Pathward nonperforming loans rise to $289.3 million as energy projects falter
Key Facts
Nonperforming loans and leases at Pathward Financial rose to $289.3 million at the end of September 2026, according to the company's fiscal fourth-quarter earnings release, as renewable energy projects continued to struggle. The comparable balance was $275.1 million at the end of June of the same year, reflecting a continued increase during the final quarter of the fiscal year. These loans and leases stood at $99.1 million at the end of September 2025, before the annual increase that the company attributed primarily to its commercial finance portfolio. Pathward identified the source of that increase as "renewable energy construction projects sharing a single developer," according to the earnings release. It said it was working with other parties to complete these projects. Net loan charge-offs totaled $52.0 million in the fiscal fourth quarter, alongside the increase in nonperforming assets.
On earnings, Pathward reported net income of $38.6 million for the fiscal quarter ended September 2026. Diluted earnings per share for the period were $1.85, according to figures in the official earnings release. Basic earnings per share for the fiscal fourth quarter were $1.86. The company closed fiscal 2026 with net income of $175.7 million as it faced the annual increase in nonperforming loans. Annual profit was below the fiscal 2025 level, when Pathward recorded net income of $185.9 million, according to the comparison provided in its results.
In its income breakdown, net interest income totaled $117.559 million in the fiscal fourth quarter of 2026, according to the company's statement. Pathward attributed its decline from the corresponding period a year earlier to lower income from its credit sponsorship and warehouse finance portfolios. Commercial finance partly offset this decline, according to the company's explanation of interest income performance during the period. Noninterest income rose to $65.6 million in the fiscal fourth quarter, compared with $58.8 million in the comparable quarter of 2025. The company said card and deposit fees helped support the increase in noninterest income. Secondary market revenue also contributed to growth in this category, alongside fees, while interest income declined year on year.
Noninterest expense totaled $129.7 million in the fiscal fourth quarter of 2026, according to figures reported by Pathward. In explaining the movement in expenses, the company cited lower legal and consulting costs during the period. This decline was partly offset by higher spending on premises and software, among the items the company identified to explain its noninterest expenses. Loan originations rose to $2.2 billion in the fiscal fourth quarter of 2026. Originations in the corresponding quarter of fiscal 2025 totaled about $1.3 billion, according to the comparison in the earnings release. Pathward attributed the growth in originations primarily to an increase in credit sponsorship loans, despite lower income from these portfolios in its explanation of the decline in net interest income.
For fiscal 2027, Pathward's management reaffirmed its diluted earnings-per-share guidance, according to coverage by Investing and the earnings call transcript. The company set a target range of $9.50 to $10.00 per share for the coming fiscal year. The guidance assumes no additional changes in interest rates during the year, according to the call. On asset quality, the chief financial officer said management expected credit conditions to normalize during 2027 as nonperforming loans were reduced. He added, according to the call transcript: "We continue to expect credit conditions to normalize in 2027."