enthusiastic heading into it.
Greg Sigrist: Yeah. I think the other thing is tax season too, as we think about our guide, we clearly think to a multitude of different scenarios across our businesses. I think Brett picked through some of the positives on the tax business heading into tax season here, and we're really enthusiastic about it. I agree with Brett. I mean, the two factors that are going to push us to the higher end of that guide, one is the timing on just the pull-through on those partners we talked about, the ones we've already announced. The other is going to be the success of the tax season. We're really enthusiastic about it, but until you get into tax season and you start to see the numbers, you've got to temper expectations a little bit. But we're really, really enthusiastic heading into it.
Speaker #4: And I think Brett ticked through some of the positives on the tax business heading into tax season here, and we're really enthusiastic about it.
Yeah, I mean, I, I think that out of our control would be more like, there's a range of possibilities and we'll continue to manage those and hope for the upper side of it. But, uh, you don't know till, you know, and and what we don't want to do is overcommit.
Speaker #4: But I agree with Brett. I mean, the two factors that are going to push us to the higher end of that guide—one is the timing on just the pull-through on those partners.
Speaker #4: We talked about the ones we've already announced. The other is going to be the success of the tax season. We're really enthusiastic about it.
That's fair. Um, and then just kind of 1 last 1 for me here. So new loan, originations, you know, increased pretty meaningfully in the quarter. You know, I understand part of that was due to
Speaker #4: But until you get into tax season and you start to see the numbers, you've got to temper expectations a little bit. But we're really
Speaker #4: But until you get into tax season, you start to see the numbers, you've got to temper expectations a little bit. But we're really enthusiastic heading into it.
some of the new relationships. Um, you know, on the consumer side,
Speaker #2: Yeah. One other thing, don't miss the secondary market income topic this time. The government shutdown slowed us down a little bit. I think this was in Greg's comments.
Brett Pharr: Yeah. One other thing. Don't miss the secondary market income topic this time. The government shutdown slowed us down a little bit. I think this was in Greg's comments. We expect that to come right back through because that was a temporary thing. So we had that to look forward to as well. That's part of what we're saying.
Brett Pharr: Yeah. One other thing. Don't miss the secondary market income topic this time. The government shutdown slowed us down a little bit. I think this was in Greg's comments. We expect that to come right back through because that was a temporary thing. We had that to look forward to as well. That's part of what we're saying.
Speaker #2: And we expect that to come right back through, because that was a temporary thing. And so we had that to look forward to as well.
Do you have a sense for what new originations will look like in 2016? And should we expect kind of the held for sale balances to increase in tandem with that or with the velocity kind of coming through the balance sheet increase? Just to kind of um mitigate that upward movement,
Speaker #2: And that's part of what we're saying.
Greg Sigrist: Yep.
Greg Sigrist: Yep.
Speaker #2: So, yep. It sounds like the two biggest swing factors are somewhat out of your control, depending on partner ramp and the volume that goes through the tax offices.
[Analyst] (KBW): So it sounds like the two biggest swing factors are somewhat out of your control depending on partner ramp and the volume that goes through the tax offices. Is that fair to say?
Joseph Yanchunis: It sounds like the two biggest swing factors are somewhat out of your control depending on partner ramp and the volume that goes through the tax offices. Is that fair to say?
Speaker #2: Is that fair to
Speaker #2: say? Yeah.
Brett Pharr: Yeah. I mean, I think, out of our control, it'd be more like there's a range of possibilities, and we'll continue to manage those and hope for the upper side of it. But you don't know until you know. And what we don't want to do is overcommit.
Brett Pharr: Yeah. I mean, I think, out of our control, it'd be more like there's a range of possibilities, and we'll continue to manage those and hope for the upper side of it. You don't know until you know. What we don't want to do is overcommit.
Speaker #3: I mean, I think out of our control, it'd be more like there's a range of possibilities, and we'll continue to manage those and hope for the upper side of it.
Speaker #3: But you don't know until you know. And what we don't want to do is overcommit.
Let's unpack that a little bit, I mean, in the quarter we certainly saw the uptick on the consumer side and as you know, those are by and large largely held for sale at this point and turned pretty quick. I I I'm optimistic that is the existing Partners ramp and scale, that that volume is going to continue to certainly on a year-over-year basis, scale versus where it was and I think scale from what we're seeing in this quarter. So again that's all balance sheet velocity and that will largely come through as a fee income. You know, there's some, some of those programs do have interest income as part of them, but the majority of the economics come through is on the fees of
Speaker #4: That's fair. And then just kind of one last one for me here. So, new loan originations increased pretty meaningfully in the quarter. I understand part of that was due to some of the new relationships on the consumer side.
