Pathward Financial, Inc. (CASH) Q3 2026 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by and welcome to Pathward Financial's Third Quarter 2026 Investor Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. I will now like to turn the conference call over to Darby Schoenfeld, Senior Vice President, Chief of Staff, and Investor Relations. Please go ahead.

Thank you, operator, and welcome. With me today are Pathward Financial's CEO, Brett Pharr, and CFO, Greg Sigrist, who will discuss our operating and financial results for the third quarter of fiscal '26, 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. The company undertakes no obligation to update any forward-looking statements. Please refer to the cautionary language in the earnings release, investor presentation and in the company's filings with the Securities and Exchange Commission, including our most recent filings for additional information covering factors that could cause actual and anticipated results to differ materially from the forward-looking statements. Additionally, today we will be discussing certain non-GAAP financial measures on this call. References to non-GAAP measures are only provided to assist you in understanding the company's results and performance trends, particularly in competitive analysis. In order to make our adjusted net interest margin as comparable as possible, we have excluded the impact of the gross accounting methodology on our consumer finance loans and included contractual rate-related processing expenses associated with deposits on the company's balance sheet. Reconciliations for such non-GAAP measures are 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 noted otherwise. Now, let me turn the call over to Brett Pharr, our CEO.

Thanks, Darby, and welcome, everyone, to our third quarter 2026 earnings conference call. This evening, before I go through the quarter's highlights, I want to address the outlier of the quarter, credit. We had an increase in provision during the quarter, largely driven by specific reserves on 2 loans and a CECL reserve build. One loan we mentioned during the June quarter earnings call last year, which at that time was shifting to non-performing with a path to work out, and another loan we believe is associated with a sophisticated fraud. You may have also noticed that our non-performing loan ratio increased. This was primarily related to certain renewable energy construction projects tied to a common developer. We continue to work with the other parties involved in these projects to bring them to completion. However, while this work is ongoing, we have moved the loans to nonaccrual status. We are currently not aware of any other loans in our portfolio that have a similar unique fact pattern. While this is certainly a disappointing outcome, credit events can and do occur in the world of lending. It's unfortunate that we had these items happen within an otherwise solid performing quarter and year thus far. We remain committed to providing transparency in connection with these credit items and continue our monitoring and oversight of the portfolio. At this time, we believe these events are not indicative of a broader systemic issue within the portfolio. With that context, we're pleased with the rest of the results achieved in the quarter. Across the organization, our team continues to deliver meaningful progress on our strategy, and over the past 9 months, I am proud of what we have accomplished. During the quarter, we generated $29 million of net income and diluted earnings per share of $1.37. At a very high level, we achieved growth in interest income from commercial finance loans as well as noninterest income and continue to manage expenses well. Year-to-date return metrics remain strong, with return on average assets of 2.37% and return on average tangible equity of 34.29%. While our business model remains straightforward, we take deposits, lend money and move money, we concurrently provide a breadth of product offerings across all 3 verticals that are aimed at meeting our partners' needs. We also continue to expand our product suite and capabilities in order to provide multi-threaded solutions that enable our partners to thrive and continue to innovate new and exciting products for the end consumers. It is through this lens that our long-term strategy was curated. Our strategy encompasses 5 focal areas: maintain an optimized balance sheet, leverage technology to facilitate evolution and scalability, people and culture are important assets, consultative risk and compliance infrastructure and client experience. We continue to make progress on all of these areas, but one I'd like to highlight is people and culture. We recently received a number of recognitions that reflect our diligent focus, which I'd like to acknowledge this evening. First, we were once again named as one of the best companies to work for by U.S. News & World Report for 2026-2027, rated among the top companies on the finance and insurance list as well as the Midwest list. Second, Pathward has been named to TIME's inaugural list of America's Best Companies 2026. These accolades serve as a testament to our employees' hard work and the cultures that they live and build every day. Congratulations to all our employees on representing Pathward's values across the country. The second area I'd like to highlight is the client experience. As we continue to grow our business and expand our product set, this remains an area that calls for intentionality, discipline, and firm execution. In our commercial finance business line, this means we strive to set clear expectations and maintain consistent, high-quality communication throughout each engagement. From initial contact to receiving funds, our goal is to make the client experience as seamless as possible. We believe this level of execution will strengthen our reputation, support high-quality referrals, and allow us to continue helping businesses reach their goals. In Partner Solutions, we aim to empower multi-threaded opportunities that help fintechs, payments companies, and brands to launch, scale, and grow with confidence. With a robust pipeline of opportunities to execute on, we view this as an imperative and we are working diligently to make sure that we deliver what our partners expect. Our pipeline consists of both new partners and expansion opportunities, and we are excited to announce that after the quarter ended, we signed a contract extension with Clair. As part of enhancing the client experience, we continue to invest in people, processes and technology. This includes building technology and risk and compliance capabilities to ensure we have a scalable platform well into the future. This has never been more important as partners are searching for banks that can not only deliver across multiple products at scale, but also help them navigate an evolving regulatory environment. Before I turn it over to Greg, I want to reiterate that while the credit events of the quarter are certainly unfortunate and we are working hard to resolve these loans, the growth of the business was solid. Greg?

