Meta Financial Group Inc

NASDAQ:CASH

Earnings Call Analysis

Pathward Financial's Strong Fiscal Year 2024 Performance

In fiscal year 2024, Pathward Financial achieved notable growth with earnings per diluted share reaching $6.62, exceeding the high end of their prior guidance by 11%. Their net income totaled approximately $168.4 million, supported by a 17% year-over-year increase in net interest income, which has risen steadily thanks to effective asset management strategies. This solid financial performance underscores Pathward's operational efficiency and focus on maximizing return on assets (ROA).

Improvement in Net Interest Margins

The net interest margin expanded to 6.41% for the year, while the adjusted net interest margin reached 4.85%. These metrics indicate Pathward's ability to optimize their balance sheet effectively, despite external economic pressures. The company has been prudent in managing its asset portfolio, targeting higher yield opportunities and ensuring compliance with regulatory requirements.

Strategic Asset Management and Business Adjustments

During the fourth quarter of 2024, Pathward announced the sale of its commercial insurance premium finance business, expected to close by October 31. This decision is aimed at redeploying capital into higher-return opportunities and is projected to be accretive to fiscal 2025 results. As part of this strategy, Pathward aims to maintain an asset limit of $10 billion, allowing them to stay below the Durbin amendment threshold and continue optimizing their asset mix.

Growth in SBA Lending and Market Position

Pathward is making significant strides in the Small Business Administration (SBA) market, moving up 80 places to become the 39th largest SBA 7(a) lender in the nation as of September 30, 2024. The company reported strong pipelines in commercial finance, specifically in SBA, USDA, and working capital loans, ensuring continual growth in these segments. Their approach focuses on partnering with firms aligned with their risk and compliance standards to foster financial inclusion.

New Product Launches and Partnerships

Celebrating its 20th anniversary in payments, Pathward rebranded its Banking as a Service division to 'Partner Solutions'. This initiative reflects their commitment to partner success, enabling better product offerings and integrated solutions. Recent contract renewals include an extended agreement with H&R Block until June 2027 and new product launches intended for diverse customer bases, enhancing their market presence.

Fiscal Year 2025 Guidance

Looking ahead to fiscal year 2025, Pathward has increased its earnings per diluted share guidance to a range of $7.10 to $7.60, not including the anticipated benefits from the recent business sale. The guidance reflects expectations of continued revenue growth driven by strong pipelines and pending market conditions, anticipating adjustments to net interest margins based on interest rate fluctuations. The effective tax rate is expected to remain between 18% to 22% due to lower investment tax volumes from evolving competition.

Challenges and Opportunities in Noninterest Income

Noninterest income during the year saw a decline, primarily due to reduced card and deposit fee income linked to lower average off-balance sheet custody deposits. Pathward is actively working to mitigate these fluctuations by enhancing service offerings and capitalizing on asset sales, strengthening their approach to gain on sales of structured finance loans to offset any revenue drops from card-related services.

Earnings Call Transcript 2024-Q4

[Operator]

Ladies and gentlemen, thank you for standing by, and welcome to Pathward Financial's Fourth Quarter and Fiscal Year 2024 Investor Conference Call. [Operator Instructions] 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.

[Darby Schoenfeld, executive]

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 fourth quarter and full fiscal year of 2024, 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 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 conference 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. Reconciliations for such non-GAAP measures are included in the earnings release and the appendix of the investor presentation. Finally, all time periods reference to our 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 Pharr, executive]

Thanks, Darby, and welcome, everyone, to our earnings conference call. 2024 was a great year for Pathward. We welcomed Greg to the company, recertified as a great place to work, remain committed to our remote first approach, announce new partnerships and extended others, celebrated employees who won multiple awards and most recently announced that our newly rebranded partner solutions team [indiscernible] best banking as a service provider.

In addition, we continue to deliver on our purpose as we help consumers and small- to medium-sized businesses with access to the financial markets. These successes translated into solid financial results as well. We reported earnings per diluted share of $6.62 for the fiscal year, which was just above the high end of the guidance range we provided last quarter and represents year-over-year growth of 11%. Net income for the year was $168.4 million. Our results were driven in part by an increase in net interest income of 17% when compared to last year. We also expanded our full year net interest margin and adjusted net interest margin, which includes contractual rate related processing expense to 6.41% and 4.85%, respectively.

