8-K
PATHWARD FINANCIAL, INC. (CASH)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 27, 2021
META FINANCIAL GROUP, INC.
(Exact name of registrant as specified in its charter)
| Delaware | 0-22140 | 42-1406262 |
|---|---|---|
| (State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
5501 South Broadband Lane, Sioux Falls, South Dakota 57108
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (877) 497-7497
| Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: | |
|---|---|
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d- 2(b)) |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4 (c)) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common Stock, $.01 par value | CASH | The NASDAQ Stock Market LLC |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02 Results of Operations and Financial Condition.
On October 27, 2021, the Registrant issued a press release announcing its results of operations and financial condition as of and for the three and year ended September 30, 2021. A copy of the press release is attached as Exhibit 99.1 to this report and is incorporated into this Item 2.02 by reference.
The information in this Item 2.02, including Exhibit 99.1, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities thereof, nor shall it be deemed to be incorporated by reference in any filing under the Exchange Act or under the Securities Act of 1933, as amended (the "Securities Act"), except to the extent specifically provided in any such filing.
Item 7.01 Regulation FD Disclosure.
Information is being furnished herein in Exhibit 99.2 with respect to the Investor Update slide presentation prepared for use with the press release. While most of the selected financial information furnished herein is derived from the Company’s consolidated financial statements and related notes prepared in accordance with generally accepted accounting principles ("GAAP") and management’s discussion and analysis of financial condition and results of operations included, or to be included, in the Company’s reports on Forms 10-K and 10-Q, this information includes selected financial and operational information through the fourth quarter of fiscal year 2021 and does not represent a complete set of financial statement and related notes prepared in conformity with GAAP. The Company’s annual financial statements are subject to independent audit. The Investor Update slide presentation is dated October 27, 2021 and the Company does not undertake to update the materials after that date.
The information in this Item 7.01, including Exhibit 99.2, shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities thereof, nor shall it be deemed to be incorporated by reference in any filing under the Exchange Act or under the Securities Act, except to the extent specifically provided in any such filing.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
| Exhibit Number | Description of Exhibit |
|---|---|
| 99.1 | Press Release of Meta Financial Group, Inc., dated October 27, 2021 regarding the results of operations and financial condition. |
| 99.2 | Investor Update slide presentation for the Fourth Quarter of Fiscal Year 2021, dated October 27, 2021, prepared for use with the Press Release. |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| META FINANCIAL GROUP, INC. | ||
|---|---|---|
| Date: October 27, 2021 | By: | /s/ Glen W. Herrick |
| Glen W. Herrick | ||
| Executive Vice President and Chief Financial Officer |
Document
Exhibit 99.1
META FINANCIAL GROUP, INC.® ANNOUNCES RESULTS FOR FOURTH QUARTER AND FISCAL YEAR 2021
Fiscal 2021 Fourth Quarter Net Income of $15.9 million, or $0.50 Per Diluted Share -
Fiscal 2021 Net Income of $141.7 million, or $4.38 Per Diluted Share -
Fiscal 2021 Earnings Per Share up 49% Versus Fiscal 2020 -
Sioux Falls, S.D., October 27, 2021 -- Meta Financial Group, Inc.® (Nasdaq: CASH) (“Meta” or the “Company”) reported net income of $15.9 million, or $0.50 per share, for the three months ended September 30, 2021, compared to net income of $13.2 million, or $0.38 per share, for the three months ended September 30, 2020. The Company reported record net income of $141.7 million, or $4.38 per share, for the fiscal year ended September 30, 2021, compared to net income of $104.7 million, or $2.94 per diluted share for the fiscal year ended September 30, 2020.
"MetaBank ended fiscal year 2021 on a strong note, as we made significant progress against our three key strategic initiatives, positioning the firm for continued improvement,” said CEO Brett Pharr. “As we start the new fiscal year, our Banking-as-a-Service pipeline has never been stronger and we will continue to advance our mission of financial inclusion for all®."
"I also want to thank our previous CEO Brad Hanson for his contributions to Meta for nearly 20 years. His efforts, together with those of our team, built the leadership position that Meta enjoys today," Pharr added.
“We achieved record earnings this past fiscal year that generated excess capital for our shareholders, as reflected in the Board’s confidence in authorizing the new share repurchase program we announced last month," said Executive Vice President and CFO Glen Herrick. "We have a balanced approach to capital deployment and will continue to evaluate strategies that create shareholder value.”
Business Development Highlights for the 2021 Fiscal Fourth Quarter and Full Fiscal Year 2021
•Named the Visa card issuer, in conjunction with Blackhawk Network, for the Excluded Workers Fund, a New York State Department of Labor program that provides one-time payments to certain New Yorkers who lost income due to COVID-19.
•Recognized a net unrealized gain of $4.1 million on a prior investment in MoneyLion Inc. ("MoneyLion") following the completion of its de-SPAC'ing process and listing on the New York Stock Exchange on September 22, 2021.
•Expanded our renewable energy financing, originating $101.1 million for the fiscal year 2021, resulting in $26.5 million in total net investment tax credits.
•Announced a new share repurchase program and during the 2021 fiscal fourth quarter repurchased 234,297 shares, at an average price of $51.18, reflecting the momentum of the business and confidence in the Company's strategy and growth trajectory. An additional 636,100 shares were purchased in October 2021 through October 22, 2021.
•Bradley C. Hanson, President and Chief Executive Officer of the Company retired from his positions at Meta Financial and MetaBank. He will remain on the Company’s Board until the next annual stockholders’ meeting, expected to take place in February 2022. He also will serve as a Strategic Advisor to Meta on industry and partner relations until the end of 2022. The Board appointed Brett L. Pharr as Chief Executive Officer and Anthony M. Sharett as President of Meta Financial Group and MetaBank effective October 1, 2021. For additional information, please see the associated press release from September 7, 2021.
•Subsequent to September 30, 2021, MetaBank sold $30.2 million in community banking loans to Central Bank and has agreements in place to sell another approximately $161.0 million. Following the sale, the legacy community bank loan portfolio will be less than $8 million. The Company expects community bank balances to be at $0 at the end of the first fiscal quarter of 2022. Included in the sales, are approximately $108.0 million of substandard and doubtful loans, of which $14.9 million are nonaccrual loans, as of September 30, 2021, representing 39% of MetaBank's substandard and doubtful loan and lease balances and 44% of our nonaccrual balances.
Financial Highlights for the 2021 Fiscal Fourth Quarter
•Total revenue for the fourth quarter was $120.2 million, an increase of $14.9 million compared to the same quarter in fiscal 2020 primarily driven by higher net interest income, payments fee income and $4.1 million in other income related to the MoneyLion valuation.
•Operating efficiency ratio improved 146 basis points to 62.5% at September 30, 2021 compared to 64.0% at September 30, 2020. See non-GAAP reconciliation table below.
•Net interest income for the fourth quarter was $70.7 million, an increase of $6.2 million compared to $64.5 million in the fourth quarter last year.
•Net interest margin ("NIM") improved to 4.35% for the fourth quarter from 3.77% during the same period of last year, chiefly due to the decrease in cash associated with the Company's participation in the Economic Impact Program ("EIP") program, as well as an increase in commercial and warehouse finance loans and leases.
•Total gross loans and leases at September 30, 2021 increased $293.7 million, to $3.61 billion, or 9%, compared to September 30, 2020 and increased $112.6 million, or 3%, when compared to June 30, 2021. The increase was primarily driven by growth in commercial finance, warehouse finance and consumer finance loans partially offset by a decrease in community bank loans, which was driven by a loan sale of $75.1 million during the quarter.
Net Interest Income
Net interest income for the fourth quarter of fiscal 2021 was $70.7 million, an increase of 10% from the same quarter in fiscal 2020. The increase was mainly attributable to the continued optimization of our earning asset and liability mix, along with increased loan balances.
The fourth quarter average outstanding balance of loans and leases increased $109.3 million compared to the prior year quarter, primarily due to increases in the commercial finance, warehouse finance and consumer finance loan and lease portfolios, partially offset by a decrease in the retained community bank portfolio. The Company’s average interest-earning assets for the fourth quarter decreased by $367.8 million to $6.44 billion compared with the same quarter in fiscal 2020, primarily due to the decrease in cash and fed funds sold, partially offset by growth in total investments and total loans and leases.
Fiscal 2021 fourth quarter NIM increased to 4.35% from 3.77% in the fourth quarter of last year. The overall reported tax-equivalent yield (“TEY”) on average earning asset yields increased 43 basis points to 4.45% compared to the prior year quarter, primarily driven by a reduction in low-yielding cash held at the Federal Reserve. The TEY on the securities portfolio was 1.50% compared to 1.78% for the comparable period last year.
The Company's cost of funds for all deposits and borrowings averaged 0.09% during the fiscal 2021 fourth quarter, compared to 0.23% during the prior year quarter, primarily driven by a reduction in wholesale deposit balances. The Company's overall cost of deposits was 0.01% in the fiscal fourth quarter of 2021, compared to 0.12% in the same quarter last year.
Noninterest Income
Fiscal 2021 fourth quarter noninterest income increased to $49.5 million, compared to $40.8 million for the same period of the prior year. The significant increase was primarily driven by payments fee income, a net unrealized gain of $4.1 million in the MoneyLion investment and $1.5 million of other income on a student loan insurance recovery, which were partially offset by a net loss on a sale of community bank loans in the quarter of $1.8 million. The payments fee income was aided by an increase in activity related to government stimulus programs.
Noninterest Expense
Noninterest expense increased 17% to $93.6 million for the fiscal 2021 fourth quarter, from $80.3 million for the same quarter last year. The increase in expense was primarily driven by $9.0 million in one-time technology and product investments. CEO transition expenses of $1.3 million related to accelerated vesting of CEO shares and associated professional expenses also contributed to the year-over-year increase.
Income Tax Expense
The Company recorded income tax expense of $1.1 million, representing an effective tax rate of 6.2%, for the fiscal 2021 fourth quarter, compared to $1.8 million, representing an effective tax rate of 11.2%, for the fourth quarter last year.
