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): July 28, 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 July 28, 2021, the Registrant issued a press release announcing its results of operations and financial condition as of and for the three and nine months ended June 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 third 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 July 28, 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 July 28, 2021 regarding the results of operations and financial condition. |
| 99.2 | Investor Update slide presentation for the Third Quarter of Fiscal Year 2021, dated July 28, 2021, prepared for use with the Press Release. |
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: July 28, 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 2021 FISCAL THIRD QUARTER
Sioux Falls, S.D., July 28, 2021 (GLOBE NEWSWIRE) -- Meta Financial Group, Inc.® (Nasdaq: CASH) (“Meta” or the “Company”) reported net income of $38.7 million, or $1.21 per share, for the three months ended June 30, 2021, compared to net income of $18.2 million, or $0.53 per share, for the three months ended June 30, 2020.
“MetaBank performed well during the third quarter, more than doubling earnings per share, as various timing items including tax season delays, additional card fee income from government stimulus programs, and reduced provision helped enhance performance year-over-year. Our results demonstrate how MetaBank’s mission of financial inclusion for all® is creating value for all our stakeholders, including our customers, employees and shareholders,” said President and CEO Brad Hanson.
Business Development Highlights for the 2021 Fiscal Third Quarter
•Published our inaugural 2020 Environmental, Social and Governance ("ESG") Report, building on the Company's vision, culture, and mission of financial inclusion for all®. The Company's 2020 ESG report can be downloaded at https://www.metafinancialgroup.com/environmental-social-governance.
•Launched the Company's Community Impact Program, focused on financial inclusion, personal and family financial empowerment, educational support, and disaster relief. Concentrating on these four areas positions MetaBank to encourage long-lasting positive impact in our communities.
•Expanded our renewable energy investment tax credit financing, originating $72.0 million for the first nine months of the fiscal year 2021, resulting in $18.9 million in total net ITC.
•Entered into a new Banking as a Service ("BaaS") partnership with Clair, a social impact embedded fintech startup. The Company will act as both the issuing bank and bank services provider, offering digital banking services for users of Clair.
Financial Highlights for the 2021 Fiscal Third Quarter
•Total revenue for the third quarter was $130.9 million, an increase of $27.7 million compared to $103.2 million for the same quarter in fiscal 2020 primarily driven by a timing shift of refund transfer product fees and additional payments card fee income from government stimulus programs.
•Operating efficiency ratio improved 185 basis points to 61.75% at June 30, 2021 compared to 63.60% at June 30, 2020. See non-GAAP reconciliation table below.
•Net interest income for the third quarter was $68.5 million, an increase of $6.4 million compared to $62.1 million in the third quarter last year, reflecting a decrease in deposit interest expense.
•Net interest margin ("NIM") improved to 3.75% for the third quarter from 3.28% during the same period of last year, chiefly due to the decrease of cash associated with the Company's participation in the EIP program and an increase in national lending loans and leases.
•Total gross loans and leases at June 30, 2021 decreased $1.5 million, to $3.50 billion, compared to June 30, 2020 and decreased $152.8 million, or 4%, when compared to March 31, 2021. The decrease was primarily driven due to the seasonal nature of the taxpayer advance loans.
•Average deposits from the Payments businesses for the fiscal 2021 third quarter increased nearly 8% to $6.79 billion when compared to the prior year quarter largely driven by excess cash on consumer cards related to government stimulus programs.
Tax Season Recap
During the third quarter of the fiscal 2021, total tax services product revenue was $13.6 million compared to $4.6 million in the prior year quarter. The significant increase for the quarter was mostly related to delayed timing of refund-transfers income due to the extension of the tax filing deadline by the IRS. Total tax services product income, net of losses and direct product expenses, increased 19% when comparing the first nine months of fiscal 2021 to the prior year period. The 2021 tax season benefited by the addition of the H&R Block relationship and has been successful despite the challenges caused by an increase in consumer liquidity due to stimulus payments throughout the 2021 tax season.
Economic Impact Program ("EIP") Update
Of the 16.5 million prepaid cards issued in conjunction with the three EIP stimulus programs, totaling approximately $24.15 billion, $2.81 billion were outstanding as of June 30, 2021, of which only $98.1 million was on Meta’s balance sheet with the remainder being held at other banks.
Net Interest Income
Net interest income for the third quarter of fiscal 2021 was $68.5 million, an increase of 10% from the same quarter in fiscal 2020. The increase was primarily driven by a reduction in total interest expense, partially offset by lower overall yields realized on investments and loan and leases.
Interest expense during the third quarter decreased $3.8 million, and loan and lease interest income increased $2.4 million. The third quarter average outstanding balance of loans and leases decreased by $4.2 million compared to the prior year quarter, primarily due to the decrease in community bank and healthcare receivable loan portfolios offset by growth of the remaining commercial loan portfolios. The Company’s average interest-earning assets for the third quarter decreased by $291.8 million to $7.32 billion compared with the prior year quarter, primarily due to the decrease in cash and fed funds sold, total investments, and community bank loans offset by growth of the national lending loans and leases.
Fiscal 2021 third quarter NIM increased to 3.75% from 3.28% for the third quarter last year. The overall reported tax-equivalent yield (“TEY”) on average earning asset yields increased 26 basis points to 3.85% 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 1.62% compared to 2.22% for the comparable period last year.
The Company's cost of funds for all deposits and borrowings averaged 0.09% during the fiscal 2021 third quarter, compared to 0.28% 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 third quarter of 2021, compared to 0.17% in the same quarter last year.
Noninterest Income
Fiscal 2021 third quarter noninterest income increased to $62.5 million, compared to $41.0 million for the same period of the prior year. This increase was primarily related to card fee income and refund transfer fee income. Card fees benefited from increased card balances related to stimulus programs. Refund transfer fee income was higher compared to last year due to refund transfer volume shift from the second fiscal quarter because of the delay in the 2021 tax season.
Noninterest Expense
Noninterest expense increased 14% to $81.5 million for the fiscal 2021 third quarter, from $71.2 million for the same quarter last year, primarily driven by increases in compensation due to a return to more normalized incentive accruals in fiscal year 2021 and additional employees to support growth. Refund transfer product expense was also higher than the same quarter last year, due largely to a shift in volume into the fiscal 2021 third quarter as a result of the delayed IRS filing date.
Income Tax Expense
The Company recorded income tax expense of $4.9 million, representing an effective tax rate of 11.0%, for the fiscal 2021 third quarter, compared to an income tax benefit of $2.4 million, representing an effective tax rate of (14.4)%, for the third quarter last year. The increase in the recorded income tax expense reflected an increase in fiscal 2021 third quarter earnings, whereas the prior year’s income tax benefit was chiefly the result of adjustments needed for the ratably recognized investment tax credits and lower earnings forecast at that time due to COVID-19.