[Analyst] (KBW): That's fair. And then just kind of one last one for me here. So new loan originations increased pretty meaningfully in the quarter. I understand part of that was due to some of the new relationships on the consumer side. Do you have a sense for what new originations will look like in 2016? And should we expect kind of the held-for-sale balances to increase in tandem with that or with the velocity kind of coming through the balance sheet increase just to kind of mitigate that upward movement?
Joseph Yanchunis: That's fair. Then just one last one for me here. New loan originations increased pretty meaningfully in the quarter. I understand part of that was due to some of the new relationships on the consumer side. Do you have a sense for what new originations will look like in 2015, should we expect kind of the held-for-sale balances to increase in tandem with that or with the velocity coming through the balance sheet increase just to mitigate that upward movement?
Speaker #4: Do you have a sense for what new originations will look like in 2016? And should we expect kind of the held-for-sale balances to increase in tandem with that or with the velocity kind of coming through the balance sheet increase just to kind of mitigate that upward movement?
Speaker #3: Well, let's unpack that a little bit. I mean, in the quarter, we certainly saw the uptick on the consumer side. And as you know, those are, by and large, largely held for sale at this point.
Greg Sigrist: Well, let's unpack that a little bit. I mean, in the quarter, we certainly saw the uptick on the consumer side. And as you know, those are by and large largely held-for-sale at this point and turned pretty quick. I'm optimistic that as the existing partners ramp and scale, that that volume is going to continue to certainly on a year-over-year basis scale versus where it was. And I think scale from what we're seeing in this quarter. So again, that's all balance sheet velocity, and that will largely come through as fee income. Some of those programs do have interest income as part of them, but the majority of the economics come through is on the fee side. We haven't touched yet on the commercial finance side. They also had a really good quarter on the production side.
Greg Sigrist: Well, let's unpack that a little bit. In the quarter, we certainly saw the uptick on the consumer side. As you know, those are by and large largely held-for-sale at this point and turned pretty quick. I'm optimistic that as the existing partners ramp and scale, that that volume is going to continue to certainly on a year-over-year basis scale versus where it was. I think scale from what we're seeing in this quarter. Again, that's all balance sheet velocity, and that will largely come through as fee income. Some of those programs do have interest income as part of them, but the majority of the economics come through is on the fee side. We haven't touched yet on the commercial finance side. They also had a really good quarter on the production side.
Numbers that are meaningful enough that we're going to start talking about them.
Speaker #3: And turned pretty quick. I'm optimistic that as the existing partners ramp and scale, that that volume is going to continue to, certainly on a year-over-year basis, scale versus where it was.
I appreciate that and then just actually 1 more for me on credit. I I, I understand that you went over and you're prepared remarks, you know npas npl ratios ticked up ncos are basically zero.
Speaker #3: And I think scale from what we're seeing in this quarter. So again, that's all balance sheet velocity, and that will largely come through as the income.
Um, is there anything that you currently see in the portfolio that you find incrementally different versus 3 months ago?
Speaker #3: There are some of those programs that do have interest income as part of them, but the majority of the economics come through on the fee side.
Speaker #3: We haven't touched it on the commercial finance side. They also had a really good quarter on the production side. And when I think about the balance of the year, that's also a pipeline that's really full, particularly when you think across USDA, SBA, working capital.
Greg Sigrist: And when I think about the balance of the year, that's also a pipeline that's really full, particularly when you think across USDA, SBA, working capital. And with the balance sheet optimization work that we've been doing for those three verticals in particular, but particularly USDA, SBA, it's about optionality. So I think we're really enthusiastic about that pipeline too. And the optionality provides us either to continue to hold on balance sheet or, as we see fit, kind of sell into the market and drive some secondary market revenues. But over the balance of the year, I would actually expect commercial finance to start generating numbers that are meaningful enough that we're going to start talking about them.
When I think about the balance of the year, that's also a pipeline that's really full, particularly when you think across USDA, SBA, working capital. With the balance sheet optimization work that we've been doing for those three verticals in particular, but particularly USDA, SBA, it's about optionality. I think we're really enthusiastic about that pipeline too. The optionality provides us either to continue to hold on balance sheet or, as we see fit, sell into the market and drive some secondary market revenues. Over the balance of the year, I would actually expect commercial finance to start generating numbers that are meaningful enough that we're going to start talking about them.
Speaker #3: And with the balance sheet optimization work that we've been doing for those three verticals in particular, but particularly USDA, SBA, it's about optionality. So I think we're really enthusiastic about that pipeline too.