The Company originated $29.1 million in solar leases during the fiscal 2021 fourth quarter, compared to $41.1 million in last year's fourth quarter. Investment tax credits related to solar leases are recognized ratably based on income throughout each fiscal year. The timing and impact of future solar tax credits are expected to vary from period to period, and Meta intends to undertake only those tax credit opportunities that meet the Company's underwriting and return criteria.
Investments, Loans and Leases
| September 30, 2021 | June 30, 2021 | March 31, 2021 | December 31, 2020 | September 30, 2020 | ||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Total investments | $ | 1,921,568 | $ | 1,981,852 | $ | 1,552,892 | $ | 1,309,452 | $ | 1,360,712 |
| Loans held for sale | ||||||||||
| Consumer credit products | 23,111 | 12,582 | 6,233 | 234 | 962 | |||||
| SBA/USDA | 33,083 | 57,208 | 61,402 | 32,983 | 52,542 | |||||
| Community Bank | — | 18,115 | — | 100,442 | 130,073 | |||||
| Total loans held for sale | 56,194 | 87,905 | 67,635 | 133,659 | 183,577 | |||||
| Term lending | 961,019 | 920,279 | 891,414 | 881,306 | 805,323 | |||||
| Asset based lending | 300,225 | 263,237 | 248,735 | 242,298 | 182,419 | |||||
| Factoring | 363,670 | 320,629 | 277,612 | 275,650 | 281,173 | |||||
| Lease financing | 266,050 | 282,940 | 308,169 | 283,722 | 281,084 | |||||
| Insurance premium finance | 428,867 | 417,652 | 344,841 | 338,227 | 337,940 | |||||
| SBA/USDA | 247,756 | 263,709 | 331,917 | 300,707 | 318,387 | |||||
| Other commercial finance | 157,908 | 118,081 | 103,234 | 101,209 | 101,658 | |||||
| Commercial Finance | 2,725,495 | 2,586,527 | 2,505,922 | 2,423,119 | 2,307,984 | |||||
| Consumer credit products | 129,251 | 105,440 | 104,842 | 88,595 | 89,809 | |||||
| Other consumer finance | 123,606 | 122,316 | 130,822 | 162,423 | 134,342 | |||||
| Consumer Finance | 252,857 | 227,756 | 235,664 | 251,018 | 224,151 | |||||
| Tax Services | 10,405 | 41,268 | 225,921 | 92,548 | 3,066 | |||||
| Warehouse Finance | 419,926 | 335,704 | 332,456 | 318,937 | 293,375 | |||||
| Community Banking | 199,132 | 303,984 | 348,065 | 353,942 | 485,564 | |||||
| Total gross loans and leases | 3,607,815 | 3,495,239 | 3,648,028 | 3,439,564 | 3,314,140 | |||||
| Allowance for credit losses | (68,281) | (91,208) | (98,892) | (72,389) | (56,188) | |||||
| Net deferred loan and lease origination fees | 1,748 | 1,431 | 9,503 | 9,111 | 8,625 | |||||
| Total loans and leases, net of allowance | $ | 3,541,282 | $ | 3,405,462 | $ | 3,558,639 | $ | 3,376,286 | $ | 3,266,577 |
The Company's investment security balances at September 30, 2021 totaled $1.92 billion, as compared to $1.98 billion at June 30, 2021 and $1.36 billion at September 30, 2020.
Total gross loans and leases totaled $3.61 billion at September 30, 2021, as compared to $3.50 billion at June 30, 2021 and $3.31 billion and as compared to September 30, 2020. The primary drivers for the increase on a prior quarter basis were commercial finance, consumer credit, and warehouse finance loans, partially offset by the decrease in community bank and tax service loans.
At September 30, 2021, commercial finance loans, which comprised 76% of the Company's gross loan and lease portfolio, totaled $2.73 billion, reflecting growth of $139.0 million, or 5%, from June 30, 2021.
As of September 30, 2021, the Company had 370 loans outstanding with total loan balances of $96.0 million originated as part of the Paycheck Protection Program ("PPP"), compared with 458 loans outstanding with total loan balances of $143.3 million for the quarter ended June 30, 2021. In total, 69% of the PPP loan balances were forgiven through September 30, 2021.
Community bank loans held for investment totaled $199.1 million as of September 30, 2021, decreasing as compared to $304.0 million at June 30, 2021 and $485.6 million at September 30, 2020. The Company sold additional loans from the retained Community Bank portfolio in the amount of $75.1 million during the fiscal 2021 fourth quarter, which resulted in a net loss on sale of $1.8 million for the quarter.
Asset Quality
The Company’s allowance for credit losses ("ACL") totaled $68.3 million at September 30, 2021, a decrease compared to $91.2 million at June 30, 2021 and an increase compared to $56.2 million at September 30, 2020. The decrease in the ACL at September 30, 2021, when compared to June 30, 2021, was primarily due to a $24.3 million decrease in the allowance for seasonal tax services loan portfolio as we recorded season-end charge-downs, a $1.3 million decrease in consumer lending and a $1.0 million decrease in the retained community banking portfolio, partially offset by a $4.3 million increase in commercial finance and $0.1 million increase in warehouse finance.
The $12.1 million year-over-year increase in the ACL was primarily driven by an $18.3 million increase within the commercial finance portfolio and a $3.7 million increase in the consumer lending portfolio. These increases were driven by the year-over-year loan growth and the adoption of the current expected credit losses ("CECL") accounting standard, which required a day one entry to increase the allowance for credit losses in the amount of $12.8 million effective October 1, 2020. The increases noted above were partially offset by a $10.0 million reduction within the retained community banking portfolio, which decreased year-over-year.
The following table presents the Company's allowance for credit losses as a percentage of its total loans and leases.
| As of the Period Ended | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (Unaudited) | September 30, 2021 | June 30, 2021 | March 31, 2021 | December 31, 2020 | October 1, 2020(1) | September 30, 2020 | ||||||
| Commercial finance | 1.77 | % | 1.73 | % | 1.77 | % | 1.88 | % | 1.85 | % | 1.30 | % |
| Consumer finance | 2.91 | % | 3.80 | % | 4.70 | % | 4.39 | % | 4.31 | % | 1.64 | % |
| Tax services | 0.02 | % | 58.99 | % | 12.90 | % | 1.53 | % | 0.06 | % | 0.06 | % |
| Warehouse finance | 0.10 | % | 0.10 | % | 0.10 | % | 0.10 | % | 0.10 | % | 0.10 | % |
| Community bank | 6.16 | % | 4.36 | % | 4.03 | % | 4.01 | % | 3.37 | % | 4.59 | % |
| Total loans and leases | 1.89 | % | 2.61 | % | 2.71 | % | 2.10 | % | 2.08 | % | 1.70 | % |
(1) Represents the Company's ACL coverage ratio upon the adoption of the Accounting Standards Update 2016-13 using September 30, 2020 loan and lease and allowance balances plus the CECL allowance adjustment.
The Company's ACL as a percentage of total loans and leases decreased to 1.89% at September 30, 2021 from 2.61% at June 30, 2021. The decrease in the total loans and leases coverage ratio reflected a seasonal reduction in the allowance for the tax services loan portfolios along with a reduction in specific reserves. When excluding the seasonal tax services loans, the ACL as a percentage of total loans and leases decreased to 1.90% at September 30, 2021 from 1.94% at June 30, 2021. The coverage ratio for the commercial finance loan category remained relatively similar to the June 30, 2021 quarter. The consumer finance coverage decreased primarily due to an improved overall macroeconomic outlook and the community bank coverage ratio increased as the majority of the remaining loans are in pandemic stressed industries, such as hospitality and movie theaters. The Company expects to continue to diligently monitor the allowance for credit losses and adjust as necessary in future periods to maintain an appropriate and supportable level.
Activity in the allowance for credit losses for the periods presented was as follows.
| (Unaudited) | Three Months Ended | Year Ended | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| September 30, 2021 | June 30, 2021 | September 30, 2020 | September 30, 2021 | September 30, 2020 | ||||||
| (Dollars in thousands) | ||||||||||
| Beginning balance | $ | 91,208 | $ | 98,892 | $ | 65,747 | $ | 56,188 | $ | 29,149 |
| Adoption of CECL accounting standard | — | — | — | 12,773 | — | |||||
| Provision - tax services loans | 457 | 4,685 | 1,599 | 33,276 | 22,006 | |||||
| Provision - all other loans and leases | 8,368 | (36) | 7,381 | 16,663 | 42,770 | |||||
| Charge-offs - tax services loans | (24,849) | (9,505) | (13,037) | (34,354) | (22,834) | |||||
| Charge-offs - all other loans and leases | (7,635) | (5,360) | (6,015) | (22,920) | (18,927) | |||||
| Recoveries - tax services loans | 51 | 17 | 3 | 1,078 | 830 | |||||
| Recoveries - all other loans and leases | 681 | 2,515 | 510 | 5,577 | 3,194 | |||||
| Ending balance | $ | 68,281 | $ | 91,208 | $ | 56,188 | $ | 68,281 | $ | 56,188 |
Provision for credit losses was $8.8 million for the quarter ended September 30, 2021, compared to $9.0 million for the comparable period in the prior fiscal year. Provision for credit losses was $49.8 million for fiscal year ended September 30, 2021, compared to $64.8 million for the comparable period in the prior fiscal year. The fiscal year-over-year decrease in provision was largely attributable to the ACL build in the prior year stemming from the COVID-19 pandemic. Net charge-offs were $31.8 million for the quarter ended September 30, 2021, compared to $18.5 million for the quarter ended September 30, 2020. The majority of the net charge-offs for the quarter were attributable to seasonal tax-related loan products.
