Cover Page - USD ($) $ in Billions	12 Months Ended
Cover Page - USD ($) $ in Billions	Sep. 30, 2023	Nov. 15, 2023	Mar. 31, 2023
Cover [Abstract]
Document Type	10-K
Document Annual Report	true
Document Period End Date	Sep. 30, 2023
Current Fiscal Year End Date	--09-30
Document Transition Report	false
Entity File Number	0-22140
Entity Registrant Name	PATHWARD FINANCIAL, INC.
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	42-1406262
Entity Address, Address Line One	5501 South Broadband Lane
Entity Address, City or Town	Sioux Falls
Entity Address, State or Province	SD
Entity Address, Postal Zip Code	57108
City Area Code	877
Local Phone Number	497-7497
Title of 12(b) Security	Common Stock, $.01 par value
Trading Symbol	CASH
Security Exchange Name	NASDAQ
Entity Well-known Seasoned Issuer	Yes
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
ICFR Auditor Attestation Flag	true
Document Financial Statement Error Correction [Flag]	false
Entity Shell Company	false
Entity Public Float			$ 1.1
Entity Common Stock, Shares Outstanding (in shares)		25,989,063
Documents Incorporated by Reference	DOCUMENTS INCORPORATED BY REFERENCE PART III of Form 10-K -- Portions of the Proxy Statement for the Annual Meeting of Stockholders expected to be held February 27, 2024 are incorporated by reference into Part III of this report.
Entity Central Index Key	0000907471
Document Fiscal Year Focus	2023
Document Fiscal Period Focus	FY
Amendment Flag	false

Audit Information	12 Months Ended
Audit Information	Sep. 30, 2023
Audit Information [Abstract]
Auditor Name	Crowe LLP
Auditor Firm ID	173
Auditor Location	South Bend, Indiana

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION - USD ($) $ in Thousands	Sep. 30, 2023	Sep. 30, 2022
ASSETS
Cash and cash equivalents	$ 375,580	$ 388,038
Securities available for sale, at fair value	1,804,228	1,882,869
Securities held to maturity, at amortized cost (fair value $31,425 and $38,171, respectively)	36,591	41,682
Federal Reserve Bank and Federal Home Loan Bank Stock, at cost	28,210	28,812
Loans held for sale	77,779	21,071
Loans and leases	4,366,116	3,536,305
Allowance for credit losses	(49,705)	(45,947)
Accrued interest receivable	23,282	17,979
Premises, furniture, and equipment, net	39,160	41,710
Rental equipment, net	211,750	204,371
Goodwill and intangible assets	330,225	335,196
Other assets	292,327	295,324
Total assets	7,535,543	6,747,410
LIABILITIES
Deposits	6,589,182	5,866,037
Short-term borrowings	13,000	0
Long-term borrowings	33,873	36,028
Accrued expenses and other liabilities	248,863	200,205
Total liabilities	6,884,918	6,102,270
STOCKHOLDERS’ EQUITY
Preferred stock, 3,000,000 shares authorized, no shares issued, none outstanding at September 30, 2023 and 2022, respectively	0	0
Additional paid-in capital	628,500	617,403
Retained earnings	278,655	245,394
Accumulated other comprehensive loss	(255,443)	(213,080)
Treasury stock, at cost, 41,980 and 90,053 common shares at September 30, 2023 and 2022, respectively	(344)	(4,835)
Total equity attributable to parent	651,630	645,170
Noncontrolling interest	(1,005)	(30)
Total stockholders’ equity	650,625	645,140
Total liabilities and stockholders’ equity	7,535,543	6,747,410
Common Class A
STOCKHOLDERS’ EQUITY
Common stock	262	288
Nonvoting Common Stock
STOCKHOLDERS’ EQUITY
Common stock	$ 0	$ 0

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Parenthetical) - USD ($) $ in Thousands	Sep. 30, 2023	Sep. 30, 2022
STOCKHOLDERS’ EQUITY
Securities held to maturity, fair value	$ 31,425	$ 38,171
Preferred stock, shares authorized (in shares)	3,000,000	3,000,000
Preferred stock, shares issued (in shares)	0	0
Preferred stock, shares outstanding (in shares)	0	0
Treasury stock (in shares)	41,980	90,053
Common Class A
STOCKHOLDERS’ EQUITY
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized (in shares)	90,000,000	90,000,000
Common stock, shares issued (in shares)	26,225,563	28,878,177
Common stock, shares outstanding (in shares)	26,183,583	28,788,124
Nonvoting Common Stock
STOCKHOLDERS’ EQUITY
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized (in shares)	3,000,000	3,000,000
Common stock, shares issued (in shares)	0	0
Common stock, shares outstanding (in shares)	0	0

CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands	12 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2021
Interest and dividend income:
Loans and leases, including fees	$ 323,602	$ 268,078	$ 256,080
Mortgage-backed securities	41,197	26,846	12,155
Other investments	33,936	17,272	17,619
Total interest and dividend income	398,735	312,196	285,854
Interest expense:
Deposits	4,356	500	1,593
FHLB advances and other borrowings	6,518	4,372	5,270
Total interest expense	10,874	4,872	6,863
Net interest income	387,861	307,324	278,991
Provision for (reversal of) credit losses	57,354	28,538	49,766
Net interest income after provision for credit losses	330,507	278,786	229,225
Noninterest income:
Gain (loss) on sale of securities	91	(1,287)	6
Gain on sale of trademarks	10,000	50,000	0
Gain (loss) on sale of other	2,572	(4,920)	11,515
Other income	22,115	17,357	26,240
Total noninterest income	316,599	293,807	270,904
Noninterest expense:
Compensation and benefits	184,318	171,126	151,090
Refund transfer product expense	9,723	8,908	11,861
Refund advance expense	1,863	2,157	2,564
Card processing	105,498	38,785	27,201
Occupancy and equipment expense	34,691	34,909	29,269
Operating lease equipment depreciation	45,710	35,636	30,987
Legal and consulting	27,102	40,634	31,341
Intangible amortization	4,971	6,585	8,545
Impairment expense	3,273	670	2,818
Other expense	47,826	45,865	48,007
Total noninterest expense	464,975	385,275	343,683
Income before income tax expense	182,131	187,318	156,446
Income tax expense	16,324	27,964	10,701
Net income before noncontrolling interest	165,807	159,354	145,745
Net income attributable to noncontrolling interest	2,192	2,968	4,037
Net income attributable to parent	$ 163,615	$ 156,386	$ 141,708
Earnings per common share:
Basic (in dollars per share)	$ 6.01	$ 5.26	$ 4.38
Diluted (in dollars per share)	$ 5.99	$ 5.26	$ 4.38
Refund transfer product fees
Noninterest income:
Noninterest income:	$ 39,452	$ 39,809	$ 37,967
Refund advance fee income
Noninterest income:
Noninterest income:	37,433	40,557	47,639
Card and deposit fees
Noninterest income:
Noninterest income:	150,746	105,733	108,121
Rental income
Noninterest income:
Noninterest income:	$ 54,190	$ 46,558	$ 39,416

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Thousands	12 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2021
Statement of Comprehensive Income [Abstract]
Net income before noncontrolling interest	$ 165,807	$ 159,354	$ 145,745
Other comprehensive income (loss):
Change in net unrealized (loss) on debt securities	(56,164)	(293,952)	(13,896)
Net (gain) loss realized on investment securities	(91)	1,287	(6)
Other comprehensive income (loss), investments	(56,255)	(292,665)	(13,902)
Unrealized gain (loss) on currency translation	331	(1,736)	476
Deferred income tax effect	(13,561)	(73,722)	(3,483)
Total other comprehensive (loss)	(42,363)	(220,679)	(9,943)
Total comprehensive income (loss)	123,444	(61,325)	135,802
Total comprehensive income attributable to noncontrolling interest	2,192	2,968	4,037
Comprehensive income (loss) attributable to parent	$ 121,252	$ (64,293)	$ 131,765

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY - USD ($) $ in Thousands	Total	Adjustment	Total Pathward Financial, Inc. Stockholders’ Equity	Total Pathward Financial, Inc. Stockholders’ Equity Adjustment	Common Stock	Additional Paid-in Capital	Retained Earnings	Retained Earnings Adjustment	Accumulated Other Comprehensive Income (Loss)	Treasury Stock	Noncontrolling interest	Noncontrolling interest Adjustment
Balance at the beginning of the period at Sep. 30, 2020	$ 847,308	$ (10,803)	$ 843,705	$ (8,351)	$ 344	$ 594,569	$ 234,927	$ (8,351)	$ 17,542	$ (3,677)	$ 3,603	$ (2,452)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Cash dividends declared on common stock	(6,400)		(6,400)				(6,400)
Issuance of common stock due to ESOP	3,036		3,036		2	3,034
Repurchases of common stock	(99,878)		(99,878)		(29)	29	(96,999)			(2,879)
Retirement of treasury stock	0						(5,696)			5,696
Stock compensation	6,852		6,852			6,852
Total other comprehensive income (loss)	(9,943)		(9,943)						(9,943)
Net Income (Loss)	145,745		141,708				141,708				4,037
Net distribution to noncontrolling interests	(4,033)										(4,033)
Balance at the end of the period at Sep. 30, 2021	871,884		870,729		317	604,484	259,189		7,599	(860)	1,155
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Cash dividends declared on common stock	(5,921)		(5,921)				(5,921)
Issuance of common stock due to ESOP	2,886		2,886		1	2,885
Repurchases of common stock	(168,235)		(168,235)		(30)	30	(164,260)			(3,975)
Stock compensation	10,004		10,004			10,004
Total other comprehensive income (loss)	(220,679)		(220,679)						(220,679)
Net Income (Loss)	159,354		156,386				156,386				2,968
Net distribution to noncontrolling interests	(4,153)										(4,153)
Balance at the end of the period at Sep. 30, 2022	645,140		645,170		288	617,403	245,394		(213,080)	(4,835)	(30)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Cash dividends declared on common stock	(5,426)		(5,426)				(5,426)
Issuance of common stock due to restricted stock	1		1		1
Repurchases of common stock	(120,437)		(120,437)		(27)	27	(117,985)			(2,452)
Retirement of treasury stock	0						(6,943)			6,943
Stock compensation	11,070		11,070			11,070
Total other comprehensive income (loss)	(42,363)		(42,363)						(42,363)
Net Income (Loss)	165,807		163,615				163,615				2,192
Net distribution to noncontrolling interests	(3,167)										(3,167)
Balance at the end of the period at Sep. 30, 2023	$ 650,625		$ 651,630		$ 262	$ 628,500	$ 278,655		$ (255,443)	$ (344)	$ (1,005)

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (Parenthetical) - $ / shares	12 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2021
Statement of Stockholders' Equity [Abstract]
Cash dividends declared on common stock (in dollars per share)	$ 0.20	$ 0.20	$ 0.20

CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	12 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2021
Cash flows from operating activities:
Net income before noncontrolling interest	$ 165,807	$ 159,354	$ 145,745
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation, amortization and accretion, net	64,955	61,601	59,047
Provision for credit losses	57,354	28,538	49,766
Provision for deferred taxes	(175)	17,587	(1,639)
Originations of loans held for sale	(1,208,684)	(985,330)	(601,481)
Proceeds from sales of loans held for sale	1,139,881	1,059,361	890,340
Net change in loans held for sale	25,922	12,819	588
Fair value adjustment of foreclosed real estate	0	301	591
Net realized (gain) on securities available for sale	0	(154)	(6)
Net realized (gain) loss on loans held for sale	(268)	3,694	(8,610)
Net realized loss on premise, furniture, and equipment	65	55	0
Net realized (gain) on lease receivables and equipment	(1,741)	(3,397)	(2,257)
Net realized (gain) on foreclosed real estate and repossessed assets	0	0	(4)
Net realized (gain) on trademarks	(10,000)	(50,000)	0
Net realized (gain) on other assets	(91)	1,441	28
Change in bank-owned life insurance value	(1,497)	(2,434)	(2,434)
Impairment on rental equipment	24	0	0
Impairment of intangibles	0	670	0
Net change in accrued interest receivable	(5,303)	(1,725)	374
Net change in other assets	17,134	(32,936)	825
Net change in accrued expenses and other liabilities	48,658	(10,640)	43,920
Stock compensation	11,070	10,004	6,852
Net cash provided by operating activities	303,111	268,809	581,645
Cash flows from investing activities:
Purchases of securities available for sale	(156,885)	(907,361)	(1,041,768)
Proceeds from sales of securities available for sale	0	265,951	50,468
Proceeds from maturities of and principal collected on securities available for sale	177,296	324,234	371,898
Proceeds from maturities of and principal collected on securities held to maturity	4,835	14,281	34,268
Purchases of Federal Reserve Bank and Federal Home Loan Bank stock	(330,144)	(173,653)	(1,296)
Redemption of Federal Reserve Bank and Federal Home Loan Bank stock	330,746	173,240	34
Purchases of loans and leases	(215,266)	(115,353)	(311,332)
Proceeds from sales of loans and leases	0	123,241	13,850
Net change in loans and leases	(307,473)	358,635	(196,356)
Purchases of premises, furniture, and equipment	(8,623)	(8,177)	(12,961)
Proceeds from sales of premises, furniture, and equipment	0	35	86
Purchases of rental equipment	(441,047)	(424,919)	(50,437)
Proceeds from sales of rental equipment	14,998	9,372	16,822
Net change in rental equipment	(236)	(5,772)	(630)
Proceeds from sales of foreclosed real estate and repossessed assets	1	1,824	8,952
Proceeds from death benefit of bank-owned life insurance	1,040	0	0
Proceeds from sale of trademarks	10,000	50,000	0
Proceeds from sale of other assets	0	3,550	0
Net cash (used in) investing activities	(920,758)	(310,872)	(1,118,402)
Cash flows from financing activities:
Net change in deposits	723,145	351,066	535,771
Net change in short-term borrowings	13,000	0	0
Redemption of long-term borrowings	0	(75,000)	0
Proceeds from long-term borrowings	0	20,000	0
Principal payments on capital lease obligations	0	(75)	(32)
Principal payments on other liabilities	(1,747)	(2,751)	(5,611)
Proceeds from other liabilities	0	0	80
Payment of debt issuance costs	(511)	0	0
Dividends paid on common stock	(5,426)	(5,921)	(6,400)
Issuance of common stock due to restricted stock	1	1	0
Issuance of common stock due to ESOP	0	2,886	3,036
Repurchases of common stock	(120,437)	(168,235)	(99,878)
Distributions to noncontrolling interest	(3,167)	(4,153)	(4,033)
Net cash provided by financing activities	604,858	117,818	422,933
Effect of exchange rate changes on cash	331	(1,736)	476
Net change in cash and cash equivalents	(12,458)	74,019	(113,348)
Cash and cash equivalents at beginning of fiscal year	388,038	314,019	427,367
Cash and cash equivalents at end of fiscal period	375,580	388,038	314,019
Supplemental disclosure of cash flow information:
Interest	10,819	5,259	8,207
Income taxes	14,056	13,940	8,038
Franchise taxes	250	250	250
Other taxes	1,109	541	722
Supplemental schedule of non-cash investing activities:
Held for sale to loans and leases	158	115,934	36,919
Loans and leases to held for sale	13,421	169,045	188,638
Loans and leases to rental equipment	3,122	3,893	28,604
Loans and leases to foreclosed real estate and repossessed assets	0	49	9
Rental equipment to loan and leases	377,250	400,148	24,324
Rental equipment to foreclosed real estate and repossessed assets	0	0	1,650
Recognition of operating lease ROU assets, net of measurements	0	117	12,954
Retirement of treasury stock	$ 6,943	$ 0	$ 0

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

12 Months Ended

Sep. 30, 2023

Accounting Policies [Abstract]

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The Consolidated Financial Statements include the accounts of Pathward Financial, Inc. ("Pathward Financial" or the “Company” or "us"), a registered bank holding company located in Sioux Falls, South Dakota, and its wholly-owned subsidiaries. The Company's subsidiaries include Pathward®, National Association ("Pathward®, N.A." or "Pathward" or the “Bank”), a national bank whose primary federal regulator is the Office of the Comptroller of the Currency (the "OCC"), and Pathward Venture Capital, LLC, a wholly-owned service corporation subsidiary of Pathward, N.A. which invests in companies in the financial services industry. All significant intercompany balances and transactions have been eliminated. The Company also owns 100% of First Midwest Financial Capital Trust I (the “Trust”), which was formed in July 2001 for the purpose of issuing trust preferred securities, and Crestmark Capital Trust I, which was acquired from the Crestmark Acquisition in August 2018. The Trust and Crestmark Capital Trust I are not included in the Consolidated Financial Statements of the Company.

In addition, the Company is a variable interest holder in certain entities in which the equity holders do not have the characteristics of a controlling financial interest or where the entity does not have enough equity at risk to finance its activities without additional subordinated financial support (referred to as variable interest entities or "VIEs"). The Company's variable interest arises from contractual ownership or other monetary interests that change with fluctuations in the VIE's net asset value. The primary beneficiary is the entity which has both: (1) the power to direct the activities of the VIE that most significantly impacts the VIE's economic performance, and (2) the obligation to absorb losses or receive benefits of the entity that could potentially be significant to the VIE. To determine whether or not a variable interest the Company holds could potentially be significant to the VIE, the Company considers both qualitative and quantitative factors regarding the nature, size and form of the Company's involvement with the VIE. Further, the Company assesses whether or not the Company is the primary beneficiary of a VIE on an ongoing basis. If the determination is made that the Company is the primary beneficiary, then that entity is included in the Consolidated Financial Statements.

Noncontrolling interests represent the portion of net income and equity attributable to third-party owners of consolidated subsidiaries that are not wholly-owned by Pathward Financial. All of the Company's noncontrolling interests relate to the Company's Commercial Finance business line.

Variable Interest Entities

As a result of the Crestmark Acquisition, the Company acquired existing membership interests of certain joint venture limited liability companies (the "LLCs"). The Company holds 80% of the membership interests in each of the LLC entities, which offer commercial lending and other financing arrangements. In connection with these LLCs, the Company exclusively provides funding for each entity's activities. The Company determined it is the primary beneficiary of all LLCs as it has the managing power under the terms of each of the LLC operating agreements. Results of the LLCs are reflected in the Company's September 30, 2023 Consolidated Financial Statements and are summarized below. The assets recognized as a result of consolidating the LLCs are the property of the LLCs and are not available for any other purpose.


(Dollars in thousands)	At September 30, 2023
Cash and cash equivalents	$	174
Loans and leases	63,628
Allowance for credit losses	(3,290)
Accrued interest receivable	183

Foreclosed real estate and repossessed assets, net	—
Other assets	1,368
Total assets	62,063
Accrued expenses and other liabilities	533
Noncontrolling interest	(1,005)
Net assets less noncontrolling assets	$	62,535

Amounts for noncontrolling interests reflect the proportionate share of membership interest (equity) and net income attributable to the holders of minority membership interest in the following entities:

•Capital Equipment Solutions, LLC (“CES”) - CES engages in the business of providing equipment financing term loans.

•CM Help, LLC - CM Help provides flexible patient loan programs to hospitals and patient customers of hospitals as a financing alternative for the self-pay and co-pay portions of patients’ hospital expenses.

•CM Southgate II, LLC - CM Southgate II engages in the business of acquiring fleet leases and semi-trailer/tractor loans and leases.

•CM TFS, LLC - CM TFS engages in the business of acquiring equipment financing term loans and leases.

In the normal course of business, the Company enters into off-balance sheet transactions with special purpose entities ("SPEs"), which can be structured as corporations, trusts, limited liability companies, or partnerships and are established for a limited purpose. Currently, the Company utilizes a SPE facility for certain term lending products within the Company's Commercial Finance business line. The Company participated in the structuring of the SPE, has a minority ownership interest in the SPE, and acts as servicer for the SPE in exchange for a servicing fee. Pathward is not the primary beneficiary of the SPE as our risk of loss or right to benefits from the SPE are not significant. As of September 30, 2023, there are $13.7 million commercial term loans held at the SPE, and the Company’s equity investment in the SPE is $1.2 million. The Company’s maximum exposure to loss from the SPE is limited to its equity investment. As of September 30, 2023, there are no commercial term loans classified as held for sale related to this SPE.

NATURE OF BUSINESS AND INDUSTRY SEGMENT INFORMATION

One of the Company's primary sources of revenue relates to payment processing services for prepaid debit cards, ATM sponsorship, tax refund transfer and other money transfer systems and services. Additionally, a significant source of revenue for the Company is interest from the purchase or origination of commercial finance loans, consumer finance loans, and warehouse finance loans. The Company accepts deposits from customers in the normal course of business on a national basis through its Payments and tax services divisions, and through wholesale funding. The Company operates in the banking industry, which accounts for the majority of its revenues and assets. The Company uses the “management approach” for reporting information about segments in annual and interim financial statements. The management approach is based on the way the chief operating decision-maker organizes segments within a company for making operating decisions and assessing performance. Reportable segments are based on products and services, geography, legal structure, management structure and any other manner in which management disaggregates a company. Based on the management approach model, the Company has determined that its business is comprised of three reporting segments. See Note 17. Segment Reporting for additional information on the Company's segment reporting.

USE OF ESTIMATES IN PREPARING FINANCIAL STATEMENTS

The preparation of Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Certain significant estimates include the valuation of residual values within lease receivables, allowance for credit losses, the valuation of goodwill and intangible assets and the fair values of securities and other financial instruments. These estimates are reviewed by management regularly; however, they are particularly susceptible to significant changes in the future.