Thank you, Brett. With the exception of the credit metrics Brett mentioned, we are pleased with the financial performance in the quarter, which is marked by solid growth, delivering higher commercial finance interest income and noninterest income combined with disciplined expense management. Starting with revenue, the sale of the consumer finance portfolio back in October impacted net interest income as expected, given the elimination of the grossed-up accounting for that portfolio. Having said that, our strategy of balance sheet optimization continues to deliver solid revenues with growth in our core commercial finance business. With the aim of favoring assets where we believe we have a competitive advantage, holding to our pricing discipline remains an imperative for us and not chasing volume for volume's sake. This is where we believe being governed by the Treasury-led model serves us well at Pathward and continues to generate higher risk-adjusted returns. Noninterest income increased 4% versus the same period last year. After a delay in secondary market revenues over the last few quarters, we are pleased to say that those sales volumes are catching up from earlier in the year. I want to take a moment to highlight the tax team's continued successes. They closed out their tax season during the quarter and had a phenomenal one at that. Their significant efforts produced third quarter year-over-year growth of nearly $2 million in total tax product revenue. From start to finish, the momentum from sales and marketing efforts led us to solid operational and financial performance as the team onboarded new tax offices and helped our existing partners provide additional products. We are very proud of all the team was able to accomplish. Noninterest expense improved in the quarter as a result of disciplined expense management, with lower card processing expense and lower legal and consulting expenses. These items are partially offset by expenses that directly correlate to the execution of our strategy, with an emphasis on people and culture, as well as technology to facilitate evolution and scalability. Deposits held on the company's balance sheet at June 30th were relatively flat versus a year ago. Lower yielding assets, such as securities, declined, and average partner deposits were strong in the quarter. This allowed us to have nearly $100 million more in average custodial deposits than in the prior year's quarter. Loans and leases at June 30th grew 8%. Our focus on ensuring we have the right loans on the balance sheet was the primary driver of the increase. While net interest margin declined to 6.59% in the quarter, the adjusted net interest margin was stable at 5.27%. Originations during the quarter grew $760 million, driven primarily by growth in our credit solutions business from both a new contract signed last year and expansion with current partners. Regarding credit, over the last year we have been discussing a few larger loans that we are monitoring. As Brett mentioned, a specific reserve was established on one of the loans we referenced in prior quarters. We no longer believe we have a path to favorable resolution and have now prepared for liquidation. With that, the larger loans that we have discussed during the last year have specific reserves, as appropriate, established to reflect expected proceeds. Additionally, we have also identified a working capital loan that we believe involves a sophisticated fraud within what we understand to be a viable operating company. Due to the fraud, it is possible there is a portion of the loan that we estimate may be uncollectible, also resulting in a specific reserve. The majority of the provision related to commercial finance in the quarter can be attributed to the specific reserves on these 2 loans and adjustments to the CECL reserve. Additionally, while past dues have increased, there were roughly $100 million in loans that came current since quarter end. Brett mentioned that the increase in nonperforming loans was primarily based on a set of loans with a common developer. Add in the loans that we have been discussing on this call, and that total constitutes the majority of the nonperforming loans in the quarter. The strength of our balance sheet, along with our earnings and capital accretion power, allow for return of capital to shareholders. As of June 30th, our liquidity was $2.7 billion, and during the quarter, we were able to repurchase approximately 304,000 shares at an average price of $92.18. This leaves 3.1 million shares still available for repurchase under the current stock repurchase program. Now to update our fiscal year 2026 and initial fiscal year 2027 guidance. We are updating our fiscal 2026 guidance to an EPS range of $7.80 to $8.20, which includes the following assumptions: no additional rate changes during the year, an effective tax rate of 16% to 18%, and expected share repurchases. We are also introducing a fiscal year 2027 guidance range of $9.50 to $10.00, which includes the following assumptions: no 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 expected share repurchases of around 70% to 80% of net income. This concludes our prepared remarks. Operator, please open the line for questions.

