Pathward Financial, Inc. (CASH) Q4 2026 Earnings Call Transcript

Operator: Ladies and gentlemen, thank you for standing by and welcome to Pathward Financial's Fourth Quarter 26 Investor Conference Call. During the presentation, all participants will be in a listen-only mode. Following the prepared remarks, please press *1 to raise your hand. To withdraw your question, press *1 again. As a reminder, this conference call is being recorded. I would now like to turn the conference call over to Darby Schoenfeld, Senior Vice President, Chief of Staff and Investor Relations. Please go ahead.

Darby Schoenfeld: Thank you, operator, and welcome. With me today are Pathway Financial's CEO, Brett Farr and CFO, Gregory A. Sigrist, who will discuss our operating and financial results for the fourth quarter and full fiscal year of 2026. After which, we will take your questions. Additional information, including the earnings release, the investor presentation that accompanies our prepared remarks and supplemental slides may be found on our website at pathwardfinancial.com. As a reminder, our comments may include forward-looking statements. Those statements are subject to risks and uncertainties that could cause actual and anticipated results to differ. These statements speak only as of this date, and the company undertakes no obligation to update any forward looking statement, except as may be required by applicable law. Please refer to the cautionary language in the earnings release investor presentation, and in the company's filings with the Securities and Exchange Commission including our most recent filings for additional information covering factors that could cause actual results to differ materially from those expressed or implied in the forward-looking statements. Additionally, today, we will be discussing certain non-GAAP financial measures on this conference call. References to non GAAP measures are only provided to you to assist in understanding the company's results and performance. Additional information regarding these non-GAAP measures as well as reconciliations included in the earnings release and the appendix of the investor presentation. Finally, all time periods referenced are fiscal quarters and fiscal years, and all comparisons are to the prior year period unless otherwise noted. Now let me turn the call over to Brett Pharr, our CEO.

Brett L. Pharr: Thanks, Darby, and good evening, everyone. Thank you for joining our earnings call. Looking forward to sharing our updates today, but I would like to start by taking a moment to reflect on an important milestone. This quarter marks 5 years since my first earnings call as CEO of Pathward. Looking back, it is remarkable to reflect on everything the Pathward team has accomplished together. We have navigated the challenges of COVID, rebranded the company as Pathward, expanded our executive team, and strategically reshaped our balance sheet. All while evolving our business and strengthening our position as a trusted platform that enables our partners to thrive. Through each chapter, 1 thing has remained constant, and that is the dedication and commitment of our employees. Our success has always been rooted in our people. Every day, talented employees across Pathward work with customers and businesses to enable financial availability, choice, and opportunity. Their unwavering commitment to true partnership is what has enabled us to adapt, execute and continue delivering for all of our stakeholders. I am very proud that we have continued to sustainably grow while staying true to our purpose of powering financial inclusion. That is not a coincidence. Our purpose continues to guide our strategy, and we believe that this diligent focus helps drive long term value for our shareholders. And while I find tremendous value in times of reflection, I am even more excited about what lies ahead. We have a strong foundation, a team that embodies our values, and is committed to success, as well as a clear strategy to guide us forward. With that, let me spend a few minutes on our strategy. Then I will provide a quick update on credit, before turning the call over to Gregory. Fiscal 26 was another important year of execution for Pathway. We successfully advanced the strategic priorities we set out to accomplish last year, and this was by no means a small feat. We had some major wins across each area, starting with maintaining an optimized balance sheet. Commercial finance growth, combined with reductions in our lower yielding securities portfolio, reflects our disciplined approach while remaining cognizant of our balance sheet capacity. We deployed capital where we believe would provide us with optionality or generated strong risk adjusted returns. We made significant inroads in the small business administration loan market moving up within the top 20 SBA 7(a) program lenders in the country. Next, we continue to make investments in technology, risk, and compliance. We believe these continued investments will allow our partners both present and future to deliver with confidence as they leverage our expertise, infrastructure, and collaborative support. The world is only moving faster, and we are proud to enable our partners by offering a broad suite of capabilities. Furthermore, we are very proud to have been recognized by a few different organizations throughout the year for our standout workforce and culture. We believe part of our success can be attributed to our talent anywhere approach. With this talent strategy, we have been very successful in expanding our reach beyond local candidates as a remote enabled employer and strengthening our ability to meet the evolving needs of our business. The last strategic priority is the client experience. We believe our partners see the value in Pathward platform and our ability to grow alongside them. Last quarter, we announced that we had renewed our relationship with Clair, a company that has empowered workforce management and payroll to offer early access to earned wages to employees at no cost to employers. This quarter, we are pleased to announce that we have renewed our contract with long standing partner H&R Block, extending our relationship through mid-2030. H&R Block has been a leader in the tax preparation industry for more than 70 years with a deep commitment to their clients, associates, and community. We are excited to continue to support them. We still see significant opportunity in our pipeline with both new and existing partners to build on this momentum by expanding the products and capabilities we deliver. As we look ahead to fiscal 2027, our strategy will remain consistent. We believe the continuity in our strategy reflects the confidence that we have both in the direction of the business and the progress we have made throughout fiscal 2026. Our focus is now on continuing to execute against these areas and building momentum across the organization. Importantly, we believe our diversified mix of partners, products capabilities remains a key differentiator of Pathward. We are not dependent on a single partner, industry or market, which we believe delivers a resilient business model while providing multiple avenues for growth. Our broad suite of solutions allows us to create opportunities deepen relationships, and deliver value. As a result, we believe we are well positioned to capitalize on the opportunities in front of us. We continue to work through the renewable energy projects that we mentioned last quarter, and still believe we have line of sight to bringing them to completion. While we made significant progress during the quarter, these things take time. We will continue to provide transparency in connection with these credit items. Additionally, we continue to believe that these events are not indicative of a broader systemic issue within the portfolio. Aside from credits, we are very pleased with the results of the year. Now I would like to turn it over to Gregory, who will take you through the details of our financials and fiscal year 2027 guidance.