CASH AND CASH EQUIVALENTS

For purposes of reporting cash flows, cash and cash equivalents is defined to include the Company’s cash on hand and due from financial institutions and short-term interest-bearing deposits in other financial institutions. The Company reports cash flows net for customer loan transactions, securities purchased under agreement to resell, federal funds purchased, deposit transactions, securities sold under agreements to repurchase, and FHLB advances with terms less than 90 days. The FRB requires all depository institutions to maintain reserves at specified levels against their transaction accounts, primarily checking accounts. In response to the COVID-19 pandemic, the FRB reduced reserve requirement ratios to zero percent effective on March 26, 2020, to support lending to households and businesses. At September 30, 2023, the Bank was not required to maintain any reserve balances. The Company at times maintains balances in excess of insured limits at various financial institutions including the FHLB, the FRB and other private institutions. At September 30, 2023, the Company had $1.9 million interest-bearing deposits held at the FHLB and $260.3 million in interest-bearing deposits held at the FRB. The Company does not believe these instruments carry a significant risk of loss but cannot provide assurances that no losses could occur if these institutions were to become insolvent.

SECURITIES

GAAP requires that, at acquisition, an enterprise classify debt securities into one of three categories: Available for Sale (“AFS”), Held to Maturity (“HTM”) or trading. AFS debt securities are carried at fair value on the Consolidated Statements of Financial Condition. Unrealized holding gains and losses due to risk of credit loss are recognized in earnings while unrealized holding gains and losses due to market conditions and other non-credit risk factors are excluded from earnings and recognized as a separate component of equity in accumulated other comprehensive income (loss) (“AOCI”). See Note 20. Fair Values of Financial Instruments for additional information on fair value of AFS debt securities. HTM debt securities are measured at amortized cost. The Company classifies the majority of its debt securities as AFS, which are those the Company may decide to sell if needed for liquidity, asset/liability management, or other reasons. Both AFS and HTM are subject to an allowance for credit loss. Pathward Financial did not hold trading securities at September 30, 2023 or 2022.

Gains and losses on the sale of securities are determined using the specific identification method based on amortized cost and are reflected in results of operations at the time of sale. Interest and dividend income, adjusted by amortization of purchase premium or discount using the level yield method, is included in income as earned. For callable debt securities, any purchase premium is amortized to the first call date while any discount is accreted over the contractual life of the security.

Debt Securities Credit Losses

The Company evaluates HTM debt securities for credit losses on a quarterly basis and records any such losses as a component of provision for credit losses in the Consolidated Statements of Operations. The Company has concluded that its portfolio as of September 30, 2023 has a zero risk of credit loss due to the U.S. Government financial guarantees underlying the securities within the HTM portfolio and as a result has not recorded an allowance for credit loss.

The Company evaluates AFS debt securities for credit losses on a quarterly basis and records any such losses as a component of provision for credit losses in the Consolidated Statements of Operations. The Company has concluded that any unrealized holding losses in its portfolio as of September 30, 2023 are not related to credit loss and as a result has not recorded an allowance for credit loss. See Note 3. Securities for further information.

Equity Investments

The Company holds marketable equity securities, which have readily determinable fair value, and include common equity and mutual funds. These securities are recorded at fair value with unrealized gains and losses, due to changes in fair value, reflected in earnings. Interest and dividend income from these securities is recognized in interest income. See Note 3. Securities for additional information on marketable equity securities.

The Company also holds non-marketable equity investments that are included in Other Assets in the Company’s Consolidated Financial Statements. The Company generally accounts for these investments under the equity method or the provisions of Accounting Standards Codification ("ASC") 321. Equity Securities. Investments where the Company has significant influence, but not control, over the investee are accounted for under the equity method. Investments where the Company cannot exercise significant influence over the investee are measured at fair value, with changes in fair value recognized in earnings, unless those investments have no readily determinable fair value. Investments without readily determinable fair value are measured under the measurement alternative, which reflects cost less impairment, with adjustments in value resulting from observable price changes arising from orderly transactions of the same or a similar security from the same issuer ("measurement alternative investments").

The Company reviews for impairment for equity method and measurement alternative investments and includes an analysis of the facts and circumstances for each investment, expectations of cash flows, capital needs, and viability of its business model. For equity method, the asset carrying value is reduced when the decline in fair value is considered to be other than temporary. For measurement alternative investments, the asset carrying value is reduced when the fair value is less than the carrying value, without the consideration of recovery.

The Company held the following non-marketable equity investments:

•Equity Method - The Company held equity method investments of $4.1 million within other assets as of September 30, 2023 and $2.9 million at September 30, 2022. The Company’s ownership of such investments typically ranges from 5% - 25% of the investee. The Company recognized nominal net earnings from these investments within noninterest income for the fiscal year ended September 30, 2023. The Company elected to classify distributions received from equity method investments using the cumulative earnings approach on the Consolidated Statements of Cash Flows.

•Fair Value Method - The Company held equity investments measured at net asset value (NAV) per share (or its equivalent) of $8.4 million at September 30, 2023 and $7.2 million at September 30, 2022 where NAV is considered the fair value practical expedient. These investments are recorded within other assets on the Company’s Consolidated Financial Statements. Fluctuations in fair value are recognized in earnings within noninterest Income.

•Measurement Alternative - The Company held equity investments measured using the measurement alternative of $12.1 million as of September 30, 2023 and $15.3 million at September 30, 2022 within other assets on the Company’s Consolidated Financial Statements. Equity investments measured using the measurement alternative are subject to fair value adjustments when observable price changes in orderly transactions for the identical or similar investment of the same issuer occur. The Company did not recognize any fair value adjustments in the fiscal year ended September 30, 2023, and recognized a decrease in fair value of $1.0 million in the fiscal year ended September 30, 2022. Additionally, the Company recognized impairment loss of $3.3 million and zero of such investments during the fiscal years ended September 30, 2023 and 2022, respectively.

LOANS HELD FOR SALE ("LHFS")

Loans are designated as LHFS based on management's intent to sell loans, or portions of loans, in established secondary markets or to participating third-party financial institutions. LHFS are held at the lower of cost or fair value. Any amount by which the cost exceeds fair value is initially recorded as a valuation allowance and subsequently reflected in the gain or loss on sale when sold. At September 30, 2023 and 2022, there was no valuation allowance recorded for LHFS. Gains and losses on LHFS are recorded in noninterest income on the Consolidated Statements of Operations. Loan costs and fees are deferred at origination and are recognized in income at the time of sale. Interest income is calculated based on the note rate of the loan and is recorded as interest income. The Company occasionally transfers loans between held for sale and held for investment classifications based on its intent and ability to hold or sell loans. Management's intent to sell may be impacted by secondary market conditions, loan credit quality, or other factors.

The following table summarizes the activity pertaining to loans held for sale:


	Fiscal Year Ended September 30,
	2023				2022
(Dollars in thousands)	Consumer		Commercial		Consumer		Commercial
Beginning of year balance	$	21,071	$	—	$	23,111	$	33,083
Originations	1,206,201		2,483		856,819		128,511
Proceeds from sales	(1,123,271)		(16,610)		(855,291)		(50,848)
Gain (loss) on sales	—		268		—		5,813
Principal collections, net of deferred fees and costs	(26,222)		280		(4,062)		(625)
Non-cash transfers, net	—		13,579		494		(115,934)
End of year balance	$	77,779	$	—	$	21,071	$	—

LOANS AND LEASES

Loans Receivable

Loans receivable that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off are classified as held for investment and are generally reported at their outstanding principal balances net of any unearned income, cumulative charge-offs, unamortized deferred fees and costs on originated loans, and unamortized premiums or discounts on purchased loans (amortized cost).

Interest income on loans is accrued over the term of the loans based upon the amount of principal outstanding except when serious doubt exists as to the collectability of a loan, in which case the accrual of interest is discontinued. Unearned income, deferred loan fees and costs, and discounts and premiums are amortized to interest income over the contractual life of the loan using the interest method. The Company's business lines follow a nonaccrual policy with certain commercial finance, consumer finance and tax service loans not generally being placed on non-accrual status, but instead are charged off when the collection of principal and interest become doubtful. When placed on nonaccrual status, the accrued unpaid interest receivable is reversed against interest income and any remaining amortizing of net deferred fees is suspended. Cash collected on these loans is applied to first reduce the carrying value of the loan with any remainder being recognized as interest income. Generally, a loan can return to accrual status when all delinquent interest and principal become current under the terms of the loan agreement and collectability of the remaining principal and interest is no longer doubtful. Loans are considered past due when contractually required principal or interest payments have not been made on the due dates.

For commercial loans, the Company generally fully charges off or charges down to net realizable value (fair value of collateral, less estimated costs to sell) for loans secured by collateral when: management judges the loans to be uncollectible; repayment is deemed to be protracted beyond reasonable time frames; the loan has been classified as a loss by either the Company's internal loan review process or its banking regulatory agencies; the customer has filed bankruptcy and the loss becomes evident owing to lack of assets; or the loan meets a defined number of days past due unless the loan is both well-secured and in the process of collection. For consumer loans, the Company fully charges off or charges down to net realizable value when deemed uncollectible due to bankruptcy or other factors, or meets a defined number of days past due.

As part of the Company’s ongoing risk management practices, management generally attempts to work with borrowers when necessary to extend or modify loan terms to better align with their current ability to repay. Extensions and modifications to loans are made in accordance with internal policies and guidelines which conform to regulatory guidance. Modified loan terms may include interest rate reductions, principal forgiveness, term extensions, payment forbearance or other actions intended to minimize the Company’s economic loss and to avoid foreclosure or repossession of the collateral. Each occurrence is unique to the borrower and is evaluated separately. In a situation where an economic concession has been granted to a borrower that is experiencing financial difficulty, the Company identifies and reports that loan as a troubled debt restructuring (“TDR”). Management considers regulatory guidelines when restructuring loans to ensure that prudent lending practices are followed. As such, qualification criteria and payment terms consider the borrower’s current and prospective ability to comply with the modified terms of the loan. Additionally, the Company structures loan modifications with the intent of strengthening repayment prospects. Loans that are reported as TDRs apply the identical criteria in the determination of whether the loan should be accruing or not accruing. The event of classifying the loan as a TDR due to a modification of terms may be independent from the determination of accruing interest on a loan.

Leases Receivable

The Company provides various types of commercial lease financing that are classified for accounting purposes as direct financing, sales-type or operating leases. Leases that transfer substantially all of the benefits and risks of ownership to the lessee are classified as direct financing or sales-type leases and are included in loans and leases receivable on the Consolidated Statements of Financial Condition. Direct financing and sales-type leases are carried at the combined present value of future minimum lease payments and lease residual values. The determination of lease classification requires various judgments and estimates by management, including the fair value of equipment at lease inception, useful life of the equipment under lease, lease residual value, and collectability of minimum lease payments.

Sales-type leases generate dealer profit, which is recognized at lease inception by recording lease revenue net of lease cost. Lease revenue consists of the present value of the future minimum lease payments. Lease cost consists of the lease equipment’s book value, less the present value of its residual. Interest income on direct financing and sales-type leases is recognized using methods that approximate a level yield over the fixed, non-cancelable term of the lease. Recognition of interest income is generally discontinued at the time the lease becomes 90 days delinquent, unless the lease is well-secured and in process of collection. Delinquency and past due status is based on the contractual terms of the lease. The Company receives pro rata rent payments for the interim period until the lease contract commences and the fixed, non-cancelable lease term begins. Interim payments are recognized in the month they are earned and are recorded in interest income. Management has policies and procedures in place for the determination of lease classification and review of the related judgments and estimates for all lease financings.

The Company generally fully charges off or charges down to net realizable value (fair value of collateral, less estimated costs to sell) for leases when management judges the lease to be uncollectible; repayment is deemed to be protracted beyond reasonable time frames; the lease has been classified as a loss by either the Company's internal review process or its banking regulatory agencies; the customer has filed bankruptcy and the loss becomes evident owing to lack of assets; or the lease meets a defined number of days past due unless the lease is both well-secured and in the process of collection.

Some lease financings include a residual value component, which represents the estimated fair value of the leased equipment at the expiration of the initial term of the transaction. The estimation of the residual value involves judgments regarding product and technology changes, customer behavior, shifts in supply and demand, and other economic assumptions. The Company may purchase and sell minimum lease payments, primarily as a credit risk reduction tool, to third-party financial institutions at fixed rates on a non-recourse basis with its underlying equipment as collateral. For those transactions that achieve sale treatment, the related lease cash flow stream and the non-recourse financing are derecognized. For those transactions that do not achieve sale treatment, the underlying lease remains on the Company’s Consolidated Statements of Financial Condition and non-recourse debt is recorded in the amount of the proceeds received. The Company retains servicing of these leases and bills, collects, and remits funds to the third-party financial institution. Upon default by the lessee, the third-party financial institutions may take control of the underlying collateral which the Company would otherwise retain as residual value.

Leases that do not transfer substantially all benefits and risks of ownership to the lessee are classified as operating leases. Such leased equipment are included in rental equipment on the Consolidated Statements of Financial Condition and are depreciated on a straight-line basis over the term of the lease to its estimated residual value.

Depreciation expense is recorded as operating lease equipment depreciation expense within noninterest expense. Operating lease rental income is recognized when it becomes due and is reflected as a component of noninterest income. The Company evaluates the carrying value of rental equipment for impairment whenever events or circumstances have occurred that would indicate the carrying amount may not be fully recoverable. If the carrying amount is not fully recoverable, an impairment loss is recognized to reduce the carrying amount to fair value, where fair value is based on the condition of the rental equipment and the projected net cash flows from rental and sale adjusted for current market conditions. A nominal impairment expense from rental equipment was recognized for the fiscal year ended September 30, 2023, and no impairment expense was recognized for fiscal years ended September 30, 2022 and 2021.

Loan Servicing and Transfers of Financial Assets

The Company sells loan participations, generally without recourse, in both the commercial and consumer segments. The Company also sells commercial SBA and USDA loans to third parties, generally without recourse. Sold loans are not included in the Consolidated Financial Statements. The Bank generally retains the right to service the sold loans for a fee. If the fee is determined commensurate and customary with market terms, no servicing asset or liability is recorded. Any fee that is above or below market terms results in a servicing asset or liability and is included within Other Assets on the Consolidated Statements of Financial Condition. At September 30, 2023 and 2022, the Bank was servicing loans for others with aggregate unpaid principal balances of $332.5 million and $336.6 million, respectively. The service fees and ancillary income related to these loans were immaterial.

Transfers of loans, portions of loans meeting the definition of a participating interest, and other financial assets are accounted for as sales on the transaction settlement date when control has been surrendered. Control over transferred assets is deemed to be surrendered when (1) the assets have been legally isolated from the Company, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of such right) to pledge or exchange the transferred assets, and (3) the Company does not maintain effective control over the transferred assets through a repurchase agreement or other means. Upon sale, the loans or other financial assets are derecognized from the Company’s Consolidated Statements of Financial Condition. If the transfer does not satisfy the aforementioned control criteria, the transaction is recorded as a secured borrowing with the loans or other financial assets remaining on the Company’s Consolidated Statements of Financial Condition and proceeds recognized as a liability.

ALLOWANCE FOR CREDIT LOSSES

The ACL represents management’s estimate of current credit losses expected to be incurred by the loan and lease portfolio over the life of each financial asset as of the balance sheet date. The Company individually evaluates loans and leases that do not share similar risk characteristics with other financial assets, which generally means loans and leases on nonaccrual status. All other loans and leases are evaluated collectively for credit loss. A reserve for unfunded credit commitments such as letters of credit and binding unfunded loan commitments is recorded in other liabilities on the Consolidated Statements of Financial Condition.

Individually evaluated loans and leases are a key component of the ACL. Generally, the Company measures credit loss on individually evaluated loans based on the fair value of the collateral less estimated selling costs, as the Company considers these financial assets to be collateral dependent. If an individually evaluated loan or lease is not collateral dependent, credit loss is measured at the present value of expected future cash flows discounted at the loan or lease initial effective interest rate. Management has also identified certain structured finance credits for alternative energy projects in which a substantial cash collateral account has been established to mitigate credit risk. Due to the nature of the transactions and significant cash collateral positions, these credits are evaluated individually.

Credit loss for all other loans and leases is evaluated collectively by various characteristics. The collective evaluation of expected losses in all commercial finance portfolios is based on a cohort loss rate and adjustments for forward-looking information, including industry and macroeconomic forecasts. The cohort loss rate is a life of loan loss rate that immediately reverts to historical loss information for the remaining maturity of the financial asset. Management has elected to use a twelve to twenty-four month reasonable and supportable forecast for forward-looking information. Factors utilized in the determination of the allowance include historical loss experience, current economic forecasts and measurement date credit characteristics such as product type, delinquency, and industry. The unfunded credit commitments depend on these same factors, as well as estimates of lines of credit usage. The various quantitative and qualitative factors used in the methodologies are reviewed quarterly.

The collective evaluation of expected credit losses for certain consumer lending portfolios utilize different methodologies when estimating expected credit losses. The determination of the allowance is governed by structured tiers that dictate how cash collections are applied to losses to assess if there are sufficient available funds to cover expected credit losses.

The amount of ACL depends significantly on management’s estimates or key factors and assumptions affecting valuation, appraisals of collateral, evaluations of performance and status, the amounts and timing of future cash flows expected to be received, forecasts of future economic conditions and reversion periods. Such estimates, appraisals, evaluations, cash flows and forecasts may be subject to frequent adjustments due to changing economic prospects of borrowers, lessees, properties or economic conditions. These estimates are reviewed quarterly and adjustments, if necessary, are recorded in the provision for credit losses in the periods in which they become known.

Accrued interest receivable is presented separately on the Consolidated Statements of Financial Condition, and an ACL is not recorded for these balances. Generally, when a loan or lease is placed on nonaccrual status, typically when the collection of interest or principal is 90 days or more past due, uncollected interest accrued in prior years is charged off against the ACL and interest accrued in the current year is reversed against interest income.

Management maintains a framework of controls over the estimation process for the ACL, including review of collective reserve methodologies for compliance with GAAP. Management has a quarterly process to review the appropriateness of historical observation periods and loss assumptions and risk ratings assigned to loans and leases, if applicable. Management reviews its qualitative framework and the effect on the collective reserve compared with relevant credit risk factors and consistency with credit trends. Management also maintains controls over information systems, models and spreadsheets used in the quantitative components of the reserve estimate. This includes the quality and accuracy of historical data used to derive loss rates, the inputs to industry and macroeconomic forecasts and the reversion periods utilized. The results of this process are summarized and presented to management quarterly for their approval of the recorded allowance. See Note 4. Loans and Leases, Net for further information.

The following are risk characteristics of the Company’s loan and lease portfolio:

Commercial Finance

The Company's Commercial Finance business line offers a variety of products through its working capital, equipment finance, structured finance, and insurance premium finance lending solutions. These products include term lending, asset-based lending, factoring, lease financing, insurance premium finance, government guaranteed lending and other commercial finance products offered on a nationwide basis that are subject to adverse market conditions which may impact the borrower’s ability to make repayment on the loan or lease or could cause a decline in the value of the collateral that secures the loan or lease. The loans or leases are primarily made based on the operating cash flows of the borrower and on the underlying collateral provided by the borrower. The cash flows of borrowers may be volatile and the value of the collateral securing these loans and leases may be difficult to measure. Most commercial finance loans and leases are secured by the assets being financed or other business assets such as accounts receivable or inventory. Although the loans and leases are often collateralized by equipment, inventory, accounts receivable, insurance premiums or other business assets, the liquidation of collateral in the event of a borrower default may be an insufficient source of repayment, because accounts receivable may be uncollectible and inventories and equipment may be obsolete or of limited use. The Company attempts to mitigate these risks by adhering to its underwriting policies in evaluating the management of the business and the credit-worthiness of borrowers and guarantors.

Consumer Finance

The Company's BaaS business line offers a variety of installment and revolving consumer lending products through its credit solutions. The Bank designs its credit program relationships with certain desired outcomes, including liquidity, credit protection, and risk retention by the program partner. The Bank believes the benefits of these outcomes not only support its goals but the goals of the credit program partner as well. The Bank designs its program credit protections in a manner so that the Bank earns a reasonable risk adjusted return, but is protected by certain layers of credit support, similar to what you would find in structured finance. Certain loans are sold to third parties based on terms and conditions within the Program Agreement.

Tax Services

The Bank's BaaS business line also offers tax solutions, which includes short-term refund advance loans. Through this product, taxpayers are underwritten to determine eligibility for these unsecured loans. Due to the nature of refund advance loans, it typically takes no more than three e-file cycles (the period of time between scheduled IRS payments) from when the return is accepted by the IRS to collect from the borrower. In the event of default, the Bank has no recourse against the tax consumer. When collection of principal becomes doubtful, the Bank will charge off the balance of a refund advance loan on September 30. Any remaining balances are charged off at the end of the calendar year. The Bank may record recoveries of previously charged off loans if collected in subsequent tax years.

The Bank offers short-term electronic return originator ("ERO") advance loans on a nationwide basis. These loans are typically utilized by tax preparers to purchase tax preparation software and to prepare tax office operations for the upcoming tax season. EROs go through an underwriting process to determine eligibility for the unsecured advances. ERO loans are not collateralized. Collection on ERO advances begins once the ERO begins to process refund transfers. Generally, the Bank will charge off the balance of an ERO advance loan if there is a balance at the end of June, or when collection of principal becomes doubtful.