Performance metrics remained strong, with return on average assets for the year of 2.2% and return on average tangible equity of 41.7%. We continue to focus on optimizing the asset mix on the balance sheet with an asset limit of $10 billion in order to remain below the Durbin amendment exemption, we want to ensure that the assets we are holding are giving us the opportunity to maximize our ROA. We've seen the results of these efforts as our loan and lease portfolio yield moved from 8.3% for the fourth quarter of 2023 to 8.67% for the fourth quarter of this year. As part of the strategy, during the fourth quarter, we announced the sale of our commercial insurance premium finance business, and we now expect this transaction to close by October 31, allowing additional time for operational readiness.

While we do expect this to be accretive to fiscal 2025, as we redeploy and release capital and deposits into other commercial finance loans and leases with higher risk-adjusted returns resulting in better ROAs, the guidance we are giving today will not include the impact of the transaction. Greg will go into more detail shortly.

We've also made significant inroads in the SBA market, moving up almost 80 places to the 39th largest SBA 7(a) program lender in the country for the year ending September 30, 2024. We continue to see strong pipelines particularly in SBA, USDA and working capital. Our consumer lending pipeline has also grown. As we continue to focus on partners who are aligned with our risk and compliance philosophy, and purpose of powering financial inclusion.

In September, we celebrated our 20th anniversary in the payments industry and announced the renaming of our Banking as a Service business to Partner Solutions. We think it's an important distinction to reflect our business model, which is founded on our commitment to helping our partners grow their business, innovate solutions and create new products and services. The new name includes a refreshed emphasis on our core value propositions, defined by time-tested industry experience, operational excellence that streamlines the making processes and a mature risk and compliance infrastructure that promotes program sustainability. These elements are critical to enabling our partners' success in today's rapidly evolving marketplace.

Ultimately, partnership is the heart of what we do. We believe our 2 decades of experience in this space positions us as a forward-thinking bank with the scale and capability to help our partners expand across multiple solutions, providing them with a one-stop shop for their banking needs.

We build strong relationships and are deeply invested in seeing our partners succeed. We also believe that we have the right people and the right tools to support our partners and their programs, delivering financial solutions today to a wide range of tomorrow's customers. This success means that we are living up to our purpose of delivering financial inclusion for all. It's this commitment that helped us earn the 2024 Finovate Award for Best Banking as a Service provider, which recognizes a financial institution that excels in making banking and financial services available to nonfinancial institutions.

As we mentioned before, our position in the industry has created a strong pipeline for us, and we are starting to see results. During the fourth quarter, we extended the contract with one of our current partners, and I am pleased to announce that after the quarter closed, we extended our contract with H&R Block to June of 2027 and are proud to be the partner enabling their efforts to provide their customers with banking products that take their financial experience beyond the annual tax return. We signed a DDA sponsorship agreement with [ Rain ]. The card will serve as a disbursement card option for earned wage access programs administered by [ Rain ]. We signed an additional extension with an existing partner. And we launched a new secured credit product with our existing partner [indiscernible] by launching a new product that allows expanded utility, [indiscernible] is demonstrating our commitment to financial inclusion and meeting additional needs for our partner and its customers.

As you can see, we are providing a series of embedded finance solutions to our partners where we bundle together a number of products that help them meet their customers' needs. As I mentioned, this is an example of how we can be the one-stop shop for our partners.

Last quarter, we introduced our strategy to be the trusted platform that enables our partners to thrive. And I'm going to take a moment to delve a little deeper into that. First, we've talked a lot about the right-sized balance sheet with an optimized asset mix. Looking ahead, we intend to continue to favor asset rotation to areas where we believe we have a competitive advantage to deliver a higher return on assets. This includes not only higher risk-adjusted return categories, but also assets that provide us with optionality. For example, SBA and USDA loans have active secondary markets, and we can benefit from underwriting and eventually selling the guaranteed portion of these. This allows us to recognize additional fee income, which can boost our ROA and give us the ability to then reinvest those funds into additional loans without growing the balance sheet.

Second, we are constantly working to deliver scalable solutions to our partners faster. We continue to invest in technology that will allow us to quickly adapt to the needs of our partners, ultimately enabling their programs to thrive and we are always investing in our people and talent, specifically aligned to that technology. For example, we continue investing in modern infrastructure with heavy emphasis on our data and other transactional platforms, helping support partner integration, automation and scaling of our business and improving partner experiences. We also continue to invest in our data platforms to leverage our data assets and further bolster our risk and compliance posture. And we continue to evolve through adoption of technology operating models and norms that help us build operating discipline and the culture that ensures a successful return on our investments.