The Company originated $13.5 million in solar leases during the fiscal 2021 third quarter, compared to $1.3 million in last year's third 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
| June 30, 2021 | March 31, 2021 | December 31, 2020 | September 30, 2020 | June 30, 2020 | ||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Total investments | $ | 1,981,852 | $ | 1,552,892 | $ | 1,309,452 | $ | 1,360,712 | $ | 1,268,416 |
| Loans held for sale | ||||||||||
| Consumer credit products | 12,582 | 6,233 | 234 | 962 | 391 | |||||
| SBA/USDA | 57,208 | 61,402 | 32,983 | 52,542 | 31,438 | |||||
| Community Bank | 18,115 | — | 100,442 | 130,073 | 48,076 | |||||
| Total loans held for sale | 87,905 | 67,635 | 133,659 | 183,577 | 79,905 | |||||
| National Lending | ||||||||||
| Term lending | 920,279 | 891,414 | 881,306 | 805,323 | 738,454 | |||||
| Asset based lending | 263,237 | 248,735 | 242,298 | 182,419 | 181,130 | |||||
| Factoring | 320,629 | 277,612 | 275,650 | 281,173 | 206,361 | |||||
| Lease financing | 282,940 | 308,169 | 283,722 | 281,084 | 264,988 | |||||
| Insurance premium finance | 417,652 | 344,841 | 338,227 | 337,940 | 359,147 | |||||
| SBA/USDA | 263,709 | 331,917 | 300,707 | 318,387 | 308,611 | |||||
| Other commercial finance | 118,081 | 103,234 | 101,209 | 101,658 | 100,214 | |||||
| Commercial Finance | 2,586,527 | 2,505,922 | 2,423,119 | 2,307,984 | 2,158,905 | |||||
| Consumer credit products | 105,440 | 104,842 | 88,595 | 89,809 | 102,808 | |||||
| Other consumer finance | 122,316 | 130,822 | 162,423 | 134,342 | 138,777 | |||||
| Consumer Finance | 227,756 | 235,664 | 251,018 | 224,151 | 241,585 | |||||
| Tax Services | 41,268 | 225,921 | 92,548 | 3,066 | 19,168 | |||||
| Warehouse Finance | 335,704 | 332,456 | 318,937 | 293,375 | 277,614 | |||||
| Total National Lending loans and leases | 3,191,255 | 3,299,963 | 3,085,622 | 2,828,576 | 2,697,272 | |||||
| Community Banking | ||||||||||
| Commercial real estate and operating | 294,810 | 335,587 | 339,141 | 457,371 | 608,303 | |||||
| Consumer one-to-four family real estate and other | 1,349 | 4,567 | 5,077 | 16,486 | 166,479 | |||||
| Agricultural real estate and operating | 7,825 | 7,911 | 9,724 | 11,707 | 24,655 | |||||
| Total Community Banking loans | 303,984 | 348,065 | 353,942 | 485,564 | 799,437 | |||||
| Total gross loans and leases | 3,495,239 | 3,648,028 | 3,439,564 | 3,314,140 | 3,496,709 | |||||
| Allowance for credit losses | (91,208) | (98,892) | (72,389) | (56,188) | (65,747) | |||||
| Net deferred loan and lease origination fees | 1,431 | 9,503 | 9,111 | 8,625 | 5,937 | |||||
| Total loans and leases, net of allowance | $ | 3,405,462 | $ | 3,558,639 | $ | 3,376,286 | $ | 3,266,577 | $ | 3,436,899 |
The Company's investment security balances at June 30, 2021 totaled $1.98 billion, as compared to $1.55 billion at March 31, 2021 and $1.27 billion at June 30, 2020.
Total gross loans and leases totaled $3.50 billion at June 30, 2021, as compared to $3.65 billion at March 31, 2021 and $3.50 billion and as compared to June 30, 2020. The primary driver for the decrease on a linked quarter basis was the pay down of seasonal tax service loans.
At June 30, 2021, commercial finance loans, which comprised 74% of the Company's gross loan and lease portfolio, totaled $2.59 billion, reflecting growth of $80.6 million, or 3%, from March 31, 2021. The increase in commercial finance loans was primarily due to increases in insurance premium finance by $72.8 million and factoring by $43.0 million, partially offset by decreases in lease financing by $25.2 million and SBA/USDA loans by $68.2 million, respectively, along with slight increases spread across several of the other commercial finance categories.
As of June 30, 2021, the Company had 458 loans outstanding with total loan balances of $143.3 million originated as part of the Paycheck Protection Program ("PPP"), compared with 576 loans outstanding with total loan balances of $208.6 million for the quarter ended March 31, 2021. In total, 53% of the PPP loan balances were forgiven through June 30, 2021.
Consumer finance loans totaled $227.8 million as of June 30, 2021, a decrease compared to $235.7 million at March 31, 2021 and $241.6 million at June 30, 2020. This reduction was primarily driven by other consumer finance, which includes student loans and certain seasonal lending products for tax customers.
Tax services loans totaled $41.3 million as of June 30, 2021, a seasonal decrease as compared to $225.9 million for March 31, 2021 and an increase as compared to $19.2 million at June 30, 2020. Warehouse finance loans totaled $335.7 million at June 30, 2021, a 1% increase from March 31, 2021.
Community bank loans held for investment totaled $304.0 million as of June 30, 2021, decreasing as compared to $348.1 million at March 31, 2021 and $799.4 million at June 30, 2020. As of June 30, 2021, the Company had $18.1 million in community bank loans classified as held for sale.
Asset Quality
The Company’s allowance for credit losses totaled $91.2 million at June 30, 2021, a decrease compared to $98.9 million at March 31, 2021 and an increase compared to $65.7 million at June 30, 2020. The decrease in the allowance at June 30, 2021 when compared to March 31, 2021, was primarily due to the seasonal tax services loan portfolio, which decreased $4.8 million and consumer finance, which decreased $2.4 million during the fiscal 2021 third quarter.
The year-over-year increase in the allowance was primarily driven by a $16.0 million increase within the commercial finance portfolio, a $12.9 million increase in tax services, and a $4.4 million increase in the consumer finance portfolio. These increases were primarily driven by impacts from the pandemic, 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 $7.2 million decrease within the retained community banking portfolio, which has decreased along with the reduction in year-over-year loan balances.