Warehouse Finance

The Bank participates in several collateral-based warehouse lines of credit whereby the Bank is in a senior, secured position as the first out participant. These facilities are primarily collateralized by consumer receivables, with the Bank holding a senior collateral position enhanced by a subordinate party structure.

PREMISES, FURNITURE, AND EQUIPMENT

Land is carried at cost. Buildings, furniture, fixtures, leasehold improvements, internal-use software and equipment are carried at cost, less accumulated depreciation and amortization. The Company primarily uses the straight-line method of depreciation and amortization over the estimated useful lives of the assets, which is 39 years for buildings, three years for internal-use software, and range from two years to 15 years for leasehold improvements and for furniture, fixtures and equipment. Assets are reviewed for impairment when events indicate the carrying amount may not be recoverable. See Note 6. Premises, Furniture and Equipment, Net for further information.

GOODWILL

Goodwill represents the cost in excess of the fair value of net assets acquired (including identifiable intangibles) in transactions accounted for as business acquisitions. Goodwill is evaluated annually for impairment at a reporting unit level. The Company has determined that its reporting units are one level below the operating segments and distinguish these reporting units based on how the segments and reporting units are managed, taking into consideration the economic characteristics, nature of the products, and customers of the segments and reporting units. The Company performs its impairment evaluation as of September 30 of each fiscal year unless a triggering event occurs that would require an interim impairment evaluation. The Company generally utilizes a qualitative approach during this annual assessment to determine whether it is more likely than not (i.e. a likelihood of more than 50 percent) that the fair value of a reporting unit is less than its carrying value. If we determine it is more likely than not that goodwill is impaired, then a quantitative assessment is performed to determine fair value of the reporting unit. If the carrying amount of the reporting unit with goodwill exceeds its fair value, goodwill is considered impaired and is written down by the excess carrying value of the reporting unit. Subsequent increases in goodwill are not recognized in the Consolidated Financial Statements. No goodwill impairment was recognized during the fiscal years ended September 30, 2023, 2022 or 2021. See Note 8. Goodwill and Intangible Assets for further information.

INTANGIBLE ASSETS

Intangible assets other than goodwill are amortized over their respective estimated lives. All intangible assets are subject to an impairment test at least annually or more often if conditions indicate a possible impairment. See Note 8. Goodwill and Intangible Assets for further information.

STOCK COMPENSATION

Compensation expense for share-based awards is recorded over the vesting period at the fair value of the award at the time of grant. The fair value of non-vested (restricted) shares and performance share units granted under the Company’s incentive plans is equal to the fair market value of the underlying stock at the grant date, adjusted for dividends where applicable. The Company has elected to record forfeitures as they occur. See Note 13. Stock Compensation for further information.

INCOME TAXES

The Company records income tax expense based on the amount of taxes due on its tax return plus deferred taxes computed based on the expected future tax consequences of temporary differences between the carrying amounts and tax bases of assets and liabilities, using enacted tax rates. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.

In accordance with ASC 740, Income Taxes, the Company recognizes a tax position as a benefit only if it is more likely than not that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized upon examination. For tax positions not meeting the more likely than not test, no tax benefit is recorded. The Company recognizes interest and/or penalties related to income tax matters in noninterest income or noninterest expense. The effect on deferred tax assets and liabilities from a change in tax rates is recorded in income tax expense in the Consolidated Statements of Operations in the period in which the enactment date occurs. If current period income tax rates change, the impact on the annual effective income tax rate is applied year to date in the period of enactment. See Note 14. Income Taxes for further information.

FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK

The Company, in the normal course of business, makes commitments to originate loans which are not reflected in the Consolidated Financial Statements. The reserve for these unfunded commitments is included within Other Liabilities on the Consolidated Statements of Financial Condition.

COMPREHENSIVE INCOME (LOSS)

Comprehensive income (loss) consists of net income and other comprehensive income or loss. Other comprehensive income or loss includes the change in net unrealized holding gains and losses due to market conditions and other non-credit risk factors on AFS debt securities, net of reclassification adjustments and tax effects. Accumulated other comprehensive income (loss) is recognized as a separate component of stockholders’ equity.

REVENUE RECOGNITION

Interest revenue from loans, leases, and investments is recognized on the accrual basis of accounting as the interest is earned according to the terms of the particular loan, lease, or investment. Income from service and other customer charges is recognized as earned. Revenue within the Consumer segment is recognized as services are performed and service charges are earned in accordance with the terms of the various programs. Refer to Note 16. Revenue from Contracts with Customers for additional information.

EARNINGS PER COMMON SHARE (“EPS”)

Basic earnings per share is computed by dividing income available to common stockholders after the allocation of dividends and undistributed earnings to the participating securities by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised, and is computed after giving consideration to the weighted average dilutive effect upon vesting of restricted stock grants and after the allocation of earnings to the participating securities. See Note 5. Earnings per Common Share for further information.

RELATED PARTY TRANSACTIONS

The Company has disclosed information on its equity investments and relationships with variable interest entities in Note 1. Summary of Significant Accounting Policies.

At September 30, 2023 and 2022, the Company had no loans or deposits outstanding with individuals deemed under Regulation O to be directors, executive officers and/or employees of the Company.

RECLASSIFICATION AND REVISION OF PRIOR PERIOD BALANCES

Certain prior year amounts have been reclassified to conform to the current year financial statement presentation. These changes and reclassifications did not impact previously reported net income or comprehensive income (loss).

RECENTLY ADOPTED ACCOUNTING STANDARDS UPDATES ("ASU")

The following ASUs were adopted by the Company during the fiscal year ended September 30, 2023, none of which had a material impact on the Company's Consolidated Financial Statements. All became effective for the Company on October 1, 2022.

ASU 2021-05, Leases (Topic 842): Lessors – Certain Leases with Variable Lease Payments.

The following ASUs have been issued and are considered applicable to the Company, but have not yet been adopted as of September 30, 2023.

ASU 2022-02, Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures. The amendments in this ASU eliminate accounting guidance for troubled-debt restructurings (TDRs) by creditors in Subtopic ASC 310-40, Receivables – Troubled Debt Restructurings by Creditors, and enhance disclosure requirements for certain loan refinancings and restructurings when a borrower is experiencing financial difficulty. The ASU also requires current-period gross charge-offs by year of origination to be disclosed for loans and leases within scope of Topic 326. The adoption of this ASU will be reflected using the prospective approach beginning October 1, 2023 in the Company's Quarterly Report on Form 10-Q for the quarter ending December 31, 2023. The Company does not expect a material impact on the Consolidated Financial Statements.

SIGNIFICANT EVENTS	12 Months Ended
SIGNIFICANT EVENTS	Sep. 30, 2023
Unusual or Infrequent Items, or Both [Abstract]
SIGNIFICANT EVENTS	SIGNIFICANT EVENTSIn December 2022, the Company completed its rebranding efforts to Pathward Financial, Inc., including its bank subsidiary to Pathward, N.A. In December 2021, the Company executed a Purchase Agreement (the “Agreement”) with Beige Key, LLC (the “Assignee”) for the sale of all of the Company’s worldwide right, title and interest in and to company names and tradenames including Meta and other “Meta” formative names including MetaBank and Meta Financial Group, and the domain names, social media accounts and goodwill associated with the foregoing (collectively, the “Meta” tradenames) in exchange for $60.0 million in cash. The Company received and recognized $50.0 million as noninterest income upon execution and delivery of the Agreement, at which time the Meta tradenames were assigned to the Assignee. The Company received and recognized the remaining $10.0 million as noninterest income upon completion of required phase-out activities, which occurred in December 2022. The Company incurred $3.7 million and $13.1 million of noninterest expense in the fiscal years ending September 30, 2023 and 2022, respectively, as a result of rebranding activities.

SECURITIES

12 Months Ended

Sep. 30, 2023

Investments, Debt and Equity Securities [Abstract]

SECURITIES

The amortized cost, gross unrealized gains and losses and estimated fair values of AFS and HTM debt securities are presented below.


(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized (Losses)		Fair Value
Debt Securities AFS
At September 30, 2023
Corporate securities	$	25,000	$	—	$	(6,750)	$	18,250
SBA securities	95,549		—		(10,307)		85,242
Obligations of states and political subdivisions	2,368		—		(79)		2,289
Non-bank qualified obligations of states and political subdivisions	269,396		—		(42,673)		226,723
Asset-backed securities	255,384		234		(9,419)		246,199
Mortgage-backed securities	1,495,636		—		(270,111)		1,225,525
Total debt securities AFS	$	2,143,333	$	234	$	(339,339)	$	1,804,228
At September 30, 2022
Corporate securities	$	25,000	$	—	$	(2,813)	$	22,187
SBA securities	105,238		—		(7,470)		97,768
Obligations of states and political subdivisions	2,469		—		(125)		2,344
Non-bank qualified obligations of states and political subdivisions	290,754		—		(26,971)		263,783
Asset-backed securities	160,806		—		(13,016)		147,790
Mortgage-backed securities	1,581,452		—		(232,455)		1,348,997
Total debt securities AFS	$	2,165,719	$	—	$	(282,850)	$	1,882,869

Debt Securities HTM
At September 30, 2023
Non-bank qualified obligations of states and political subdivisions	$	34,415	$	—	$	(4,844)	$	29,571
Mortgage-backed securities	2,176		—		(322)		1,854
Total debt securities HTM	$	36,591	$	—	$	(5,166)	$	31,425
At September 30, 2022
Non-bank qualified obligations of states and political subdivisions	$	39,093	$	—	$	(3,190)	$	35,903
Mortgage-backed securities	2,589		—		(321)		2,268
Total debt securities HTM	$	41,682	$	—	$	(3,511)	$	38,171

Gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous loss position, were as follows:


	LESS THAN 12 MONTHS				OVER 12 MONTHS				TOTAL
(Dollars in thousands)	Fair Value		Gross Unrealized (Losses)		Fair Value		Gross Unrealized (Losses)		Fair Value		Gross Unrealized (Losses)
Debt Securities AFS
At September 30, 2023
Corporate securities	$	—	$	—	$	18,250	$	(6,750)	$	18,250	$	(6,750)
SBA securities	22,327		(1,919)		62,915		(8,388)		85,242		(10,307)
Obligations of state and political subdivisions	—		—		2,289		(79)		2,289		(79)
Non-bank qualified obligations of states and political subdivisions	5,010		(83)		221,714		(42,590)		226,723		(42,673)
Asset-backed securities	46,528		(224)		115,608		(9,195)		162,136		(9,419)
Mortgage-backed securities	18,311		(944)		1,207,214		(269,167)		1,225,525		(270,111)
Total debt securities AFS	$	92,176	$	(3,170)	$	1,627,990	$	(336,169)	$	1,720,165	$	(339,339)
At September 30, 2022
Corporate securities	$	—	$	—	$	22,187	$	(2,813)	$	22,187	$	(2,813)
SBA securities	97,767		(7,470)		—		—		97,767		(7,470)
Obligations of state and political subdivisions	2,345		(125)		—		—		2,345		(125)
Non-bank qualified obligations of states and political subdivisions	195,816		(19,743)		67,967		(7,228)		263,783		(26,971)
Asset-backed securities	64,886		(1,838)		82,904		(11,178)		147,790		(13,016)
Mortgage-backed securities	816,657		(106,583)		532,340		(125,872)		1,348,997		(232,455)
Total debt securities AFS	$	1,177,471	$	(135,759)	$	705,398	$	(147,091)	$	1,882,869	$	(282,850)

Debt Securities HTM
At September 30, 2023
Non-bank qualified obligations of states and political subdivisions	$	—	$	—	$	29,571	$	(4,844)	$	29,571	$	(4,844)
Mortgage-backed securities	—		—		1,854		(322)		1,854		(322)
Total debt securities HTM	$	—	$	—	$	31,425	$	(5,166)	$	31,425	$	(5,166)
At September 30, 2022
Non-bank qualified obligations of states and political subdivisions	$	3,984	$	(300)	$	31,919	$	(2,890)	$	35,903	$	(3,190)
Mortgage-backed securities	2,268		(321)		—		—		2,268		(321)
Total debt securities HTM	$	6,252	$	(621)	$	31,919	$	(2,890)	$	38,171	$	(3,511)

The decline in the fair value of investment securities balances when comparing September 30, 2023 to the prior year was primarily driven by increases in unrealized losses due to the rise in interest rates throughout the fiscal year. At September 30, 2023, there were 206 securities AFS in an unrealized loss position. All of the mortgage-backed securities ("MBS") in an unrealized loss position at September 30, 2023 were government guaranteed. Management assessed each investment security with unrealized losses for credit loss and determined all unrealized losses on these securities were due to change in interest rates versus credit loss. As part of that assessment, management evaluated and concluded that it is more-likely-than-not that the Company will not be required and does not intend to sell any of the securities prior to recovery of the amortized cost. At September 30, 2023, there was no ACL for debt securities AFS.

The amortized cost and fair value of debt securities by contractual maturity are shown below. Certain securities have call features which allow the issuer to call the security prior to maturity. Expected maturities may differ from contractual maturities in MBS because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Therefore, MBS are not included in the maturity categories in the following maturity summary. The expected maturities of certain SBA securities may differ from contractual maturities because the borrowers may have the right to prepay the obligation. However, certain prepayment penalties may apply.


	At September 30,
(Dollars in thousands)	2023				2022
Securities AFS at Fair Value	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in one year or less	$	5,023	$	4,971	$	718	$	715
Due after one year through five years	11,175		10,292		9,921		9,395
Due after five years through ten years	79,139		66,428		89,921		81,819
Due after ten years	552,360		497,012		483,707		441,943
	647,697		578,703		584,267		533,872
Mortgage-backed securities	1,495,636		1,225,525		1,581,452		1,348,997
Total securities AFS, at fair value	$	2,143,333	$	1,804,228	$	2,165,719	$	1,882,869

Securities HTM at Fair Value



Due after ten years	$	34,415	$	29,571	$	39,093	$	35,903
	34,415		29,571		39,093		35,903
Mortgage-backed securities	2,176		1,854		2,589		2,268
Total securities HTM, at cost	$	36,591	$	31,425	$	41,682	$	38,171

Activity related to the sale of securities is summarized below.


	Fiscal Year Ended September 30,
(Dollars in thousands)	2023		2022		2021
Securities AFS
Proceeds from sales	$	—	$	265,951	$	50,468
Gross gains on sales	—		1,742		179
Gross losses on sales	—		1,588		173
Net gain (loss) on securities AFS	$	—	$	154	$	6

There was no activity related to the sale of securities held to maturity during the fiscal years ended September 30, 2023, 2022, and 2021.

No securities were pledged as collateral for public funds on deposit at September 30, 2023 and 2022. No securities were pledged as collateral for individual, trust and estate deposits at September 30, 2023 and 2022.

FRB Stock. The Bank is required by federal law to subscribe to capital stock (divided into shares of $100 each) as a member of the FRB of Minneapolis with an amount equal to six per centum of the paid-up capital stock and surplus. One-half of the subscription is paid at time of application, and one-half is subject to call of the Board of Governors of the Federal Reserve System. FRB of Minneapolis stock held by the Bank totaled $19.7 million at September 30, 2023 and 2022. These equity securities are 'restricted' in that they can only be owned by member banks. At fiscal year-end 2023 and 2022, the Company pledged securities with fair values of $773.6 million and $924.2 million against FRB advances, respectively.

Included in interest and dividend income from other investments is $1.2 million, $1.2 million, and $1.5 million related to dividend income on FRB stock for the fiscal years ended September 30, 2023, 2022, and 2021, respectively.

FHLB Stock. The Company’s borrowings from the FHLB are secured by specific investment securities. Such advances can be made pursuant to several different credit programs, each of which has its own interest rate and range of maturities.

The investments in the FHLB stock are required investments related to the Company’s membership in and current borrowings from the FHLB of Des Moines. The investments in the FHLB of Des Moines could be adversely impacted by the financial operations of the FHLB and actions of their regulator, the Federal Housing Finance Agency.

The FHLB stock is carried at cost since it is generally redeemable at par value. The carrying value of the stock held at the FHLB was $8.5 million and $9.1 million at September 30, 2023 and 2022, respectively. At fiscal year-end 2023 and 2022, the Company pledged securities with fair values of approximately $996.9 million and $804.0 million, respectively, as collateral against FHLB advances. There was no combination of qualifying residential and other real estate loans pledged as collateral at September 30, 2023 and 2022.

Included in interest and dividend income from other investments is $0.5 million, $0.3 million and $0.2 million related to dividend income on FHLB stock for the fiscal years ended September 30, 2023, 2022 and 2021, respectively.

These equity securities are ‘restricted’ in that they can only be sold back to the respective institution from which they were acquired or another member institution at par. Therefore, FRB and FHLB stocks are less liquid than other marketable equity securities, and the fair value approximates cost.

Equity Securities. The Company held $3.4 million and $2.9 million in marketable equity securities at September 30, 2023 and 2022, respectively. The unrealized gains and losses associated with these securities were insignificant for the fiscal years ended September 30, 2023 and 2022. No securities were sold during the fiscal year.

Non-marketable equity securities with a readily determinable fair value totaled $8.4 million and $7.2 million at September 30, 2023 and 2022, respectively. The Company recognized $0.2 million in unrealized losses and $1.1 million in unrealized gains during the fiscal years ended September 30, 2023 and 2022, respectively. No securities were sold during the fiscal year.

Non-marketable equity securities without readily determinable fair value totaled $16.2 million and $18.2 million at September 30, 2023 and 2022, respectively. There were two securities sold during the fiscal year for a $0.1 million gain.

Equity Securities Impairment. The Company evaluates impairment for investments held at cost on at least an annual basis based on the ultimate recoverability of the par value. All other equity investments, including those under the equity method, are reviewed for other-than-temporary impairment on at least a quarterly basis. The Company recognized $3.3 million, zero, and $2.6 million in impairment for such investments for the fiscal years ended September 30, 2023, 2022, and 2021, respectively.

LOANS AND LEASES, NET

12 Months Ended

Sep. 30, 2023

Loans and Leases Receivable Disclosure [Abstract]

LOANS AND LEASES, NET

Loans and leases consist of the following:


	At September 30,
(Dollars in thousands)	2023		2022
Term lending	$	1,308,133	$	1,090,289
Asset-based lending	382,371		351,696
Factoring	358,344		372,595
Lease financing	183,392		210,692
Insurance premium finance	800,077		479,754
SBA/USDA	524,750		359,238
Other commercial finance	166,091		159,409
Commercial finance	3,723,158		3,023,673


Consumer finance	254,416		169,659
Tax services	5,192		9,098
Warehouse finance	376,915		326,850
Total loans and leases	4,359,681		3,529,280
Net deferred loan origination costs	6,435		7,025
Total gross loans and leases	4,366,116		3,536,305
Allowance for credit losses	(49,705)		(45,947)
Total loans and leases, net	$	4,316,411	$	3,490,358

During the fiscal years ended September 30, 2023 and 2022, the Company originated $1.21 billion and $985.3 million of other consumer finance and SBA/USDA loans as held for sale, respectively.

The Company sold held for sale loans resulting in proceeds of $1.14 billion and gain on sale of $0.3 million during the fiscal year ended September 30, 2023. The Company sold held for sale loans resulting in proceeds of $1.06 billion and gain on sale of $3.7 million during the fiscal year ended September 30, 2022.

Loans purchased and sold by portfolio segment, including participation interests, were as follows:


	Fiscal Year Ended September 30,
(Dollars in thousands)	2023		2022
Loans Purchased





Loans held for investment:
Commercial finance	$	480	$	3,098


Warehouse finance	214,786		112,255
Total purchases	$	215,266	$	115,353
Loans Sold
Loans held for sale:
Commercial finance	$	16,610	$	50,848
Consumer finance	1,123,271		855,291


Community banking	—		153,222
Loans held for investment:
Commercial finance	—		15,549
Consumer finance	—		77,456


Community banking	—		30,235
Total sales	$	1,139,881	$	1,182,601

Leasing Portfolio. The net investment in direct financing and sales-type leases was comprised of the following:


	At September 30,
(Dollars in thousands)	2023		2022
Minimum lease payments receivable	$	191,807	$	216,880
Unguaranteed residual assets	12,709		13,037
Unamortized initial direct costs	141		295
Unearned income	(21,124)		(19,225)
Total net investment in direct financing and sales-type leases	$	183,533	$	210,987

The components of total lease income were as follows:


	Fiscal Year Ended September 30,
(Dollars in thousands)	2023		2022
Interest income - loans and leases
Interest income on net investments in direct financing and sales-type leases	$	13,536	$	17,081

Leasing and equipment finance noninterest income
Lease income from operating lease payments	53,551		46,017

Other(1)	3,964		5,982
Total leasing and equipment finance noninterest income	57,515		51,999
Total lease income	$	71,051	$	69,080
(1) Other leasing and equipment finance noninterest income consists of gains (losses) on sales of leased equipment, fees and service charges on leases and gains (losses) on sales of leases.

Undiscounted future minimum lease payments receivable for direct financing and sales-type leases, and a reconciliation to the carrying amount recorded at September 30, 2023 were as follows:


(Dollars in thousands)
2024	$	76,899
2025	47,205
2026	25,478
2027	16,300
2028	13,378
Thereafter	12,547

Total undiscounted future minimum lease payments receivable for direct financing and sales-type leases	191,807
Third-party residual value guarantees	—
Total carrying amount of direct financing and sales-type leases	$	191,807

The Company did not record any contingent rental income from direct financing and sales-type leases in the fiscal year ended September 30, 2023.