Tim, by the way, ask as many questions as you want, you and all the guys. So ask away.

Yes, I'll go ahead. So might as well just start on the credit here, looking for some clarity at first. For the two commercial loans that drove the provision, you said one of them was already moved to NPL in the June quarter of last year. Can you discuss what changed over the last year to either the borrower or collateral that resulted in the reserve? And what's the outstanding balance now versus the reserve?

So this is Brett. So this particular transaction was in the assembly phase of being constructed. There were a number of problems with the participants in it. We were able to -- we thought we would be able to identify new additional buyers that would participate in it and lead it to completion. And we've had these kinds of circumstances before, and that's kind of where we got it to. This one did not get to that. And during the quarter, the facts changed. And we came to the conclusion that this was not going to reach its terminal value as a permanent ongoing enterprise, and it moved into liquidation. Of course, when you're liquidating equipment and those kinds of things in these circumstances, there's a different kind of economic result. So that's what happened in this particular case. We thought that we were going to be able to get it to where we could get to completion without the participants, and we did not get there.

Okay. Any color you can provide on the current outstanding balance and what the reserve level is right now?

I don't think we're going to get into specific dollars on this.

Yes, I don't think we're going to get into any more detail on the loans. I mean we've written it down to what we believe the net proceeds to be, which is common with all the loans that have been out there for the past year [indiscernible] what I'll call legacy loans. But again, the net balance of that's in the NPLs, and that's what we can tell you on the call.

Okay, fair enough. And then also in the same quarter last year, you guys mentioned that one of those loans that moved to NPL was a fraud. Is that related to the one related to fraud this quarter? Is that another separate loan? And what's your confidence on the ability to recover the potential loss either through the collateral or maybe legal means?

Yes, so this is a new thing that happened within this quarter. When you're in asset-based lending, from time to time, you run into these frauds, and then you go through a full liquidation process to the extent that you can. We go through the process and evaluate the collateral. This involves everything from field exams to having independent verifications, et cetera. And then we calculate what we believe the value will be as we liquidate and go through the process. And then we apply an appropriate reserve as we have in this case with that. So generally when these frauds happen, they happen very quickly. And then we have a team that comes in and assesses where we are and apply these appropriate reserves. So this is not something that's been there for a while.

Okay. Okay. Helpful. And then last one on the credit this quarter for the renewable energy loan. Was any of that kind of related to struggles with some of the changes made by the administration over the last year? Or any color -- or is this more kind of idiosyncratic and the rest of the portfolio you still feel confident in?

So, let's go back to the big picture here. The reason we're in these various different asset classes is the power needs of the U.S. are just expected to continue to grow and frankly are exploding. And I think everybody understands that. We're in different asset classes. We're in solar. We're in battery storage. We're in renewable natural gas. Each of those have different kinds of risks, and each of them have a different kind of view from the administration, current administration, et cetera. And so there are shifts that occur. In this particular case, particularly solar, there was some speeding up to get some things done because of the expiring of tax credits. But these are different asset classes that have different characteristics and we manage those appropriately based on the individual projects that are there. So hopefully, that answers your question. But the big thing we need to remember is we need more electricity and generally these projects are very viable.

Okay. Is this a portfolio that you plan to continue growing and maybe any color on the pace you plan to grow that over the next year or two?

We continue to be involved in alternative energy, yes, because there are a number of elements of that, that are very advantageous. But we're constantly evaluating sub-asset classes within it and where we might want to be and might not want to be, and we've made some adjustments with that over time.

Okay. All right. That's helpful. I'll move on to another topic here on the banking-as-a-service pipeline. Any update you guys have on that? It looks like really good origination volume in the consumer loans, but any color you can provide would be really helpful.

Yes, I mean we continue to say, you know, the pipeline is full. We're getting lots of sales calls, lots of opportunities. We're being selective in the partners that we work with. We've had some press releases over time that you have seen announcing these things. Some of them are quick revenues. Some of them are longer-term revenue in the '27 and '28. What we have now is in our guidance that we're providing for fiscal year '27. So the story is largely the same there. You know, after several years back when things kind of lagged because of different players, that's sort of been cleaned up and now we've got lots of opportunities to go get business.