Gregory A. Sigrist: Thank you, Brett. We were pleased with the performance during the quarter as our core businesses delivered solid results. Starting with the balance sheet, our treasury led model continues to deliver with growth, of nearly $6 million in net interest income from our commercial finance business. We also delivered double digit percentage growth in noninterest income primarily due to an increase of almost $8 million in card and deposit fee income the majority of which was driven by growth in the core payments business. Noninterest expense improved in the quarter as a result of disciplined expense management, with lower legal and consulting expense. This is partially offset by building and software expense, Additionally, we will continue to make targeted investments in our people, processes, and technology to facilitate evolution and scalability. Aside from the credit items Brett discussed, we are pleased with our full year results, and equally important, how our teams delivered them. Their focus, collaboration, and consistent execution throughout the year drove strong performance across the business. Interest income growth in commercial finance was nearly $30 million driven primarily by an increase in structured finance. Solid partner growth combined with disciplined expense management led to full-year net income of $175.7 million or $8.14 diluted earnings per share. With that, our return metrics remain strong, with a 2.30 return on average assets, and a 32.9% return on average tangible equity. We believe that these results reflect the quality of our business model, the discipline of our teams, and consistent execution. Not to mention our capacity to generate earnings, and to create capital to cover events as they arise. We believe this continues to differentiate Pathward and provide a strong foundation as we enter fiscal 2027. While deposits held on the company's balance sheet at September 30 experienced a modest decrease versus a year ago, we held more than $400 million more in average custodial deposits. As a reminder, we do earn fee income on custodial deposits that is tied to the effective fed funds rate. Average partner deposits were strong in the quarter, giving us the ability to generate additional servicing fee income. Loans and leases at September 30, grew 9%. We continue to be successful in growing structured finance term lending, and SBA and USDA loans as well as working capital asset based lending. Adjusted net interest margin improved to 5.51% in the fourth quarter as we continue to improve our earning asset mix and see the benefit of repricing. Year over year loan originations increased from $1.3 billion to $2.2 billion. Driven primarily by significant growth in our credit sponsorship business from both a new contract signed last year and expansion with current partners. Regarding credit, the nonperforming loans and lease ratio did increase modestly to 5.61% sequentially. While there are always normal flows in and out, the increase was largely attributable to additional work being done to bring certain credits to completion. Net charge offs were $52 million in the quarter, of which $20.3 million was associated with the commercial finance portfolio. We continue to expect credit to normalize in 2027, as we work down our nonperforming loans. The strength of our balance sheet along with our earnings and capital accretion power allows for return of capital to shareholders, As of September 30, our liquidity was $3.1 billion, during the quarter, we were able to repurchase approximately 282 thousand shares at an average share price of $88.75. For a total of over 2 million shares for the year. This leaves 2.8 million shares still available for repurchase under current stock repurchase program. We are reiterating our fiscal year 2027 guidance range of $9.50 to $10 per share which includes the following assumptions. No additional rate changes during the year, an effective tax rate of 18% to 22%, expected secondary market revenues between $5 million to $7 million per quarter, and includes expected share repurchases. Lastly, a comment on expenses. As we have said, we will continue to invest in people, processes, and technology. In prior years, that has largely shown up as an investment ramping throughout the year. For fiscal 2027, we expect those investments to begin in the December quarter. This will manifest as additional hirings in the first quarter that will increase the compensation and benefits run rate earlier in the year but will still hold the normal seasonal pattern. Similarly, we will continue to use consultants with modestly elevated spend in the first half of the year. This concludes our prepared remarks. Operator, please open the line for questions.