No, I mean, again the these things that we have that are non-performing, loans are, uh, very different sub asset classes, there's no pattern system or anything like that. And uh, you know, we're we're serious about our conversation that, you know, our historical past and our belief is there's not going to be a relationship between ncos and uh, you know, non-performing loans because we do a different kind of lending that is very much collateral manage. So uh I uh there's nothing in there systemic.
Speaker #3: And the optionality provides us either to continue to hold on balance sheet or, as we see fit, kind of sell into the markets and drive some secondary market revenues.
Okay, I suspect it was much. Um I appreciate you taking my questions.
Thank you. Thanks Joe, we appreciate it.
Speaker #3: But over the balance of the year, I would actually expect commercial finance to start generating numbers that are meaningful enough that we're going to start talking about them.
Thank you as a quick, reminder if you'd like to ask a question please press star 1 on your telephone keypad.
Speaker #2: I appreciate that. And then just actually one more for me on credit. I understand that you went over in your prepared remarks—NPAs, NPL ratios ticked up, NCOs are basically zero.
[Analyst] (KBW): I appreciate that. Then just actually one more for me on credit. I understand that you went over in your prepared remarks. NPAs, NPL ratios ticked up. NCOs are basically zero. Is there anything that you currently see in the portfolio that you find incrementally different versus three months ago?
Joseph Yanchunis: I appreciate that. Then just actually one more for me on credit. I understand that you went over in your prepared remarks. NPAs, NPL ratios ticked up. NCOs are basically zero. Is there anything that you currently see in the portfolio that you find incrementally different versus three months ago?
There are no more questions remaining at this time, I'll pass it back over to the team for closing remarks.
Speaker #2: Is there anything that you currently see in the portfolio that you find incrementally different versus three months ago?
All right. Well, thank you very much for joining today. Have a good evening.
Speaker #2: ago? No.
Brett Pharr: No. I mean, again, these things that we have that are non-performing loans are in various different sub-asset classes. There's no pattern system or anything like that. And we're serious about our conversation that our historical past and our belief is there's not going to be a relationship between NCOs and non-performing loans because we do a different kind of lending that is very much collateral managed. So there's nothing in there systematic.
Brett Pharr: No, again, these things that we have that are non-performing loans are in various different sub-asset classes. There's no pattern system or anything like that. We're serious about our conversation that our historical past and our belief is there's not going to be a relationship between NCOs and non-performing loans because we do a different lending that is very much collateral managed. There's nothing in there systematic.
Speaker #3: I mean, again, these things that we have that are non-performing loans or various different sub-asset classes—there's no pattern, system, or anything like that.
This concludes today's conference call. Thank you for your participation. You may now disconnect your line.
Speaker #3: And we're serious about our conversation, that our historical past and our belief is there's not going to be a relationship between NCOs and non-performing loans because we do a different kind of lending that is very much collateral managed.
Speaker #3: So there's nothing in there systematic.
Speaker #4: Okay. I suspected as much. I appreciate you taking my questions.
[Analyst] (KBW): Okay. I suspect as much. I appreciate you taking my questions.
Tim Switzer: Okay. I suspect as much. I appreciate you taking my questions.
Speaker #3: Thank
Speaker #3: you. Thanks, Joe.
Brett Pharr: Thank you.
Brett Pharr: Thank you.
Greg Sigrist: Thanks, Joe. We appreciate it.
Greg Sigrist: Thanks, Joe. We appreciate it.
Speaker #4: We appreciate it.
Speaker #1: Thank you. As a quick reminder, if you'd like to ask a question, please press star one on your telephone keypad. There are no more questions remaining at this time.
Operator: Thank you. As a quick reminder, if you'd like to ask a question, please press star one on your telephone keypad. There are no more questions remaining at this time. I'll pass it back over to the team for closing remarks.
Operator: Thank you. As a quick reminder, if you'd like to ask a question, please press star one on your telephone keypad. There are no more questions remaining at this time. I'll pass it back over to the team for closing remarks.
Speaker #1: I'll pass it back over to the team for closing.
Speaker #1: remarks. All right.
Brett Pharr: All right. Well, thank you very much for joining today. Have a good evening.
Brett Pharr: All right. Well, thank you very much for joining today. Have a good evening.
Speaker #3: Well, thank you very much for joining today. Have a good evening.
Operator: This concludes today's conference call. Thank you for your participation. You may now disconnect your line.
Operator: This concludes today's conference call. Thank you for your participation. You may now disconnect your line.