Although macroeconomic conditions and markets have improved since the COVID-19 pandemic, other factors have been affecting the economic environment in 2023 including geopolitical conflict, supply chain disruptions, inflation, rising interest rates, and bank failures brought on by, among other things, rising interest rates, deposit outflows and liquidity crises. While the ultimate impact of these factors on the Company's loan and lease portfolio remains difficult to predict, management continues to evaluate the loan and lease portfolio in order to assess the impact on repayment sources and underlying collateral that could result in additional losses and the impact to our customers and businesses as a result of these factors impacting the economy and will refine its estimate as developments occur and more information becomes available.

Activity in the allowance for credit losses was as follows:


	Fiscal Year Ended September 30,
(Dollars in thousands)	2023		2022
Beginning balance	$	45,947	$	68,281
Provision for credit losses	57,448		28,862
Charge-offs	(59,898)		(61,061)
Recoveries	6,208		9,865
Ending balance	$	49,705	$	45,947

Activity in the allowance for credit losses and balances of loans and leases by portfolio segment was as follows:


	At September 30, 2023
(Dollars in thousands)	Beginning Balance		Provision (Reversal)		Charge-offs		Recoveries		Ending Balance
Allowance for credit losses:
Term lending	$	24,621	$	10,541	$	(11,295)	$	1,819	$	25,686
Asset-based lending	1,050		4,005		(2,873)		556		2,738
Factoring	6,556		1,523		(1,545)		32		6,566
Lease financing	5,902		(1,424)		(1,479)		303		3,302
Insurance premium finance	1,450		2,349		(1,659)		497		2,637
SBA/USDA	3,263		(296)		(43)		38		2,962
Other commercial finance	1,310		1,779		—		—		3,089
Commercial finance	44,152		18,477		(18,894)		3,245		46,980


Consumer finance	1,463		3,146		(2,263)		—		2,346
Tax services	5		35,775		(38,741)		2,963		2
Warehouse finance	327		50		—		—		377
Total loans and leases	45,947		57,448		(59,898)		6,208		49,705
Unfunded commitments(1)	366		(94)		—		—		272
Total	$	46,313	$	57,354	$	(59,898)	$	6,208	$	49,977
(1) Reserve for unfunded commitments is recognized within other liabilities on the Consolidated Statements of Financial Condition.


	At September 30, 2022
(Dollars in thousands)	Beginning Balance		Provision (Reversal)		Charge-offs		Recoveries		Ending Balance
Allowance for credit losses:
Term lending	$	29,351	$	4,850	$	(12,629)	$	3,049	$	24,621
Asset-based lending	1,726		(1,092)		(16)		432		1,050
Factoring	3,997		11,699		(11,057)		1,917		6,556
Lease financing	7,629		(2,062)		(301)		636		5,902
Insurance premium finance	1,394		597		(767)		226		1,450
SBA/USDA	2,978		863		(652)		74		3,263
Other commercial finance	1,168		142		—		—		1,310
Commercial finance	48,243		14,997		(25,422)		6,334		44,152


Consumer finance	7,354		(1,449)		(4,787)		345		1,463
Tax services	2		28,093		(30,852)		2,762		5
Warehouse finance	420		(93)		—		—		327
Community banking	12,262		(12,686)		—		424		—
Total loans and leases	68,281		28,862		(61,061)		9,865		45,947
Unfunded commitments(1)	690		(324)		—		—		366
Total	$	68,971	$	28,538	$	(61,061)	$	9,865	$	46,313
(1) Reserve for unfunded commitments is recognized within other liabilities on the Consolidated Statements of Financial Condition.

Information on loans and leases that are deemed to be collateral dependent and are evaluated individually for the ACL was as follows:


(Dollars in thousands)	At September 30, 2023		At September 30, 2022
Term lending	$	3,516	$	2,885
Asset-based lending	19,226		—
Factoring	1,133		550
Lease financing	630		2,787

SBA/USDA	750		1,199

Commercial finance(1)	25,255		7,421





Total	$	25,255	$	7,421
(1) For Commercial Finance, collateral dependent financial assets have collateral in the form of cash, equipment, or other business assets.

Management has identified certain structured finance credits for alternative energy projects in which a substantial cash collateral account has been established to mitigate credit risk. Due to the nature of the transactions and significant cash collateral positions, these credits are evaluated individually. The balance of these pass rated cash collateral loans totaled $117.0 million and $120.7 million at September 30, 2023 and 2022, respectively.

Federal regulations provide for the classification of loans and other assets such as debt and equity securities considered by the Bank's primary regulator, the OCC, to be of lesser quality as “substandard,” “doubtful” or “loss.” The loan classification and risk rating definitions are as follows:

Pass - A pass asset is of sufficient quality in terms of repayment, collateral and management to preclude a special mention or an adverse rating.

Watch - A watch asset is generally a credit performing well under current terms and conditions but with identifiable weakness meriting additional scrutiny and corrective measures. Watch is not a regulatory classification but can be used to designate assets that are exhibiting one or more weaknesses that deserve management’s attention. These assets are of better quality than special mention assets.

Special Mention - A special mention asset is a credit with potential weaknesses deserving management’s close attention and, if left uncorrected, may result in deterioration of the repayment prospects for the asset. Special mention assets are not adversely classified and do not expose an institution to sufficient risk to warrant adverse classification. Special mention is a temporary status with aggressive credit management required to garner adequate progress and move to watch or higher.

The adverse classifications are as follows:

Substandard - A substandard asset is inadequately protected by the net worth and/or repayment ability or by a weak collateral position. Assets so classified will have well-defined weaknesses creating a distinct possibility the Bank will sustain some loss if the weaknesses are not corrected. Loss potential does not have to exist for an asset to be classified as substandard.

Doubtful - A doubtful asset has weaknesses similar to those classified substandard, with the degree of weakness causing the likely loss of some principal in any reasonable collection effort. Due to pending factors, the asset’s classification as loss is not yet appropriate.

Loss - A loss asset is considered uncollectible and of such little value that the asset’s continuance on the Bank’s balance sheet is no longer warranted. This classification does not necessarily mean an asset has no recovery or salvage value leaving room for future collection efforts.

Loans and leases, or portions thereof, are generally charged off when collection of principal becomes doubtful. Typically, this is associated with a delay or shortfall in payments of 210 days or more for commercial insurance premium finance, 120 days or more for consumer credit products and leases, and 90 days or more for commercial finance loans. Action is taken to charge off ERO loans if such loans have not been collected by the end of June and refund advance loans if such loans have not been collected by the end of the calendar year. Nonaccrual loans and troubled debt restructurings are generally individually evaluated for expected credit losses.

The Company recognizes that concentrations of credit may naturally occur and may take the form of a large volume of related loans and leases to an individual, a specific industry, or a geographic location. Credit concentration is a direct, indirect, or contingent obligation that has a common bond where the aggregate exposure equals or exceeds a certain percentage of the Company’s Tier 1 Capital plus the allowable Allowance for Credit Losses.

The Company has various portfolios of consumer finance and tax services loans that present unique risks that are statistically managed. Due to the unique risks associated with these portfolios, the Company monitors other credit quality indicators in its evaluation of the appropriateness of the ACL on these portfolios, and as such, these loans are not included in the asset classification table below. The outstanding balances of consumer finance loans and tax services loans were $254.4 million and $5.2 million at September 30, 2023, respectively, and $169.7 million and $9.1 million at September 30, 2022, respectively. The amortized cost basis of loans and leases by asset classification and year of origination was as follows:


	Amortized Cost Basis
(Dollars in thousands)	Term Loans and Leases by Origination Year												Revolving Loans and Leases		Total
At September 30, 2023	2023		2022		2021		2020		2019		Prior
Term lending
Pass	$	301,778	$	149,190	$	99,677	$	73,132	$	14,368	$	323,482	$	—	$	961,627
Watch	35,277		51,036		58,041		12,230		4,483		18,931		—		179,998
Special mention	15,314		13,853		20,463		723		2,932		11,300		—		64,585
Substandard	4,604		30,451		14,729		24,613		3,872		16,597		—		94,866
Doubtful	200		2,655		1,691		1,121		165		1,225		—		7,057
Total	357,173		247,185		194,601		111,819		25,820		371,535		—		1,308,133
Asset-based lending
Pass	—		—		—		—		—		—		161,744		161,744
Watch	—		—		—		—		—		—		174,243		174,243
Special mention	—		—		—		—		—		—		26,382		26,382
Substandard	—		—		—		—		—		—		19,501		19,501
Doubtful	—		—		—		—		—		—		501		501
Total	—		—		—		—		—		—		382,371		382,371
Factoring
Pass	—		—		—		—		—		—		270,754		270,754
Watch	—		—		—		—		—		—		70,833		70,833
Special mention	—		—		—		—		—		—		8,892		8,892
Substandard	—		—		—		—		—		—		7,865		7,865

Total	—		—		—		—		—		—		358,344		358,344
Lease financing
Pass	7,716		15,941		15,167		27,489		4,036		50,688		—		121,037
Watch	626		10,436		12,566		4,494		1,579		222		—		29,923
Special mention	—		—		847		415		195		—		—		1,457
Substandard	—		1,983		7,082		3,660		3,062		14,923		—		30,710
Doubtful	—		—		71		61		—		133		—		265
Total	8,342		28,360		35,733		36,119		8,872		65,966		—		183,392
Insurance premium finance
Pass	797,267		1,210		—		—		—		—		—		798,477
Watch	858		34		—		—		—		—		—		892
Special mention	250		15		—		—		—		—		—		265
Substandard	91		20		—		—		—		—		—		111
Doubtful	180		152		—		—		—		—		—		332
Total	798,646		1,431		—		—		—		—		—		800,077
SBA/USDA


Pass	158,675		148,525		26,244		36,274		8,798		18,252		—		396,768
Watch	49,010		48,833		658		51		357		2,572		—		101,481
Special mention	—		—		530		—		—		—		—		530
Substandard	252		2,356		1,718		5,418		8,509		7,718		—		25,971

Total	207,937		199,714		29,150		41,743		17,664		28,542		—		524,750
Other commercial finance
Pass	2,330		18,927		32,737		1,137		10,122		69,927		—		135,180
Watch	1,742		—		—		—		—		—		—		1,742

Substandard	2,753		450		25,708		—		—		258		—		29,169

Total	6,825		19,377		58,445		1,137		10,122		70,185		—		166,091
Warehouse finance
Pass	—		—		—		—		—		—		376,915		376,915




Total	—		—		—		—		—		—		376,915		376,915
Total loans and leases
Pass	1,267,766		333,793		173,825		138,032		37,324		462,349		809,413		3,222,502
Watch	87,513		110,339		71,265		16,775		6,419		21,725		245,076		559,112
Special mention	15,564		13,868		21,840		1,138		3,127		11,300		35,274		102,111
Substandard	7,700		35,260		49,237		33,691		15,443		39,496		27,366		208,193
Doubtful	380		2,807		1,762		1,182		165		1,358		501		8,155
Total	$	1,378,923	$	496,067	$	317,929	$	190,818	$	62,478	$	536,228	$	1,117,630	$	4,100,073


	Amortized Cost Basis
(Dollars in thousands)	Term Loans and Leases by Origination Year												Revolving Loans and Leases		Total
At September 30, 2022	2022		2021		2020		2019		2018		Prior
Term lending
Pass	$	246,627	$	240,018	$	105,170	$	60,417	$	89,072	$	61,229	$	—	$	802,533
Watch	45,539		24,318		45,052		11,698		21,077		9,799		—		157,483
Special mention	9,500		24,885		14,300		2,861		619		242		—		52,407
Substandard	10,627		16,694		12,248		23,266		10,457		2,255		—		75,547
Doubtful	175		407		469		872		204		192		—		2,319
Total	312,468		306,322		177,239		99,114		121,429		73,717		—		1,090,289
Asset-based lending
Pass	—		—		—		—		—		—		154,494		154,494
Watch	—		—		—		—		—		—		162,990		162,990
Special mention	—		—		—		—		—		—		13,770		13,770
Substandard	—		—		—		—		—		—		20,442		20,442

Total	—		—		—		—		—		—		351,696		351,696
Factoring
Pass	—		—		—		—		—		—		254,883		254,883
Watch	—		—		—		—		—		—		86,219		86,219
Special mention	—		—		—		—		—		—		9,174		9,174
Substandard	—		—		—		—		—		—		22,319		22,319

Total	—		—		—		—		—		—		372,595		372,595
Lease financing
Pass	7,407		38,818		31,408		26,552		12,361		823		—		117,369
Watch	8,799		17,098		10,284		6,655		2,899		151		—		45,886
Special mention	151		6,151		2,644		481		2,876		2,811		—		15,114
Substandard	825		9,486		11,819		7,273		1,245		—		—		30,648


Doubtful	144		163		1,280		88		—		—		—		1,675
Total	17,326		71,716		57,435		41,049		19,381		3,785		—		210,692
Insurance premium finance
Pass	478,504		307		8		—		—		—		—		478,819
Watch	539		7		—		—		—		—		—		546
Special mention	169		40		—		—		—		—		—		209
Substandard	106		46		—		—		—		—		—		152
Doubtful	14		14		—		—		—		—		—		28
Total	479,332		414		8		—		—		—		—		479,754
SBA/USDA
Pass	54,512		111,907		40,474		56,538		28,874		24,305		—		316,610
Watch	—		13,836		1,266		702		—		710		—		16,514
Special mention	—		211		—		869		—		—		—		1,080
Substandard	4,149		10,968		4,278		—		1,094		4,545		—		25,034

Total	58,661		136,922		46,018		58,109		29,968		29,560		—		359,238
Other commercial finance
Pass	5,886		13,607		26,040		20,458		23,098		40,782		—		129,871


Substandard	—		9,538		—		—		—		20,000		—		29,538

Total	5,886		23,145		26,040		20,458		23,098		60,782		—		159,409
Warehouse finance
Pass	—		—		—		—		—		—		294,350		294,350

Special mention	—		—		—		—		—		—		32,500		32,500


Total	—		—		—		—		—		—		326,850		326,850
Total loans and leases
Pass	792,936		404,657		203,100		163,965		153,405		127,139		703,727		2,548,929
Watch	54,877		55,259		56,602		19,055		23,976		10,660		249,209		469,638
Special mention	9,820		31,287		16,944		4,211		3,495		3,053		55,444		124,254
Substandard	15,707		46,732		28,345		30,539		12,796		26,800		42,761		203,680
Doubtful	333		584		1,749		960		204		192		—		4,022
Total	$	873,673	$	538,519	$	306,740	$	218,730	$	193,876	$	167,844	$	1,051,141	$	3,350,523

Past due loans and leases were as follows:


	At September 30, 2023
	Accruing and Nonaccruing Loans and Leases												Nonperforming Loans and Leases
(Dollars in thousands)	30-59 Days Past Due		60-89 Days Past Due		> 89 Days Past Due		Total Past Due		Current		Total Loans and Leases Receivable		> 89 Days Past Due and Accruing		Nonaccrual Balance		Total
Loans held for sale	$	626	$	549	$	306	$	1,481	$	76,298	$	77,779	$	306	$	—	$	306

Term lending	13,898		7,723		11,136		32,757		1,275,376		1,308,133		3,737		15,324		19,061
Asset-based lending	—		—		123		123		382,248		382,371		—		18,082		18,082
Factoring	—		—		—		—		358,344		358,344		—		1,298		1,298
Lease financing	6,865		158		4,828		11,851		171,541		183,392		4,242		1,666		5,908
Insurance premium finance	2,159		1,262		2,339		5,760		794,317		800,077		2,339		—		2,339
SBA/USDA	512		—		1,835		2,347		522,403		524,750		833		1,002		1,835
Other commercial finance	—		—		91		91		166,000		166,091		91		—		91
Commercial finance	23,434		9,143		20,352		52,929		3,670,229		3,723,158		11,242		37,372		48,614


Consumer finance	2,992		2,425		2,210		7,627		246,789		254,416		2,210		—		2,210
Tax services	—		—		5,082		5,082		110		5,192		5,082		—		5,082
Warehouse finance	—		—		—		—		376,915		376,915		—		—		—
Total loans and leases held for investment	26,426		11,568		27,644		65,638		4,294,043		4,359,681		18,534		37,372		55,906
Total loans and leases	$	27,052	$	12,117	$	27,950	$	67,119	$	4,370,341	$	4,437,460	$	18,840	$	37,372	$	56,212


	At September 30, 2022
	Accruing and Nonaccruing Loans and Leases												Nonperforming Loans and Leases
(Dollars in thousands)	30-59 Days Past Due		60-89 Days Past Due		> 89 Days Past Due		Total Past Due		Current		Total Loans and Leases Receivable		> 89 Days Past Due and Accruing		Nonaccrual Balance		Total
Loans held for sale	$	—	$	—	$	—	$	—	$	21,071	$	21,071	$	—	$	—	$	—

Term lending	14,066		2,576		4,458		21,100		1,069,189		1,090,289		2,035		7,576		9,611
Asset-based lending	—		—		68		68		351,628		351,696		39		29		68
Factoring	—		—		—		—		372,595		372,595		—		569		569
Lease financing	8,265		2,253		1,714		12,232		198,460		210,692		440		3,750		4,190
Insurance premium finance	2,550		1,379		1,628		5,557		474,197		479,754		1,628		—		1,628
SBA/USDA	—		—		—		—		359,238		359,238		—		1,451		1,451
Other commercial finance	—		—		—		—		159,409		159,409		—		—		—
Commercial finance	24,881		6,208		7,868		38,957		2,984,716		3,023,673		4,142		13,375		17,517


Consumer finance	3,322		2,609		2,793		8,724		160,935		169,659		2,793		—		2,793
Tax services	—		—		8,873		8,873		225		9,098		8,873		—		8,873
Warehouse finance	—		—		—		—		326,850		326,850		—		—		—
Total loans and leases held for investment	28,203		8,817		19,534		56,554		3,472,726		3,529,280		15,808		13,375		29,183
Total loans and leases	$	28,203	$	8,817	$	19,534	$	56,554	$	3,493,797	$	3,550,351	$	15,808	$	13,375	$	29,183

Nonaccrual loans and leases by year of origination were as follows:


	Amortized Cost Basis
(Dollars in thousands)	Term Loans and Leases by Origination Year												Revolving Loans and Leases		Total		Nonaccrual with No ACL
At September 30, 2023	2023		2022		2021		2020		2019		Prior
Term lending	$	748	$	4,942	$	2,933	$	2,165	$	3,134	$	1,402	$	—	$	15,324	$	—
Asset-based lending	—		—		—		—		—		—		18,082		18,082		—
Factoring	—		—		—		—		—		—		1,298		1,298		—
Lease financing	—		—		446		660		—		560		—		1,666		1

SBA/USDA	—		750		—		—		—		252		—		1,002		—

Commercial finance	748		5,692		3,379		2,825		3,134		2,214		19,380		37,372		1





Total nonaccrual loans and leases	$	748	$	5,692	$	3,379	$	2,825	$	3,134	$	2,214	$	19,380	$	37,372	$	1


	Amortized Cost Basis
(Dollars in thousands)	Term Loans and Leases by Origination Year												Revolving Loans and Leases		Total		Nonaccrual with No ACL
At September 30, 2022	2022		2021		2020		2019		2018		Prior
Term lending	$	251	$	1,110	$	1,964	$	989	$	3,096	$	166	$	—	$	7,576	$	2,885
Asset-based lending	—		—		—		—		—		—		29		29		—
Factoring	—		—		—		—		—		—		569		569		550
Lease financing	977		310		2,442		13		8		—		—		3,750		—

SBA/USDA	—		—		1,199		—		—		252		—		1,451		1,199

Commercial finance	1,228		1,420		5,605		1,002		3,104		418		598		13,375		4,634





Total nonaccrual loans and leases	$	1,228	$	1,420	$	5,605	$	1,002	$	3,104	$	418	$	598	$	13,375	$	4,634

Loans and leases that are 90 days or more delinquent and accruing by year of origination were as follows:


	Amortized Cost Basis
(Dollars in thousands)	Term Loans and Leases by Origination Year												Revolving Loans and Leases		Total
At September 30, 2023	2023		2022		2021		2020		2019		Prior
Loans held for sale	$	306	$	—	$	—	$	—	$	—	$	—	$	—	$	306
Term lending	1,290		1,371		500		233		29		314		—		3,737


Lease financing	—		490		979		784		1,794		195		—		4,242
Insurance premium finance	—		414		114		—		334		1,477		—		2,339
SBA/USDA	—		—		—		833		—		—		—		833
Other commercial finance	—		—		—		—		—		91		—		91
Commercial finance	1,290		2,275		1,593		1,850		2,157		2,077		—		11,242


Consumer finance	891		1,045		246		—		—		—		28		2,210
Tax services	5,082		—		—		—		—		—		—		5,082

Total loans and leases held for investment	7,263		3,320		1,839		1,850		2,157		2,077		28		18,534
Total 90 days or more delinquent and accruing	$	7,569	$	3,320	$	1,839	$	1,850	$	2,157	$	2,077	$	28	$	18,840


	Amortized Cost Basis
(Dollars in thousands)	Term Loans and Leases by Origination Year												Revolving Loans and Leases		Total
At September 30, 2022	2022		2021		2020		2019		2018		Prior
Term lending	$	207	$	720	$	716	$	130	$	70	$	192	$	—	$	2,035
Asset-based lending	—		—		—		—		—		—		39		39

Lease financing	8		158		98		131		45		—		—		440
Insurance premium finance	1,513		110		5		—		—		—		—		1,628


Commercial finance	1,728		988		819		261		115		192		39		4,142


Consumer finance	2,123		605		42		23		—		—		—		2,793
Tax services	8,873		—		—		—		—		—		—		8,873

Total 90 days or more delinquent and accruing	$	12,724	$	1,593	$	861	$	284	$	115	$	192	$	39	$	15,808

Certain loans and leases 90 days or more past due as to interest or principal continue to accrue because they are (1) well-secured and in the process of collection or (2) consumer loans exempt under regulatory rules from being classified as non-accrual until later delinquency, usually 120 days past due.