The Company's past due loans and leases were as follows for the periods presented.
| As of September 30, 2021 | Accruing and Nonaccruing Loans and Leases | Nonperforming Loans and Leases | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (Dollars in Thousands) | 30-59 Days<br>Past Due | 60-89 Days<br>Past Due | > 89 Days Past Due | Total Past<br>Due | Current | Total Loans and Leases<br>Receivable | > 89 Days Past Due and Accruing | Non-accrual balance | Total | |||||||||
| Commercial finance | $ | 18,269 | $ | 7,388 | $ | 15,439 | $ | 41,096 | $ | 2,684,399 | $ | 2,725,495 | $ | 12,489 | $ | 19,330 | $ | 31,819 |
| Consumer finance | 1,676 | 812 | 1,236 | 3,724 | 249,133 | 252,857 | 1,160 | — | 1,160 | |||||||||
| Tax services | — | — | 7,962 | 7,962 | 2,443 | 10,405 | 7,962 | — | 7,962 | |||||||||
| Warehouse finance | — | — | — | — | 419,926 | 419,926 | — | — | — | |||||||||
| Community banking | — | — | — | — | 199,132 | 199,132 | — | 14,915 | 14,915 | |||||||||
| Total loans and leases held for investment | 19,945 | 8,200 | 24,637 | 52,782 | 3,555,033 | 3,607,815 | 21,611 | 34,245 | 55,856 | |||||||||
| As of June 30, 2021 | Accruing and Nonaccruing Loans and Leases | Nonperforming Loans and Leases | ||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| (Dollars in Thousands) | 30-59 Days Past Due | 60-89 Days Past Due | > 89 Days Past Due | Total Past Due | Current | Total Loans and Leases Receivable | > 89 Days Past Due and Accruing | Non-accrual balance | Total | |||||||||
| Commercial finance | $ | 22,117 | $ | 10,650 | $ | 8,844 | $ | 41,611 | $ | 2,544,916 | $ | 2,586,527 | $ | 4,350 | $ | 17,315 | $ | 21,665 |
| Consumer finance | 843 | 1,009 | 525 | 2,377 | 225,379 | 227,756 | 469 | — | 469 | |||||||||
| Tax services | — | 40,958 | — | 40,958 | 310 | 41,268 | — | — | — | |||||||||
| Warehouse finance | — | — | — | — | 335,704 | 335,704 | — | — | — | |||||||||
| Community banking | 62 | — | 1,769 | 1,831 | 302,153 | 303,984 | — | 19,773 | 19,773 | |||||||||
| Total loans and leases held for investment | 23,022 | 52,617 | 11,138 | 86,777 | 3,408,462 | 3,495,239 | 4,819 | 37,088 | 41,907 |
The Company's nonperforming assets at September 30, 2021 were $61.8 million, representing 0.92% of total assets, compared to $45.1 million, or 0.64% of total assets at June 30, 2021 and $48.0 million, or 0.79% of total assets at September 30, 2020. The changes in the nonperforming assets as a percentage of total assets at September 30, 2021 were driven in large part by a $10.2 million increase in nonperforming assets in the commercial finance portfolio which is primarily due to an administrative timing item that management believes is not a credit concern, and an increase related to the seasonal tax services portfolio that is also timing and not credit-related, partially offset by a decrease in nonperforming assets in the community bank portfolio when compared to both the linked-quarter and the prior year.
The Company's nonperforming loans and leases at September 30, 2021, were $55.9 million, representing 1.52% of total gross loans and leases, compared to $41.9 million, or 1.17% of total gross loans and leases at June 30, 2021 and $34.0 million, or 0.97% of total gross loans and leases at September 30, 2020. The increases are related to the aforementioned non-credit related increases in nonperforming assets in the commercial finance and tax services portfolios.
Loan and lease balances that were within their active deferment period decreased to $39.1 million at September 30, 2021 from $41.5 million at June 30, 2021.
Meta has revised its credit administration policies and reviewed its loan portfolio to better align with OCC guidance for national banks, a process that began during the quarter ending June 30, 2021 and was substantially completed as of September 30, 2021. These credit policy revisions had an impact on our loan and lease risk ratings, resulting in downgrades of certain credits in several categories. Our loan and collateral management practices have proven effective in managing losses during previous economic cycles; and while we expect this process will result in setting a new baseline for portfolio metrics going forward, it does not indicate a deterioration in our portfolio's expected performance. Further, these changes do not reflect an increase in credit risk for past or future periods and thus we do not anticipate any increase in losses as a result of these one-time administrative adjustments to these credits' risk ratings.
The Company has various portfolios of consumer lending and tax services loans that present unique risks that are statistically managed. Due to the unique risks associated with these portfolios, the Company monitors other credit quality indicators in their evaluation of the appropriateness of the allowance for credit losses on these portfolios, and as such, these loans are not included in the asset classification table below. The Company's loans and leases held for investment by asset classification were as follows for the periods presented.
| Asset Classification | Pass | Watch | Special Mention | Substandard | Doubtful | Total | ||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| As of September 30, 2021 | (Dollars in Thousands) | |||||||||||||||||||||||||
| Commercial finance | $ | 2,039,324 | $ | 364,713 | $ | 170,527 | $ | 144,414 | $ | 6,517 | $ | 2,725,495 | ||||||||||||||
| Warehouse finance | 419,926 | — | — | — | — | 419,926 | ||||||||||||||||||||
| Community banking | 10,314 | 27,121 | 35,916 | 120,238 | 5,543 | 199,132 | ||||||||||||||||||||
| Total Loans and Leases | $ | 2,469,564 | $ | 391,834 | $ | 206,443 | $ | 264,652 | $ | 12,060 | $ | 3,344,553 | Asset Classification | Pass | Watch | Special Mention | Substandard | Doubtful | Total | |||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | ||||||||||||||
| As of June 30, 2021 | (Dollars in Thousands) | |||||||||||||||||||||||||
| Commercial finance | $ | 2,315,437 | $ | 133,124 | $ | 55,869 | $ | 74,930 | $ | 7,166 | $ | 2,586,526 | ||||||||||||||
| Warehouse finance | 335,704 | — | — | — | — | 335,704 | ||||||||||||||||||||
| Community banking | 195,721 | 33,494 | 14,574 | 60,196 | — | 303,985 | ||||||||||||||||||||
| Total Loans and Leases | $ | 2,846,862 | $ | 166,618 | $ | 70,443 | $ | 135,126 | $ | 7,166 | $ | 3,226,215 |
Deposits, Borrowings and Other Liabilities
Total average deposits for the fiscal 2021 fourth quarter decreased by $389.7 million to $6.08 billion compared to the same period in fiscal 2020, primarily due to a reduction in wholesale deposits. Average wholesale deposits decreased $485.3 million, while noninterest-bearing deposits decreased $11.1 million, for the fiscal 2021 fourth quarter when compared to the same period in fiscal 2020.
The average balance of total deposits and interest-bearing liabilities was $6.17 billion for the three-month period ended September 30, 2021, compared to $6.66 billion for the same period in the prior fiscal year, representing a decrease of 7%.
Total end-of-period deposits increased 11% to $5.51 billion at September 30, 2021, compared to $4.98 billion at September 30, 2020. The increase in end-of-period deposits was primarily driven by an increase in noninterest-bearing deposits of $661.6 million, partially offset by a decrease in wholesale deposits of $269.1 million. The increase in noninterest-bearing deposits was driven by government stimulus-related dollars loaded on various partner cards.
Of the 16.5 million prepaid cards issued in conjunction with the three EIP stimulus programs, totaling approximately $24.15 billion, $1.64 billion were outstanding as of September 30, 2021, of which only $69.8 million was on Meta’s balance sheet with the remainder being held by other banks.
Regulatory Capital
The Company and MetaBank remained above the federal regulatory minimum capital requirements at September 30, 2021, continued to be classified as well-capitalized, and in good standing with the regulatory agencies. A temporary exemption was granted by the Office of the Comptroller of the Currency related to the financial impacts of distributing prepaid debit cards as part of the EIP program. Regulatory capital ratios of the Company and the Bank are stated in the table below.
The tables below include certain non-GAAP financial measures that are used by investors, analysts and bank regulatory agencies to assess the capital position of financial services companies. Management reviews these measures along with other measures of capital as part of its financial analysis.
| As of the dates indicated | September 30, 2021 (1) | June 30,<br>2021 | March 31,<br>2021 | December 31,<br>2020 | September 30,<br>2020 | |||||
|---|---|---|---|---|---|---|---|---|---|---|
| Company | ||||||||||
| Tier 1 leverage capital ratio | 7.67 | % | 6.85 | % | 4.75 | % | 7.39 | % | 6.58 | % |
| Common equity Tier 1 capital ratio | 12.12 | % | 12.76 | % | 11.29 | % | 10.72 | % | 11.78 | % |
| Tier 1 capital ratio | 12.46 | % | 13.11 | % | 11.63 | % | 11.07 | % | 12.18 | % |
| Total capital ratio | 15.45 | % | 16.18 | % | 14.65 | % | 14.14 | % | 15.30 | % |
| MetaBank | ||||||||||
| Tier 1 leverage capital ratio | 8.69 | % | 7.83 | % | 5.47 | % | 8.60 | % | 7.56 | % |
| Common equity Tier 1 capital ratio | 14.11 | % | 14.94 | % | 13.39 | % | 12.87 | % | 13.96 | % |
| Tier 1 capital ratio | 14.13 | % | 14.96 | % | 13.40 | % | 12.89 | % | 14.00 | % |
| Total capital ratio | 15.38 | % | 16.22 | % | 14.66 | % | 14.14 | % | 15.26 | % |
(1) September 30, 2021 amounts are preliminary pending completion and filing of the Company's regulatory reports. Regulatory capital presented for periods in fiscal year 2021 reflect the Company's election of the five-year CECL transition for regulatory capital purposes.