Third, we are incredibly proud of our people and culture here at Pathward. In fiscal 2024, we had several employees who are recognized by external parties including the [ coal ] price is 1 of the most influential women and payments by American Banker; Shannon Stetson named [indiscernible] under 40 list and Britney Kelly, named American Bankers List for most influential women in payments next.

Finally, our experience in the industry has allowed us to build our risk and compliance framework into what we believe is a competitive advantage. In fact, the recently announced extension of our partnership with MoneyLion through 2029 was driven in part by their acknowledgment of our mature compliance culture and deep knowledge of the regulatory landscape. We've done a lot of work in fiscal 2024 to execute on our strategy, and we believe this has laid the groundwork for a successful future. As a result, we are increasing our fiscal 2025 guidance for earnings per diluted share to $7.10 to $7.60, which does not include the impact of the sale of our commercial insurance premium finance business.

Now I'd like to turn it over to Greg, who will take you through the financials and guidance in more detail.

[Gregory Sigrist, executive]

Thank you, Brett. Net income for the quarter ended September 30 was $33.6 million or $1.35 per diluted share. As has been the case for a year, net interest income in the quarter was the driver of our results, growing 10% when compared to the prior year quarter. For the full year, net interest income grew 17%. The fourth quarter net interest margin of 6.66% and adjusted net interest margin of 5.15%, both expanded sequentially from the third quarter of 2024. This was largely due to an increase in our loan and lease yields, combined with the continued rotation from the securities portfolio, which contributed to a mix shift into higher earning assets.

The new production yield on all commercial finance loans and leases in the quarter was 8.82%, compared to the quarterly yield on the same portfolio from last quarter at 8.39%. This performance is a direct result of our focus on risk adjusted returns and ROAs. We are very pleased with what the team has been able to accomplish and look forward to continuing to benefit from this focus moving into 2025.

Provision for credit losses was approximately $800,000 and compares to $9 million for the same quarter last year, with the decrease primarily stemming from reductions in the commercial finance portfolio and the tax services portfolio.

A portion of the commercial finance reduction is related to the sale of our insurance premium finance business. During the quarter, we moved these loans into a held-for-sale status from an accounting perspective, which reverses the provision for credit losses.

In Tax Services, the provision benefited from work we did prior to last year's tax season to enhance data analytics, underwriting and monitoring. For the year, provision for credit loss was $42.6 million, a 26% decrease from the prior year, demonstrating our ongoing discipline and strengthen our collateral managed credit process and enhancements made within our independent tax business.

Noninterest income declined when compared to the prior year's quarter, primarily due to a decrease in card and deposit fee income. This was largely driven by lower servicing fee income due to lower average levels of off-balance sheet custody deposits during the quarter, as we set EIP funds back to the U.S. Treasury throughout the year. The decline in noninterest income in the fourth quarter was partially offset by an increase in gain on sale of other, which is driven by our decision to sell some of our structured finance loans, reflecting our balance sheet velocity strategy.

For the full year, noninterest income also declined primarily due to lower servicing fee income from off-balance sheet custodial deposits. Total noninterest expense increased versus the same quarter last year, primarily due to increases in compensation and benefits and higher rate-related card processing expenses. The year-over-year increase in comp and benefits was partially driven by adding nearly 50 FTEs. The sequential increase in compensation and benefits was primarily due to net new FTEs during the quarter, and several onetime items, including true-ups.

On a go-forward basis, after adding in the impact of annual compensation adjustments for 2025, we expect the quarterly compensation and benefits expense run rate to settle in roughly $1 million lower than the fourth quarter. The second quarter will be elevated due to the seasonal impact of tax season. The remaining noninterest expenses also include transaction costs associated with the sale of our commercial insurance creaming finance business and some in-period technology expenses that we would not expect to recur.

Deposits on balance sheet at September 30 totaled $5.9 million, a decrease of over $700 million from a year ago. However, if you look at average deposit balances over the quarter, the change was nearly flat versus last year's quarter as ending spot balances were impacted by normal flows in some of our programs. Off-balance sheet custodial deposits held a partner banks at September 30 totaled $202 million compared to $268 million last year. This declined approximately $150 million from the end of the June quarter, primarily due to the normal seasonal trend downward with the end of the September quarter typically being the lowest point.