The following table provides the average recorded investment in nonaccrual loans and leases:


	Fiscal Year Ended September 30,
(Dollars in thousands)	2023		2022
Term lending	$	11,494	$	11,320
Asset-based lending	10,295		3,754
Factoring	578		6,344
Lease financing	2,852		3,278

SBA/USDA	1,244		1,244

Commercial finance	26,463		25,940





Total loans and leases	$	26,463	$	25,940

The recognized interest income on the Company's nonaccrual loans and leases for the fiscal years ended September 30, 2023 and 2022 was not significant.

The Company’s troubled debt restructurings ("TDRs") typically involve forgiving a portion of interest or principal on existing loans, making loans at a rate materially less than current market rates, or extending the term of the loan. There were $1.1 million loans that were modified in a TDR during the fiscal year ended September 30, 2023. There were $10.5 million of commercial finance loans and $0.9 million of consumer finance loans that were modified in a TDR during the fiscal year ended September 30, 2022, all of which were modified to extend the term of the loan.

During the fiscal year ended September 30, 2023, the Company had $0.9 million of commercial finance loans that were modified in a TDR within the previous 12 months and for which there was a payment default. During the fiscal year ended September 30, 2022, the Company had $5.2 million of commercial finance loans and $1.1 million of consumer finance loans that were modified in a TDR within the previous 12 months and for which there was a payment default. TDR net charge-offs and the impact of TDRs on the Company's allowance for credit losses were insignificant during the fiscal years ended September 30, 2023 and September 30, 2022.

EARNINGS PER COMMON SHARE ("EPS")

12 Months Ended

Sep. 30, 2023

Earnings Per Share [Abstract]

EARNINGS PER COMMON SHARE ("EPS")

The Company has granted restricted share awards with dividend rights that are considered to be participating securities. Accordingly, a portion of the Company’s earnings is allocated to those participating securities in the earnings per share calculation under the two-class method. Basic EPS is computed using the two-class method by dividing income available to common stockholders after the allocation of dividends and undistributed earnings to the participating securities by the weighted average number of common shares outstanding for the period. Diluted EPS is calculated using the more dilutive of the treasury stock method or the two-class method. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised, and is computed after giving consideration to the weighted average dilutive effect of the Company’s stock options, performance share units, and nonvested restricted stock, where applicable. Diluted EPS under the two-class method also considers the allocation of earnings to the participating securities. Antidilutive securities are disregarded in earnings per share calculations. Diluted EPS shown below reflects the two-class method, as diluted EPS under the two-class method was more dilutive than under the treasury stock method.

A reconciliation of net income and common stock share amounts used in the computation of basic and diluted earnings per share is presented below.


	Fiscal Year Ended September 30,
(Dollars in thousands, except per share data)	2023		2022		2021
Basic income per common share:
Net income attributable to Pathward Financial, Inc.	$	163,615	$	156,386	$	141,708
Dividends and undistributed earnings allocated to participating securities	(2,453)		(2,565)		(2,698)
Basic net earnings available to common stockholders	161,162		153,821		139,010
Undistributed earnings allocated to nonvested restricted stockholders	2,372		2,468		2,575
Reallocation of undistributed earnings to nonvested restricted stockholders	(2,364)		(2,468)		(2,573)


Diluted net earnings available to common stockholders	$	161,170	$	153,821	$	139,012

Total weighted-average basic common shares outstanding	26,833,079		29,227,071		31,729,596
Effect of dilutive securities(1)

Performance share units	92,527		5,176		21,926

Total effect of dilutive securities	92,527		5,176		21,926
Total weighted-average diluted common shares outstanding	26,925,606		29,232,247		31,751,522

Net earnings per common share:
Basic earnings per common share	$	6.01	$	5.26	$	4.38
Diluted earnings per common share(2)	$	5.99	$	5.26	$	4.38

(1) Represents the effect of the assumed exercise of stock options and vesting of performance share units and restricted stock, as applicable, utilizing the treasury stock method.

(2) Excluded from the computation of diluted earnings per share for the fiscal years ended September 30, 2023, 2022, and 2021, respectively, were 408,477, 487,476, and 615,811 weighted average shares of nonvested restricted stock because their inclusion would be anti-dilutive.

PREMISES, FURNITURE, AND EQUIPMENT, NET

12 Months Ended

Sep. 30, 2023

Property, Plant and Equipment [Abstract]

PREMISES, FURNITURE, AND EQUIPMENT, NET

Premises, furniture, and equipment consists of the following:


	At September 30,
(Dollars in thousands)	2023		2022
Land	$	1,354	$	1,354
Buildings	21,331		21,300
Furniture, fixtures, and equipment	62,312		56,631
	84,997		79,285
Less: accumulated depreciation and amortization	(45,837)		(37,575)
Net book value	$	39,160	$	41,710

Depreciation expense of premises, furniture and equipment included in occupancy and equipment expense was approximately $11.1 million, $11.3 million and $9.6 million for the fiscal years ended September 30, 2023, 2022 and 2021, respectively.

RENTAL EQUIPMENT, NET

Rental equipment consists of the following:


	At September 30,
(Dollars in thousands)	2023		2022
Computers and IT networking equipment	$	25,094	$	21,669
Motor vehicles and other	122,845		107,648
Other furniture and equipment	37,637		34,254
Solar panels and equipment	142,355		133,765
Total	327,931		297,336

Accumulated depreciation	(117,418)		(94,355)
Unamortized initial direct costs	1,237		1,390
Net book value	$	211,750	$	204,371

Future minimum lease payments expected to be received for operating leases at September 30, 2023 were as follows:


(Dollars in thousands)
2024	$	45,612
2025	37,424
2026	27,542
2027	19,791
2028	11,495
Thereafter	13,891
Total	$	155,755

RENTAL EQUIPMENT, NET

12 Months Ended

Sep. 30, 2023

Property, Plant and Equipment [Abstract]

RENTAL EQUIPMENT, NET

PREMISES, FURNITURE, AND EQUIPMENT, NET

Premises, furniture, and equipment consists of the following:


	At September 30,
(Dollars in thousands)	2023		2022
Land	$	1,354	$	1,354
Buildings	21,331		21,300
Furniture, fixtures, and equipment	62,312		56,631
	84,997		79,285
Less: accumulated depreciation and amortization	(45,837)		(37,575)
Net book value	$	39,160	$	41,710

Depreciation expense of premises, furniture and equipment included in occupancy and equipment expense was approximately $11.1 million, $11.3 million and $9.6 million for the fiscal years ended September 30, 2023, 2022 and 2021, respectively.

RENTAL EQUIPMENT, NET

Rental equipment consists of the following:


	At September 30,
(Dollars in thousands)	2023		2022
Computers and IT networking equipment	$	25,094	$	21,669
Motor vehicles and other	122,845		107,648
Other furniture and equipment	37,637		34,254
Solar panels and equipment	142,355		133,765
Total	327,931		297,336

Accumulated depreciation	(117,418)		(94,355)
Unamortized initial direct costs	1,237		1,390
Net book value	$	211,750	$	204,371

Future minimum lease payments expected to be received for operating leases at September 30, 2023 were as follows:


(Dollars in thousands)
2024	$	45,612
2025	37,424
2026	27,542
2027	19,791
2028	11,495
Thereafter	13,891
Total	$	155,755

GOODWILL AND INTANGIBLE ASSETS

12 Months Ended

Sep. 30, 2023

Goodwill and Intangible Assets Disclosure [Abstract]

GOODWILL AND INTANGIBLE ASSETS

GOODWILL AND INTANGIBLE ASSETSThe Company held a total of $309.5 million of goodwill at September 30, 2023. The recorded goodwill is a result of multiple business combinations that occurred from 2015 to 2018. There have been no changes to the carrying amount of goodwill during the fiscal years ended September 30, 2023 and 2022.

The changes in the carrying amount of the Company's intangible assets were as follows:


(Dollars in thousands)	Trademark(1)		Non-Compete		Customer Relationships(2)		All Others(3)		Total
At September 30, 2022	$	8,605	$	—	$	12,395	$	4,691	$	25,691

Amortization during the period	(1,128)		—		(3,285)		(558)		(4,971)

At September 30, 2023	$	7,477	$	—	$	9,110	$	4,133	$	20,720

Gross carrying amount	$	14,314	$	301	$	77,578	$	7,796	$	99,989
Accumulated amortization	(6,837)		(301)		(57,550)		(3,445)		(68,133)
Accumulated impairment	—		—		(10,918)		(218)		(11,136)
At September 30, 2023	$	7,477	$	—	$	9,110	$	4,133	$	20,720

At September 30, 2021	$	9,823	$	40	$	17,868	$	5,417	$	33,148
Acquisitions during the period	—		—		—		1		1
Amortization during the period	(1,218)		(40)		(4,803)		(524)		(6,585)
Write-offs and disposals during the period	—		—		(670)		(203)		(873)
At September 30, 2022	$	8,605	$	—	$	12,395	$	4,691	$	25,691

Gross carrying amount	$	14,624	$	2,481	$	82,088	$	9,940	$	109,133
Accumulated amortization	(6,019)		(2,481)		(58,775)		(5,031)		(72,306)
Accumulated impairment	—		—		(10,918)		(218)		(11,136)
At September 30, 2022	$	8,605	$	—	$	12,395	$	4,691	$	25,691

(1) Book amortization period of 5-15 years. Amortized using the straight line and accelerated methods.

(2) Book amortization period of 10-30 years. Amortized using the accelerated method.

(3) Book amortization period of 3-20 years. Amortized using the straight line method.

The estimated amortization expense of intangible assets assumes no activities, such as acquisitions, which would result in additional amortizable intangible assets. Estimated amortization expense of intangible assets in the subsequent fiscal years at September 30, 2023 was as follows:


(Dollars in thousands)
2024	$	4,116
2025	3,554
2026	3,208
2027	2,562
2028	2,251
Thereafter	5,029
Total anticipated intangible amortization	$	20,720

There was a no impairment to intangible assets for the fiscal year ended September 30, 2023 and $0.7 million impairment for the fiscal year ended September 30, 2022. Intangible impairment expense is recorded within the impairment expense line of the Consolidated Statements of Operations.

OPERATING LEASE RIGHT-OF-USE ASSETS AND LIABILITIES

12 Months Ended

Sep. 30, 2023

Leases [Abstract]

OPERATING LEASE RIGHT-OF-USE ASSETS AND LIABILITIES

Operating lease right-of-use ("ROU") assets, included in other assets, were $26.9 million and $30.1 million at September 30, 2023 and 2022, respectively.

Operating lease liabilities, included in accrued expenses and other liabilities, were $28.8 million and $32.1 million at September 30, 2023 and 2022, respectively.

Undiscounted future minimum operating lease payments and a reconciliation to the amount recorded as operating lease liabilities at September 30, 2023 were as follows:


(Dollars in thousands)
2024	$	3,913
2025	3,718
2026	3,195
2027	3,092
2028	3,803
Thereafter	14,836
Total undiscounted future minimum lease payments	32,557
Discount	(3,724)
Total operating lease liabilities	$	28,833

The weighted-average discount rate and remaining lease term for operating leases at September 30, 2023 were as follows:


Weighted-average discount rate	2.38	%
Weighted-average remaining lease term (years)	9.66

The components of total lease costs for operating leases were as follows:


	Fiscal Year Ended September 30,
(Dollars in thousands)	2023		2022
Lease expense	$	3,951	$	4,431
Short-term and variable lease cost	142		194
ROU asset impairment	—		670
Sublease income	(1,409)		(1,267)
Total lease cost for operating leases	$	2,684	$	4,028

TIME CERTIFICATES OF DEPOSIT

12 Months Ended

Sep. 30, 2023

Deposits [Abstract]

TIME CERTIFICATES OF DEPOSIT

Time certificates of deposit in denominations of $250,000 or more were approximately $5.0 million and $6.2 million at September 30, 2023, and 2022, respectively.

Scheduled maturities of time certificates of deposit at September 30, 2023 were as follows for the fiscal years ending:


(Dollars in thousands)
2024	$	5,165
2025	369
2026	—
2027	—
2028	—
Thereafter	—
Total(1)	$	5,534

(1) As of September 30, 2023, the Company had no certificates of deposit recorded in wholesale deposits on the Consolidated Statements of Financial Condition.

Under the Dodd-Frank Act, IRA and non-IRA deposit accounts are insured up to $250,000 by the DIF under management of the FDIC.

SHORT-TERM AND LONG-TERM BORROWINGS

12 Months Ended

Sep. 30, 2023

Debt Disclosure [Abstract]

SHORT-TERM AND LONG-TERM BORROWINGS

Short-Term Borrowings


	At September 30,
(Dollars in thousands)	2023		2022
Overnight fed funds purchased	$	13,000	$	—

Total	$	13,000	$	—

The Bank has executed blanket pledge agreements whereby the Bank assigns, transfers, and pledges to the FHLB and grants to the FHLB a security interest in real estate and securities collateral. The Bank has the right to use, commingle, and dispose of the collateral it has assigned to the FHLB. Under the agreement, the Bank must maintain “eligible collateral” that has a “lending value” at least equal to the “required collateral amount,” all as defined by the agreement.

At September 30, 2023 and 2022, the Bank pledged securities with fair values of approximately $996.9 million and $804.0 million, respectively, to be used against FHLB advances as needed. In addition, qualifying real estate loans of approximately $21.3 million were pledged as collateral at September 30, 2023 compared to none at September 30, 2022.

The Company had no securities sold under agreements to repurchase at September 30, 2023 and 2022.

Long-Term Borrowings


	At September 30,
(Dollars in thousands)	2023		2022

Trust preferred securities	$	13,661	$	13,661
Subordinated debentures, net of issuance costs	19,591		20,000
Other long-term borrowings(1)	621		2,367
Total	$	33,873	$	36,028

(1) Includes $0.6 million and $2.4 million of discounted leases at September 30, 2023 and 2022, respectively.

Scheduled maturities of the Company's long-term borrowings at September 30, 2023 were as follows for the fiscal years ending:


(Dollars in thousands)	Trust preferred securities		Subordinated debentures		Other long-term borrowings		Total
2024	$	—	$	—	$	—	$	—
2025	—		—		621		621
2026	—		—		—		—
2027	—		—		—		—
2028	—		—		—		—
Thereafter	13,661		19,591		—		33,252
Total long-term borrowings	$	13,661	$	19,591	$	621	$	33,873

Certain trust preferred securities are due to First Midwest Financial Capital Trust I, a 100%-owned nonconsolidated subsidiary of the Company. The securities were issued in 2001 in conjunction with the Trust’s issuance of 10,000 shares of Trust Preferred Securities. The securities bear the same interest rate and terms as the trust preferred securities. The securities are included on the Consolidated Statements of Financial Condition as liabilities.

The Company issued all of the 10,310 authorized shares of trust preferred securities of First Midwest Financial Capital Trust I holding solely securities. Distributions are paid semi-annually. Cumulative cash distributions are calculated at 6-Month CME Term SOFR plus 0.42826% tenor spread adjustment plus 3.75% (9.65% at September 30, 2023 and 7.98% at September 30, 2022), not to exceed 12.5%. The Company may, at one or more times, defer interest payments on the capital securities for up to 10 consecutive semi-annual periods, but not beyond July 25, 2031. At the end of any deferral period, all accumulated and unpaid distributions are required to be paid. The capital securities are required to be redeemed on July 25, 2031; however, the Company has a semi-annual option to shorten the maturity date. The redemption price is $1,000 per capital security plus any accrued and unpaid distributions to the date of redemption.

Holders of the capital securities have no voting rights, are unsecured and rank junior in priority of payment to all of the Company’s indebtedness and senior to the Company’s common stock.

Although the securities issued by the Trust are not included as a component of stockholders’ equity, the securities are treated as capital for regulatory purposes, subject to certain limitations.

Through the Crestmark Acquisition, the Company acquired $3.4 million in floating rate capital securities due to Crestmark Capital Trust I, a 100%-owned nonconsolidated subsidiary of the Company. The subordinated debentures bear interest at 3-Month CME Term SOFR plus 0.26161% tenor spread adjustment plus 3.00%, have a stated maturity of 30 years and are redeemable by the Company at par, with regulatory approval. The interest rate is reset quarterly at distribution dates in February, May, August, and November. The interest rate as of September 30, 2023 was 8.66%. The Company has the option to defer interest payments on the subordinated debentures from time to time for a period not to exceed five consecutive years.

The Company redeemed its $75.0 million of 5.75% fixed-to-floating rate subordinated debentures on May 15, 2022 with payment of $75.0 million principal and approximately $1.0 million interest. On September 23, 2022, the Company completed a private placement of $20.0 million of its 6.625% fixed-to-floating rate subordinated debentures due 2032 to certain qualified institutional buyers and accredited investors. These notes will mature on September 30, 2032, unless earlier redeemed. Beginning on September 30, 2027, the notes may be redeemed, in whole or in part, at the Company's option subject to regulatory approval, on any scheduled interest payment date. Prior to September 30, 2027, the notes may be redeemed, in whole but not in part, at any time upon certain other specified events. At September 30, 2023, the Company had $20.0 million in aggregate principal amount in subordinated debentures remains outstanding.

- Definition

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 470
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 1B
-Subparagraph (h)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481139/470-20-50-1B

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Topic 235
-SubTopic 10
-Name Accounting Standards Codification
-Section S99
-Paragraph 1
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Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef
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Reference 4: http://www.xbrl.org/2003/role/disclosureRef
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-Section 50
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-URI https://asc.fasb.org//1943274/2147481139/470-20-50-1B

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
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-URI https://asc.fasb.org//1943274/2147481139/470-20-50-1B

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
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Reference 7: http://www.xbrl.org/2003/role/disclosureRef
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Reference 8: http://www.xbrl.org/2003/role/disclosureRef
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Reference 9: http://www.xbrl.org/2003/role/disclosureRef
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Reference 10: http://www.xbrl.org/2003/role/disclosureRef
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-URI https://asc.fasb.org//1943274/2147481139/470-20-50-1E

Reference 11: http://www.xbrl.org/2003/role/disclosureRef
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-Paragraph 1I
-Subparagraph (a)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481139/470-20-50-1I

Reference 12: http://www.xbrl.org/2003/role/disclosureRef
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-Section 50
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-Subparagraph (b)
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-URI https://asc.fasb.org//1943274/2147481139/470-20-50-1I

Reference 13: http://www.xbrl.org/2003/role/disclosureRef
-Topic 470
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 1I
-Subparagraph (d)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481139/470-20-50-1I

+ Details

STOCKHOLDERS' EQUITY	12 Months Ended
STOCKHOLDERS' EQUITY	Sep. 30, 2023
Equity [Abstract]
STOCKHOLDERS' EQUITY	STOCKHOLDERS' EQUITY Repurchase of Common Stock. The Company's Board of Directors authorized the September 3, 2021 share repurchase program to repurchase up to 6,000,000 shares of the Company's outstanding common stock. This authorization is effective from September 3, 2021 through September 30, 2024. On August 25, 2023, the Company's Board of Directors announced a share repurchase program to repurchase up to an additional 7,000,000 shares of the Company's outstanding common stock on or before September 30, 2028. During the fiscal years ended September 30, 2023 and 2022, the Company repurchased 2,628,541 and 3,020,899 shares, respectively, as part of the share repurchase programs. Under the repurchase programs, repurchased shares were retired and designated as authorized but unissued shares. The Company accounts for repurchased shares using the par value method under which the repurchase price is charged to paid-in capital up to the amount of the original proceeds of those shares. When the repurchase price is greater than the original issue proceeds, the excess is charged to retained earnings. As of September 30, 2023, 8,666,436 shares of common stock remained available for repurchase. For the fiscal years ended September 30, 2023, and 2022, the Company also repurchased 67,103 and 73,522 shares, or $2.5 million and $4.0 million, of common stock, respectively, in settlement of employee tax withholding obligations due upon the vesting of restricted stock. Repurchase of Treasury Stock. The Company accounts for the retirement of repurchased shares, including treasury stock, using the par value method under which the repurchase price is charged to paid-in capital up to the amount of the original proceeds of those shares. When the repurchase price is greater than the original issue proceeds, the excess is charged to retained earnings. The Company retired 149,679 and zero shares of common stock held in treasury during the fiscal years ended September 30, 2023 and 2022, respectively.