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) | June 30, 2021 | March 31, 2021 | December 31, 2020 | October 1, 2020(1) | September 30, 2020 | June 30, 2020 | ||||||
| Commercial finance | 1.73 | % | 1.77 | % | 1.88 | % | 1.85 | % | 1.30 | % | 1.36 | % |
| Consumer finance | 3.80 | % | 4.70 | % | 4.39 | % | 4.31 | % | 1.64 | % | 1.75 | % |
| Tax services | 58.99 | % | 12.90 | % | 1.53 | % | 0.06 | % | 0.06 | % | 59.67 | % |
| Warehouse finance | 0.10 | % | 0.10 | % | 0.10 | % | 0.10 | % | 0.10 | % | 0.10 | % |
| National Lending | 2.44 | % | 2.57 | % | 1.89 | % | 1.86 | % | 1.20 | % | 1.68 | % |
| Community Bank | 4.36 | % | 4.03 | % | 4.01 | % | 3.37 | % | 4.59 | % | 2.55 | % |
| Total loans and leases | 2.61 | % | 2.71 | % | 2.10 | % | 2.08 | % | 1.70 | % | 1.88 | % |
(1) Represents the Company's allowance 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 allowance for credit losses as a percentage of total loans and leases decreased to 2.61% at June 30, 2021 from 2.71% at March 31, 2021. The decrease in the total loans and leases coverage ratio reflected a seasonal reduction in the allowance of the tax services loan portfolios. The coverage ratios for the other non-tax-related loan categories remained relatively similar to the March 31, 2021 quarter. 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 | Nine Months Ended | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| June 30, 2021 | March 31, 2021 | June 30, 2020 | June 30, 2021 | June 30, 2020 | ||||||
| (Dollars in thousands) | ||||||||||
| Beginning balance | $ | 98,892 | $ | 72,389 | $ | 65,355 | $ | 56,188 | $ | 29,149 |
| Adoption of CECL accounting standard | — | — | — | 12,773 | — | |||||
| Provision - tax services loans | 4,685 | 27,680 | (100) | 32,819 | 20,407 | |||||
| Provision - all other loans and leases | (36) | 2,519 | 15,193 | 8,294 | 35,390 | |||||
| Charge-offs - tax services loans | (9,505) | — | (9,797) | (9,505) | (9,797) | |||||
| Charge-offs - all other loans and leases | (5,360) | (4,248) | (5,808) | (15,284) | (12,912) | |||||
| Recoveries - tax services loans | 17 | 54 | 15 | 1,027 | 827 | |||||
| Recoveries - all other loans and leases | 2,515 | 498 | 889 | 4,896 | 2,684 | |||||
| Ending balance | $ | 91,208 | $ | 98,892 | $ | 65,747 | $ | 91,208 | $ | 65,747 |
Provision for credit losses was $4.6 million for the quarter ended June 30, 2021, compared to $15.1 million for the comparable period in the prior fiscal year. The decrease in the overall provision compared to the prior year was due in large part to the increase in the allowance as part of the Company's response to the emerging COVID-19 pandemic during the third quarter of fiscal 2020. Net charge-offs were $12.3 million for the quarter ended June 30, 2021, compared to $14.7 million for the quarter ended June 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 June 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 | $ | 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 | — | — | — | |||||||||
| Total National Lending | 22,960 | 52,617 | 9,369 | 84,946 | 3,106,309 | 3,191,255 | 4,819 | 17,315 | 22,134 | |||||||||
| Total 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 |
| As of March 31, 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 | $ | 34,675 | $ | 8,730 | $ | 9,488 | $ | 52,893 | $ | 2,453,029 | $ | 2,505,922 | $ | 4,810 | $ | 18,305 | $ | 23,115 |
| Consumer finance | 2,033 | 4,162 | 2,294 | 8,489 | 227,175 | 235,664 | 517 | — | 517 | |||||||||
| Tax services | 507 | — | — | 507 | 225,414 | 225,921 | — | — | — | |||||||||
| Warehouse finance | — | — | — | — | 332,456 | 332,456 | — | — | — | |||||||||
| Total National Lending | 37,215 | 12,892 | 11,782 | 61,889 | 3,238,074 | 3,299,963 | 5,327 | 18,305 | 23,632 | |||||||||
| Total Community Banking | 12 | — | 1,818 | 1,830 | 346,235 | 348,065 | — | 19,824 | 19,824 | |||||||||
| Total loans and leases held for investment | $ | 37,227 | $ | 12,892 | $ | 13,600 | $ | 63,719 | $ | 3,584,309 | $ | 3,648,028 | $ | 5,327 | $ | 38,129 | $ | 43,456 |
The Company's nonperforming assets at June 30, 2021 were $45.1 million, representing 0.64% of total assets, compared to $46.7 million, or 0.48% of total assets at March 31, 2021 and $56.1 million, or 0.64% of total assets at June 30, 2020. The changes in the nonperforming assets as a percentage of total assets at June 30, 2021 were driven in large part by a significant reduction in period-end total assets as the total nonperforming assets for June 30, 2021 decreased when compared to both the linked-quarter and the prior year.
The Company's nonperforming loans and leases at June 30, 2021, were $41.9 million, representing 1.17% of total gross loans and leases, compared to $43.5 million, or 1.17% of total gross loans and leases at March 31, 2021 and $39.3 million, or 1.10% of total gross loans and leases at June 30, 2020.
Loan and lease balances that were within their active deferment period decreased to $41.5 million at June 30, 2021 from $66.5 million at March 31, 2021.
Meta is now revising its credit administration policies and reviewing its loan portfolio to better align with OCC guidance for national banks, a process that began during the quarter ending June 30, 2021 and is expected to be completed by September 30, 2021. We expect these credit policy revisions will have 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 finance and tax services loans that present unique risks. 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 by asset classification were as follows for the periods presented.
| Asset Classification | Pass | Watch | Special Mention | Substandard | Doubtful | Total | ||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| As of June 30, 2021 | (Dollars in Thousands) | |||||||||||||||||||||||||
| Commercial finance | $ | 2,370,132 | $ | 135,691 | $ | 55,805 | $ | 74,941 | $ | 7,166 | $ | 2,643,735 | ||||||||||||||
| Warehouse finance | 335,704 | — | — | — | — | 335,704 | ||||||||||||||||||||
| Total National Lending | 2,705,836 | 135,691 | 55,805 | 74,941 | 7,166 | 2,979,439 | ||||||||||||||||||||
| Total Community Banking | 212,283 | 33,494 | 16,126 | 60,196 | — | 322,099 | ||||||||||||||||||||
| Total Loans and Leases | $ | 2,918,119 | $ | 169,185 | $ | 71,931 | $ | 135,137 | $ | 7,166 | $ | 3,301,538 | Asset Classification | Pass | Watch | Special Mention | Substandard | Doubtful | Total | |||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | ||||||||||||||
| As of March 31, 2021 | (Dollars in Thousands) | |||||||||||||||||||||||||
| Commercial finance | $ | 2,310,043 | $ | 142,506 | $ | 59,904 | $ | 52,492 | $ | 2,378 | $ | 2,567,323 | ||||||||||||||
| Warehouse finance | 332,456 | — | — | — | — | 332,456 | ||||||||||||||||||||
| Total National Lending | 2,642,499 | 142,506 | 59,904 | 52,492 | 2,378 | 2,899,779 | ||||||||||||||||||||
| Total Community Banking | 239,650 | 84,107 | 684 | 23,625 | — | 348,066 | ||||||||||||||||||||
| Total Loans and Leases | $ | 2,882,149 | $ | 226,613 | $ | 60,588 | $ | 76,117 | $ | 2,378 | $ | 3,247,845 |
Deposits, Borrowings and Other Liabilities
Total average deposits for the fiscal 2021 third quarter decreased by $240.7 million to $6.98 billion compared to the same period in fiscal 2020, due to a reduction in wholesale deposits partially offset by increases in all other non-maturity deposit categories. Average wholesale deposits decreased $731.1 million, or 89%, while noninterest-bearing deposits increased $323.1 million, or 5%, for the fiscal 2021 third quarter when compared to the same period in fiscal 2020. Average deposits from the Payments division increased nearly 8% to $6.79 billion for the fiscal 2021 third quarter when compared to the same period in fiscal 2020. Excluding the balances on the EIP cards, average payments deposits for the fiscal 2021 second quarter were $6.67 billion, representing an increase of 42% compared to the same period of the prior year, which continues to be largely driven by other stimulus-related dollars loaded on various partner cards.