Okay, that's good to hear. And then one last one from me and I'll jump back into queue. For the secondary market revenue, big jump up this quarter. I believe your commentary last quarter was that the government shutdown had an impact on your ability to sell those loans. Was that kind of a catch-up, and we'll get back to that $5 million to $7 million range in the next quarter?

Tim, that's exactly right. I mean we were able to start moving some loans through the pipeline. We were probably one of the first to do so. And there's a lot of demand out there for the USDA loans, particularly the higher rate loans that we have. So we kind of -- what we were able to do in the June quarter was catch up. And going forward, yes, we do expect $5 million to $7 million a quarter. I mean and I will tell you, though, for the fourth quarter, the demand is still out there, so we're probably going to trend to the higher end of that guidance for the fourth quarter of '26.

So I was hoping to ask just a couple more questions on credit, although I think Tim covered most of them. So while I understand these credit issues seem largely one-off in nature, but has this caused you to change any of your underwriting or monitoring methodology?

we're always monitoring how we look at these loans, whether you're talking about ones in asset-based lending or our approach to the alternative energy. And so I would say it's always evolving. And as fraudsters get more sophisticated, we have to adjust things over time. So this is not an episode. This is not a one and done. This is an ongoing process that we're engaged in and we'll continue to be engaged in as we watch this business. This is a particular niche expertise that we have, and we're constantly monitoring and evolving as we need to for market conditions.

All right. I appreciate that. And then, if I heard you correctly, it sounded like the non-performing renewable energy credit was related to solar. So is that true? And, if so, how much solar exposure remains on the balance sheet?

Well, let me answer the first part. Yes, the nonperforming loan addition is associated with solar projects that are single developer, et cetera, and it's multiple projects that are in the process of assembly. And so we're having to step in and help with the assembly of those projects. Exact dollar amount on the other question.

Well, I think the exact dollar amount, Joe, as we said on the call, it's the majority of the increase from the prior quarter. And I would say the majority is, you're probably closer to, at least 75% or 80% of the increase over the prior quarter.

Okay. Let's move on from credit. So with the new fiscal '27 guide, what are the main factors that would push results towards the top or bottom of the range?

Well, obviously getting to the higher end of the range, part of it's going to be the pace with which we pull through some of the new partners we'announced. I mean Brett's already touched on it, whether it's announced or what's in the guide right now, faster pace on our partners ramping those projects is going to help push us to the higher end of the guide. So I think that one's an obvious. We've also obviously had some good success with credit solutions, the volumes there. And if those volumes continue to trend higher as we hope they do, but hope is not a strategy, then I think that can push us a little higher on the guide as well, which is helpful. And on the bottom end, I think that's part of your question, too. I mean I think the biggest one on the bottom end is if there are unforeseen credit issues that we don't foresee today, which is why they're unforeseen, that would trend us to the bottom end.

All right. And then within this outlook, what drove the decision to lower your buyback ratio to that 70% to 80% of net income? I guess was part of this decision based on holding more capital for potential credit normalization?

No, I'll answer the last part first. I mean I think we're comfortable with the level of capital we're holding and where we're trending to. We're always trying to create just a bit of additional capital every quarter, and I think we feel very comfortable, particularly where we're going to exit our fiscal year. I mean we're hitting our targets where we want to be. For next year, I mean, I think the guide is 70% to 80%. We might be opportunistic and bump it above the 80%. But there's -- again, I don't think there's a need to build an additional layer related to credit if that's really where your question's coming from.

All right, that's helpful. And then you said growth with current partners contributed to really strong origination numbers. What products are you seeing the most traction with and are you still under-penetrated within your existing partner base?

Are you talking, Joe, on the commercial finance side or are you talking about on the payments side?

On both.

Yes, I mean, for example, we just did the announcement on Clair, which is an early wage access partner as a renewal of that and that business continues to grow. And so we're seeing a lot of traction in that. In commercial finance, we're continuing to do a lot of the same things. Some of the emphasis we want to have is around government-guaranteed things. An example would be potential SBA types of opportunities that are there.

And then I think on the money movement side, it's really also just scaling some of the new partners we've announced on the acquiring side. That's really -- the pull-through on that probably happened at a faster pace than we could have hoped. And that's a positive too.

Yes.

I appreciate the new EPS guide. Is there a portion of the decline this year that assumes some lower EPS of these current issues creeping into next quarter?