- Definition

The entire disclosure for equity.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 505
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 13
-Subparagraph (b)
-Publisher FASB
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Reference 2: http://www.xbrl.org/2003/role/disclosureRef
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Reference 3: http://www.xbrl.org/2003/role/disclosureRef
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Reference 6: http://www.xbrl.org/2003/role/disclosureRef
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Reference 7: http://www.xbrl.org/2003/role/disclosureRef
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Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Topic 505
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Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Topic 235
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Reference 10: http://fasb.org/us-gaap/role/ref/legacyRef
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-URI https://asc.fasb.org//505/tableOfContent

Reference 11: http://www.xbrl.org/2003/role/disclosureRef
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Reference 12: http://www.xbrl.org/2003/role/disclosureRef
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Reference 14: http://www.xbrl.org/2003/role/disclosureRef
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Reference 17: http://www.xbrl.org/2003/role/disclosureRef
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Reference 18: http://www.xbrl.org/2003/role/disclosureRef
-Topic 505
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-Name Accounting Standards Codification
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Reference 19: http://www.xbrl.org/2003/role/disclosureRef
-Topic 505
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-Section 50
-Paragraph 18
-Subparagraph (d)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481112/505-10-50-18

+ Details

STOCK COMPENSATION

12 Months Ended

Sep. 30, 2023

Share-Based Payment Arrangement [Abstract]

STOCK COMPENSATION

The Company previously maintained the Pathward Financial, Inc. 2002 Omnibus Incentive Plan, as amended and restated (the "Prior Omnibus Incentive Plan"). On September 27, 2023, the Board adopted the Pathward Financial, Inc. 2023 Omnibus Incentive Plan (the "New Omnibus Incentive Plan") contingent on stockholder approval at the Annual Meeting of Stockholders expected to be held on February 27, 2024. The Prior Omnibus Incentive Plan provided for the awarding of stock options, nonvested (restricted) shares, and performance share units ("PSUs") to certain officers and directors of the Company. Awards were granted by the Compensation Committee of the Board of Directors based on the performance of the award recipients or other relevant factors. No awards have been granted under the Prior Omnibus Incentive Plan following November 25, 2022, the date that the Prior Omnibus Incentive Plan expired by its terms.

Shares have previously been granted each year to executives and senior leadership members under the applicable Company incentive plan. These shares vest at various times ranging from immediately to three years based on circumstances at time of grant. The fair value is determined based on the fair market value of the Company’s stock on the grant date. Director shares are issued to the Company’s directors, and these shares have historically vested one year from the grant date.

The Company also grants selected executives and other key employees PSU awards. The vesting of these awards is contingent on meeting company-wide performance goals, including but not limited to return on equity, earnings per share, and total shareholder return. PSUs are generally granted at the market value of the underlying share on the date of grant, adjusted for dividends, as performance share units do not participate in dividends. The awards contingently vest over a period of three years and have payout levels ranging from a threshold of 50% to a maximum of 200%. Upon vesting, each performance share unit earned is converted into one share of common stock.

The fair value of the PSUs is determined by the dividend-adjusted fair value on the grant date for those awards subject to a performance condition. For those PSUs subject to a market condition, a simulation valuation is performed.

In addition, during the first and second quarters of fiscal year 2017, shares were granted to certain executive officers of the Company in connection with their signing of employment agreements with the Company. These stock awards vest in equal installments over eight years.

The following tables show the activity of share awards (including shares of restricted stock subject to vesting, fully-vested restricted stock, and PSUs) granted, exercised or forfeited under all of the Company’s incentive plans during the fiscal years ended September 30, 2023 and 2022.


(Dollars in thousands, except per share data)	Number of Shares	Weighted Average Fair Value at Grant
Nonvested shares outstanding, September 30, 2022	474,348	$	36.52
Granted	135,417	36.68
Vested	(229,803)	37.46
Forfeited or expired	(9,811)	41.14
Nonvested shares outstanding, September 30, 2023	370,151	$	35.87

Nonvested shares outstanding, September 30, 2021	547,063	$	30.22
Granted	178,631	55.56
Vested	(230,323)	35.70
Forfeited or expired	(21,023)	43.45
Nonvested shares outstanding, September 30, 2022	474,348	$	36.52


(Dollars in thousands, except per share data)	Number of Units	Weighted Average Fair Value at Grant
Performance share units outstanding, September 30, 2022	96,689	$	42.59
Granted(1)	59,115	38.94
Vested	—	—
Forfeited or expired	—	—
Performance share units outstanding, September 30, 2023	155,804	$	41.20
(1) The number of PSUs granted reflects the target number of PSUs able to be earned under a given award.

Compensation expense for share-based awards is recorded over the vesting period at the fair value of the award at the time of the grant. The exercise price of fair value of nonvested (restricted) shares and PSUs granted under the Company’s incentive plans is equal to the fair market value of the underlying stock at the grant date, adjusted for dividends where applicable. The Company has elected to record forfeitures as they occur.

The following table shows the effect to income, net of tax benefits, of share-based compensation expense recorded:


	Fiscal Year Ended September 30,
(Dollars in thousands)	2023		2022		2021
Total employee stock-based compensation expense recognized in income, net of tax effects of $1,838, $2,181, and $1,562, respectively	$	8,465	$	7,824	$	5,290

As of September 30, 2023, stock-based compensation expense not yet recognized in income totaled $6.1 million, which is expected to be recognized over a weighted-average remaining period of 1.45 years.

INCOME TAXES

12 Months Ended

Sep. 30, 2023

Income Tax Disclosure [Abstract]

INCOME TAXES

The Company and its subsidiaries file a consolidated federal income tax return on a fiscal year basis. The provision for income taxes were as follows:


	Fiscal Year Ended September 30,
(Dollars in thousands)	2023		2022		2021
Federal:
Current	$	8,682	$	5,657	$	6,402
Deferred	(1,168)		12,900		(3,909)
	7,514		18,557		2,493
State:
Current	7,817		4,720		5,938
Deferred	993		4,687		2,270
	8,810		9,407		8,208
Income tax expense	$	16,324	$	27,964	$	10,701

The tax effects of the Company's temporary differences that give rise to significant portions of its deferred tax assets and liabilities were:


	At September 30,
(Dollars in thousands)	2023		2022
Deferred tax assets:
Bad debts	$	11,606	$	10,636
Deferred compensation	3,739		2,652
Stock based compensation	3,916		3,521


Valuation adjustments	393		3,047
General business credits(1)	59,783		52,684
Accrued expenses	2,558		1,948
Lease liability	7,210		8,074
Net unrealized loss on securities available for sale	84,908		71,336
Other assets	4,193		2,662
	178,306		156,560
Deferred tax liabilities:
Premises and equipment	(2,016)		(3,148)
Intangibles	(5,862)		(4,099)


Leased assets	(66,877)		(58,592)
Right-of-use assets	(6,877)		(7,758)
Other liabilities	(1,349)		(1,170)
	(82,981)		(74,767)
Net deferred tax assets	$	95,325	$	81,793

(1) The general business credits are investment tax credits generated from qualified solar energy property placed in service during the fiscal years ended September 30, 2023 and 2022. These credits will begin to expire on September 30, 2041.

As of September 30, 2023, the Company had a gross deferred tax asset of $2.7 million for separate company state cumulative net operating loss carryforwards, for which $2.7 million was reserved. At September 30, 2022, the Company had a gross deferred tax asset of $2.9 million for separate company state cumulative net operating loss carryforwards, for which $2.9 million was reserved. These state operating loss carryforwards will expire in various subsequent periods.

In general, management believes that the realization of its deferred tax assets is more likely than not based on the expectations as to future taxable income; therefore, there was no deferred tax valuation allowance at September 30, 2023, or 2022 with the exception of the state cumulative net operating loss carryforwards discussed above.

The table below reconciles the statutory federal income tax expense and rate to the effective income tax expense and rate for the fiscal years presented. The Company's effective tax rate is calculated by dividing income tax expense by income before income tax expense.


	Fiscal Year Ended September 30,
	2023				2022				2021
(Dollars in thousands)	Amount		Rate		Amount		Rate		Amount		Rate
Statutory federal income tax expense and rate	$	38,248	21.0	%	$	38,714	21.0	%	$	32,854	21.0	%
Change in tax rate resulting from:
State income taxes net of federal benefits	7,047		3.9	%	7,413		4.0	%	6,452		4.1	%
162(m) disallowance	919		0.5	%	1,125		0.4	%	686		0.4	%
Tax exempt income	(783)		(0.4)	%	(743)		(0.4)	%	(835)		(0.5)	%

General business credits	(28,633)		(15.7)	%	(17,589)		(9.5)	%	(26,945)		(17.2)	%

Other, net	(474)		(0.3)	%	(956)		(0.3)	%	(1,511)		(1.0)	%
Income tax expense	$	16,324	9.0	%	$	27,964	15.2	%	$	10,701	6.8	%

The Company uses the flow through method of accounting for investment tax credits under which the credits are recognized as a reduction to income tax expense in the period in which the credit arises. During the fiscal years ended September 30, 2023, 2022, and 2021, $27.4 million, $16.8 million, and $26.5 million in investment tax credits were recognized as a reduction to income tax expense, respectively.

The Company’s tax reserves reflect management’s judgment as to the resolution of the issues involved if subject to judicial review. While the Company believes that its reserves are adequate to cover reasonably expected tax risks, there can be no assurance that, in all instances, an issue raised by a tax authority will be resolved at a financial cost that does not exceed its related reserve. With respect to these reserves, the Company’s income tax expense would include (i) any changes in tax reserves arising from material changes during the period in the facts and circumstances surrounding a tax issue, and (ii) any difference from the Company’s tax position as recorded in the Consolidated Financial Statements and the final resolution of a tax issue during the period.

The tax years ended September 30, 2020 and later remain subject to examination by the Internal Revenue Service. For state purposes, the tax years ended September 30, 2020 and later remain open for examination, with few exceptions.

A reconciliation of the beginning and ending balances for liabilities associated with unrecognized tax benefits follows:


	At September 30,
(Dollars in thousands)	2023		2022
Balance at beginning of fiscal year	$	645	$	777



Additions (reductions) for tax positions related to prior years	(124)		(132)
Balance at end of fiscal year	$	521	$	645

The total amount of unrecognized tax benefits that, if recognized, would impact the effective rate was $164,000 as of September 30, 2023. The Company recognizes interest related to unrecognized tax benefits as a component of income tax expense. The amount of accrued interest related to unrecognized tax benefits was $80,000 as of September 30, 2023. The Company does not anticipate any significant change in the total amount of unrecognized tax benefits within the next 12 months.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 946
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 13
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147480990/946-20-50-13

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Topic 235
-SubTopic 10
-Name Accounting Standards Codification
-Section S99
-Paragraph 1
-Subparagraph (SX 210.4-08(h)(2))
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147480678/235-10-S99-1

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
-Name Accounting Standards Codification
-Publisher FASB
-URI https://asc.fasb.org//740/tableOfContent

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 14
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147482685/740-10-50-14

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
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-Name Accounting Standards Codification
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-Paragraph 21
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147482685/740-10-50-21

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
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-Paragraph 1
-Publisher FASB
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Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 17
-Subparagraph (b)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147482685/740-10-50-17

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
-SubTopic 10
-Name Accounting Standards Codification
-Section S99
-Paragraph 1
-Subparagraph (SAB TOPIC 6.I.5.Q1)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147479360/740-10-S99-1

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
-SubTopic 10
-Name Accounting Standards Codification
-Section S99
-Paragraph 2
-Subparagraph (SAB Topic 11.C)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147479360/740-10-S99-2

Reference 10: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
-SubTopic 30
-Name Accounting Standards Codification
-Section 50
-Paragraph 2
-Subparagraph (a)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147482603/740-30-50-2

+ Details

CAPITAL REQUIREMENTS AND RESTRICTIONS ON RETAINED EARNINGS

12 Months Ended

Sep. 30, 2023

CAPITAL REQUIREMENTS AND RESTRICTIONS ON RETAINED EARNINGS [Abstract]

CAPITAL REQUIREMENTS AND RESTRICTIONS ON RETAINED EARNINGS

The Company and the Bank are required to comply with the regulatory capital rules administered by federal banking agencies (the "Capital Rules"). Under the Capital Rules and the regulatory framework for prompt corrective action, the Company and Bank must meet specific capital guidelines that involve quantitative measures of the Company’s and Bank’s assets, liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices. The Company’s and Bank’s capital amounts and classifications are also subject to qualitative judgments by regulators about components, risk weightings, and other factors.

The Capital Rules require the Company and the Bank to maintain minimum ratios (set forth in the table below) of total risk-based capital and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined), and a leverage ratio consisting of Tier 1 capital (as defined) to average assets (as defined). At September 30, 2023, the Company and the Bank exceeded federal regulatory minimum capital requirements to be classified as well-capitalized under the prompt corrective action requirements. The Company and the Bank took the AOCI opt-out election; under the rule, non-advanced approach banking organizations were given a one-time option to exclude certain AOCI components.

The tables below include certain non-GAAP financial measures that are used by investors, analysts and bank regulatory agencies to assess the capital position of financial services companies. Management reviews these measures along with other measures of capital as part of its financial analyses and has included this non-GAAP financial information, and the corresponding reconciliation to total equity.


	Company		Bank		Minimum to be Adequately Capitalized Under Prompt Corrective Action Provisions		Minimum to be Well Capitalized Under Prompt Corrective Action Provisions
At September 30, 2023
Tier 1 leverage capital ratio	8.11	%	8.32	%	4.00	%	5.00	%
Common equity Tier 1 capital ratio	11.25		11.81		4.50		6.50
Tier 1 capital ratio	11.50		11.81		6.00		8.00
Total capital ratio	12.84		12.76		8.00		10.00

At September 30, 2022
Tier 1 leverage capital ratio	8.10	%	8.19	%	4.00	%	5.00	%
Common equity Tier 1 capital ratio	12.07		12.55		4.50		6.50
Tier 1 capital ratio	12.39		12.55		6.00		8.00
Total capital ratio	13.88		13.57		8.00		10.00

The following table provides a reconciliation of the amounts included in the table above for the Company.


(Dollars in thousands)	Standardized Approach(1) September 30, 2023
Total stockholders' equity	$	650,625
Adjustments:
LESS: Goodwill, net of associated deferred tax liabilities	297,679
LESS: Certain other intangible assets	21,228
LESS: Net deferred tax assets from operating loss and tax credit carry-forwards	19,679
LESS: Net unrealized (losses) on available for sale securities	(254,294)
LESS: Noncontrolling interest	(1,005)
ADD: Adoption of Accounting Standards Update 2016-13	2,017
Common Equity Tier 1(1)	569,355
Long-term borrowings and other instruments qualifying as Tier 1	13,661
Tier 1 minority interest not included in common equity Tier 1 capital	(826)
Total Tier 1 capital	582,190
Allowance for credit losses	47,960
Subordinated debentures, net of issuance costs	19,591
Total capital	$	649,741
(1) Capital ratios were determined using the Basel III capital rules that became effective on January 1, 2015. Basel III revised the definition of capital, increased minimum capital ratios, and introduced a minimum common equity tier 1 capital ratio.

The following table provides a reconciliation of tangible common equity and tangible common equity excluding AOCI, each of which is used in calculating tangible book value data, to total stockholders' equity. Each of tangible common equity and tangible common equity excluding AOCI is a non-GAAP financial measure that is commonly used within the banking industry.


(Dollars in thousands)	At September 30, 2023
Total stockholders' equity	$	650,625
LESS: Goodwill	309,505
LESS: Intangible assets	20,720
Tangible common equity	320,400
LESS: AOCI	(255,443)
Tangible common equity excluding AOCI	$	575,843

Since January 1, 2016, the Company and the Bank have been required to maintain a capital conservation buffer above the minimum risk-based capital requirements in order to avoid certain limitations on capital distributions, stock repurchases and discretionary bonus payments to executive officers. The capital conservation buffer is exclusively composed of Common Equity Tier 1 capital, and it applies to each of the three risk-based capital ratios but not the leverage ratio. The required Common Equity Tier 1 risk-based, Tier 1 risk-based and total risk-based capital ratios with the buffer are currently 7.0%, 8.5% and 10.5%, respectively.

Based on current and expected continued profitability and subject to continued access to capital markets, we believe that the Company and the Bank will continue to meet the capital conservation buffer of 2.5% in addition to required minimum capital ratios.

- Definition

The entire disclosure for regulatory capital requirement for depository and lending institutions. Institutions include, but not are not limited to, finance company, insured depository institution, bank holding company, savings and loan association holding company, bank and savings institution not federally insured, mortgage company, foreign financial institution and credit union.

+ References + Details

REVENUE FROM CONTRACTS WITH CUSTOMERS

12 Months Ended

Sep. 30, 2023

Revenue from Contract with Customer [Abstract]

REVENUE FROM CONTRACTS WITH CUSTOMERS

REVENUE FROM CONTRACTS WITH CUSTOMERSTopic 606 applies to all contracts with customers unless such revenue is specifically addressed under existing guidance. The table below presents the Company’s revenue by operating segment. For additional descriptions of the Company’s operating segments, including additional financial information and the underlying management accounting process, see Note 17. Segment Reporting to the Consolidated Financial Statements.


(Dollars in thousands)	Consumer				Commercial					Corporate Services/Other			Consolidated Company
Fiscal Year Ended September 30,	2023		2022			2023		2022			2023		2022		2023		2022
Net interest income(1)	$	154,316	$	98,366		$	195,239	$	187,209		$	38,306	$	21,749	$	387,861	$	307,324
Noninterest income:
Refund transfer product fees	39,452		39,809			—		—			—		—		39,452		39,809
Refund advance fee income(1)	37,433		40,557			—		—			—		—		37,433		40,557
Card and deposit fees	149,703		104,684			1,018		1,020			25		29		150,746		105,733
Rental income(1)	—		—			53,346		46,023			844		535		54,190		46,558
Gain (loss) on sale of securities(1)	—		—			—		—			91		(1,287)		91		(1,287)
Gain on trademarks(1)	—		—			—		—			10,000		50,000		10,000		50,000
Gain (loss) on sale of other(1)	—		—			2,005		8,782			567		(13,702)		2,572		(4,920)
Other income(1)	6,956		4,202			9,682		12,587			5,477		568		22,115		17,357
Total noninterest income	233,544		189,252			66,051		68,412			17,004		36,143		316,599		293,807
Revenue	$	387,860	$	287,618		$	261,290	$	255,621		$	55,310	$	57,892	$	704,460	$	601,131
(1) These revenues are not within the scope of Topic 606. Additional details are included in other footnotes to the accompanying financial statements. The scope of Topic 606 explicitly excludes net interest income as well as many other revenues for financial assets and liabilities, including loans, leases, and securities.

Following is a discussion of key revenues within the scope of Topic 606. The Company provides services to customers that have related performance obligations that must be completed to recognize revenue. Revenues are generally recognized immediately upon the completion of the service or over time as services are performed. Any services performed over time generally require that the Company renders services each period; therefore, the Company measures progress in completing these services based upon the passage of time. Revenue from contracts with customers did not generate significant contract assets and liabilities for the fiscal year ended September 30, 2023.

Refund Transfer Product Fees. Refund transfer fees are specific to the BaaS business line and reflect product fees offered by the Company through third-party tax preparers and tax preparation software providers where the Company acts as the partnering financial institution. A refund transfer allows a taxpayer to pay tax preparation and filing fees directly from their federal or state government tax refund, with the remainder of the refund being disbursed in accordance with the terms and conditions of the taxpayer agreement, which may include satisfaction of other disbursement obligations before going directly to the taxpayer via check, direct deposit, or prepaid card. Refund transfer fees are recognized by the Company immediately after the taxpayer's refund has been disbursed in accordance with the contract and are based on standalone pricing included within the terms and conditions. Certain expenses to tax preparation software providers are netted with refund transfer fee income as the Company is considered the agent in these contractual relationships. All refund transfer fees are recorded within the Consumer reporting segment.

Card and Deposit Fees. Card fees relate to the BaaS business line and consists of income from prepaid cards and merchant services, including interchange fees from prepaid cards processed through card association networks, merchant services and other card related services. Interchange rates are generally set by card association networks based on transaction volume and other factors. Since interchange fees are generated by cardholder activity, the Company recognizes the income as transactions occur. Fee income for merchant services and other card related services reflect account management and transaction fees charged to merchants for processing card association network transactions. The associated income is recognized as transactions occur or as services are performed. For the Company's internally managed prepaid card programs, fees are based on standalone pricing within the terms and conditions of the cardholder agreement. The Company is considered the principal of these relationships resulting in all fee income being presented on a gross basis within the Consolidated Statement of Operations. For the Company's sponsorship prepaid card programs where a third-party is considered the Program Manager, the fees are based on standalone pricing within the terms and conditions of the Program Agreement. For these relationships, the Company is considered the agent and certain expenses with the Program Manager, networks and associations are netted with card fee revenue. All card fee income is included in the Consumer reporting segment.

Deposit fees relate to the BaaS and Commercial Finance business lines and consist of income from banking and deposit-related services, including account services, overdraft protection, and wire transfers. Fee income for account services is recognized over the course of the month as the performance obligation is satisfied. Fee income for overdraft protection and wire transfers is recognized at the point in time when such event occurs. For BaaS, the fees for account services and overdraft protection are based on standalone pricing within the terms and conditions of the Program Agreement with the sponsorship partner. For these relationships, the Company is considered the agent and certain expenses with the partner are netted with deposit fee revenue. For Commercial Finance, fees for wire transfers are based on standalone pricing within the terms and conditions of the customer deposit agreement. Bank and deposit fees for the BaaS and Commercial Finance business lines are included in the Consumer and Commercial reporting segments, respectively. Also included within Card and Deposit Fees for the Consumer reporting segment are servicing fees the Company recognizes for custodial off-balance sheet deposits. This fee income is for services the Bank performs to maintain records of cardholder funds placed at one or more third-party banks insured by the FDIC. The servicing fee is typically reflective of the EFFR.