Operator: We will now begin the question and answer session. If you would like to ask a question, please press *1 to raise your hand. To withdraw your question, press *1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile our roster of Q&A. Your first question comes from Timothy Switzer with KBW. Timothy, your line is now open. Please go ahead.

Timothy Switzer: Hey. Good afternoon. Thanks for taking my question.

Brett L. Pharr: Hey, Timothy.

Timothy Switzer: Sounds like good progress on the partnership side announced with H&R Block. And Clair and others recently. I am curious on where do you think the new partners will be coming from specific industries And is it more on the credit sponsorship side, embedded finance? You know, the card and debit business. We would love to get an update there.

Brett L. Pharr: Yeah. So I think there is a variety of ways. It is pretty broad. 1 of the things we kind of emphasize is our business model and product set. And so it is all of the above that we are seeing. And we have said it before, a lot come from potential new partners and also an awful lot of our increase in revenue comes from existing partners. But there is not 1 that I would single out and say that it is a higher percentage of it. This is all about the breadth and depth of our offerings and our partners really want to understand that and be a part of it.

Timothy Switzer: Okay. And do you guys feel like there is any areas right now we need to invest a little bit more in to keep up with the competition in the vast embedded finance space, where are you directing most of your investment dollars right now?

Brett L. Pharr: Gregory, I will get you to talk about this a little bit. But, I mean, we have said for a while that we have been in our run rate investment in technology and enhancing the infrastructure in the back. Anything you want to add to that?

Gregory A. Sigrist: No. I think that is right. I mean, it is more just staying contemporary with our clients and really help them support their own endeavors. As I said in my prepared remarks, we also invest on the risk and compliance side because with the onboarding we have done and just the increase in the volumes today and in the future, we just wanna make sure that stays, you know, state of the art and stays at the strength that we have had historically. So that is just an area we wanna make sure we stay ahead of.

Timothy Switzer: Okay. that is helpful. I want to ask a few on the credit side here. With the charge offs this quarter, and I guess in the last few, which were--some of them were in the renewable energy space. Are there any specific verticals or industries that these are concentrated in this quarter?

Brett L. Pharr: No. None specific that we would call out. And, you know, a lot of this is related to transactions that we have already talked about before. As we work through the process. So there is not anything new or any new kind of asset classes that we would bring to the table and say we are seeing things here.

Gregory A. Sigrist: And, Timothy, I think the key point there with predatory time. Yeah. I think the key point which you really touched on, though, is that the elevated charge offs and, frankly, still the NPL and the NPL ratio, it is concentrated in the credits we have already talked about. And I think, importantly, we are making resolutions. You know, you saw the past dues have declined. that is important to see too, and we have not seen any evidence that there is any other, you know, issues spreading across the portfolios.

Timothy Switzer: Okay. I mean, I guess with the charge-offs this quarter, we still see NPAs staying around the same level. Should we expect further charge offs starting next year? What kind of assumptions should we have?

Brett L. Pharr: Yeah. Keep in mind, and we talked last time about a number of the projects that we were going to take over and have to lead to completion. That means you fund the projects and then eventually complete them, get them producing, and then you sell them. Well, for the existing portfolio, when you fund some of that construction, those dollars go into nonaccrual until you sell the product.