No. I mean I think the guide for this year is really just acknowledging -- I mean I'll just take you through the numbers to let you know. I mean we've said that the majority of the credit provisioning in the quarter related to specific reserves and the CECL build. That all occurred in this quarter. And if you put numbers to it, you see in the press release that our credit provision in the quarter related to commercial finance was roughly $34 million. Of that, that's probably elevated by $28 million to $30 million related to the things we've talked about here, and that's about $1 per share. That's what weighed on reducing the guide. But obviously when you do the math, you realize there's some upside that probably wasn't in the guide before. So again, I think that goes back to the success we've had with the acquiring volumes increasing, some of the other things too. So hopefully that answers the question.

And then that -- with next year's guide, it's kind of where consensus almost was. So it's almost like next year's guide assumes that most of this is much more normalized credit performance from here. What gives you the confidence that there aren't more of these loans out there?

Well, we're always looking at the portfolio to see what's there. And of course, the loans that are in the nonperforming loans, we have a current view of the outcomes that are there. And we continue to have our monitoring of our loans and making sure they're properly rated and we'll go through all that process. So if we knew that there were things that were coming, they would be reserved for, et cetera. So, yes, we're in the lending business. And so you have to understand in the lending business, things happen. But we don't see anything right now.

Yes. And I think the answer to the first part of your question, if it was a part of the question though, I mean, I do think that there's going to be a normalization, more of a reversion to the mean, and that's really what's baked into the assumptions here. And if you kind of go back in time, being focused specifically on the commercial finance portfolio, I think that normalized ACL ratio has been in that 120 to 130 basis point range and that's what we've included in our guide.

Your partners see this as well. Have any of your past credit events impacted partner growth before? How have you discussed these with partners in the past?

So there's really no relationship between sort of our credit book and our, we'll call it, payment solutions partners. So no connection, and we have no issues around that. And one of the things we have to remember is that while we had unfortunate credit losses, we had substantial earnings still, right? So if you compare us to other banks that might have credit losses, this is a reduction in net income, not an elimination of net income.

I hear you. What are your conversations like?

With our partners? They're very positive. We are working with our partners and expanding the breadth of products that we sell to them and work with them. They're very much going after a broad consumer share of wallet. The payments industry, as we understand, is in a great deal of innovation and change, and we're a part of those conversations. And we're excited to be engaged in that. And so we're -- in this particular sponsor banking, we're one of the premier players, and names small and great come to us and want to engage with us in those things. So those conversations are going well. I mean the point should be made here is we had a fantastic year so far with all the things that we have. It's just unfortunate we had this one credit issue that has come through, but otherwise, all elements of the business are running very well. And Greg even mentioned the tax business and the big success we had in the tax season.

We've been looking at the card and deposit fee line as evidence of kind of building partner programs. It took a little bit of a step down linked quarter this quarter, but it's still elevated. Is that still kind of on target for like the mid- to high single-digit growth on that line?

Yes, I believe it is. I mean in the quarter it was down really more because the quarter last year was a bit elevated. We do occasionally get some contractual revenues that are a bit lumpy tied to things like incentives and that hit in the prior year quarter. And that usually hits at some point on the calendar year. You can't always predict what quarter you're going to hit the breakpoint and have the confidence level on it. But that's really what caused the year-on-year optics. But prospectively, yes, we're still looking at that mid- to high -- probably I would even say high single-digit growth on core card fee income. We're still very positive on the business and the outlook there.

Kind of switching back a little bit to the guide, is there any buyback limitation due to anything related to credit? It's just kind of your appetite and you can be as opportunistic as necessary if there's a share decline at any point?

Well, it really gets back fundamentally to our capital strategy and our capital plan. And we've consciously, over the last 3 years, put away additional -- we slowed down the buybacks to put away additional capital and in the process, pushed our Tier 1 leverage ratio to upwards of 10% or above. And since we already made that decision and have done that, that gives us the headroom here to be opportunistic without any limitations, at least with the facts and the environment we have right now.

Okay. We've talked a little bit about kind of a NIM or a core NIM outlook in the past. There's a lot of moving parts with it. Is there a part that you can kind of guide near term here, which is the best way to look at it? Happy to consider any of the various ways to look at it going forward. I thought of it as kind of flat. Look at the core adjusted NIM, it's down about 5 basis points. Just kind of thoughts on NIM and NII outlook from here.