- Definition

The entire disclosure of revenue from contract with customer to transfer good or service and to transfer nonfinancial asset. Includes, but is not limited to, disaggregation of revenue, credit loss recognized from contract with customer, judgment and change in judgment related to contract with customer, and asset recognized from cost incurred to obtain or fulfill contract with customer. Excludes insurance and lease contracts.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 9
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147479806/606-10-50-9

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 10
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147479806/606-10-50-10

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
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-Name Accounting Standards Codification
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-Paragraph 15
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-URI https://asc.fasb.org//1943274/2147479806/606-10-50-15

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
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-Subparagraph (a)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147479806/606-10-50-12

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
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Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
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-Section 50
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-URI https://asc.fasb.org//1943274/2147479806/606-10-50-12

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
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-Section 50
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-URI https://asc.fasb.org//1943274/2147479806/606-10-50-12

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
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-Name Accounting Standards Codification
-Section 50
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Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
-SubTopic 10
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-Section 50
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-Publisher FASB
-URI https://asc.fasb.org//1943274/2147479806/606-10-50-13

Reference 10: http://www.xbrl.org/2003/role/disclosureRef
-Name Accounting Standards Codification
-Topic 606
-Publisher FASB
-URI https://asc.fasb.org//606/tableOfContent

+ Details

SEGMENT REPORTING

12 Months Ended

Sep. 30, 2023

Segment Reporting [Abstract]

SEGMENT REPORTING

An operating segment is generally defined as a component of a business for which discrete financial information is available and whose results are reviewed by the chief operating decision-maker. Operating segments are aggregated into reportable segments if certain criteria are met.

The Company reports its results of operations through the following three business segments: Consumer, Commercial, and Corporate Services/Other. The BaaS business line is reported in the Consumer segment. The Commercial Finance business line is reported in the Commercial segment. The Corporate Services/Other segment includes certain shared services as well as treasury related functions such as the investment portfolio, warehouse finance, wholesale deposits, and borrowings.

The following tables present segment data for the Company:


	Fiscal Year Ended September 30, 2023
(Dollars in thousands)	Consumer		Commercial		Corporate Services/Other		Total
Net interest income	$	154,316	$	195,239	$	38,306	$	387,861
Provision for (reversal of) credit losses	38,920		18,384		50		57,354
Noninterest income	233,544		66,051		17,004		316,599
Noninterest expense	165,782		141,627		157,566		464,975
Income (loss) before income tax expense	183,158		101,279		(102,306)		182,131

Total assets	492,964		4,179,914		2,862,665		7,535,543
Total goodwill	87,145		222,360		—		309,505
Total deposits	6,376,467		5,958		206,757		6,589,182


	Fiscal Year Ended September 30, 2022
(Dollars in thousands)	Consumer		Commercial		Corporate Services/Other		Total
Net interest income	$	98,366	$	187,209	$	21,749	$	307,324
Provision for (reversal of) credit losses	30,680		14,674		(16,816)		28,538
Noninterest income	189,252		68,412		36,143		293,807
Noninterest expense	99,589		128,904		156,782		385,275
Income (loss) before income tax expense	157,349		112,043		(82,074)		187,318

Total assets	356,994		3,487,461		2,902,955		6,747,410
Total goodwill	87,145		222,360		—		309,505
Total deposits	5,695,776		8,965		161,296		5,866,037


	Fiscal Year Ended September 30, 2021
(Dollars in thousands)	Consumer		Commercial		Corporate Services/Other		Total
Net interest income	$	91,489	$	173,969	$	13,533	$	278,991
Provision for (reversal of) credit losses	35,765		19,791		(5,790)		49,766
Noninterest income	195,708		61,813		13,383		270,904
Noninterest expense	90,792		114,925		137,966		343,683
Income (loss) before income tax expense	160,640		101,066		(105,260)		156,446

Total assets	354,441		3,208,889		3,127,320		6,690,650
Total goodwill	87,145		222,360		—		309,505
Total deposits	5,342,192		6,625		166,154		5,514,971

- Definition

The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 280
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 22
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147482810/280-10-50-22

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Topic 280
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Reference 14: http://www.xbrl.org/2003/role/disclosureRef
-Topic 280
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 32
-Subparagraph (e)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147482810/280-10-50-32

+ Details

PARENT COMPANY FINANCIAL STATEMENTS

12 Months Ended

Sep. 30, 2023

Condensed Financial Information Disclosure [Abstract]

PARENT COMPANY FINANCIAL STATEMENTS

Presented below are the condensed financial statements for the parent company, Pathward Financial.


Condensed Statements of Financial Condition
(Dollars in thousands)	September 30, 2023		September 30, 2022
ASSETS
Cash and cash equivalents	$	1,399	$	13,117
Investment securities held to maturity, at cost	9,220		8,003
Investment in subsidiaries	678,572		665,172
Other assets	1,312		928
Total assets	$	690,503	$	687,220

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES
Subordinated debentures	$	33,252	$	33,661
Other liabilities	6,626		8,419
Total liabilities	39,878		42,080

STOCKHOLDERS' EQUITY
Common stock	262		288
Additional paid-in capital	628,500		617,403
Retained earnings	278,655		245,394
Accumulated other comprehensive income (loss)	(255,443)		(213,080)
Treasury stock, at cost	(344)		(4,835)
Total equity attributable to parent	651,630		645,170
Non-controlling interest	(1,005)		(30)
Total stockholders' equity	650,625		645,140
Total liabilities and stockholders' equity	$	690,503	$	687,220


Condensed Statements of Operations
	Fiscal Year Ended September 30,
(Dollars in thousands)	2023		2022		2021
Interest expense	$	2,538	$	3,982	$	4,915
Other expense	1,409		1,062		1,287
Total expense	3,947		5,044		6,202

Loss before income taxes and equity in undistributed net income of subsidiaries	(3,947)		(5,044)		(6,202)

Income tax (benefit) expense	(967)		(1,029)		395

Loss before equity in undistributed net income of subsidiaries	(2,980)		(4,015)		(6,597)

Equity in undistributed net income of subsidiaries	166,738		159,652		147,895
Other income	(143)		749		410
Total income	166,595		160,401		148,305

Net income attributable to parent	$	163,615	$	156,386	$	141,708


Condensed Statements of Cash Flows
	Fiscal Year Ended September 30,
(Dollars in thousands)	2023		2022		2021
Cash flows from operating activities:
Net income attributable to parent	$	163,615	$	156,386	$	141,708
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation, amortization and accretion, net	102		1,020		173
Equity in undistributed net income of subsidiaries	(166,738)		(159,652)		(147,895)

Net change in accrued interest receivable	(30)		(15)		—
Net change in other assets	(354)		(636)		3,030
Net change in accrued expenses and other liabilities	(1,793)		3,163		(2,698)
Cash dividend received	110,000		229,200		104,000

Stock compensation	11,070		10,004		6,852
Net cash provided by operating activities	115,872		239,470		105,170

Cash flows from investing activities:




Alternative investments	(1,217)		(3,380)		(3,415)
Net cash (used in) investing activities	(1,217)		(3,380)		(3,415)

Cash flows from financing activities:


Redemption of long-term borrowings	—		(75,000)		—
Payment of debt issuance costs	(511)		—		—
Proceeds from long-term borrowings	—		20,000		—
Dividends paid on common stock	(5,426)		(5,921)		(6,400)

Issuance of common stock due to restricted stock	1		1		—
Issuance of common stock due to ESOP	—		2,886		3,036
Repurchases of common stock	(120,437)		(168,235)		(99,878)
Net cash (used in) financing activities	(126,373)		(226,269)		(103,242)

Net change in cash and cash equivalents	(11,718)		9,821		(1,487)

Cash and cash equivalents at beginning of fiscal year	13,117		3,296		4,783
Cash and cash equivalents at end of fiscal year	$	1,399	$	13,117	$	3,296

The extent to which the Company may pay cash dividends to stockholders will depend on the cash currently available at the Company, as well as the ability of the Bank to pay dividends to the Company. For further discussion, see Note 15 herein.

SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

12 Months Ended

Sep. 30, 2023

Quarterly Financial Information Disclosure [Abstract]

SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)


	Quarter Ended
(Dollars in thousands, except per share data)	December 31		March 31		June 30		September 30
Fiscal Year 2023
Interest and dividend income	$	85,060	$	104,687	$	99,346	$	109,642
Interest expense	1,003		3,282		1,881		4,708
Net interest income	84,057		101,405		97,465		104,934
Provision for credit losses	9,776		36,763		1,773		9,042
Noninterest income	65,777		127,038		67,733		56,051
Net income attributable to parent	27,842		54,771		45,096		35,906
Earnings per common share
Basic	$	0.98	$	1.99	$	1.69	$	1.37
Diluted	0.98		1.99		1.68		1.36
Dividend declared per share	0.05		0.05		0.05		0.05

Fiscal Year 2022
Interest and dividend income	$	72,891	$	85,177	$	73,906	$	80,222
Interest expense	1,278		1,377		1,755		462
Net interest income	71,613		83,800		72,151		79,760
Provision for (reversal of) loan and lease losses	186		32,302		(1,302)		(2,648)
Noninterest income	86,591		109,766		53,994		43,456
Net income attributable to parent	61,324		49,251		22,391		23,420
Earnings per common share
Basic	$	2.00	$	1.66	$	0.76	$	0.81
Diluted	2.00		1.66		0.76		0.81
Dividend declared per share	0.05		0.05		0.05		0.05

Fiscal Year 2021
Interest and dividend income	$	68,146	$	75,669	$	69,983	$	72,056
Interest expense	2,147		1,819		1,508		1,389
Net interest income	65,999		73,850		68,475		70,667
Provision for loan and lease losses	6,089		30,290		4,612		8,775
Noninterest income	45,455		113,453		62,453		49,542
Net income attributable to parent	28,037		59,066		38,701		15,903
Earnings per common share
Basic	$	0.84	$	1.84	$	1.21	$	0.50
Diluted	0.84		1.84		1.21		0.50
Dividend declared per share	0.05		0.05		0.05		0.05

FAIR VALUES OF FINANCIAL INSTRUMENTS

12 Months Ended

Sep. 30, 2023

Fair Value Disclosures [Abstract]

FAIR VALUES OF FINANCIAL INSTRUMENTS

ASC 820, Fair Value Measurements defines fair value, establishes a framework for measuring the fair value of assets and liabilities using a hierarchy system and requires disclosures about fair value measurement. It clarifies that fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the market in which the reporting entity transacts.

The fair value hierarchy is as follows:

Level 1 Inputs - Valuation is based upon quoted prices for identical instruments traded in active markets that the Company has the ability to access at measurement date.

Level 2 Inputs - Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques for which significant assumptions are observable in the market.

Level 3 Inputs - Valuation is generated from model-based techniques that use significant assumptions not observable in the market and are used only to the extent that observable inputs are not available. These unobservable assumptions reflect the Company’s own estimates of assumptions that market participants would use in pricing the asset or liability.

There were no transfers between levels of the fair value hierarchy for the fiscal years ended September 30, 2023 or 2022.

Debt Securities Available for Sale and Held to Maturity. Debt securities available for sale are recorded at fair value on a recurring basis and debt securities held to maturity are carried at amortized cost.

The fair values of debt securities available for sale, categorized primarily as Level 2, is recorded using prices obtained from independent asset pricing services that are based on observable transactions, but not quoted markets. Management reviews the prices obtained from independent asset pricing services for unusual fluctuations and compares to current market trading activity.

Equity Securities. Marketable equity securities and certain non-marketable equity securities are recorded at fair value on a recurring basis. The fair values of marketable equity securities are determined by obtaining quoted prices on nationally recognized securities exchanges (Level 1 inputs).

The following tables summarize the fair values of debt securities available for sale and equity securities as they are measured at fair value on a recurring basis.


	Fair Value At September 30, 2023
(Dollars in thousands)	Total		Level 1		Level 2		Level 3
Debt securities AFS
Corporate securities	$	18,250	$	—	$	18,250	—
SBA securities	85,242		—		85,242		—
Obligations of states and political subdivisions	2,289		—		2,289		—
Non-bank qualified obligations of states and political subdivisions	226,723		—		226,723		—
Asset-backed securities	246,199		—		246,199		—
Mortgage-backed securities	1,225,525		—		1,225,525		—
Total debt securities AFS	$	1,804,228	$	—	$	1,804,228	$	—
Common equities and mutual funds(1)	$	3,378	$	3,378	$	—	$	—
Non-marketable equity securities(2)	$	8,389	$	—	$	—	$	—

(1) Equity securities at fair value are included within other assets on the consolidated statement of financial condition at September 30, 2023.

(2) Consists of certain non-marketable equity securities that are measured at fair value using net asset value ("NAV") per share (or its equivalent) as a practical expedient and are excluded from the fair value hierarchy.


	Fair Value At September 30, 2022
(Dollars in thousands)	Total		Level 1		Level 2		Level 3
Debt securities AFS
Corporate securities	$	22,187	$	—	$	22,187	$	—
SBA securities	97,768		—		97,768		—
Obligations of states and political subdivisions	2,344		—		2,344		—
Non-bank qualified obligations of states and political subdivisions	263,783		—		263,783		—
Asset-backed securities	147,790		—		147,790		—
Mortgage-backed securities	1,348,997		—		1,348,997		—
Total debt securities AFS	$	1,882,869	$	—	$	1,882,869	$	—
Common equities and mutual funds(1)	$	2,874	$	2,874	$	—	$	—
Non-marketable equity securities(2)	$	7,212	$	—	$	—	$	—

(1) Equity securities at fair value are included within other assets on the consolidated statement of financial condition at September 30, 2022.

(2) Consists of certain non-marketable equity securities that are measured at fair value using NAV per share (or its equivalent) as a practical expedient and are excluded from the fair value hierarchy.

Loans and Leases. The Company does not record loans and leases at fair value on a recurring basis. However, if a loan or lease is individually evaluated for risk of credit loss and repayment is expected to be solely provided by the values of the underlying collateral, the Company measures fair value on a nonrecurring basis. Fair value is determined by the fair value of the underlying collateral less estimated costs to sell. The fair value of the collateral is determined based on the internal estimates and/or assessment provided by third-party appraisers and the valuation relies on discount rates ranging from 3% to 25%.

The following table summarizes the assets of the Company that are measured at fair value in the Consolidated Statements of Financial Condition on a non-recurring basis:


	Fair Value At September 30, 2023
(Dollars in thousands)	Total		Level 1		Level 2		Level 3
Loans and leases, net individually evaluated for credit loss
Commercial finance	$	21,829	$	—	$	—	$	21,829
Total loans and leases, net individually evaluated for credit loss	21,829		—		—		21,829

Total	$	21,829	$	—	$	—	$	21,829


	Fair Value At September 30, 2022
(Dollars in thousands)	Total		Level 1		Level 2		Level 3
Loans and leases, net individually evaluated for credit loss
Commercial finance	$	1,575	$	—	$	—	$	1,575
Total loans and leases, net individually evaluated for credit loss	1,575		—		—		1,575
Foreclosed assets, net	1		—		—		1
Total	$	1,576	$	—	$	—	$	1,576

Quantitative Information About Level 3 Fair Value Measurements

(Dollars in thousands)

Fair Value at September 30, 2023

Fair Value at September 30, 2022

Valuation
Technique

Unobservable Input

Range of Inputs

Loans and leases, net individually evaluated for credit loss

$

21,829

1,575

Market approach

Appraised values(1)

3% - 25%

Foreclosed assets, net

$

—

1

Market approach

Appraised values(1)

9% - 20%

(1) The Company generally relies on external appraisers to develop this information. Management reduced the appraised value by estimated selling costs and other inputs in a range of 3% to 25%.

Management discloses the estimated fair value of financial instruments, including assets and liabilities on and off the Consolidated Statements of Financial Condition, for which it is practicable to estimate fair value. These fair values estimates were made at September 30, 2023 and 2022 based on relevant market information and information about financial instruments. Fair value estimates are intended to represent the price at which an asset could be sold or a liability could be settled. However, since there is no active market for certain financial instruments of the Company, the estimates of fair value are subjective in nature, involve uncertainties, and include matters of significant judgment. Changes in assumptions as well as tax considerations could significantly affect the estimated values. Accordingly, the aggregate fair value estimates are not intended to represent the underlying value of the Company, on either a going concern or a liquidation basis.

The following tables present the carrying amount and estimated fair value of the financial instruments held by the Company:


	At September 30, 2023
(Dollars in thousands)	Carrying Amount		Estimated Fair Value		Level 1		Level 2		Level 3
Financial assets
Cash and cash equivalents	$	375,580	$	375,580	$	375,580	$	—	$	—
Debt securities available for sale	1,804,228		1,804,228		—		1,804,228		—
Debt securities held to maturity	36,591		31,425		—		31,425		—
Common equities and mutual funds(1)	3,378		3,378		3,378		—		—
Non-marketable equity securities(1)(2)	20,453		20,453		—		12,064		—
Loans held for sale	77,779		77,779		—		77,779		—
Loans and leases	4,359,681		4,223,010		—		—		4,223,010
Federal Reserve Bank and Federal Home Loan Bank stocks	28,210		28,210		—		28,210		—
Accrued interest receivable	23,282		23,282		23,282		—		—
Financial liabilities

Deposits	6,589,182		6,589,065		6,583,648		5,417		—


Other short- and long-term borrowings	33,873		31,187		—		31,187		—
Accrued interest payable	247		247		247		—		—

(1) Equity securities at fair value are included within other assets on the consolidated statement of financial condition at September 30, 2023.

(2) Includes certain non-marketable equity securities that are measured at fair value using NAV per share (or its equivalent) as a practical expedient and are excluded from the fair value hierarchy.


	At September 30, 2022
(Dollars in thousands)	Carrying Amount		Estimated Fair Value		Level 1		Level 2		Level 3
Financial assets
Cash and cash equivalents	$	388,038	$	388,038	$	388,038	$	—	$	—
Debt securities available for sale	1,882,869		1,882,869		—		1,882,869		—
Debt securities held to maturity	41,682		38,171		—		38,171		—
Common equities and mutual funds(1)	2,874		2,874		2,874		—		—
Non-marketable equity securities(1)(2)	22,526		22,526		—		15,314		—
Loans held for sale	21,071		21,071		—		21,071		—
Loans and leases	3,529,280		3,525,803		—		—		3,525,803
Federal Reserve Bank and Federal Home Loan Bank stocks	28,812		28,812		—		28,812		—
Accrued interest receivable	17,979		17,979		17,979		—		—
Financial liabilities

Deposits	5,866,037		5,865,854		5,858,283		7,571		—


Other short- and long-term borrowings	36,028		35,986		—		35,986		—
Accrued interest payable	192		192		192		—		—

(1) Equity securities at fair value are included within other assets on the consolidated statement of financial condition at September 30, 2022.

(2) Includes certain non-marketable equity securities that are measured at fair value using NAV per share (or its equivalent) as a practical expedient and are excluded from the fair value hierarchy.

The following sets forth the methods and assumptions used in determining the fair value estimates for the Company’s financial instruments at September 30, 2023 and 2022.

CASH AND CASH EQUIVALENTS

The carrying amount of cash and short-term investments is assumed to approximate the fair value.

DEBT SECURITIES AVAILABLE FOR SALE AND EQUITY SECURITIES

Fair values for debt securities available for sale are based on quoted prices of similar securities on nationally recognized securities exchanges, or matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities, but rather by relying on the securities’ relationship to other benchmark quoted securities. Fair values for marketable equity securities are based on unadjusted quoted prices from active markets in which the security is traded. Non-marketable equity securities are measured at fair value using NAV per share (or its equivalent) as a practical expedient.

LOANS HELD FOR SALE

Loans held for sale are carried at the lower of amortized cost or fair value, where fair value reflects the amount a willing market participant would pay for the loan. The Company classifies SBA/USDA loans held for sale as Level 2 in the fair value hierarchy as there is an active secondary market in which these loans are exchanged. Consumer loans held for sale are classified as Level 3 in the fair value hierarchy as the price at which these loans are sold are dictated by terms of the Program Agreements with consumer lending partners.

LOANS AND LEASES

The fair values of loans and leases were estimated using an exit price methodology. The exit price estimation of fair value is based on the present value of expected cash flows, which are based on the contractual terms of the loans, adjusted for prepayments and a discount rate based on the relative risk of the cash flows. Other considerations include the loan type, remaining life of the loan and credit risk.

FEDERAL RESERVE BANK AND FEDERAL HOME LOAN BANK STOCKS

The fair value of FRB and FHLB stock is assumed to approximate book value since the Company is only able to redeem this stock at par value.

ACCRUED INTEREST RECEIVABLE

The carrying amount of accrued interest receivable is assumed to approximate the fair value.

DEPOSITS

With the exception of time certificate deposits and wholesale deposits, the carrying values of deposits are assumed to approximate fair value since deposits are immediately withdrawable without penalty. The fair value of time certificate deposits and wholesale certificate of deposits are estimated using a discounted cash flows calculation that applies the FHLB Des Moines curve to aggregated expected maturities of time deposits.

FEDERAL HOME LOAN BANK ADVANCES

The fair value of such advances was estimated by discounting the expected future cash flows using current interest rates for advances with similar terms and remaining maturities.

SUBORDINATED DEBENTURES AND OTHER BORROWINGS

The fair value of these instruments was estimated by discounting the expected future cash flows using derived interest rates approximating market over the contractual maturity of such borrowings.

ACCRUED INTEREST PAYABLE

The carrying amount of accrued interest payable is assumed to approximate the fair value.