The following table provides the non-GAAP financial measures used to compute certain of the ratios included in the table above, as well as a reconciliation of such non-GAAP financial measures to the most directly comparable financial measure in accordance with GAAP:
| Standardized Approach(1) | September 30,<br>2021 | June 30,<br>2021 | March 31,<br>2021 | December 31,<br>2020 | September 30,<br>2020 | |||||
|---|---|---|---|---|---|---|---|---|---|---|
| (Dollars in Thousands) | ||||||||||
| Total stockholders' equity | $ | 871,884 | $ | 876,633 | $ | 835,258 | $ | 813,210 | $ | 847,308 |
| Adjustments: | ||||||||||
| LESS: Goodwill, net of associated deferred tax liabilities | 300,780 | 301,179 | 301,602 | 301,999 | 302,396 | |||||
| LESS: Certain other intangible assets | 33,572 | 35,100 | 36,779 | 39,403 | 40,964 | |||||
| LESS: Net deferred tax assets from operating loss and tax credit carry-forwards | 22,801 | 17,753 | 19,306 | 24,105 | 18,361 | |||||
| LESS: Net unrealized gains (losses) on available-for-sale securities | 7,344 | 14,750 | 12,458 | 19,894 | 17,762 | |||||
| LESS: Non-controlling interest | 1,155 | 1,490 | 1,092 | 1,536 | 3,603 | |||||
| ADD: Adoption of Accounting Standards Update 2016-13 | 8,202 | 13,913 | 10,439 | 10,439 | — | |||||
| Common Equity Tier 1(1) | 514,434 | 520,274 | 474,460 | 436,712 | 464,222 | |||||
| Long-term borrowings and other instruments qualifying as Tier 1 | 13,661 | 13,661 | 13,661 | 13,661 | 13,661 | |||||
| Tier 1 minority interest not included in common equity tier 1 capital | 747 | 932 | 690 | 749 | 1,894 | |||||
| Total Tier 1 Capital | 528,842 | 534,867 | 488,811 | 451,122 | 479,777 | |||||
| Allowance for credit losses | 53,159 | 51,317 | 53,232 | 51,070 | 49,343 | |||||
| Subordinated debentures (net of issuance costs) | 73,980 | 73,936 | 73,892 | 73,850 | 73,807 | |||||
| Total qualifying capital | $ | 655,981 | $ | 660,119 | $ | 615,935 | $ | 576,042 | $ | 602,927 |
(1) Capital ratios were determined using the Basel III capital rules that became effective on January 1, 2015. Basel III revised the definition of capital, increased minimum capital ratios, and introduced a minimum CET1 ratio; those changes are being fully phased in through the end of 2021.
The following table provides a reconciliation of tangible common equity and tangible common equity excluding accumulated other comprehensive income ("AOCI"), each of which is used in calculating tangible book value data, to Total Stockholders' Equity. Each of tangible common equity and tangible common equity excluding AOCI is a non-GAAP financial measure that is commonly used within the banking industry.
| September 30,<br>2021 | June 30,<br>2021 | March 31,<br>2021 | December 31,<br>2020 | September 30,<br>2020 | ||||||
|---|---|---|---|---|---|---|---|---|---|---|
| (Dollars in Thousands) | ||||||||||
| Total Stockholders' Equity | $ | 871,884 | $ | 876,633 | $ | 835,258 | $ | 813,210 | $ | 847,308 |
| Less: Goodwill | 309,505 | 309,505 | 309,505 | 309,505 | 309,505 | |||||
| Less: Intangible assets | 33,148 | 34,898 | 36,903 | 39,660 | 41,692 | |||||
| Tangible common equity | 529,231 | 532,230 | 488,850 | 464,045 | 496,111 | |||||
| Less: Accumulated other comprehensive income (loss) ("AOCI") | 7,599 | 15,222 | 12,809 | 20,119 | 17,542 | |||||
| Tangible common equity excluding AOCI | $ | 521,632 | $ | 517,008 | $ | 476,041 | $ | 443,926 | $ | 478,569 |
Conference Call
The Company will host a conference call and earnings webcast at 4:00 p.m. Central Time (5:00 p.m. Eastern Time) on Wednesday, October 27, 2021. The live webcast of the call can be accessed from Meta’s Investor Relations website at www.metafinancialgroup.com. Telephone participants may access the conference call by dialing (844) 200-6205 approximately 10 minutes prior to start time and reference access code 483958. A webcast replay will also be archived at www.metafinancialgroup.com for one year.
Upcoming Investor Events
•KBW Financial Services Symposium, February 17, 2022 | Boca Raton, FL
•Raymond James Institutional Investors Conference, March 8, 2022 | Orlando, FL
Forward-Looking Statements
The Company and MetaBank may from time to time make written or oral “forward-looking statements,” including statements contained in this press release, the Company’s filings with the SEC, the Company’s reports to stockholders, and in other communications by the Company and MetaBank, which are made in good faith by the Company pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995.
You can identify forward-looking statements by words such as “may,” “hope,” “will,” “should,” “expect,” “plan,” “anticipate,” “intend,” “believe,” “estimate,” “predict,” “potential,” “continue,” “could,” “future,” or the negative of those terms, or other words of similar meaning or similar expressions. You should carefully read statements that contain these words because they discuss our future expectations or state other “forward-looking” information. These forward-looking statements are based on information currently available to us and assumptions about future events, and include statements with respect to the Company’s beliefs, expectations, estimates, and intentions, which are subject to significant risks and uncertainties, and are subject to change based on various factors, some of which are beyond the Company’s control. Such risks, uncertainties and other factors may cause our actual growth, results of operations, financial condition, cash flows, performance and business prospects and opportunities to differ materially from those expressed in, or implied by, these forward-looking statements. Such statements address, among others, the following subjects: future operating results; expectations in connection with the impact of the ongoing COVID-19 pandemic and related government actions on our business, our industry and the capital markets; customer retention; loan and other product demand; expectations concerning acquisitions and divestitures; new products and services, including those offered by Meta Payment Systems, Refund Advantage, EPS Financial and Specialty Consumer Services divisions; credit quality; the level of net charge-offs and the adequacy of the allowance for credit losses; technology; and the Company's employees. The following factors, among others, could cause the Company's financial performance and results of operations to differ materially from the expectations, estimates, and intentions expressed in such forward-looking statements: maintaining our executive management team; expected growth opportunities may not be realized or may take longer to realize than expected; the potential adverse effects of the ongoing COVID-19 pandemic and any governmental or societal responses thereto including the deployment and efficacy of the COVID-19 vaccines, or other unusual and infrequently occurring events; actual changes in interest rates and the Fed Funds rate; additional changes in tax laws; the strength of the United States' economy, in general, and the strength of the local economies in which the Company operates; changes in trade, monetary, and fiscal policies and laws, including interest rate policies of the Federal Reserve; inflation, market, and monetary fluctuations; the timely and efficient development of, and acceptance of, new products and services offered by the Company or its strategic partners, as well as risks (including reputational and litigation) attendant thereto, and the perceived overall value of these products and services by users; the risks of dealing with or utilizing third parties, including, in connection with the Company’s refund advance business, the risk of reduced volume of refund advance loans as a result of reduced customer demand for or usage of Meta’s strategic partners’ refund advance products; our relationship with, and any actions which may be initiated by, our regulators; the impact of changes in financial services laws and regulations, including, but not limited to, laws and regulations relating to the tax refund industry and the insurance premium finance industry; technological changes, including, but not limited to, the protection of our electronic systems and information; the impact of acquisitions and divestitures; litigation risk; the growth of the Company’s business, as well as expenses related thereto; continued maintenance by MetaBank of its status as a well-capitalized institution; changes in consumer spending and saving habits; the impact of our participation as prepaid card issuer for the EIP program and similar programs in the future; losses from fraudulent or illegal activity; technological risks and developments and cyber threats, attacks, or events; and the success of the Company at maintaining its high quality asset level and managing and collecting assets of borrowers in default should problem assets increase.
The foregoing list of factors is not exclusive. We caution you not to place undue reliance on these forward-looking statements. The forward-looking statements included in this press release speak only as of the date hereof. Additional discussions of factors affecting the Company’s business and prospects are reflected under the caption “Risk Factors” and in other sections of the Company’s Annual Report on Form 10-K for the Company’s fiscal year ended September 30, 2020, and in other filings made with the SEC. The Company expressly disclaims any intent or obligation to update any forward-looking statements, whether written or oral, that may be made from time to time by or on behalf of the Company or its subsidiaries, whether as a result of new information, changed circumstances, or future events or for any other reason.