Total loans and leases at September 30 were $4.1 billion, a decrease of $290 million from a year ago. During the quarter, we moved approximately $600 million of loans associated with our insurance premium finance business to held for sale, decreasing this balance. If you exclude the commercial insurance premium finance business, loan balances when comparing this quarter to the September quarter of fiscal '23, we grew loans and leases by over $500 million. This is primarily due to growth in structured finance and working capital.

Compared to the end of last quarter, total loans decreased approximately $500 million. Again, if you exclude the impact of the insurance premium finance sale, total loans and leases increased approximately $80 million. Our liquidity remains in a strong position with approximately $2.1 billion in available liquidity. As this is typically our seasonal low point from a deposit perspective, we feel very good about where we sit today.

As Brett mentioned, optimizing the balance sheet will continue as a result of our desire to stay below $10 billion in assets.

Finally, during the quarter, we repurchased approximately 236,000 shares at an average share price of $63.44, bringing us to just over 1.5 million shares repurchased during the fiscal year. We are increasing our fiscal year 2025 GAAP earnings per diluted share guidance to a range of $7.10 to $7.60. This includes a number of assumptions. We have built [indiscernible] basis point rate cuts, one in November and the second in December. In addition, we have incorporated the September 30 consensus rates for the middle part of the interest rate curve, which is roughly 50 basis points below where rates are today. As you know, there's been much volatility along the curve. So our guidance anticipates a range of possible rate scenarios.

We expect net interest margins to exceed those in fiscal '24 as a result of our strategy to optimize the balance sheet. We expect an effective tax rate of 18% to 22% for the year based on lower expected investment tax credit volumes. We are seeing lower volumes in this area due to an evolving market and increased competition. As Brett mentioned, this guidance does not include the impact of the sale of our insurance premium finance business. We expect the transaction to be accretive to fiscal year 2025 and intend to update our guidance following the close of the transaction. In addition, it is still our intent to utilize the gain to optimize our securities portfolio. The combination of these 2 actions could be as much as $0.40 accretive to earnings per diluted shares in years after fiscal 2025, as redeployment of the capital and liquidity should take between 12 to 18 months.

The impact to fiscal 2025 will obviously be less than the full year impact and depends on a number of factors. But again, we will update you on that after the close of the transaction. Guidance also includes expected share repurchases.

We have started to see the pull-through of our Partner Solutions pipeline. But remember, these contracts have an implementation time line, so any deal signed now would likely impact the latter part of this fiscal year and into 2026 and beyond. As a result, we expect our quarterly results to follow our typical seasonality, but growth in earnings will be more weighted toward the back half of the year. This concludes our prepared remarks. Operator, please open the line for questions.

[Operator]

[Operator Instructions] Our first question comes from the line of David Feaster with Raymond James.

[David Feaster, analyst]

Let's start on kind of your last commentary on the updated guidance. I'm curious maybe -- what are some of the key factors from your standpoint to get you to the top end of the bottom? And then assuming additional cuts, how do you think that would impact guidance, and does the guidance include that securities restructuring like you were talking about? Or is that part of the premium finance sale that's excluded?

[Gregory Sigrist, executive]

Well, I'll try to take all 14 of those questions. I think [indiscernible]. Let's start with the rates, right? I mean as I said, we had 2 front-end curve rate cuts this fiscal year's calendar year still. And then we pulled in the consensus curve from, I think, it was effectively October 1st. And that, as you know, most of our loans are going to reprice [indiscernible] and a lot of the work we're doing on balance sheet strategy is going to reprice along the middle part of the curve, that 3 to 5 year, which frankly, we're pretty substantially higher today than we were when we -- versus the curve we used. And you've heard me say it many times, the bond market has been wrong pretty consistently for the last couple of years. So which is why we run a number of scenarios here.

Now the way I think about the short end of the curve is we are still pretty close to neutral, but each 25 basis point rate cut does have a modest negative impact to us. And it's not completely linear. We do have some consumer finance programs that actually would hit breakpoints after each like, for example, 100 basis points now. But the point though is, the pace of cuts will matter if there are more cuts later in the year, there are obviously muted impact on this year. But typically, though, the overnight cuts, we can mitigate that just through ongoing balance sheet management, including some of the balance sheet velocity work we're doing, which includes gain on sales of the structured finance book.