LIMITATIONS

Fair value estimates are made at a specific point in time and are based on relevant market information about the financial instrument. Additionally, fair value estimates are based on existing on- and off-balance sheet financial instruments without attempting to estimate the value of anticipated future business, customer relationships and the value of assets and liabilities that are not considered financial instruments. These estimates do not reflect any premium or discount that could result from offering the Company’s entire holdings of a particular financial instrument for sale at one time. Furthermore, since no market exists for certain of the Company’s financial instruments, fair value estimates may be based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with a high level of precision. Changes in assumptions as well as tax considerations could significantly affect the estimates. Accordingly, based on the limitations described above, the aggregate fair value estimates are not intended to represent the underlying value of the Company, on either a going concern or a liquidation basis.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details

SUBSEQUENT EVENTS	12 Months Ended
SUBSEQUENT EVENTS	Sep. 30, 2023
Subsequent Events [Abstract]
SUBSEQUENT EVENTS	SUBSEQUENT EVENTS Management has evaluated subsequent events that occurred after September 30, 2023. During this period, up to the filing date of this Annual Report on Form 10-K, management identified the following subsequent events: •On October 5, 2023 the Company announced that Gregory A. Sigrist was appointed as Executive Vice President, Chief Financial Officer effective immediately after the filing of the Company's Annual Form 10-K for the fiscal year ended September 30, 2023.

Pay vs Performance Disclosure - USD ($) $ in Thousands	3 Months Ended												12 Months Ended
Pay vs Performance Disclosure - USD ($) $ in Thousands	Sep. 30, 2023	Jun. 30, 2023	Mar. 31, 2023	Dec. 31, 2022	Sep. 30, 2022	Jun. 30, 2022	Mar. 31, 2022	Dec. 31, 2021	Sep. 30, 2021	Jun. 30, 2021	Mar. 31, 2021	Dec. 31, 2020	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2021
Pay vs Performance Disclosure
Net income attributable to Pathward Financial, Inc.	$ 35,906	$ 45,096	$ 54,771	$ 27,842	$ 23,420	$ 22,391	$ 49,251	$ 61,324	$ 15,903	$ 38,701	$ 59,066	$ 28,037	$ 163,615	$ 156,386	$ 141,708

- Definition

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 235
-SubTopic 10
-Name Accounting Standards Codification
-Section S99
-Paragraph 1
-Subparagraph (SX 210.4-08(g)(1)(ii))
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147480678/235-10-S99-1

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Topic 323
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 3
-Subparagraph (c)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481687/323-10-50-3

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Topic 825
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 28
-Subparagraph (f)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147482907/825-10-50-28

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Topic 220
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 6
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147482765/220-10-50-6

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Topic 250
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 3
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147483443/250-10-50-3

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Topic 250
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 1
-Subparagraph (b)(2)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147483443/250-10-50-1

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Topic 815
-SubTopic 40
-Name Accounting Standards Codification
-Section 65
-Paragraph 1
-Subparagraph (f)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147480175/815-40-65-1

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Topic 250
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 8
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147483443/250-10-50-8

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Topic 250
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 9
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147483443/250-10-50-9

Reference 10: http://www.xbrl.org/2003/role/disclosureRef
-Topic 250
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 11
-Subparagraph (a)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147483443/250-10-50-11

Reference 11: http://www.xbrl.org/2003/role/disclosureRef
-Topic 250
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 11
-Subparagraph (b)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147483443/250-10-50-11

Reference 12: http://www.xbrl.org/2003/role/disclosureRef
-Topic 250
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+ Details

Insider Trading Arrangements	3 Months Ended
Insider Trading Arrangements	Sep. 30, 2023
Trading Arrangements, by Individual
Rule 10b5-1 Arrangement Adopted	false
Non-Rule 10b5-1 Arrangement Adopted	false
Rule 10b5-1 Arrangement Terminated	false
Non-Rule 10b5-1 Arrangement Terminated	false

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

12 Months Ended

Sep. 30, 2023

Accounting Policies [Abstract]

PRINCIPLES OF CONSOLIDATION

The Consolidated Financial Statements include the accounts of Pathward Financial, Inc. ("Pathward Financial" or the “Company” or "us"), a registered bank holding company located in Sioux Falls, South Dakota, and its wholly-owned subsidiaries. The Company's subsidiaries include Pathward®, National Association ("Pathward®, N.A." or "Pathward" or the “Bank”), a national bank whose primary federal regulator is the Office of the Comptroller of the Currency (the "OCC"), and Pathward Venture Capital, LLC, a wholly-owned service corporation subsidiary of Pathward, N.A. which invests in companies in the financial services industry. All significant intercompany balances and transactions have been eliminated. The Company also owns 100% of First Midwest Financial Capital Trust I (the “Trust”), which was formed in July 2001 for the purpose of issuing trust preferred securities, and Crestmark Capital Trust I, which was acquired from the Crestmark Acquisition in August 2018. The Trust and Crestmark Capital Trust I are not included in the Consolidated Financial Statements of the Company.

In addition, the Company is a variable interest holder in certain entities in which the equity holders do not have the characteristics of a controlling financial interest or where the entity does not have enough equity at risk to finance its activities without additional subordinated financial support (referred to as variable interest entities or "VIEs"). The Company's variable interest arises from contractual ownership or other monetary interests that change with fluctuations in the VIE's net asset value. The primary beneficiary is the entity which has both: (1) the power to direct the activities of the VIE that most significantly impacts the VIE's economic performance, and (2) the obligation to absorb losses or receive benefits of the entity that could potentially be significant to the VIE. To determine whether or not a variable interest the Company holds could potentially be significant to the VIE, the Company considers both qualitative and quantitative factors regarding the nature, size and form of the Company's involvement with the VIE. Further, the Company assesses whether or not the Company is the primary beneficiary of a VIE on an ongoing basis. If the determination is made that the Company is the primary beneficiary, then that entity is included in the Consolidated Financial Statements.

Noncontrolling interests represent the portion of net income and equity attributable to third-party owners of consolidated subsidiaries that are not wholly-owned by Pathward Financial. All of the Company's noncontrolling interests relate to the Company's Commercial Finance business line.

NATURE OF BUSINESS AND INDUSTRY SEGMENT INFORMATION

NATURE OF BUSINESS AND INDUSTRY SEGMENT INFORMATIONOne of the Company's primary sources of revenue relates to payment processing services for prepaid debit cards, ATM sponsorship, tax refund transfer and other money transfer systems and services. Additionally, a significant source of revenue for the Company is interest from the purchase or origination of commercial finance loans, consumer finance loans, and warehouse finance loans. The Company accepts deposits from customers in the normal course of business on a national basis through its Payments and tax services divisions, and through wholesale funding. The Company operates in the banking industry, which accounts for the majority of its revenues and assets. The Company uses the “management approach” for reporting information about segments in annual and interim financial statements. The management approach is based on the way the chief operating decision-maker organizes segments within a company for making operating decisions and assessing performance. Reportable segments are based on products and services, geography, legal structure, management structure and any other manner in which management disaggregates a company. Based on the management approach model, the Company has determined that its business is comprised of three reporting segments.

USE OF ESTIMATES IN PREPARING FINANCIAL STATEMENTS

USE OF ESTIMATES IN PREPARING FINANCIAL STATEMENTSThe preparation of Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Certain significant estimates include the valuation of residual values within lease receivables, allowance for credit losses, the valuation of goodwill and intangible assets and the fair values of securities and other financial instruments. These estimates are reviewed by management regularly; however, they are particularly susceptible to significant changes in the future.

CASH AND CASH EQUIVALENTS

For purposes of reporting cash flows, cash and cash equivalents is defined to include the Company’s cash on hand and due from financial institutions and short-term interest-bearing deposits in other financial institutions. The Company reports cash flows net for customer loan transactions, securities purchased under agreement to resell, federal funds purchased, deposit transactions, securities sold under agreements to repurchase, and FHLB advances with terms less than 90 days. The FRB requires all depository institutions to maintain reserves at specified levels against their transaction accounts, primarily checking accounts. In response to the COVID-19 pandemic, the FRB reduced reserve requirement ratios to zero percent effective on March 26, 2020, to support lending to households and businesses. At September 30, 2023, the Bank was not required to maintain any reserve balances. The Company at times maintains balances in excess of insured limits at various financial institutions including the FHLB, the FRB and other private institutions. At September 30, 2023, the Company had $1.9 million interest-bearing deposits held at the FHLB and $260.3 million in interest-bearing deposits held at the FRB. The Company does not believe these instruments carry a significant risk of loss but cannot provide assurances that no losses could occur if these institutions were to become insolvent.

SECURITIES

GAAP requires that, at acquisition, an enterprise classify debt securities into one of three categories: Available for Sale (“AFS”), Held to Maturity (“HTM”) or trading. AFS debt securities are carried at fair value on the Consolidated Statements of Financial Condition. Unrealized holding gains and losses due to risk of credit loss are recognized in earnings while unrealized holding gains and losses due to market conditions and other non-credit risk factors are excluded from earnings and recognized as a separate component of equity in accumulated other comprehensive income (loss) (“AOCI”). See Note 20. Fair Values of Financial Instruments for additional information on fair value of AFS debt securities. HTM debt securities are measured at amortized cost. The Company classifies the majority of its debt securities as AFS, which are those the Company may decide to sell if needed for liquidity, asset/liability management, or other reasons. Both AFS and HTM are subject to an allowance for credit loss. Pathward Financial did not hold trading securities at September 30, 2023 or 2022.

Gains and losses on the sale of securities are determined using the specific identification method based on amortized cost and are reflected in results of operations at the time of sale. Interest and dividend income, adjusted by amortization of purchase premium or discount using the level yield method, is included in income as earned. For callable debt securities, any purchase premium is amortized to the first call date while any discount is accreted over the contractual life of the security.

Debt Securities Credit Losses

The Company evaluates HTM debt securities for credit losses on a quarterly basis and records any such losses as a component of provision for credit losses in the Consolidated Statements of Operations. The Company has concluded that its portfolio as of September 30, 2023 has a zero risk of credit loss due to the U.S. Government financial guarantees underlying the securities within the HTM portfolio and as a result has not recorded an allowance for credit loss.

The Company evaluates AFS debt securities for credit losses on a quarterly basis and records any such losses as a component of provision for credit losses in the Consolidated Statements of Operations. The Company has concluded that any unrealized holding losses in its portfolio as of September 30, 2023 are not related to credit loss and as a result has not recorded an allowance for credit loss. See Note 3. Securities for further information.

Equity Investments

The Company holds marketable equity securities, which have readily determinable fair value, and include common equity and mutual funds. These securities are recorded at fair value with unrealized gains and losses, due to changes in fair value, reflected in earnings. Interest and dividend income from these securities is recognized in interest income. See Note 3. Securities for additional information on marketable equity securities.

The Company also holds non-marketable equity investments that are included in Other Assets in the Company’s Consolidated Financial Statements. The Company generally accounts for these investments under the equity method or the provisions of Accounting Standards Codification ("ASC") 321. Equity Securities. Investments where the Company has significant influence, but not control, over the investee are accounted for under the equity method. Investments where the Company cannot exercise significant influence over the investee are measured at fair value, with changes in fair value recognized in earnings, unless those investments have no readily determinable fair value. Investments without readily determinable fair value are measured under the measurement alternative, which reflects cost less impairment, with adjustments in value resulting from observable price changes arising from orderly transactions of the same or a similar security from the same issuer ("measurement alternative investments").

The Company reviews for impairment for equity method and measurement alternative investments and includes an analysis of the facts and circumstances for each investment, expectations of cash flows, capital needs, and viability of its business model. For equity method, the asset carrying value is reduced when the decline in fair value is considered to be other than temporary. For measurement alternative investments, the asset carrying value is reduced when the fair value is less than the carrying value, without the consideration of recovery.

The Company held the following non-marketable equity investments:

•Equity Method - The Company held equity method investments of $4.1 million within other assets as of September 30, 2023 and $2.9 million at September 30, 2022. The Company’s ownership of such investments typically ranges from 5% - 25% of the investee. The Company recognized nominal net earnings from these investments within noninterest income for the fiscal year ended September 30, 2023. The Company elected to classify distributions received from equity method investments using the cumulative earnings approach on the Consolidated Statements of Cash Flows.

•Fair Value Method - The Company held equity investments measured at net asset value (NAV) per share (or its equivalent) of $8.4 million at September 30, 2023 and $7.2 million at September 30, 2022 where NAV is considered the fair value practical expedient. These investments are recorded within other assets on the Company’s Consolidated Financial Statements. Fluctuations in fair value are recognized in earnings within noninterest Income.

•Measurement Alternative - The Company held equity investments measured using the measurement alternative of $12.1 million as of September 30, 2023 and $15.3 million at September 30, 2022 within other assets on the Company’s Consolidated Financial Statements. Equity investments measured using the measurement alternative are subject to fair value adjustments when observable price changes in orderly transactions for the identical or similar investment of the same issuer occur. The Company did not recognize any fair value adjustments in the fiscal year ended September 30, 2023, and recognized a decrease in fair value of $1.0 million in the fiscal year ended September 30, 2022. Additionally, the Company recognized impairment loss of $3.3 million and zero of such investments during the fiscal years ended September 30, 2023 and 2022, respectively.

LOANS HELD FOR SALE ("LHFS")

Loans are designated as LHFS based on management's intent to sell loans, or portions of loans, in established secondary markets or to participating third-party financial institutions. LHFS are held at the lower of cost or fair value. Any amount by which the cost exceeds fair value is initially recorded as a valuation allowance and subsequently reflected in the gain or loss on sale when sold. At September 30, 2023 and 2022, there was no valuation allowance recorded for LHFS. Gains and losses on LHFS are recorded in noninterest income on the Consolidated Statements of Operations. Loan costs and fees are deferred at origination and are recognized in income at the time of sale. Interest income is calculated based on the note rate of the loan and is recorded as interest income. The Company occasionally transfers loans between held for sale and held for investment classifications based on its intent and ability to hold or sell loans. Management's intent to sell may be impacted by secondary market conditions, loan credit quality, or other factors.

The following table summarizes the activity pertaining to loans held for sale:


	Fiscal Year Ended September 30,
	2023				2022
(Dollars in thousands)	Consumer		Commercial		Consumer		Commercial
Beginning of year balance	$	21,071	$	—	$	23,111	$	33,083
Originations	1,206,201		2,483		856,819		128,511
Proceeds from sales	(1,123,271)		(16,610)		(855,291)		(50,848)
Gain (loss) on sales	—		268		—		5,813
Principal collections, net of deferred fees and costs	(26,222)		280		(4,062)		(625)
Non-cash transfers, net	—		13,579		494		(115,934)
End of year balance	$	77,779	$	—	$	21,071	$	—

LOANS AND LEASES

Loans Receivable

Loans receivable that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off are classified as held for investment and are generally reported at their outstanding principal balances net of any unearned income, cumulative charge-offs, unamortized deferred fees and costs on originated loans, and unamortized premiums or discounts on purchased loans (amortized cost).

Interest income on loans is accrued over the term of the loans based upon the amount of principal outstanding except when serious doubt exists as to the collectability of a loan, in which case the accrual of interest is discontinued. Unearned income, deferred loan fees and costs, and discounts and premiums are amortized to interest income over the contractual life of the loan using the interest method. The Company's business lines follow a nonaccrual policy with certain commercial finance, consumer finance and tax service loans not generally being placed on non-accrual status, but instead are charged off when the collection of principal and interest become doubtful. When placed on nonaccrual status, the accrued unpaid interest receivable is reversed against interest income and any remaining amortizing of net deferred fees is suspended. Cash collected on these loans is applied to first reduce the carrying value of the loan with any remainder being recognized as interest income. Generally, a loan can return to accrual status when all delinquent interest and principal become current under the terms of the loan agreement and collectability of the remaining principal and interest is no longer doubtful. Loans are considered past due when contractually required principal or interest payments have not been made on the due dates.

For commercial loans, the Company generally fully charges off or charges down to net realizable value (fair value of collateral, less estimated costs to sell) for loans secured by collateral when: management judges the loans to be uncollectible; repayment is deemed to be protracted beyond reasonable time frames; the loan has been classified as a loss by either the Company's internal loan review process or its banking regulatory agencies; the customer has filed bankruptcy and the loss becomes evident owing to lack of assets; or the loan meets a defined number of days past due unless the loan is both well-secured and in the process of collection. For consumer loans, the Company fully charges off or charges down to net realizable value when deemed uncollectible due to bankruptcy or other factors, or meets a defined number of days past due.

As part of the Company’s ongoing risk management practices, management generally attempts to work with borrowers when necessary to extend or modify loan terms to better align with their current ability to repay. Extensions and modifications to loans are made in accordance with internal policies and guidelines which conform to regulatory guidance. Modified loan terms may include interest rate reductions, principal forgiveness, term extensions, payment forbearance or other actions intended to minimize the Company’s economic loss and to avoid foreclosure or repossession of the collateral. Each occurrence is unique to the borrower and is evaluated separately. In a situation where an economic concession has been granted to a borrower that is experiencing financial difficulty, the Company identifies and reports that loan as a troubled debt restructuring (“TDR”). Management considers regulatory guidelines when restructuring loans to ensure that prudent lending practices are followed. As such, qualification criteria and payment terms consider the borrower’s current and prospective ability to comply with the modified terms of the loan. Additionally, the Company structures loan modifications with the intent of strengthening repayment prospects. Loans that are reported as TDRs apply the identical criteria in the determination of whether the loan should be accruing or not accruing. The event of classifying the loan as a TDR due to a modification of terms may be independent from the determination of accruing interest on a loan.

Leases Receivable

The Company provides various types of commercial lease financing that are classified for accounting purposes as direct financing, sales-type or operating leases. Leases that transfer substantially all of the benefits and risks of ownership to the lessee are classified as direct financing or sales-type leases and are included in loans and leases receivable on the Consolidated Statements of Financial Condition. Direct financing and sales-type leases are carried at the combined present value of future minimum lease payments and lease residual values. The determination of lease classification requires various judgments and estimates by management, including the fair value of equipment at lease inception, useful life of the equipment under lease, lease residual value, and collectability of minimum lease payments.

Sales-type leases generate dealer profit, which is recognized at lease inception by recording lease revenue net of lease cost. Lease revenue consists of the present value of the future minimum lease payments. Lease cost consists of the lease equipment’s book value, less the present value of its residual. Interest income on direct financing and sales-type leases is recognized using methods that approximate a level yield over the fixed, non-cancelable term of the lease. Recognition of interest income is generally discontinued at the time the lease becomes 90 days delinquent, unless the lease is well-secured and in process of collection. Delinquency and past due status is based on the contractual terms of the lease. The Company receives pro rata rent payments for the interim period until the lease contract commences and the fixed, non-cancelable lease term begins. Interim payments are recognized in the month they are earned and are recorded in interest income. Management has policies and procedures in place for the determination of lease classification and review of the related judgments and estimates for all lease financings.

The Company generally fully charges off or charges down to net realizable value (fair value of collateral, less estimated costs to sell) for leases when management judges the lease to be uncollectible; repayment is deemed to be protracted beyond reasonable time frames; the lease has been classified as a loss by either the Company's internal review process or its banking regulatory agencies; the customer has filed bankruptcy and the loss becomes evident owing to lack of assets; or the lease meets a defined number of days past due unless the lease is both well-secured and in the process of collection.

Some lease financings include a residual value component, which represents the estimated fair value of the leased equipment at the expiration of the initial term of the transaction. The estimation of the residual value involves judgments regarding product and technology changes, customer behavior, shifts in supply and demand, and other economic assumptions. The Company may purchase and sell minimum lease payments, primarily as a credit risk reduction tool, to third-party financial institutions at fixed rates on a non-recourse basis with its underlying equipment as collateral. For those transactions that achieve sale treatment, the related lease cash flow stream and the non-recourse financing are derecognized. For those transactions that do not achieve sale treatment, the underlying lease remains on the Company’s Consolidated Statements of Financial Condition and non-recourse debt is recorded in the amount of the proceeds received. The Company retains servicing of these leases and bills, collects, and remits funds to the third-party financial institution. Upon default by the lessee, the third-party financial institutions may take control of the underlying collateral which the Company would otherwise retain as residual value.

Leases that do not transfer substantially all benefits and risks of ownership to the lessee are classified as operating leases. Such leased equipment are included in rental equipment on the Consolidated Statements of Financial Condition and are depreciated on a straight-line basis over the term of the lease to its estimated residual value.

Depreciation expense is recorded as operating lease equipment depreciation expense within noninterest expense. Operating lease rental income is recognized when it becomes due and is reflected as a component of noninterest income. The Company evaluates the carrying value of rental equipment for impairment whenever events or circumstances have occurred that would indicate the carrying amount may not be fully recoverable. If the carrying amount is not fully recoverable, an impairment loss is recognized to reduce the carrying amount to fair value, where fair value is based on the condition of the rental equipment and the projected net cash flows from rental and sale adjusted for current market conditions. A nominal impairment expense from rental equipment was recognized for the fiscal year ended September 30, 2023, and no impairment expense was recognized for fiscal years ended September 30, 2022 and 2021.

LOAN SERVICING AND TRANSFERS OF FINANCIAL ASSETS

Loan Servicing and Transfers of Financial AssetsThe Company sells loan participations, generally without recourse, in both the commercial and consumer segments. The Company also sells commercial SBA and USDA loans to third parties, generally without recourse. Sold loans are not included in the Consolidated Financial Statements. The Bank generally retains the right to service the sold loans for a fee. If the fee is determined commensurate and customary with market terms, no servicing asset or liability is recorded. Any fee that is above or below market terms results in a servicing asset or liability and is included within Other Assets on the Consolidated Statements of Financial Condition.