Condensed Consolidated Statements of Financial Condition (Unaudited)
(Dollars in Thousands, Except Share Data)
| ASSETS | September 30, 2021 | June 30, 2021 | March 31, 2021 | December 30, 2020 | September 30, 2020 | |||||
|---|---|---|---|---|---|---|---|---|---|---|
| Cash and cash equivalents | $ | 314,019 | $ | 720,243 | $ | 3,724,242 | $ | 1,586,451 | $ | 427,367 |
| Investment securities available for sale, at fair value | 847,870 | 854,023 | 921,947 | 797,363 | 814,495 | |||||
| Mortgage-backed securities available for sale, at fair value | 1,017,029 | 1,063,582 | 558,833 | 430,761 | 453,607 | |||||
| Investment securities held to maturity, at cost | 52,944 | 60,228 | 67,709 | 76,176 | 87,183 | |||||
| Mortgage-backed securities held to maturity, at cost | 3,725 | 4,019 | 4,403 | 5,152 | 5,427 | |||||
| Loans held for sale | 56,194 | 87,905 | 67,635 | 133,659 | 183,577 | |||||
| Loans and leases | 3,609,563 | 3,496,670 | 3,657,531 | 3,448,675 | 3,322,765 | |||||
| Allowance for credit losses | (68,281) | (91,208) | (98,892) | (72,389) | (56,188) | |||||
| Federal Reserve Bank and Federal Home Loan Bank stocks, at cost | 28,400 | 28,433 | 28,433 | 27,138 | 27,138 | |||||
| Accrued interest receivable | 16,254 | 16,230 | 17,429 | 17,133 | 16,628 | |||||
| Premises, furniture, and equipment, net | 44,888 | 44,107 | 41,510 | 39,932 | 41,608 | |||||
| Rental equipment, net | 213,116 | 211,368 | 211,397 | 206,732 | 205,964 | |||||
| Bank-owned life insurance | 94,749 | 94,142 | 93,542 | 92,937 | 92,315 | |||||
| Foreclosed real estate and repossessed assets, net | 2,077 | 1,204 | 1,483 | 7,186 | 9,957 | |||||
| Goodwill | 309,505 | 309,505 | 309,505 | 309,505 | 309,505 | |||||
| Intangible assets | 33,148 | 34,898 | 36,903 | 39,660 | 41,692 | |||||
| Prepaid assets | 10,513 | 7,482 | 10,201 | 11,270 | 8,328 | |||||
| Deferred taxes | 25,173 | 20,072 | 25,435 | 24,411 | 17,723 | |||||
| Other assets | 79,764 | 88,909 | 110,877 | 82,763 | 82,983 | |||||
| Total assets | $ | 6,690,650 | $ | 7,051,812 | $ | 9,790,123 | $ | 7,264,515 | $ | 6,092,074 |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||
| LIABILITIES | ||||||||||
| Deposits: | ||||||||||
| Noninterest-bearing checking | 5,018,233 | 5,385,569 | 7,928,235 | 5,581,597 | 4,356,630 | |||||
| Interest-bearing checking | 254,721 | 255,509 | 416,164 | 274,504 | 157,571 | |||||
| Savings deposits | 86,356 | 93,608 | 126,834 | 54,080 | 47,866 | |||||
| Money market deposits | 67,204 | 63,920 | 55,045 | 56,440 | 48,494 | |||||
| Time certificates of deposit | 9,091 | 11,425 | 12,614 | 13,522 | 20,223 | |||||
| Wholesale deposits | 79,366 | 78,840 | 103,521 | 227,648 | 348,416 | |||||
| Total deposits | 5,514,971 | 5,888,871 | 8,642,413 | 6,207,791 | 4,979,200 | |||||
| Long-term borrowings | 92,834 | 93,634 | 95,336 | 96,760 | 98,224 | |||||
| Accrued interest payable | 579 | 1,853 | 679 | 2,068 | 1,923 | |||||
| Accrued expenses and other liabilities | 210,382 | 190,821 | 216,437 | 144,686 | 165,419 | |||||
| Total liabilities | 5,818,766 | 6,175,179 | 8,954,865 | 6,451,305 | 5,244,766 | |||||
| STOCKHOLDERS’ EQUITY | ||||||||||
| Preferred stock | — | — | — | — | — | |||||
| Common stock, $.01 par value | 317 | 319 | 319 | 326 | 344 | |||||
| Common stock, Nonvoting, $.01 par value | — | — | — | — | — | |||||
| Additional paid-in capital | 604,484 | 602,720 | 601,222 | 598,669 | 594,569 | |||||
| Retained earnings | 259,189 | 262,578 | 225,471 | 198,000 | 234,927 | |||||
| Accumulated other comprehensive income | 7,599 | 15,222 | 12,809 | 20,119 | 17,542 | |||||
| Treasury stock, at cost | (860) | (5,696) | (5,655) | (5,440) | (3,677) | |||||
| Total equity attributable to parent | 870,729 | 875,143 | 834,166 | 811,674 | 843,705 | |||||
| Noncontrolling interest | 1,155 | 1,490 | 1,092 | 1,536 | 3,603 | |||||
| Total stockholders’ equity | 871,884 | 876,633 | 835,258 | 813,210 | 847,308 | |||||
| Total liabilities and stockholders’ equity | $ | 6,690,650 | $ | 7,051,812 | $ | 9,790,123 | $ | 7,264,515 | $ | 6,092,074 |
Consolidated Statements of Operations (Unaudited)
(Dollars in Thousands, Except Share and Per Share Data)
| Three Months Ended | Year Ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| September 30, 2021 | June 30, 2021 | September 30, 2020 | September 30,<br>2021 | September 30,<br>2020 | ||||||
| Interest and dividend income: | ||||||||||
| Loans and leases, including fees | $ | 63,665 | $ | 62,287 | $ | 62,022 | $ | 256,080 | $ | 261,128 |
| Mortgage-backed securities | 3,979 | 3,446 | 1,877 | 12,155 | 9,028 | |||||
| Other investments | 4,412 | 4,250 | 4,508 | 17,619 | 22,685 | |||||
| 72,056 | 69,983 | 68,407 | 285,854 | 292,841 | ||||||
| Interest expense: | ||||||||||
| Deposits | 164 | 188 | 1,904 | 1,593 | 22,616 | |||||
| FHLB advances and other borrowings | 1,225 | 1,320 | 1,990 | 5,270 | 11,187 | |||||
| 1,389 | 1,508 | 3,894 | 6,863 | 33,803 | ||||||
| Net interest income | 70,667 | 68,475 | 64,513 | 278,991 | 259,038 | |||||
| Provision for credit losses | 8,775 | 4,612 | 8,980 | 49,766 | 64,776 | |||||
| Net interest income after provision for credit losses | 61,892 | 63,863 | 55,533 | 229,225 | 194,262 | |||||
| Noninterest income: | ||||||||||
| Refund transfer product fees | 2,567 | 12,073 | 2,335 | 37,967 | 36,061 | |||||
| Tax advance product fees | 226 | 891 | (14) | 47,639 | 31,826 | |||||
| Payments card and deposit fees | 25,541 | 29,203 | 21,422 | 107,182 | 87,379 | |||||
| Other bank and deposit fees | 230 | 338 | 228 | 939 | 1,310 | |||||
| Rental income | 9,709 | 9,976 | 10,144 | 39,416 | 44,826 | |||||
| Net gain realized on investment securities | — | — | 51 | 6 | 51 | |||||
| Gain on divestitures | — | — | — | — | 19,275 | |||||
| Gain (loss) on sale of other | 580 | 5,955 | 3,455 | 11,515 | 4,425 | |||||
| Other income | 10,689 | 4,017 | 3,129 | 26,240 | 14,641 | |||||
| Total noninterest income | 49,542 | 62,453 | 40,750 | 270,904 | 239,794 | |||||
| Noninterest expense: | ||||||||||
| Compensation and benefits | 36,222 | 38,604 | 35,616 | 151,090 | 136,247 | |||||
| Refund transfer product expense | 3,219 | 2,435 | 162 | 11,861 | 7,644 | |||||
| Tax advance product expense | 30 | (25) | (97) | 2,564 | 2,723 | |||||
| Card processing | 7,063 | 6,809 | 6,524 | 27,201 | 25,956 | |||||
| Occupancy and equipment expense | 8,252 | 7,381 | 6,826 | 29,269 | 26,995 | |||||
| Operating lease equipment depreciation | 7,865 | 8,122 | 7,594 | 30,987 | 32,831 | |||||
| Legal and consulting | 14,369 | 5,680 | 5,615 | 31,341 | 20,858 | |||||
| Intangible amortization | 1,761 | 2,013 | 2,283 | 8,545 | 10,997 | |||||
| Impairment expense | 601 | 505 | 1,232 | 2,818 | 1,982 | |||||
| Other expense | 14,232 | 9,999 | 14,528 | 48,007 | 52,818 | |||||
| Total noninterest expense | 93,614 | 81,523 | 80,283 | 343,683 | 319,051 | |||||
| Income before income tax expense | 17,820 | 44,793 | 16,000 | 156,446 | 115,005 | |||||
| Income tax expense (benefit) | 1,101 | 4,934 | 1,791 | 10,701 | 5,661 | |||||
| Net income before noncontrolling interest | 16,719 | 39,859 | 14,209 | 145,745 | 109,344 | |||||
| Net income attributable to noncontrolling interest | 816 | 1,158 | 1,051 | 4,037 | 4,624 | |||||
| Net income attributable to parent | $ | 15,903 | $ | 38,701 | $ | 13,158 | $ | 141,708 | $ | 104,720 |
| Less: Allocation of Earnings to participating securities(1) | 297 | 729 | 309 | 2,698 | 2,414 | |||||
| Net income attributable to common shareholders(1) | 15,606 | 37,972 | 12,849 | 139,010 | 102,306 | |||||
| Earnings per common share | ||||||||||
| Basic | $ | 0.50 | $ | 1.21 | $ | 0.38 | $ | 4.38 | $ | 2.94 |
| Diluted | $ | 0.50 | $ | 1.21 | $ | 0.38 | $ | 4.38 | $ | 2.94 |
| Shares used in computing earnings per common share | ||||||||||
| Basic | 31,280,162 | 31,320,893 | 33,783,659 | 31,729,596 | 34,829,971 | |||||
| Diluted | 31,299,555 | 31,338,947 | 33,783,659 | 31,751,522 | 34,829,971 |
(1) Amounts presented are used in the two-class earnings per common share calculation.