The average balance of total deposits and interest-bearing liabilities was $7.08 billion for the three-month period ended June 30, 2021, compared to $7.49 billion for the same period in the prior fiscal year, representing a decrease of 6%.
Total end-of-period deposits decreased 22% to $5.89 billion at June 30, 2021, compared to $7.59 billion at June 30, 2020. The reduction in end-of-period deposits was primarily driven by decreases in noninterest-bearing deposits of $1.15 billion and wholesale deposits of $665.0 million. The decrease in noninterest-bearing deposits was driven by a $2.58 billion reduction in EIP program card balances from June 30, 2020 to June 30, 2021 as Meta was able to shift most of the remaining EIP program card balances from its balance sheet to other banks. That decrease in EIP balances was partially offset by growth in payments deposits that has been largely driven by excess cash on consumer cards related to government stimulus programs.
Regulatory Capital
The Company and MetaBank remained above the federal regulatory minimum capital requirements at June 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 | June 30, 2021(1) | March 31,<br>2021 | December 31,<br>2020 | September 30,<br>2020 | June 30,<br>2020 | |||||
|---|---|---|---|---|---|---|---|---|---|---|
| Company | ||||||||||
| Tier 1 leverage capital ratio | 6.85 | % | 4.75 | % | 7.39 | % | 6.58 | % | 5.91 | % |
| Common equity Tier 1 capital ratio | 12.76 | % | 11.29 | % | 10.72 | % | 11.78 | % | 11.51 | % |
| Tier 1 capital ratio | 13.11 | % | 11.63 | % | 11.07 | % | 12.18 | % | 11.90 | % |
| Total capital ratio | 16.18 | % | 14.65 | % | 14.14 | % | 15.30 | % | 14.99 | % |
| MetaBank | ||||||||||
| Tier 1 leverage capital ratio | 7.83 | % | 5.47 | % | 8.60 | % | 7.56 | % | 6.89 | % |
| Common equity Tier 1 capital ratio | 14.94 | % | 13.39 | % | 12.87 | % | 13.96 | % | 13.82 | % |
| Tier 1 capital ratio | 14.96 | % | 13.40 | % | 12.89 | % | 14.00 | % | 13.86 | % |
| Total capital ratio | 16.22 | % | 14.66 | % | 14.14 | % | 15.26 | % | 15.12 | % |
(1) June 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) | June 30,<br>2021 | March 31,<br>2021 | December 31,<br>2020 | September 30,<br>2020 | June 30,<br>2020 | |||||
|---|---|---|---|---|---|---|---|---|---|---|
| (Dollars in Thousands) | ||||||||||
| Total stockholders' equity | $ | 876,633 | $ | 835,258 | $ | 813,210 | $ | 847,308 | $ | 829,909 |
| Adjustments: | ||||||||||
| LESS: Goodwill, net of associated deferred tax liabilities | 301,179 | 301,602 | 301,999 | 302,396 | 302,814 | |||||
| LESS: Certain other intangible assets | 35,100 | 36,779 | 39,403 | 40,964 | 42,865 | |||||
| LESS: Net deferred tax assets from operating loss and tax credit carry-forwards | 17,753 | 19,306 | 24,105 | 18,361 | 10,360 | |||||
| LESS: Net unrealized gains (losses) on available-for-sale securities | 14,750 | 12,458 | 19,894 | 17,762 | 8,382 | |||||
| LESS: Non-controlling interest | 1,490 | 1,092 | 1,536 | 3,603 | 3,787 | |||||
| ADD: Adoption of Accounting Standards Update 2016-13 | 13,913 | 10,439 | 10,439 | — | — | |||||
| Common Equity Tier 1(1) | 520,274 | 474,460 | 436,712 | 464,222 | 461,701 | |||||
| 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 | 932 | 690 | 749 | 1,894 | 1,894 | |||||
| Total Tier 1 Capital | 534,867 | 488,811 | 451,122 | 479,777 | 477,256 | |||||
| Allowance for credit losses | 51,317 | 53,232 | 51,070 | 49,343 | 50,338 | |||||
| Subordinated debentures (net of issuance costs) | 73,936 | 73,892 | 73,850 | 73,807 | 73,765 | |||||
| Total qualifying capital | $ | 660,119 | $ | 615,935 | $ | 576,042 | $ | 602,927 | $ | 601,359 |
(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.
| June 30,<br>2021 | March 31,<br>2021 | December 31,<br>2020 | September 30,<br>2020 | June 30,<br>2020 | ||||||
|---|---|---|---|---|---|---|---|---|---|---|
| (Dollars in Thousands) | ||||||||||
| Total Stockholders' Equity | $ | 876,633 | $ | 835,258 | $ | 813,210 | $ | 847,308 | $ | 829,909 |
| Less: Goodwill | 309,505 | 309,505 | 309,505 | 309,505 | 309,505 | |||||
| Less: Intangible assets | 34,898 | 36,903 | 39,660 | 41,692 | 43,974 | |||||
| Tangible common equity | 532,230 | 488,850 | 464,045 | 496,111 | 476,430 | |||||
| Less: Accumulated other comprehensive income (loss) ("AOCI") | 15,222 | 12,809 | 20,119 | 17,542 | 7,995 | |||||
| Tangible common equity excluding AOCI | $ | 517,008 | $ | 476,041 | $ | 443,926 | $ | 478,569 | $ | 468,435 |
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, July 28, 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 live conference call by dialing (844) 461-9934 beginning approximately 10 minutes prior to start time. Please ask to join the Meta Financial conference call, and provide conference ID 5084665 upon request. International callers should dial (636) 812-6634. A webcast replay will also be archived at www.metafinancialgroup.com for one year.