Yes, the down versus the sequential quarter of a couple of basis points, I mean, I view that as being pretty stable. I mean -- and what really drove it down slightly were the nonaccrual loans that went on in the quarter. So even with the nonaccrual loans, we stayed pretty stable to the prior quarter. The other data point I would give you, though, is in the quarter, new loan production was pretty close to 9% for the new originations, it was at 8.99%. You compare that to the portfolio yield right now for loans of, I think, it's 7.42%. I mean that gives you a sense of some of the tailwinds we still have in the portfolio. We also, over the next 12 months, have $150 million of principal coming off of the securities portfolio. It's obviously much lower book yield on that, that will get recycled and repriced. So that gives us a bit more tailwind, too. And as we've talked about for the last several quarters, regardless of whether the Fed raises rates or lowers rates, my crystal ball is broken on that one right now, but we're still incredibly close to neutral on the short end of the curve. So any changes on the short end of the curve would have a very muted impact going forward on the net interest margin. So, and more pointedly, the adjusted net interest margin. I hope that helps.

Sorry, guys. My follow-up was on the adjusted NIM trajectory. I think last quarter you guys mentioned that it should continue to maybe gradually move higher over time. Can you quantify that at all? And how would rate hikes impact, not necessarily just the adjusted NIM, but the whole income statement overall?

Yes. As I might have already laid out some of this, but sequentially, down a couple of basis points to me is stable and being down was driven principally by the nonaccrual loans that arose in the quarter. And so to be stable with that, I think, is a pretty good thing. Going forward, though, again, a couple of data points for you. New loan production in commercial finance for the quarter was 8.99%, and that's versus a book yield of 7.42%. So that will give you some uplift and some tailwind going forward, assuming, again, we always talk about that middle part of the treasury curve, the 3- to 5-year part of the curve. Obviously, it's been -- there's been slope to the curve, which is helpful. And consistent as it relates to the short end of the curve, we are incredibly close to neutral. So whether you have a 25 basis point cut or a 25 basis point increase, it's pretty negligible on EPS. And the other one, again, just a reminder, it's the same story line. There's roughly $150 million of principal balance expected to come off the securities portfolio over the next 12 months, and that will get recycled back into higher-yielding likely loans. So there's going to be some tailwind there. Beyond that, I'm not really seeing any drivers one way or the other. I think those are the biggest drivers that are going to hit the P&L.

Okay, that's helpful. And then how should we think about core OpEx excluding the card processing expense going forward? It seems like there are a lot of moving pieces in FQ3.

Yes, we have spent a lot of time over the last couple of quarters managing expenses pretty tightly and we're very pleased with what we've been able to do and I think you've seen the OpEx expenses trending down. As we think about next year, you're obviously still going to see investments in people. We talked about it consistently. It's for scalability. It's for really driving the platform that we need to succeed with our partners, so it's people, process, technology. I do think some of the drivers from a year ago, in terms of consulting and things like that, have kind of dropped off, and that's a good thing. If I think about next year in terms of OpEx as a total, you're probably mid to high single digits as a total. We're going to continue to work the noninterest expense down to the extent we can to fund the things that we know we want to do from a strategic perspective, like people and the platform.

Okay, great. And then the last question I have is in terms of M&A, are there any areas you guys are interested in? Some of you've kind of talked about a little bit before, and I assume a lot of this is out of the bank space, but any updates you have there?

So I mean we always have our eyes open. As we've said before, things that we might have been interested in have had such high prices. And so we really haven't engaged. And we're in a very sort of unique and innovative business, and we tend to have to do things more on a proprietary basis internally. It's not the kind of thing that somebody has built for us on the outside. So always willing, always interested, would always be looking for something that's accretive, but not anything that we've seen that we could talk about at all.

I wanted to kind of piggyback off that last answer there. Has the kind of evolution of AI, has that changed your decision at all about owning the technology stack instead of using third parties at all?

Well, it's interesting. We already were in a situation where there were things that we had to do internally rather than purchasing them from suppliers. We have a very robust engineering department for that reason. AI has the potential to actually even accelerate that to where we do more of that. So you're going to be in a situation where you're going to be evaluating the economics of buying it, building it. And then as very common in the news, the related token costs that are associated with that, what's the right tool that goes with it. So I think we were already on the side of building more than buying, and this may lean us more to that over time.

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

Thank you everyone for joining today. Appreciate the questions. Have a great evening.

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