Average Balances, Interest Rates and Yields
The following table presents, for the periods indicated, the total dollar amount of interest income from average interest-earning assets and the resulting yields, as well as the interest expense on average interest-bearing liabilities, expressed both in dollars and in rates. Only the yield/rate reflects tax-equivalent adjustments. Nonaccruing loans and leases have been included in the table as loans carrying a zero yield.
| Three Months Ended September 30, | 2021 | 2020 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (Dollars in Thousands) | Average<br>Outstanding<br>Balance | Interest<br>Earned /<br>Paid | Yield /<br><br>Rate(1) | Average<br>Outstanding<br>Balance | Interest<br>Earned /<br>Paid | Yield /<br><br>Rate(1) | ||||||
| Interest-earning assets: | ||||||||||||
| Cash and fed funds sold | $ | 852,122 | $ | 1,248 | 0.58 | % | $ | 1,960,020 | $ | 891 | 0.18 | % |
| Mortgage-backed securities | 1,049,258 | 3,979 | 1.50 | % | 394,456 | 1,877 | 1.89 | % | ||||
| Tax exempt investment securities | 232,006 | 772 | 1.67 | % | 374,876 | 1,347 | 1.81 | % | ||||
| Asset-backed securities | 400,507 | 1,199 | 1.19 | % | 331,939 | 1,241 | 1.49 | % | ||||
| Other investment securities | 258,367 | 1,193 | 1.83 | % | 208,078 | 1,029 | 1.97 | % | ||||
| Total investments | 1,940,138 | 7,143 | 1.50 | % | 1,309,349 | 5,494 | 1.78 | % | ||||
| Commercial finance | 2,690,064 | 48,285 | 7.12 | % | 2,240,591 | 42,390 | 7.53 | % | ||||
| Consumer finance | 258,043 | 4,308 | 6.62 | % | 234,468 | 3,998 | 6.78 | % | ||||
| Tax services | 37,174 | 165 | 1.76 | % | 16,651 | 5 | 0.13 | % | ||||
| Warehouse finance | 388,477 | 6,332 | 6.47 | % | 287,294 | 4,378 | 6.06 | % | ||||
| Community banking | 272,554 | 4,575 | 6.66 | % | 757,993 | 11,251 | 5.91 | % | ||||
| Total loans and leases | 3,646,312 | 63,665 | 6.93 | % | 3,536,997 | 62,022 | 6.98 | % | ||||
| Total interest-earning assets | $ | 6,438,572 | $ | 72,056 | 4.45 | % | $ | 6,806,366 | $ | 68,407 | 4.02 | % |
| Noninterest-earning assets | 822,592 | 866,407 | ||||||||||
| Total assets | $ | 7,261,164 | $ | 7,672,773 | ||||||||
| Interest-bearing liabilities: | ||||||||||||
| Interest-bearing checking(2) | $ | 243,005 | $ | — | — | % | $ | 186,952 | $ | — | — | % |
| Savings | 89,110 | 5 | 0.02 | % | 52,616 | 1 | 0.01 | % | ||||
| Money markets | 67,083 | 58 | 0.34 | % | 41,179 | 32 | 0.31 | % | ||||
| Time deposits | 10,218 | 21 | 0.81 | % | 21,947 | 92 | 1.66 | % | ||||
| Wholesale deposits | 77,506 | 80 | 0.41 | % | 562,828 | 1,779 | 1.26 | % | ||||
| Total interest-bearing deposits | 486,922 | 164 | 0.13 | % | 865,522 | 1,904 | 0.88 | % | ||||
| FHLB advances | — | — | — | % | 94,457 | 619 | 2.61 | % | ||||
| Subordinated debentures | 73,951 | 1,065 | 5.71 | % | 73,779 | 1,147 | 6.19 | % | ||||
| Other borrowings | 19,299 | 160 | 3.29 | % | 25,431 | 224 | 3.50 | % | ||||
| Total borrowings | 93,250 | 1,225 | 5.21 | % | 193,667 | 1,990 | 4.09 | % | ||||
| Total interest-bearing liabilities | 580,172 | 1,390 | 0.95 | % | 1,059,189 | 3,894 | 1.46 | % | ||||
| Noninterest-bearing deposits | 5,589,946 | — | — | % | 5,601,052 | — | — | % | ||||
| Total deposits and interest-bearing liabilities | $ | 6,170,118 | $ | 1,390 | 0.09 | % | $ | 6,660,241 | $ | 3,894 | 0.23 | % |
| Other noninterest-bearing liabilities | 204,726 | 164,766 | ||||||||||
| Total liabilities | 6,374,844 | 6,825,007 | ||||||||||
| Shareholders' equity | 886,320 | 847,766 | ||||||||||
| Total liabilities and shareholders' equity | $ | 7,261,164 | $ | 7,672,773 | ||||||||
| Net interest income and net interest rate spread including noninterest-bearing deposits | $ | 70,667 | 4.36 | % | $ | 64,513 | 3.79 | % | ||||
| Net interest margin | 4.35 | % | 3.77 | % | ||||||||
| Tax-equivalent effect | 0.01 | % | 0.02 | % | ||||||||
| Net interest margin, tax-equivalent(3) | 4.37 | % | 3.79 | % |
(1) Tax rate used to arrive at the TEY for the three months ended September 30, 2021 and 2020 was 21%.
(2) Of the total balance, $242.7 million are interest-bearing deposits where interest expense is paid by a third party and not by the Company.
(3) Net interest margin expressed on a fully-taxable-equivalent basis ("net interest margin, tax-equivalent") is a non-GAAP financial measure. The tax-equivalent adjustment to net interest income recognizes the estimated income tax savings when comparing taxable and tax-exempt assets and adjusting for federal and state exemption of interest income. The Company believes that it is a standard practice in the banking industry to present net interest margin expressed on a fully taxable equivalent basis and, accordingly, believes the presentation of this non-GAAP financial measure may be useful for peer comparison purposes.
Selected Financial Information
| As of and For the Three Months Ended | September 30,<br>2021 | June 30,<br>2021 | March 31,<br>2021 | December 31,<br>2020 | September 30,<br>2020 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity to total assets | 13.03 | % | 12.43 | % | 8.53 | % | 11.19 | % | 13.91 | % | |||||
| Book value per common share outstanding | $ | 27.53 | $ | 27.46 | $ | 26.16 | $ | 24.93 | $ | 24.66 | |||||
| Tangible book value per common share outstanding | $ | 16.71 | $ | 16.67 | $ | 15.31 | $ | 14.23 | $ | 14.44 | |||||
| Tangible book value per common share outstanding excluding AOCI | $ | 16.47 | $ | 16.20 | $ | 14.91 | $ | 13.61 | $ | 13.93 | |||||
| Common shares outstanding | 31,669,952 | 31,919,780 | 31,926,008 | 32,620,251 | 34,360,890 | ||||||||||
| Nonperforming assets to total assets | 0.92 | % | 0.64 | % | 0.48 | % | 0.73 | % | 0.79 | % | |||||
| Nonperforming loans and leases to total loans and leases | 1.52 | % | 1.17 | % | 1.17 | % | 1.18 | % | 0.97 | % | |||||
| Net interest margin | 4.35 | % | 3.75 | % | 3.07 | % | 4.65 | % | 3.77 | % | |||||
| Net interest margin, tax-equivalent | 4.37 | % | 3.77 | % | 3.08 | % | 4.67 | % | 3.79 | % | |||||
| Return on average assets | 0.88 | % | 1.90 | % | 2.22 | % | 1.73 | % | 0.69 | % | |||||
| Return on average equity | 7.18 | % | 18.07 | % | 28.93 | % | 13.91 | % | 6.21 | % | |||||
| Full-time equivalent employees | 1,124 | 1,109 | 1,075 | 1,038 | 1,015 |
Non-GAAP Reconciliation
| Efficiency Ratio | For the last twelve months ended | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (Dollars in Thousands) | September 30,<br>2021 | June 30,<br>2021 | March 31,<br>2021 | December 31,<br>2020 | September 30,<br>2020 | ||||||||||
| Noninterest Expense - GAAP | $ | 343,683 | $ | 330,352 | $ | 320,070 | $ | 315,828 | $ | 319,051 | |||||
| Net Interest Income | 278,991 | 272,837 | 266,499 | 260,386 | 259,038 | ||||||||||
| Noninterest Income | 270,903 | 262,111 | 240,706 | 247,766 | 239,794 | ||||||||||
| Total Revenue: GAAP | $ | 549,894 | $ | 534,948 | $ | 507,205 | $ | 508,152 | $ | 498,832 | |||||
| Efficiency Ratio, last twelve months | 62.50 | % | 61.75 | % | 63.10 | % | 62.15 | % | 63.96 | % |
About Meta Financial Group, Inc.®
Meta Financial Group, Inc.®("Meta") (Nasdaq: CASH) is a South Dakota-based financial holding company. At Meta, our mission is financial inclusion for all®. Through our subsidiary, MetaBank®, N.A., we strive to remove barriers to financial access and promote economic mobility by working with third parties to provide responsible, secure, high quality financial products that contribute to the social and economic benefit of communities at the core of the real economy. Meta works to increase financial availability, choice, and opportunity for all. Additional information can be found by visiting www.metafinancialgroup.com.