Gregory A. Sigrist: Yeah. But specifically on charge-offs, Tim, just-- You have to separate and differentiate the charge offs from when you take the specific reserves and how that kind of dovetails with the life cycle Brett just mentioned. Right? The charge offs you are seeing are results of, you know, specific reserves that we have taken in prior quarters. And you have to differentiate that against our ongoing credit cost of, you know, credit, right, which is what we provision for. You know, we talked about last quarter, we see credit normalizing in 2027. And what that really means is the cost of credit, which is our credit provisioning, is getting--I feel it is going to migrate back to our historic levels. The charge offs are a bit more episodic, and they are tied to the idiosyncratic, you know, loans that we have talked about over the last year, frankly. But it is a byproduct of just a natural progress of working through some of those.

Timothy Switzer: Okay. Alright. My last 1 here, and Gregory, you just touched on this. But what kind of provision expense expectations are embedded within your guidance for 2027?

Gregory A. Sigrist: Yeah. I touched on it last quarter too and where I said we would normalize back to kind of the historic run rate and what. And I think I said this last quarter too. What that really means is if you focus solely on the commercial finance portfolio, the historic ACL ratio has been. You can see it in the deck. it is in there. But it could be down, you know, roughly a 1.20% to a 1.30% probably a normalized level. I think that is the starting point. And then in anything up or. That, it is really just gonna be a more of a function of the mix. Of new production. What you saw this quarter, frankly, the provisioning in the quarter is really just provisioning for new, you know, for new. For loan growth. Depending upon what that mix was. And that is the way I kinda see next year playing is more akin to that 120 to a 130 basis point range.

Timothy Switzer: Okay. Since you are already near those levels, it seems like, you know, the provision going forward would be more for loan growth rather than credit deterioration.

Gregory A. Sigrist: Based upon the facts we have right now, that is exactly the way we are feeling about it.

Timothy Switzer: Alright. Good to hear. Thanks for taking all my questions.

Brett L. Pharr: Thanks, Tim.

Operator: Your next question from the line of Joe Yanchunis with Raymond James. Your line is now open. Please go ahead.

Joseph Yanchunis: Good afternoon, guys. Thanks for taking my questions.

Brett L. Pharr: Hey. How are you doing?

Joseph Yanchunis: Yep. I am doing well.

Gregory A. Sigrist: So new originations increased pretty meaningfully this quarter, you know, largely driven by credit sponsorship. And you would referenced growth with existing partners. You know, how much that growth represents a new normalized run rate versus potentially some acceleration in specific programs? I am just kind of curious what you are seeing in the pipeline today that gives you confidence in that continued growth.

Brett L. Pharr: Yeah. I believe that really represents the new run rate based upon the programs and the partners we have announced and onboarded. I think we tend to ramp into those programs more rapidly than an issuing partner or acquiring is pretty rapid too. But I think that is the new normal. And from here, it is really just growth and partner programs and then growth in the partner base.

Joseph Yanchunis: that is great to hear. And then, Brett, you know, having completed 5 years of earnings calls for Pathward, and congratulations for that, was hoping you could talk a little bit about the next 5 years. And what do you think the themes will be in the BaaS space? And how do you expect consolidation in the regulatory environment will play out?

Brett L. Pharr: Well, so I think there is a broad set of things over there. Obviously, there is lots of continual change in all kinds of payments I mean, if you think about where we were 5 years ago, and the products that we offered and provided and then what we offer today is vastly different. And I think 5 years from now, there will be a lot more of things that are let's say, not just issuing an interchange related and that is gonna continue to advance. Some of which are the products we are already doing, some of which are products that we do not even know about or that are coming. And we gotta let all that play out. We have got to let AI play. that is gonna have a material impact on our industry. I think it is gonna be more on the customer front end ultimately, and how that shows up. So that is gonna be a big part of, I think, 5 years out. And I think, you know, we are in a period of time where some are looking at vertical integration. We are gonna see if that is right or wrong, and I am not sure. I think there are pros and cons to that. And so I think we will watch that play out. That will not be 5 years. That will be 2 years, and we will watch as that plays out. But, you know, very optimistic about this because this whole thing has always been about third party delivery. And about people being creative, innovative, entrepreneurial, upfront with the customer, and then us providing the infrastructure and the backbone behind it, obviously wrapped in risk and compliance. And I just think that is a fabulous business model for whatever's coming. So excited about the future and, you know, we lead on what our partners lead into. So we watch them and what they are doing, then we help support them to do that and often co create. And I think we will keep doing that.