Middle part of the curve, again, as long as we stay above where the rates were when a lot of those loans were put on the remaining loans in 2021 and 2022, we've got a pretty long runway there from a rate perspective. So part of this is going to be upon the rate curve. For the things we can control, which, in part, includes the pipelines. Pipelines are strong. Commercial finance pipeline, we're very pleased with it, really across all the verticals we talk about. And I think Brett has already touched on the successes we've had so far this quarter even once just in the last couple of days, the last week or so around pulling through on the Partner Solutions pipeline, David.

So again, I think it's just -- part of it is the timing on when the pipeline sit, particularly on the Partner Solutions side, and then where the rate environment goes. But again, we have -- we feel like we have all the tools we need from a balance sheet strategy perspective to keep pushing it up.

[Brett Pharr, executive]

And David, I think you had a question about securities portfolio as well. So key to understand this guidance does not include the IPF sales nor the impact on the securities portfolio associated with that. That being said, and listen carefully to Greg's comments, while we know there's going to be an EPS benefit over time, that's not immediate because you're taking the assets off of the balance sheet, and then you will appropriately and with great stewardship add them back, and I think we're talking about a 12- to 18-month cycle before we get the full benefit of that. But none of that is in our guidance. Our slight guidance increase is related to the pipeline and interest rates.

[Gregory Sigrist, executive]

And just the general momentum that we're starting to see behind all businesses, which is great.

[David Feaster, analyst]

Okay. That is terrific color. And then I guess to that point, I mean, let's touch on the pipeline of partners? And is the strength that you're seeing is that from the existing partners that you have? And then just kind of what is the pipeline of new partners, the pace of inquiries, and it's also great to see the extension of some of these. You talked about the tax business, and we saw MoneyLion, kind of curious just how some of those negotiations are going upon renewal and just kind of the pipeline for Partners?

[Brett Pharr, executive]

Yes. So I mean, this is coming both from existing partners wanting to do more programs and new products with their same customers, which has been a migration that's been going on the last several years and is really, really important. But it's also come from new people coming to us who already have a book of business. And we've talked for a while about the dislocation that's occurring in the third-party delivery banking services and that impact. We've been saying for several quarters, our pipeline is stronger than it's ever been. We're adding to that not only is the pipeline is stronger than it's ever been, but we've closed some transactions. And that's the difference this quarter you should recognize.

[David Feaster, analyst]

Okay. That's great. And then we've -- I just want to touch on the plans post the loan sale. We moved the time line back a little bit, but has there been any change -- talk to the 12 to 18 months, what are some of the -- I mean where do you see the most opportunity to deploy that liquidity and kind of the pace to do it? And then how does the change in rates impact that if we start seeing gain on sale margins starting to improve, like in SBA, it does look like your SBA held for sale started to increase a little bit. I didn't know if your thoughts on selling production versus retaining had shifted at all just kind of -- given some of that. So kind of another big question, sorry.

[Brett Pharr, executive]

Yes. I mean I think there's a lot of variety there in a perfect world, our commercial finance pipeline, delivery and other asset deliveries will give us higher yielding assets that we can put on the balance sheet over time with appropriate credit structures, et cetera, and we'll do that. Now we'll look at the securities portfolio, and we'll do things there that we need to or appropriate. But I'm most excited about the opportunity to put on some of our higher-yielding assets with all the appropriate capabilities and controls that we have during this time frame.

So that's what I'm talking about. But as you know, it takes time to build that and go through it. And that's why we're not going to go run out and immediately try to put a bunch of assets on the balance sheet. And we're doing this as part of an active asset rotation.

The other thing I would say about SBA, USDA, we're increasingly wanting to create a flow business. Now sometimes that depends on rates and markets and all those things and we'll make those appropriate decisions. But being able to have a balance sheet that you can expand or contract based on opportunities to take things in the flow market, that's a key part of our future.