| Investor Relations Contact |
|---|
| Brittany Kelley Elsasser |
| 605-362-2423 |
| bkelley@metabank.com |
| Media Relations Contact |
| mediarelations@metabank.com |
15
a4qfy21irquarterlydeck_1
QUARTERLY INVESTOR UPDATE FOURTH QUARTER & FISCAL YEAR END 2021
FORWARD LOOKING STATEMENTS 2 This investor update contains “forward-looking statements” which are made in good faith by the Company pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. You can identify forward-looking statements by words such as “may,” “hope,” “will,” “should,” “expect,” “plan,” “anticipate,” “intend,” “believe,” “estimate,” “predict,” “potential,” “continue,” “could,” “future,” or the negative of those terms, or other words of similar meaning or similar expressions. These forward-looking statements are based on information currently available to us and assumptions about future events, and include statements with respect to the Company’s beliefs, expectations, estimates, and intentions, which are subject to significant risks and uncertainties, and are subject to change based on various factors, some of which are beyond the Company’s control. Such risks, uncertainties and other factors may cause our actual growth, results of operations, financial condition, cash flows, performance and business prospects and opportunities to differ materially from those expressed in, or implied by, these forward-looking statements. Such statements address, among others, the following subjects: future operating results; expectations in connection with the impact of the ongoing COVID-19 pandemic and related government actions on our business, our industry and the capital markets; customer retention; loan and other product demand; expectations concerning acquisitions and divestitures; new products and services, including those offered by Meta Payment Systems, Refund Advantage, EPS Financial and Specialty Consumer Services divisions; credit quality; the level of net charge-offs and the adequacy of the allowance for loan and lease losses; technology; and the Company's employees. The following factors, among others, could cause the Company's financial performance and results of operations to differ materially from the expectations, estimates, and intentions expressed in such forward-looking statements: maintaining our executive management team; expected growth opportunities may not be realized or may take longer to realize than expected; the potential adverse effects of the ongoing COVID-19 pandemic and any governmental or societal responses thereto, including the deployment and efficacy of the COVID-19 vaccines, or other unusual and infrequently occurring events; actual changes in interest rates and the Fed Funds rate; additional changes in tax laws; the strength of the United States' economy, in general, and the strength of the local economies in which the Company operates; changes in, trade, monetary, and fiscal policies and laws, including interest rate policies of the Federal Reserve; inflation, market, and monetary fluctuations; the timely and efficient development of, and acceptance of, new products and services offered by the Company or its strategic partners, as well as risks (including reputational and litigation) attendant thereto, and the perceived overall value of these products and services by users; the risks of dealing with or utilizing third parties, including, in connection with the Company’s refund advance business, the risk of reduced volume of refund advance loans as a result of reduced customer demand for or usage of the Company’s strategic partners’ refund advance products; our relationship with, and any actions which may be initiated by, our regulators; the impact of changes in financial services laws and regulations, including, but not limited to, laws and regulations relating to the tax refund industry and the insurance premium finance industry; technological changes, including, but not limited to, the protection of our electronic systems and information; the impact of acquisitions and divestitures; litigation risk; the growth of the Company’s business, as well as expenses related thereto; continued maintenance by MetaBank of its status as a well-capitalized institution, changes in consumer spending and saving habits; the impact of our participation as prepaid card issuer for the Economic Impact Payment (“EIP”) program and similar programs, losses from fraudulent or illegal activity, technological risks and developments and cyber threats, attacks or events; the success of the Company at maintaining its high quality asset level and managing and collecting assets of borrowers in default should problem assets increase; and the other factors described under the caption “Risk Factors” and in other sections of the Company’s Annual Report on Form 10-K for the Company's fiscal year ended September 30, 2020 and in other filings made by the Company with the Securities and Exchange Commission (“SEC”). The forward-looking statements included herein speak only as of the date of this investor update. The Company expressly disclaims any intent or obligation to update any forward-looking statements, whether written or oral, that may be made from time to time by or on behalf of the Company or its subsidiaries, whether as a result of new information, changed circumstances or future events or for any other reason. Meta Financial Group, Inc. (Nasdaq: CASH) | Quarterly Investor Presentation
3 WE STRIVE TO INCREASE FINANCIAL AVAILABILITY, CHOICE, AND OPPORTUNITY THROUGH FINANCIAL EMPOWERMENT. We work to disrupt traditional banking norms by developing partnerships with fintechs, affinity groups, government agencies, and other banks to make a range of quality financial products and services available to the communities we serve nationally. Our national bank charter, coordination with regulators, and deep understanding of risk mitigation and compliance allows us to guide our partners and deliver the financial products and services that meet the needs of those who need them most. We believe in financial inclusion for all®. Meta Financial Group, Inc. (Nasdaq: CASH) | Quarterly Investor Presentation
Optimize Interest-Earning Assets Optimize Deposits Optimize Operating Efficiencies Efficiency ratio improved to 62.5% from 64.0% as of September 30, 2020. • Continuing to drive simplification and optimization of existing business platforms. • Investing in technology to help drive efficiencies and operating leverage. Reduced wholesale funding and borrowings by 77% from September 30, 2020. • Substantial deposit growth during fiscal year 2021 as a result of government stimulus programs and organic growth. • In partnership with Blackhawk, issued prepaid debit cards for the New York State Department of Labor’s Excluded Workers Fund. Focus on commercial finance business lines. • Grew commercial finance loans by $139 million, or 5%, from the linked- quarter. • Subsequent to the quarter-end sold $30 million and reached an agreement to sell approximately $161 million of community bank loans. These sales will wind down nearly all of the legacy community bank loan portfolio. FOURTH QUARTER BUSINESS HIGHLIGHTS & KEY STRATEGIC INITIATIVES 4Meta Financial Group, Inc. (Nasdaq: CASH) | Quarterly Investor Presentation
SUMMARY FINANCIAL RESULTS FOURTH QUARTER ENDED SEPTEMBER 30, 2021 5 1 Amounts presented are used in the two-class earnings per common share calculation. INCOME STATEMENT ($ in thousands, except per share data) 4Q20 3Q21 4Q21 Net interest income 64,513 68,475 70,667 Provision for credit losses 8,980 4,612 8,775 Total noninterest income 40,750 62,453 49,542 Total noninterest expense 80,283 81,523 93,614 Net income before taxes 16,000 44,793 17,820 Income tax expense 1,791 4,934 1,101 Net income before non-controlling interest 14,209 39,859 16,719 Net income attributable to non-controlling interest 1,051 1,159 816 Net income attributable to parent 13,158 38,701 15,903 Less: Allocation of earnings to participating securities1 309 729 297 Net income attributable to common shareholders1 12,849 37,972 15,606 Earnings per share, diluted $0.38 $1.21 $0.50 Average diluted shares 33,783,659 31,338,947 31,299,555 Revenue of $120.2 million, a 14% increase compared to $105.3 million for the same quarter in fiscal 2020. • Strong revenue growth compared to the prior year related to higher payments fee income, driven by increased activity related to stimulus programs and delayed timing of the tax season. • Recognized a net unrealized gain of $4.1 million on a prior investment in MoneyLion Inc. after it completed its de-SPAC process and became publicly traded on September 22, 2021. Noninterest expense increased 17% to $93.6 million for the fiscal 2021 fourth quarter, from $80.3 million for the same quarter of last year • Increased as a result of one-time spend of $9 million dollars related to investments in technology and product stack. Furthermore, the Company recognized $1.3 million dollars of expense associated with the CEO transition. • Earnings per share increased 32% year-over-year to $0.50 for 4Q21. Reported earnings of $4.38 per share for fiscal year 2021, an increase of 49% compared to fiscal year 2020. Meta Financial Group, Inc. (Nasdaq: CASH) | Quarterly Investor Presentation
$- $5.0 $10.0 $15.0 $20.0 $25.0 $30.0 $35.0 $40.0 $45.0 $50.0 4Q20 3Q21 4Q21 Payments Tax Services Consumer Lending BaaS CAPABILITIES GENERATE INCREASING LOW-COST DEPOSITS AND REVENUE 6 Growth in BaaS revenue Average Payments Deposits* ($ in billions) 28% 33% 27% % of Total Revenue % of Payments Revenue ($ in millions) $5.82 $6.79 $5.89 4Q20 3Q21 4Q21 *Deposit growth includes stimulus-related deposits as a result of Economic Impact Payments (“EIP”) disbursed in 2020 and 2021. **Banking Services includes ATM, ACH/Faster Payments, Merchant Acquiring Growth in BaaS deposits Banking Services** Checking Prepaid 11% 10% 79% Meta Financial Group, Inc. (Nasdaq: CASH) | Quarterly Investor Presentation 9% 11% 80% 10% 8% 82%
BALANCE SHEET HIGHLIGHTS FOURTH QUARTER ENDED SEPTEMBER 30, 2021 7 BALANCE SHEET PERIOD ENDING ($ in thousands) 4Q20 3Q21 4Q21 Cash and cash equivalents 427,367 720,243 314,019 Investments 1,360,712 1,981,852 1,921,568 Loans held for sale 183,577 87,905 56,194 Loans and leases (HFI)1 3,322,765 3,496,670 3,609,563 Allowance for credit losses (56,188) (91,208) (68,281) Other assets 853,841 856,350 857,587 Total assets 6,092,074 7,051,812 6,690,650 Total deposits 4,979,200 5,888,871 5,514,971 Total borrowings 98,224 93,634 92,834 Other liabilities 167,342 192,674 210,961 Total liabilities 5,244,766 6,175,179 5,818,766 Total stockholders’ equity 847,308 876,633 871,884 Total liabilities and stockholders’ equity 6,092,074 7,051,812 6,690,650 Loans (HFI) / Deposits 67 % 59 % 65 % Net Interest Margin 3.77 % 3.75 % 4.35 % Return on Average Assets 0.69 % 1.90 % 0.88 % Return on Average Equity 6.21 % 18.07 % 7.18 % 1Includes $219.0 million, $143.3 million, and $96.0 million of PPP loans in 4Q20, 3Q21, and 4Q21, respectively. The effects of government stimulus programs have had a significant impact on the Company’s balance sheet. These programs include EIP, enhanced unemployment benefits that flow through to existing prepaid card programs, and Paycheck Protection Program (“PPP”) loans. Meta Financial Group, Inc. (Nasdaq: CASH) | Quarterly Investor Presentation
Quarterly Average Earning Asset Mix % in charts represent % of total interest earning assets At the Quarter Ended SEP 30, 2020 SEP 30, 2021 ($ in thousands) 4 Q 2 0 4 Q 2 1 Y/Y Δ COMMERCIAL FINANCE 2,307,984 2,725,495 18% Term lending 805,323 961,019 19% Asset-based lending 182,419 300,225 65% Factoring 281,173 363,670 29% Lease financing 281,084 266,050 (5)% Insurance premium finance 337,940 428,867 27% SBA/USDA¹ 318,387 247,756 (22)% Other commercial finance 101,658 157,908 55% CONSUMER LENDING 224,151 252,857 13% Consumer credit programs 89,809 129,251 44% Other consumer lending 134,342 123,606 (8)% TAX SERVICES 3,066 10,405 239% WAREHOUSE FINANCE 293,375 419,926 43% COMMUNITY BANKING 485,564 199,132 (59)% TOTAL GROSS LOANS & LEASES HFI 3,314,940 3,607,815 9% TOTAL GROSS LOANS & LEASES HFS 183,577 56,194 (69)% CASH & INVESTMENTS 1,716,594 2,176,694 27% TOTAL EARNING ASSETS 5,215,111 5,840,703 12% RENTAL EQUIPMENT, NET 205,964 213,116 3% 1Includes balances of $219.0 million in PPP loans at September 30, 2020 and $96.0 million at September 30, 2021. DIVERSIFIED EARNING ASSET PORTFOLIO 8 33% 36% 42% 8% 8% 10% 0% 1% 1% 11% 5% 4% 48% 50% 43% 4Q20 3Q21 4Q21 Commercial Finance Target: >55% Consumer & Warehouse Finance Target: <15%Tax Services Community Bank Target: 0% Cash & Investments Target: <20% The effects of government stimulus programs in 2020 and 2021 have had a significant impact on the Company’s cash balances. Meta Financial Group, Inc. (Nasdaq: CASH) | Quarterly Investor Presentation
OVERVIEW OF LOAN PORTFOLIO 9 ($ in millions) Business Line Balance Sheet Category 4Q20 3Q21 4Q21 MRQ Yield Commercial Finance Commercial Finance Guaranteed portion of US govt SBA/USDA loans SBA/USDA 54.9 71.9 61.9 Unguaranteed portion of US govt SBA/USDA loans SBA/USDA 44.5 48.6 89.8 Paycheck protection program loans SBA/USDA 219.0 143.3 96.0 Renewable energy debt financing¹ (term lending only) Term lending N/A 231.2 259.7 Other Term lending 365.9 218.3 235.1 TOTAL 684.3 713.2 742.6 5.42% Equipment Finance Large ticket Lease Financing 240.6 247.0 232.5 Term lending 184.4 195.9 201.8 Small ticket Lease Financing 32.1 27.6 24.4 Term lending 255.1 274.9 264.4 Other Lease Financing 8.3 8.3 9.1 TOTAL 720.5 753.7 732.3 7.40% Working Capital Asset-Based Lending 182.4 263.2 300.2 Factoring 281.2 320.6 363.7 TOTAL 463.6 583.8 663.9 10.75% Specialty Finance Insurance Premium Finance 337.9 417.7 428.9 Other commercial finance 101.7 118.1 157.9 TOTAL 439.6 535.8 586.8 5.21% Consumer Lending Consumer credit programs Consumer credit programs 89.8 105.4 129.3 Private student loans Other consumer finance 115.4 101.4 96.7 Other consumer lending Other consumer finance 18.9 20.9 26.9 TOTAL 224.2 227.7 252.9 6.62% Tax Services Refund advance loans Tax Services 1.7 41.0 8.0 Tax preparer loans Tax Services 1.3 0.3 2.4 TOTAL 3.1 41.3 10.4 1.76% Corporate Warehouse Finance 293.4 335.7 419.9 Community Banking 485.6 304.0 199.1 TOTAL 778.9 639.7 619.1 6.55% Total Lending Portfolio (HFI) 3,314.1 3,495.2 3,607.8 6.93% Meta Financial Group, Inc. (Nasdaq: CASH) | Quarterly Investor Presentation 1Total renewable energy debt financing outstanding was $413.0 million in 4Q21. Majority of balances in term lending balance sheet category.