Upcoming Investor Events
•Raymond James U.S. Bank Conference, September 8, 2021 | Chicago, IL
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 | June 30, 2021 | March 31, 2021 | December 31, 2020 | September 30, 2020 | June 30, 2020 | |||||
|---|---|---|---|---|---|---|---|---|---|---|
| Cash and cash equivalents | $ | 720,243 | $ | 3,724,242 | $ | 1,586,451 | $ | 427,367 | $ | 3,108,141 |
| Investment securities available for sale, at fair value | 854,023 | 921,947 | 797,363 | 814,495 | 825,579 | |||||
| Mortgage-backed securities available for sale, at fair value | 1,063,582 | 558,833 | 430,761 | 453,607 | 338,250 | |||||
| Investment securities held to maturity, at cost | 60,228 | 67,709 | 76,176 | 87,183 | 98,205 | |||||
| Mortgage-backed securities held to maturity, at cost | 4,019 | 4,403 | 5,152 | 5,427 | 6,382 | |||||
| Loans held for sale | 87,905 | 67,635 | 133,659 | 183,577 | 79,905 | |||||
| Loans and leases | 3,496,670 | 3,657,531 | 3,448,675 | 3,322,765 | 3,502,646 | |||||
| Allowance for credit losses | (91,208) | (98,892) | (72,389) | (56,188) | (65,747) | |||||
| Federal Reserve Bank and Federal Home Loan Bank stocks, at cost | 28,433 | 28,433 | 27,138 | 27,138 | 31,836 | |||||
| Accrued interest receivable | 16,230 | 17,429 | 17,133 | 16,628 | 17,545 | |||||
| Premises, furniture, and equipment, net | 44,107 | 41,510 | 39,932 | 41,608 | 40,361 | |||||
| Rental equipment, net | 211,368 | 211,397 | 206,732 | 205,964 | 216,336 | |||||
| Bank-owned life insurance | 94,142 | 93,542 | 92,937 | 92,315 | 91,697 | |||||
| Foreclosed real estate and repossessed assets, net | 1,204 | 1,483 | 7,186 | 9,957 | 6,784 | |||||
| Goodwill | 309,505 | 309,505 | 309,505 | 309,505 | 309,505 | |||||
| Intangible assets | 34,898 | 36,903 | 39,660 | 41,692 | 43,974 | |||||
| Prepaid assets | 7,482 | 10,201 | 11,270 | 8,328 | 6,806 | |||||
| Deferred taxes | 20,072 | 25,435 | 24,411 | 17,723 | 15,944 | |||||
| Other assets | 88,909 | 110,877 | 82,763 | 82,983 | 104,877 | |||||
| Total assets | $ | 7,051,812 | $ | 9,790,123 | $ | 7,264,515 | $ | 6,092,074 | $ | 8,779,026 |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||
| LIABILITIES | ||||||||||
| Deposits: | ||||||||||
| Noninterest-bearing checking | 5,385,569 | 7,928,235 | 5,581,597 | 4,356,630 | 6,537,809 | |||||
| Interest-bearing checking | 255,509 | 416,164 | 274,504 | 157,571 | 187,003 | |||||
| Savings deposits | 93,608 | 126,834 | 54,080 | 47,866 | 55,896 | |||||
| Money market deposits | 63,920 | 55,045 | 56,440 | 48,494 | 40,811 | |||||
| Time certificates of deposit | 11,425 | 12,614 | 13,522 | 20,223 | 25,000 | |||||
| Wholesale deposits | 78,840 | 103,521 | 227,648 | 348,416 | 743,806 | |||||
| Total deposits | 5,888,871 | 8,642,413 | 6,207,791 | 4,979,200 | 7,590,325 | |||||
| Short-term borrowings | — | — | — | — | — | |||||
| Long-term borrowings | 93,634 | 95,336 | 96,760 | 98,224 | 209,781 | |||||
| Accrued interest payable | 1,853 | 679 | 2,068 | 1,923 | 4,332 | |||||
| Accrued expenses and other liabilities | 190,821 | 216,437 | 144,686 | 165,419 | 144,679 | |||||
| Total liabilities | 6,175,179 | 8,954,865 | 6,451,305 | 5,244,766 | 7,949,117 | |||||
| STOCKHOLDERS’ EQUITY | ||||||||||
| Preferred stock | — | — | — | — | — | |||||
| Common stock, $.01 par value | 319 | 319 | 326 | 344 | 346 | |||||
| Common stock, Nonvoting, $.01 par value | — | — | — | — | — | |||||
| Additional paid-in capital | 602,720 | 601,222 | 598,669 | 594,569 | 592,693 | |||||
| Retained earnings | 262,578 | 225,471 | 198,000 | 234,927 | 228,500 | |||||
| Accumulated other comprehensive income | 15,222 | 12,809 | 20,119 | 17,542 | 7,995 | |||||
| Treasury stock, at cost | (5,696) | (5,655) | (5,440) | (3,677) | (3,412) | |||||
| Total equity attributable to parent | 875,143 | 834,166 | 811,674 | 843,705 | 826,122 | |||||
| Noncontrolling interest | 1,490 | 1,092 | 1,536 | 3,603 | 3,787 | |||||
| Total stockholders’ equity | 876,633 | 835,258 | 813,210 | 847,308 | 829,909 | |||||
| Total liabilities and stockholders’ equity | $ | 7,051,812 | $ | 9,790,123 | $ | 7,264,515 | $ | 6,092,074 | $ | 8,779,026 |
Consolidated Statements of Operations (Unaudited)
(Dollars in Thousands, Except Share and Per Share Data)
| Three Months Ended | Year Ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| June 30, 2021 | March 31, 2021 | June 30, 2020 | June 30,<br>2021 | June 30,<br>2020 | ||||||
| Interest and dividend income: | ||||||||||
| Loans and leases, including fees | $ | 62,287 | $ | 68,472 | $ | 59,911 | $ | 192,415 | $ | 199,107 |
| Mortgage-backed securities | 3,446 | 2,608 | 2,269 | 8,176 | 7,151 | |||||
| Other investments | 4,250 | 4,589 | 5,226 | 13,207 | 18,176 | |||||
| 69,983 | 75,669 | 67,406 | 213,798 | 224,434 | ||||||
| Interest expense: | ||||||||||
| Deposits | 188 | 445 | 3,130 | 1,429 | 20,712 | |||||
| FHLB advances and other borrowings | 1,320 | 1,374 | 2,139 | 4,045 | 9,197 | |||||
| 1,508 | 1,819 | 5,269 | 5,474 | 29,909 | ||||||
| Net interest income | 68,475 | 73,850 | 62,137 | 208,324 | 194,525 | |||||
| Provision for credit losses | 4,612 | 30,290 | 15,093 | 40,991 | 55,796 | |||||
| Net interest income after provision for credit losses | 63,863 | 43,560 | 47,044 | 167,333 | 138,729 | |||||
| Noninterest income: | ||||||||||
| Refund transfer product fees | 12,073 | 22,680 | 4,595 | 35,400 | 33,726 | |||||
| Tax advance product fees | 891 | 44,562 | 28 | 47,413 | 31,840 | |||||
| Payments card and deposit fees | 29,203 | 29,875 | 21,302 | 81,641 | 65,957 | |||||
| Other bank and deposit fees | 338 | 133 | 214 | 709 | 1,083 | |||||
| Rental income | 9,976 | 9,846 | 11,231 | 29,707 | 34,682 | |||||
| Net gain realized on investment securities | — | 6 | — | 6 | — | |||||