[Gregory Sigrist, executive]

Yes. The only other thing I would add is the outcome around what Brett had mentioned in terms of the opportunities. We'd be swapping out what is effectively a short-duration asset, the loan book for IPF. Those loans were priced inside of 12 months. And over time, to a large degree, taking duration in the loan book. So from an IRR perspective, David, I think there's part of how we intend to manage rates on a longer-term basis here, which gives us a bit more comfort that particularly if the short end of the curve is going to come down, and the middle part of the curve stays within a relative range. It's going to give us a bit more tailwind in terms of managing NIM than otherwise, we otherwise would have.

[Operator]

Our next question comes from the line of Frank Schiraldi with Piper Sandler.

[Frank Schiraldi, analyst]

Just wanted to follow up on a couple of those. In terms of the -- I just want to make sure I understand. In terms of the Partner Solutions growth, so the pipeline is really strong, but you've added some new business. And so I guess the idea would be that the bottom line impact or bottom line growth in this business should accelerate a bit in the back half of 2025 as those partnerships start driving revenue? .

[Brett Pharr, executive]

Yes, that's right. And as we said, it takes a little time for it to come on and our guidance assumes a good chunk of that comes in the back half of the year as these revenue-producing programs come online.

[Frank Schiraldi, analyst]

Okay. And then just in terms of -- obviously, you've got the premium finance sale and looking to grow the book in and around that over a 12- to 18-month period. And I guess, I'm just trying to -- want to make sure I understand the pipeline in the commercial finance book, would you say that -- is that still sort of high single digits to low double digits. Is that sort of the range of growth you anticipate in that commercial book?

[Gregory Sigrist, executive]

Yes. I mean where we are today, I think we're low single digits. I think we're probably at least stand at potentially 10% to 15% is the range, I'm looking at right now. I think we have a lot of opportunities there. But even if we don't close or if the transaction wasn't on the table, I think that the pipelines are pretty full. So that's part of the reason why the transaction itself is going to take 12 to 18 months, and it goes back to Brett's point, you can't push the pipelines, particularly over the next couple of months to be any bigger than they already are. You need to be prudent with it.

But just to tie the 2 concepts together, it's going to be, I think, low double digits, but it's going to take some time just to have that consistent trajectory of building that pipeline out later into the year after the IPO transaction closes.

[Frank Schiraldi, analyst]

Okay. And I guess that it looked like structured finance was a big driver this quarter. I guess that should be a blend going forward of working capital and structured finance. Those are the 2 biggest drivers?

[Brett Pharr, executive]

Yes. That and SBA is in there, too.

[Gregory Sigrist, executive]

Yes.

[Frank Schiraldi, analyst]

Okay. And then just Brett, I think you mentioned a secured credit product. So I know the consumer side of things is a lot smaller piece of the pie. What do you -- what do you think that looks like in a year's time in terms of sort of similar piece of the pie and the secured credit product and maybe some other growth kind of helps that keep pace that sub-10% of the total book, I think it is. Where should we expect to see maybe consumer finance footings in a year or 2 from? .

[Brett Pharr, executive]

Yes. I mean the consumer loan marketplace lending kinds of products, we've had some pretty good growth in that arena. Now again, remind you about all the waterfall credit protections and all those elements that are in there. And there's -- in our third-party delivery, there's very careful compliance kinds of controllers in that space that are important. But yes, I would -- I could see it going up some from where it is, but not becoming a materially larger part of our total balance sheet. .

[Frank Schiraldi, analyst]

Okay. Great. And then if I could just sneak in 1 last one. Just on the updated guide, $7.10 to $7.60, in terms of thinking about levers to get you to the bottom or the top end of that, is the biggest lever just that middle part of the curve? And Greg, it sounds like you have baked in essentially 50 basis points of reduction in the middle part of that curve. I guess that's sort of midyear. And so if it's less, you kind of get all else equal towards the higher end, if it's more contraction towards the lower end? Is that the best way to think about drivers in terms of drivers of that range?

[Gregory Sigrist, executive]

Yes, particularly the drivers we can't control. I think we [indiscernible] on that one, but the slope is our friend, right? To the extent we have -- there's an increasing slope in the curve [indiscernible] drive us higher in the range versus lower relative to the rate environment. Then I think the pace of pulling through the pipelines, really frankly, both commercial finance as well as in Partner Solutions is the other lever that we, again, to a large degree, have some control over. But those are the ones that come to my mind.

[Operator]

Thank you for your questions. That concludes the Pathward Financial's Fourth Quarter and Full Fiscal Year 2024 Investor Conference Call. Thank you. You may now disconnect your lines.