$5.5 $3.8 $3.8 $2.8 $7.0 0.63% 0.44% 0.44% 0.32% 0.77% 4Q20 1Q21 2Q21 3Q21 4Q21 Period Ended Adj. NCOs Adj. NCOs / Adj. Average Loans Adjusted Net Charge-Offs (“NCOs”)¹ Excludes Tax Services NCOs and Related Seasonal Average Loans ($ in millions) KEY CREDIT METRICS • Annualized adjusted net charge-offs1: – 0.77% of average loans in 4Q21 – 0.50% of average loans over last 12 months • Allowance for credit loss $68.3 million, or 1.89% of total loans and leases, a 72bps decrease from the linked-quarter. • Changes in the NPAs at September 30, 2021, were driven in large part by a $10.2 million increase in NPAs the commercial finance portfolio primarily due to an administrative timing item. • In October 2021, sold $30 million of legacy community banking loans and have agreements in place to sell approximately $161 million loans which included $14.9 million of NPLs and NPAs. $48.0 $53.2 $46.7 $45.1 $61.8 0.79% 0.73% 0.48% 0.64% 0.92% 4Q20 1Q21 2Q21 3Q21 4Q21 Period Ended NPAs NPAs / Total Assets ASSET QUALITY 10 1 Non-GAAP measures, see appendix for reconciliations. Tax Services NCOs and related seasonal average loans are excluded to adjust for the cyclicality of activity related to the overall economics of the tax services business line. $34.0 $42.3 $43.5 $41.9 $55.9 0.97% 1.18% 1.17% 1.17% 1.52% 4Q20 1Q21 2Q21 3Q21 4Q21 Period Ended NPLs NPLs / Total Loans Nonperforming Assets (“NPAs”) ($ in millions) Nonperforming Loans (“NPLs”) ($ in millions) Meta Financial Group, Inc. (Nasdaq: CASH) | Quarterly Investor Presentation
-10% 5% 20% 35% -100 +100 +200 +300 Parallel Shock Ramp 1 Fixed rate securities, loans and leases are shown for contractual periods. -2,000 0 2,000 4,000 Month 1-12 Month 13-36 Month 37-60 Month 61-180 V o lu m e ($ M M ) Period Variance Total Assets Total Liabilities INTEREST RATE RISK MANAGEMENT SEPTEMBER 30, 2021 11 4% 28% 11% 57% • Low-rate environment; focus is on reducing wholesale funding and deploying deposits into positive carry opportunities. • Interest rate risk shows asset sensitive balance sheet; net interest income modeled under an instantaneous, parallel rate shock and a gradual parallel ramp. • Management employs rigorous modeling techniques under a variety of yield curve shapes, twists and ramps. Fixed Rate > 1 Year 12-Month Interest Rate Sensitivity from Base Net Interest Income Earning Asset Pricing Attributes1 Asset/Liability Gap Analysis Fixed Rate < 1 Year Floating or Variable Federal Reserve Bank Deposits (Floating or Variable) Meta Financial Group, Inc. (Nasdaq: CASH) | Quarterly Investor Presentation
6.58% 7.39% 4.75% 6.85% 7.67%7.56% 8.60% 5.47% 7.83% 8.69% 4Q20 1Q21 2Q21 3Q21 4Q21 CAPITAL AND SOURCES OF LIQUIDITY REGULATORY CAPITAL AS OF SEPTEMBER 30, 2021 Minimum Requirement to be Well-Capitalized under Prompt Corrective Action Provisions Meta Financial Group, Inc. MetaBank, N.A. Capital Ratio Trends At September 30, 2021¹ Meta Financial Group, Inc. MetaBank, N.A. Tier 1 Leverage 7.67% 8.69% Common Equity Tier 1 12.12% 14.11% Tier 1 Capital 12.46% 14.13% Total Capital 15.45% 15.38% MetaBank remains well-capitalized. Tier 1 Leverage ratios impacted from government stimulus programs during fiscal 2020 and fiscal 2021. Capital levels have returned to a more normalized rate. Granted temporary exemption from meeting certain capital leverage ratios by the OCC, related to participation in distributing Bank-issued EIP cards. Primary & Secondary Liquidity Sources ($ in millions) Cash and Cash Equivalents $265 Unpledged Investment Securities $1,040 FHLB Borrowing Capacity $725 Funds Available through Fed Discount Window $230 PPP Loan Collateral $95 Unsecured Lines of Credit $1,215 - $1,510 EIP Deposit Balances Held at Other Banks $1,573 15.30% 14.14% 14.65% 16.18% 15.45%15.26% 14.14% 14.66% 16.22% 15.38% 4Q20 1Q21 2Q21 3Q21 4Q21 10% 5% 12 Total Capital Ratio Tier 1 Leverage Ratio 1 Regulatory capital reflects the Company's election of the five-year CECL transition for regulatory capital purposes. Amounts are preliminary pending completion and filing of the Company's regulatory reports. ² Non-GAAP measure, see appendix for reconciliations. Meta Financial Group, Inc. (Nasdaq: CASH) | Quarterly Investor Presentation
APPENDIX 13Meta Financial Group, Inc. (Nasdaq: CASH) | Quarterly Investor Presentation
1 Tax Services NCOs and average loans are excluded to adjust for the cyclicality of activity related to the overall economics of the Company's tax services business line. FINANCIAL MEASURE RECONCILIATIONS 14 For the last twelve months ended ($ in thousands) Sep 30, 2020 Dec 31, 2020 Mar 31, 2021 Jun 30, 2021 Sep 30, 2021 Noninterest Expense - GAAP 319,051 315,828 320,070 330,352 343,683 Net Interest Income 259,038 260,386 266,499 272,837 278,991 Noninterest Income 239,794 247,766 240,706 262,111 270,903 Total Revenue: GAAP 498,832 508,152 507,205 534,948 549,894 Efficiency Ratio, LTM 63.96% 62.15% 63.10% 61.75% 62.50% For the quarter ended ($ in thousands) Sep 30, 2020 Dec 31, 2020 Mar 31, 2021 Jun 30, 2021 Sep 30, 2021 Net Charge-offs 18,538 2,836 3,696 12,333 31,753 Less: Tax services net charge-offs 13,034 (956) (54) 9,488 24,798 Adjusted Net Charge-offs $5,504 $3,792 $3,750 $2,845 $6,955 Quarterly Average Loans and Leases 3,536,997 3,495,696 4,120,555 3,618,733 3,646,312 Less: Quarterly Average Tax Services Loans 16,650 25,104 714,789 91,804 31,174 Adjusted Quarterly Average Loans and Leases $3,520,347 $3,470,592 $3,405,766 $3,526,929 $3,609,138 Annualized NCOs/Average Loans and Leases 2.10% 0.32% 0.36% 1.36% 3.48% Adjusted Annualized NCOs/Adjusted Average Loans and Leases1 0.63% 0.44% 0.44% 0.32% 0.77% Efficiency Ratio Non-GAAP Reconciliation Adjusted Annualized NCOs and Adjusted Average Loans and Leases Meta Financial Group, Inc. (Nasdaq: CASH) | Quarterly Investor Presentation