| Gain on divestitures | — | — | — | — | 19,275 | |||||
| Gain (loss) on sale of other | 5,955 | 2,133 | 1,214 | 10,935 | 969 | |||||
| Other income | 4,017 | 4,218 | 2,464 | 15,550 | 11,512 | |||||
| Total noninterest income | 62,453 | 113,453 | 41,048 | 221,361 | 199,044 | |||||
| Noninterest expense: | ||||||||||
| Compensation and benefits | 38,604 | 43,932 | 32,102 | 114,867 | 100,631 | |||||
| Refund transfer product expense | 2,435 | 6,146 | (139) | 8,642 | 7,482 | |||||
| Tax advance product expense | (25) | 2,189 | (11) | 2,534 | 2,820 | |||||
| Card processing | 6,809 | 7,212 | 7,128 | 20,138 | 19,432 | |||||
| Occupancy and equipment expense | 7,381 | 6,748 | 6,502 | 21,017 | 20,169 | |||||
| Operating lease equipment depreciation | 8,122 | 7,419 | 8,536 | 23,122 | 25,237 | |||||
| Legal and consulting | 5,680 | 6,045 | 4,660 | 16,972 | 15,242 | |||||
| Intangible amortization | 2,013 | 2,757 | 2,636 | 6,784 | 8,714 | |||||
| Impairment expense | 505 | 554 | — | 2,217 | 750 | |||||
| Other expense | 9,999 | 12,969 | 9,827 | 33,775 | 38,291 | |||||
| Total noninterest expense | 81,523 | 95,971 | 71,241 | 250,068 | 238,768 | |||||
| Income before income tax expense | 44,793 | 61,042 | 16,851 | 138,626 | 99,005 | |||||
| Income tax expense (benefit) | 4,934 | 1,133 | (2,426) | 9,600 | 3,870 | |||||
| Net income before noncontrolling interest | 39,859 | 59,909 | 19,277 | 129,026 | 95,135 | |||||
| Net income attributable to noncontrolling interest | 1,158 | 843 | 1,087 | 3,221 | 3,573 | |||||
| Net income attributable to parent | $ | 38,701 | $ | 59,066 | $ | 18,190 | $ | 125,805 | $ | 91,562 |
| Less: Allocation of Earnings to participating securities(1) | 729 | 1,113 | 432 | 2,411 | 2,097 | |||||
| Net income attributable to common shareholders(1) | 37,972 | 57,953 | 17,758 | 123,394 | 89,465 | |||||
| Earnings per common share | ||||||||||
| Basic | $ | 1.21 | $ | 1.84 | $ | 0.53 | $ | 3.87 | $ | 2.54 |
| Diluted | $ | 1.21 | $ | 1.84 | $ | 0.53 | $ | 3.87 | $ | 2.54 |
| Shares used in computing earnings per common share | ||||||||||
| Basic | 31,320,893 | 31,520,505 | 33,794,154 | 31,880,653 | 35,180,068 | |||||
| Diluted | 31,338,947 | 31,535,022 | 33,815,651 | 31,900,597 | 35,201,702 |
(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 June 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 | $ | 1,867,988 | $ | 528 | 0.11 | % | $ | 2,692,270 | $ | 783 | 0.12 | % |
| Mortgage-backed securities | 882,042 | 3,446 | 1.57 | % | 342,174 | 2,269 | 2.67 | % | ||||
| Tax exempt investment securities | 263,401 | 884 | 1.70 | % | 417,042 | 1,658 | 2.02 | % | ||||
| Asset-backed securities | 438,163 | 1,651 | 1.51 | % | 336,562 | 1,770 | 2.11 | % | ||||
| Other investment securities | 246,493 | 1,187 | 1.93 | % | 197,643 | 1,014 | 2.06 | % | ||||
| Total investments | 1,830,099 | 7,168 | 1.62 | % | 1,293,420 | 6,711 | 2.22 | % | ||||
| Total commercial finance | 2,616,942 | 48,641 | 7.46 | % | 2,160,175 | 40,375 | 7.52 | % | ||||
| Total consumer finance | 241,813 | 3,916 | 6.50 | % | 247,824 | 4,635 | 7.52 | % | ||||
| Total tax services | 91,804 | 604 | 2.64 | % | 39,845 | — | — | % | ||||
| Total warehouse finance | 332,759 | 5,151 | 6.21 | % | 304,839 | 4,582 | 6.05 | % | ||||
| National lending loans and leases | 3,283,318 | 58,312 | 7.12 | % | 2,752,683 | 49,592 | 7.25 | % | ||||
| Community Banking loans | 335,415 | 3,975 | 4.75 | % | 870,245 | 10,319 | 4.77 | % | ||||
| Total loans and leases | 3,618,733 | 62,287 | 6.90 | % | 3,622,928 | 59,911 | 6.65 | % | ||||
| Total interest-earning assets | $ | 7,316,820 | $ | 69,983 | 3.85 | % | $ | 7,608,618 | $ | 67,406 | 3.59 | % |
| Noninterest-earning assets | 841,738 | 830,589 | ||||||||||
| Total assets | $ | 8,158,558 | $ | 8,439,206 | ||||||||
| Interest-bearing liabilities: | ||||||||||||
| Interest-bearing checking(2) | $ | 336,576 | $ | — | — | % | $ | 226,382 | $ | — | — | % |
| Savings | 107,803 | 5 | 0.02 | % | 55,572 | 1 | 0.01 | % | ||||
| Money markets | 58,517 | 66 | 0.45 | % | 40,091 | 33 | 0.33 | % | ||||
| Time deposits | 11,877 | 27 | 0.91 | % | 25,392 | 113 | 1.78 | % | ||||
| Wholesale deposits | 86,295 | 90 | 0.42 | % | 817,414 | 2,983 | 1.47 | % | ||||
| Total interest-bearing deposits | 601,068 | 188 | 0.13 | % | 1,164,852 | 3,130 | 1.08 | % | ||||
| Overnight fed funds purchased | 11 | — | 0.25 | % | 59,055 | 48 | 0.33 | % | ||||
| FHLB advances | — | — | — | % | 110,000 | 670 | 2.45 | % | ||||
| Subordinated debentures | 73,907 | 1,148 | 6.23 | % | 73,738 | 1,153 | 6.29 | % | ||||
| Other borrowings | 20,657 | 172 | 3.35 | % | 27,032 | 268 | 3.98 | % | ||||
| Total borrowings | 94,575 | 1,320 | 5.60 | % | 269,825 | 2,139 | 3.19 | % | ||||
| Total interest-bearing liabilities | 695,643 | 1,508 | 0.87 | % | 1,434,677 | 5,269 | 1.48 | % | ||||
| Noninterest-bearing deposits | 6,380,371 | — | — | % | 6,057,314 | — | — | % | ||||
| Total deposits and interest-bearing liabilities | $ | 7,076,014 | $ | 1,508 | 0.09 | % | $ | 7,491,991 | $ | 5,269 | 0.28 | % |
| Other noninterest-bearing liabilities | 225,862 | 122,940 | ||||||||||
| Total liabilities | 7,301,876 | 7,614,931 | ||||||||||
| Shareholders' equity | 856,682 | 824,276 | ||||||||||
| Total liabilities and shareholders' equity | $ | 8,158,558 | $ | 8,439,206 | ||||||||
| Net interest income and net interest rate spread including noninterest-bearing deposits | $ | 68,475 | 3.76 | % | $ | 62,137 | 3.30 | % | ||||
| Net interest margin | 3.75 | % | 3.28 | % | ||||||||
| Tax-equivalent effect | 0.02 | % | 0.02 | % | ||||||||
| Net interest margin, tax-equivalent(3) | 3.77 | % | 3.31 | % |
(1) Tax rate used to arrive at the TEY for the three months ended June 30, 2021 and 2020 was 21%.