Joseph Yanchunis: You know, you mentioned the vertical integration in your answer there, and I believe this question has come up on the past probably 5 or so earnings calls with you guys. You know, with more fintechs considering their own charters and more banks building vast capabilities, what is the hardest aspect for a competitor to replicate? You know, do you think it is the regulatory infrastructure product breadth, technology, or just the relationships?

Brett L. Pharr: it is the culture. Culture matters. And there is a distinct reason that banks do banking and our program managers do what they do. And by the way, you cannot hire culture. You have to spend a lot of time creating it. And I think the best business model has worked because banks had the bank culture and the program managers had the program manager culture. I think we have already had in the past household names that you know that tried vertical integration, and failed. Now some of them as we go forward, we will figure it out. Some of them have narrow based charters that can let them do some things, and so it will not be quite as hard. But the fully vertical integrated model I think it is hard to get up every day and have a culture that meets the needs of a banking infrastructure. In the background and all the things you need on the front end as a program manager. And as I said, you cannot hire that.

Joseph Yanchunis: that is a good point. Then 1 more for me here to bring Gregory kind of back in the fold. The securities portfolio continues to wind down. Now it is under $1.2 billion. I think you have about another $150 million cash flowing in fiscal 2027. Where would you like to see the portfolio settle out?

Gregory A. Sigrist: You know, we still keep it there largely as a reservoir of liquidity just in case we need it. You know, it is pledged. We borrow against it. that is part of, you know, how we fund tax season. But the reality is I think we can let that run down to the $800 million to perhaps a $1 billion range. And it will settle out there. We are in that environment, though, where rates are. And I have said historically, we will take that 140 or 150 million of principal off the portfolio and reinvest it back into the loan book. The reality is, though, there is probably a benefit for us to buy a few securities along the way. Just to give us, in the event there is a down rate scenario, a bit of coverage on the OCI front. I would not say it is gonna be a lot, but I would say there might be a little bit there. But that is still. In my view, we are gonna normalize around that $800 million to a $1 billion range.

Joseph Yanchunis: Alright. All right. Brett, well, thank you for taking my questions.

Gregory A. Sigrist: Thanks, Joe.

Brett L. Pharr: Thanks, Joe.

Operator: Your next question from the line of Manuel Navas with Piper Sandler. Your line is now open. Please go ahead.

Manuel Navas: Hey. Good evening.

Gregory A. Sigrist: Hi, Manuel. With this higher rate environment, can you guys talk through and also the NIM rebound this quarter.

Manuel Navas: Can you just kind of talk through what are some of the expectations from the September hike? How did. how a potential December hike could impact your EPS trajectory, And also, maybe touch on is this. How this could show up potentially down the road in credit?

Gregory A. Sigrist: Let me tackle the first 1 first, then I may hand off to Brett so we can do a little tag team here. But I will I will break it down maybe just broadly on the adjusted net interest margin, how I think about, you know, headwinds, tailwinds there. And you touched on the September hike, the possibility of a December hike, but you know, more broadly, we have been fairly rate-neutral from a asset liability perspective. So each, you know, 25-basis-point rate cut or increase has been pretty close to, you know, pretty negligible. We, during the balance of 2026, did shift a little bit of new production toward floating rate loans. Particularly tied to prime. So that is put us at a moment in time at a slightly asset sensitive position. So this point, if we have a 25-basis-point raise in December or the next meeting, it is perhaps $2 million pretax, maybe a little bit more for the full year. But I point it out at this point in time because a lot of that new production came from the renewable space and the infrastructure space, and it is in the construction loans. And I think we are probably at a high watermark of where those are gonna be. So over time, as that portfolio comes down and also the treasury team's looking over the next, you know, 9-month timeline. But I think we will get the assets back to neutral, certainly over the next couple of years. So do not think there is a long term trend. Think it is a short term trend. But it is a trend that is helpful at this point in time just given where the rate environment's going. I think the other tailwind, though, and we. We have talked about this consistently, is just the middle part of the curve. You know, roughly 35% of the book in new production is fixed rate loans, which price off of the 3- to 5-year part of the curve. And with the curve--the 5-year had touched 5% and then backed off a little bit. You think about the loan portfolio, which is currently book yielding around 3.00%. And you assume that we are taking a $100 million or $150 million recycling that, that is a pretty large tailwind for us as we continue to do that. Not to mention the fixed rate loans in the book that are continuing to reprice because some of those still came on pre 2022 which has been really great. You are obviously, over time, gonna have some offsets. You know, cost of deposits will go up a little bit, but it is gonna be more than offset with the raise. With the with the rate environment. Did that make sense? I will assume yes because you might be on mute. I will hand it over to Brett.

