Ladies and gentlemen, thank you for standing by, and welcome to Pathward Financial's Second Quarter Fiscal Year 2023 Investor Conference Call. During the presentation, all participants will be in a listen-only mode. Following the prepared remarks, we will conduct a question-and-answer session. As a reminder, this conference call is being recorded. I would now like to turn the conference call over to Darby Schoenfeld, Senior Vice President, Head of Investor Relations. Please go ahead.

Thank you, operator, and welcome. With me today are Pathward Financial's CEO, Brett Pharr; and CFO, Glen Herrick, who will discuss our operating and financial results for the second fiscal quarter of 2023, 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, including with respect to anticipated results for future periods. Those statements are subject to risks and uncertainties that could cause actual and anticipated results to differ. The company undertakes no obligation to update any forward-looking statement. 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 the forward-looking statements. Additionally, today, we will be discussing certain non-GAAP financial measures on this call. References to non-GAAP measures are only provided to assist you in understanding the company's results and performance trends. Reconciliations for such non-GAAP measures are included in the appendix of the investor presentation. Now, let me turn the call over to Brett Pharr, our CEO.

Thanks, everyone for joining us today. We're very happy to welcome Darby to Pathward. Please reach out to her to say hello, introduce yourself, and let her know what you might need. We thought this was a good opportunity and time to offer all of you a bit more context and detail than we have in the past about Pathward. We've taken advantage of the recent attention focus on our industry to assess our strengths, focus on the potential for new opportunities and more about these in a few minutes, and better communicate to you and others, why Pathward is uniquely positioned for a strong and stable future. I'm going to start today with an in-depth look and how Pathward is different. Our business is unique and how we differentiate ourselves from traditional banks. And more importantly, why we think that differentiation matters and how it offers our investors and customers a better value proposition. Financial inclusion for all drives our actions and our strategy. We want to be a leader in providing access to unreserved banking markets. Why? Three reasons. The unreserved gap that's in the marketplace for both consumers and commercial small business customers is significant. We can help close that gap. Second, we believe our approach to inclusion generates a unique value for our shareholders. And three, we believe it offers valuable and meaningful career opportunities for our employees. We continuously strive to provide financial inclusion by positioning ourselves at the hub of the financial ecosystem, where financial technology and banking intersect. Sitting at this intersection gives Pathward and you our investors multiple advantages and opportunities. First off, provides us with strength, provides us with stability and it provides us with the ability to produce stronger capital returns. It also gives us the ability to innovate and…

Thank you, Brett. Net income for the quarter ended March 31st totaled $54.8 million or $1.99 per share, an increase from $49.3 million or $1.66 per share recorded in the prior year quarter. When excluding the financial impact of the previously mentioned legacy mobile solar deal, a venture capital impairment and their corresponding tax impacts, net income was $60.3 million or $2.18 per share for the fiscal second quarter. The second quarter's results were driven by the expansion of the net interest margin and increases in noninterest income, generating 11% GAAP net income growth and 16% adjusted net income growth. Continued expansion in Pathward's net interest margin enabled net interest income to grow 21% year-over-year. Total net interest margin for the fiscal second quarter of 6.12% increased considerably when compared to the 4.80% recorded in the second quarter of fiscal year 2022. We expect our net interest margin to continue to expand through the ongoing remix of our balance sheet and the repricing of our earning assets in today's higher rate environment. Provision expense in the fiscal second quarter of $36.8 million represents a $4.5 million increase from the prior year. The primary driver of the increase is higher provisioning in tax products. Excluding the impact of tax, the provision expense was $5.3 million, a $2.1 million increase from the prior year. This increase reflects the shift in the overall mix of loans. Total noninterest income increased 16% to $127 million in the fiscal second quarter as compared to $109.8 million in the prior year's quarter. The large increase was attributable to revenues associated from off-balance sheet deposits servicing along with refund transfer product fee income, partially offset by a $2 million loss on the disposal of rental equipment related to the mobile solar generator activity, Brett mentioned. For the…

Thank you. We will now begin our question-and-answer session. [Operator Instructions] Our first question will be from the line of Frank Schiraldi with Piper Sandler. Your line is now open.

Hi. Good afternoon.

Hi, Frank.

Glen, I wanted to ask, just off the bat, you just mentioned the guidance. You reiterated the guidance. And I know in the quarter, you talked about the adjusted earnings per share excluding the impairments and mostly on solar generators. And it seemed in the release that you talked about the adjusted earnings per share being in the range of $5.40 to $5.80 that would include the impairments this quarter though, right, given what you say in the release.

It did not, Frank. So the adjusted earnings would actually be higher if you're going to adjust out the solar impairment. We use the same methodology when we first issued guidance, which was just for the rebranding gain that we had in the impacts from that.

All right. That's what I thought. Okay. I just wanted to make sure. And then as far as these the mobile generators. I believe you guys, I mean, obviously, you're not in that one partnership or that one relationship any longer. But I believe you basically exited that business following that issue. Is that the case or anything else that's like that on the -- in the loan book?

Yeah. Frank, this is Brett. That is the only mobile solar transaction set that we did with one borrower as we said turned out to be a fraudulent borrower. If you go back to 2019, you can read all the story about that, there were a number of lenders that got caught in that. But no, we don't have anything else like that. All of our solar business is fixed panels, the things that are considerably different than that.

Right, okay. And then just lastly if I could, on the commercial finance side, we've talked in the past and then you talked a little bit about the detail there, Brett, on the call about the business in general. You've talked about pricing may be being impacted a bit by all the liquidity in the system. It seems like some of that liquidity has come out of the system over the last -- certainly over the last few months. And just wondering, it seems like maybe you're getting some better pricing there? Just curious, any color on both the pricing you're seeing there and also maybe the opportunity is, as this seems like it's the time where other more traditional banks kind of back off that business a bit?

Yeah. I think you're right, Frank. We literally within the past couple of weeks are starting to see what you're talking about as other banks begin to pull back, either because of their own liquidity concerns or any kind of view of a credit C&I kind of credit view. So we are just now starting to see that and that gives us an opportunity to get a higher yield on the kinds of transactions we're comfortable with. So, I think, part of our guidance view is, we're going to get the benefit of that through the next few months.

Got it. Okay, great. I appreciate all the color. Thanks.

Thank you.

Thank you. There are currently no additional questions registered at this time. [Operator Instructions] There are currently no additional questions registered at this time. So I will pass the call back over to the management team for closing remarks.

Thank you, everybody for joining us today, and your interest in Pathward. Have a great evening.

That concludes today's conference call. Thank you for your participation. You may now disconnect your lines.