(2) Of the total balance, $336.2 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 | June 30,<br>2021 | March 31,<br>2021 | December 31,<br>2020 | September 30,<br>2020 | June 30,<br>2020 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity to total assets | 12.43 | % | 8.53 | % | 11.19 | % | 13.91 | % | 9.45 | % | |||||
| Book value per common share outstanding | $ | 27.46 | $ | 26.16 | $ | 24.93 | $ | 24.66 | $ | 23.96 | |||||
| Tangible book value per common share outstanding | $ | 16.67 | $ | 15.31 | $ | 14.23 | $ | 14.44 | $ | 13.76 | |||||
| Tangible book value per common share outstanding excluding AOCI | $ | 16.20 | $ | 14.91 | $ | 13.61 | $ | 13.93 | $ | 13.53 | |||||
| Common shares outstanding | 31,919,780 | 31,926,008 | 32,620,251 | 34,360,890 | 34,631,160 | ||||||||||
| Nonperforming assets to total assets | 0.64 | % | 0.48 | % | 0.73 | % | 0.79 | % | 0.64 | % | |||||
| Nonperforming loans and leases to total loans and leases | 1.17 | % | 1.17 | % | 1.18 | % | 0.97 | % | 1.10 | % | |||||
| Net interest margin | 3.75 | % | 3.07 | % | 4.65 | % | 3.77 | % | 3.28 | % | |||||
| Net interest margin, tax-equivalent | 3.77 | % | 3.08 | % | 4.67 | % | 3.79 | % | 3.31 | % | |||||
| Return on average assets | 1.90 | % | 2.22 | % | 1.73 | % | 0.69 | % | 0.86 | % | |||||
| Return on average equity | 18.07 | % | 28.93 | % | 13.91 | % | 6.21 | % | 8.83 | % | |||||
| Full-time equivalent employees | 1,109 | 1,075 | 1,038 | 1,015 | 999 |
Non-GAAP Reconciliation
| Efficiency Ratio | For the last twelve months ended | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (Dollars in Thousands) | June 30,<br>2021 | March 31,<br>2021 | December 31,<br>2020 | September 30,<br>2020 | June 30,<br>2020 | ||||||||||
| Noninterest Expense - GAAP | $ | 330,352 | $ | 320,070 | $ | 315,828 | $ | 319,051 | $ | 314,911 | |||||
| Net Interest Income | 272,837 | 266,499 | 260,386 | 259,038 | 260,142 | ||||||||||
| Noninterest Income | 262,111 | 240,706 | 247,766 | 239,794 | 235,024 | ||||||||||
| Total Revenue: GAAP | $ | 534,948 | $ | 507,205 | $ | 508,152 | $ | 498,832 | $ | 495,166 | |||||
| Efficiency Ratio, last twelve months | 61.75 | % | 63.10 | % | 62.15 | % | 63.96 | % | 63.60 | % |
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
a3qfy21irquarterlydeck_0
QUARTERLY INVESTOR UPDATE THIRD QUARTER FISCAL YEAR 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
DIFFERENTIATED BUSINESS LINES WITH SIGNIFICANT GROWTH OPPORTUNITIES 49% $272.8 $103.1 $85.1 $39.9 $34.1 Net Interest Income Payments Fees Tax Product Income Rental Income Other Income Noninterest Income as a percent of Total Revenue in LTM ending June 30, 2021 Consumer Finance Our Consumer Finance division helps consumers to better control their financial futures with empowered spending and reliable access to funds. Responsible credit options create pathways towards upward mobility by establishing credit histories and building credit scores. Meta Ventures provides capital to emerging and strategic companies that align with our mission and contribute to our goal of bringing financial inclusion to all. Our Tax Services division helps tax preparation firms to provide underbanked consumers with access to electronic tax filing services and refund advances, helping consumers gain faster, more convenient access to their tax refunds. Tax Services Our Payments division works with fintechs, third-party providers, and various other organizations to distribute prepaid cards, deposit accounts, and payment related transactions. Meta is the fiduciary or custodian who issues accounts and manages the money, moving billions of dollars each day. Payments Meta Ventures Our Commercial Finance division provides America’s small and medium sized enterprises and some large businesses with flexible capital solutions they often cannot get elsewhere. We offer factoring, asset-based lending, leasing, and government guaranteed lending using years of experience and proprietary techniques to actively monitor collateral and mitigate risk. Commercial Finance Revenue Makeup Last Twelve Months Ending June 30, 2021 ($ in millions) 4Meta Financial Group, Inc. (Nasdaq: CASH) | Quarterly Investor Presentation
Increase Percentage of Funding From Core Deposits Optimize Interest- earning Asset Mix Improve Operating Efficiencies Efficiency ratio of 61.75% improved from 63.60% as of June 30, 2020. • Continuing to drive optimization and utilization of existing business platforms. • Leveraging technology to help drive future efficiencies. Reduced wholesale funding and borrowings by 82% from June 30, 2020. • Launched new bank-account product with Clair Focus on commercial finance business lines • Grew commercial finance loans by $80.6 million, or 3%, from the linked-quarter. • Community bank loans reduced to $304.0 million from $799.4 million at June 30, 2020. THIRD QUARTER BUSINESS HIGHLIGHTS & KEY STRATEGIC INITIATIVES 5Meta Financial Group, Inc. (Nasdaq: CASH) | Quarterly Investor Presentation
SUMMARY FINANCIAL RESULTS THIRD QUARTER ENDED JUNE 30, 2021 6 1 Amounts presented are used in the two-class earnings per common share calculation. INCOME STATEMENT ($ in thousands, except per share data) 3Q21 2Q21 3Q20 Net interest income 68,475 73,850 62,137 Provision for credit losses 4,612 30,290 15,093 Total noninterest income 62,453 113,453 41,048 Total noninterest expense 81,523 95,971 71,241 Net income before taxes 44,793 61,042 16,851 Income tax expense (benefit) 4,934 1,133 (2,426) Net income before non-controlling interest 39,859 59,909 19,277 Net income attributable to non-controlling interest 1,159 843 1,087 Net income attributable to parent 38,701 59,066 18,190 Less: Allocation of earnings to participating securities1 729 1,113 432 Net income attributable to common shareholders1 37,972 57,953 17,758 Earnings per share, diluted $1.21 $1.84 $0.53 Average diluted shares 31,338,947 31,535,022 33,815,651 Revenue of $130.9 million, a 27% increase compared to $103.2 million for the same quarter in fiscal 2020. • Strong revenue growth compared to the prior year related to payments fee income driven by increased activity related to stimulus programs and delayed timing of the tax season. Noninterest expense increased 14% to $81.5 million for the fiscal 2021 third quarter, from $71.2 million for the same quarter of last year • Driven by increases in compensation due to a return to more normalized incentive accruals and additional employees to support growth as well as increased refund transfer expense due to timing. Earnings per share increased 128% year-over-year to $1.21. Meta Financial Group, Inc. (Nasdaq: CASH) | Quarterly Investor Presentation