Brett L. Pharr: Yeah. I think the other part of your question is really is, what does higher rates for longer mean from a credit perspective or economic standpoint? You gotta remember our asset-based lending and working capital portfolio actually benefits during that time because the commercial traditional C and I borrower that was at a bank, now is either being pushed out of the bank or cannot get credit And so then they start looking for alternatives, and that is where we step in. And actually, during higher rate and economic stressed environments where we get the better quality credit in the asset-based lending and working capital portfolio. So I only see that kind of--it is kind of a dark view, but I only see that as a positive. When the economy slows down, we will pick up more opportunities in that space. Higher interest rates do have an impact in the energy infrastructure portfolio because you have to use a higher capital cost. It impacts the value of the tax equity throughout the life cycle of the project. So more equity will have to come in. But these projects have such high rate of return that the incremental impact of the interest rates is not going stop the projects. It will just reframe the capital that goes in upfront. So I do not expect there to be much there. And the consumer loan originations you know, our partners are operating in a space that is not prime credit. And as I often say, these people are always in a recession. And so the interest rate costs are not gonna be very material in that space. And they may be repaying it with benefits payments rather than income payments, but they will repay it anyway because of where they live and, you know, the part of the economy that you are in. So I am not worried about an economic downturn. I actually think our credit verticals are built for those kinds of things. They assume an economic downturn.

Manuel Navas: Is there a certain level of rate increases that you think would start impacting the demand for your product, your partner's origination levels, and where it would impact some credit. Is it, like, 100 basis points from here? Just trying to ballpark that.

Brett L. Pharr: I mean, you know, let's suppose that the prime goes up 200 basis points. That is gonna slow down commercial business. And that is exactly where we would excel. In the working capital and the asset based lending. And as I said, the 200-basis-point increase in rates in the alternative energy and electricity infrastructure arena It will change the economics But because they are so rich, they will still be valid projects. You will just structure them differently. So I do not expect that we will be impacted by a slowdown in that regard. And in fact, in some ways, we might be positively impacted by it.

Manuel Navas: Okay. That. that is helpful. I appreciate that. Just about thoughts on your partner population. Do you have a sense of any that are actively pursuing national charters?

Brett L. Pharr: We have had conversations where a small subset of them have talked about it and may be pursuing it. But it is 1 of the things you gotta remember if you are a private equity firm, it is very difficult to become a bank holding company. And so there is an awful lot of them that are in that category. And maybe an exception here or there, but there is not a circumstance where having any kind of material threat from a partner because of it. And part of that is just the lack of concentrations in that partner base in the first place.

Gregory A. Sigrist: that is right.

Manuel Navas: That was gonna be another question. I appreciate that your commentary that you are not dependent on any 1 customer. You have a sense for at some sort of metric that you can track that? what is, like, your top 3, top 5, top 10 partners?

Brett L. Pharr: Is it kind of--let me give you this number. No partner represents more than 5% of Pathward's revenue.

Manuel Navas: Okay. Appreciate that. Appreciate that. 1 thing--1 area that is been quite strong is the card fee line. Is the-- It kinda bounces around quarter to quarter, but there is there is very solid year over year growth. How should I think about that feline over the next year?

Gregory A. Sigrist: Yep. If I heard the question on the card fee income line, and I mean, I am going to ask you. Is it related to off-balance-sheet? sheet? Yep. That is excellent. Yeah. Yeah. I think, really, what you are looking at right now is really sets the mark for going forward, and I think any variations from there are really just gonna be volume based from here with the partners we are on loading. Onboarding the pace, and the like. So I think what you are seeing now. But keep in mind too, there is always seasonality in that line. As we bring on deposits in the first quarter, spend them out in the second quarter. The December quarter, yeah, and then the second quarter. So you are gonna see the normal seasonality in that, but there is always kind of a you know, at the ebb and flow, there is always a low watermark as the tide comes in and out.

Manuel Navas: And then just 1 kind of wrap-up question on credit for me. How do you view how you view the rest of the tax services kind of. you ended that for the year, kind of the charge-offs there. How do you view that next year? Do you feel like you have talked in the past about how that business performed better on credit Do you have any other kind of look back on that you can apply for next year?

Brett L. Pharr: In terms of the tax services business itself? So I think we have said that for the last several years, we have continued to improve our underwriting. And that has shown up. In the numbers. We will maintain the gains we have gotten. But I doubt we will continue to improve at the same degree every year. So I would hope it is some better, but not as much better as it has been in past years.

Manuel Navas: Okay. I appreciate it. I will step back into the queue. Thank you.

Operator: Your next question from the line of Timothy Switzer with KBW. Your line is now open. Please go ahead.

Timothy Switzer: Hey. Thanks for letting me back through the queue. Gregory, you actually just kind of answered 1 of the questions I had in terms of the seasonality. Obviously, we are going to get the bump in Q1 next quarter. But has the seasonality for the rest of the quarters changed at all? Like, for example, a really strong Q4 where it would typically be down, you know, mid to high single digits at least historically. You know? Has growth from any individual partner or, like, the onboarding of new partners changed that at all?

Gregory A. Sigrist: Well, I think it is really the onboarding of, you know, new products, and then new partners, new products, and just that continued march of, you know, multithreaded opportunities. That flattens out the seasonality a bit. I think with the prepaid card business, though, you still see, you still see, you know, deposits grow in the December quarter and then you see the fee income, core fee income in the in the March quarter. I think you will always see that. But I think the continued march toward diversification of both products and partners helps to take away some of that seasonality, particularly in the fourth quarter. I think that is what you have seen when you kinda track back. There is 1 nuance, though. I mean, we talked about this last quarter a little bit. You know, we do receive some contractual, volume based incentive payments that can hit 1 quarter versus the next. And that was kind of the explanation last quarter for why when you did the year over year fiscal 2025 was a little above--or 2025 is a bit above fiscal 2026. For full year basis, we feel like we are gonna get those incentive payments, but that could skew 1 quarter to the next. That would be the only caveat to what I just said.

Timothy Switzer: Gotcha. Okay. That makes sense. And then just qualitatively, are you able to kinda parse out the acceleration we have seen year over year in fiscal 2026. On the card fees? Like, how much of that is driven by new programs, new products, new partners versus older ones that are already in place in 2025?

Gregory A. Sigrist: I think you are always gonna see, for the foreseeable future, growth year over year is still gonna be driven more by existing partners. And I think when you think back over the last 4 to 6 or 8 quarters, it is a combination of just, you know, they are putting on new programs, but also adding new multithreaded products to the mix. And I think that is still historically, that is probably been 75% to 80% of the uplift year over year. And part of that is, you know, the new partners typically take a bit more time to onboard plus part of which is going through the third party onboarding process which takes some time. And we talked about once we have gone through that process, it is a lot easier then to do multithreaded with new partners. But when I think out the next 12 months, I think it is still. Revenue growth is still largely gonna come from existing partners, perhaps a bit more uplift from new products with those partners, But brand new partners typically, unless it is, you know, credit which we can get uploaded a little faster, Acquiring, you can get those ramping a little faster. But if it is issuing business, that typically takes longer. it is usually--and plus, as part of the issuing, they would have to ramp into those new programs which really means you are talking the subsequent fiscal year before you really start to see uplift from that. But, you know, the partners in the pipelines have been talking about for new partner growth, that is just a tailwind for us. You know? Exiting 2027 and going into 2028 and 2029.

Timothy Switzer: Gotcha. Okay. Thank you so much.

Gregory A. Sigrist: You are welcome, Timothy. Thanks for coming back.

Operator: We have reached the end of the Q&A session. I will now turn the call back to Brett Pharr, CEO, for closing remarks.

Brett L. Pharr: Thank you for joining the call this evening. Hope you have a good night.

Operator: This concludes today's call. Thank you for attending. You may now disconnect.