BALANCE SHEET HIGHLIGHTS THIRD QUARTER ENDED JUNE 30, 2021 7 BALANCE SHEET PERIOD ENDING ($ in thousands) 3Q21 2Q21 3Q20 Cash and cash equivalents 720,243 3,724,242 3,108,141 Investments 1,981,852 1,552,892 1,268,416 Loans held for sale 87,905 67,635 79,905 Loans and leases (HFI)1 3,496,670 3,657,531 3,502,646 Allowance for credit losses (91,208) (98,892) (65,747) Other assets 856,350 886,715 885,665 Total assets 7,051,812 9,790,123 8,779,026 Total deposits2 5,888,871 8,642,413 7,590,325 Total borrowings 93,634 95,336 209,781 Other liabilities 192,674 217,116 149,011 Total liabilities 6,175,179 8,954,865 7,949,117 Total stockholders’ equity 876,633 835,258 829,909 Total liabilities and stockholders’ equity 7,051,812 9,790,123 8,779,026 Loans (HFI) / Deposits 59 % 42 % 46 % Net Interest Margin 3.75 % 3.07 % 3.28 % Return on Average Assets 1.90 % 2.22 % 0.86 % Return on Average Equity 18.07 % 28.93 % 8.83 % 1Includes $143.3 million, $208.6 million, and $215.5 million of PPP loans in 3Q21, 2Q21, and 3Q20, respectively. 2Includes payments businesses deposits of $5.70 billion, $8.44 billion, and $6.76 billion for 3Q21, 2Q21, and 3Q20, respectively. Average deposits from the payments businesses for the third quarter were $6.78 billion, a 7.5% increase from $6.32 billion for the 3Q20 quarter. The effects of government stimulus programs have had a significant impact on the Company’s balance sheet. These programs include Economic Impact Payments (“EIP”), enhanced unemployment benefits that flow through to existing prepaid card programs, and Paycheck Protection Program (“PPP”) loans. Meta Financial Group, Inc. (Nasdaq: CASH) | Quarterly Investor Presentation
Quarterly Average Earning Asset Mix % in charts represent % of total interest earning assets At the Quarter Ended JUNE 30, 2021 JUNE 30, 2020 ($ in thousands) 3 Q 2 1 3 Q 2 0 Y/Y Δ COMMERCIAL FINANCE 2,586,527 2,158,905 20% Term lending 920,279 738,454 25% Asset-based lending 263,237 181,130 45% Factoring 320,629 206,361 55% Lease financing 282,940 264,988 7% Insurance premium finance 417,652 359,147 16% SBA/USDA¹ 263,709 308,611 (15)% Other commercial finance 118,081 100,214 18% CONSUMER FINANCE 227,756 241,585 (6)% Consumer credit programs 105,440 102,808 3% Other consumer finance 122,316 138,777 (12)% TAX SERVICES 41,268 19,168 115% WAREHOUSE FINANCE 335,704 277,614 21% COMMUNITY BANKING 303,984 799,437 (62)% TOTAL GROSS LOANS & LEASES HFI 3,495,239 3,496,709 0% TOTAL GROSS LOANS & LEASES HFS 87,905 79,905 10% CASH & INVESTMENTS 2,635,758 4,303,341 (39)% TOTAL EARNING ASSETS 6,250,132 7,879,955 (21)% RENTAL EQUIPMENT, NET 211,368 216,336 (2)% 1Includes balances of $143.3 million in Paycheck Protection Program loans at June 30, 2021 and $215.5 million at June 30, 2020. DIVERSIFIED EARNING ASSET PORTFOLIO 8 28%25% 36% 7% 6% 8% 1%7% 1% 12%4% 5% 50% 58% 50% 3Q202Q213Q21 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
CONSUMER BUSINESS LINES 9Meta Financial Group, Inc. (Nasdaq: CASH) | Quarterly Investor Presentation
METABANK IS A WELL-RECOGNIZED LEADER IN BAAS 10 • Full range of payment and debit services • Leading issuer of prepaid debit cards • Agent for all three rounds of U.S. Treasury Economic Impact Payments • Provide partners with regulatory and compliance oversight • Provide tax return transfer and loan solutions to two largest tax preparers and 25,000+ independent tax preparers • Payments capabilities enable tax preparers to provide underbanked consumers with access to electronic tax payments and refund advances • Marketplace lending, lines of credit and consumer loans to fintechs and other partners • Consumer loan products to marketplace lenders at reasonable rates, enabling their customers to reliably access funds and better control their financial futures Payments Capabilities, Regulatory and Compliance Expertise, Are Core Strengths Tax Services Capabilities Create Value for Partners Consumer Finance Businesses Generate Higher NIM Demonstrated Ability to Provide Partners with a Full Range of Services Has Generated a High-Quality Portfolio of BaaS Clients Neobanks, Fintechs, Program Managers, Community Banks, Government Agencies, Tax Services Meta Financial Group, Inc. (Nasdaq: CASH) | Quarterly Investor Presentation
METABANK SERVES AS THE HUB OF THE PAYMENTS ECOSYSTEM 11 Regulatory/Compliance Oversight OCC Primary Regulator Issuing/Acquiring Bank End User Card Holder/ Consumer End User Merchants Processor Issuing 20+ Fintech / Program Manager Partners 50+ Community Banks 1200+ Debit/Credit Networks 20+ Fed / Settlement ATM Sponsorship 85+ ISOs Processor Acquiring 10+ Meta Financial Group, Inc. (Nasdaq: CASH) | Quarterly Investor Presentation
0.0 20,000.0 40,000.0 60,000.0 80,000.0 100,000.0 120,000.0 3Q20 2Q21 3Q21 Payments Tax Services Consumer Finance BAAS CAPABILITIES GENERATE INCREASING LOW-COST DEPOSITS AND REVENUE 12 Growth in BaaS revenue Average Payments Deposits* ($ in billions) 26% 53% 33% % of Total Revenue $6.32 $9.29 $6.79 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0 10.0 3Q20 2Q21 3Q21 *Deposit growth reflects 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 payments- generated deposits Banking Services** Checking Prepaid 10% 8% 82% Meta Financial Group, Inc. (Nasdaq: CASH) | Quarterly Investor Presentation
Refund advances (“RAs”) and refund-transfers (“RTs”) leverage BaaS infrastructure and are core to MetaBank’s mission, as they allow consumers quicker access to their money. Strong revenue generation in the quarter compared to the prior year related to delayed timing of RT product income due to the extension of the tax filing deadline by the IRS. • RT product income for the overall tax season of $35.4 million, or up 5% compared to the 2020 tax season. • RA originations of $1.79 billion compared to $1.33 billion in the 2020 tax season. – 2021 tax season benefited by the addition of H&R Block relationship. TAX SERVICES ECONOMICS Three Months Ended Nine Months Ended $ in millions June 30, 2021 June 30, 2020 % Change June 30, 2021 June 30, 2020 % Change Net interest income (expense) 0.61 0.0 0% 1.03 (1.33) (177)% Tax advance product income 0.89 0.03 3062% 47.41 31.84 49% RT product income 12.07 4.59 163% 35.40 33.73 5% Total revenue $ 13.57 $ 4.62 194% $ 83.84 $ 64.24 31% Total expense 2.41 (0.15) (1710)% 11.18 10.30 8% Provision for credit losses 4.69 (0.10) (4788)% 32.82 20.41 61% Net income, pre-tax $ 6.47 $ 4.87 33% $ 39.85 $ 33.53 19% Total refund advance originations - - - $ 1,793 $ 1,335 34% Approximate loss rate¹ (9 months) 1.83 % 1.53 % 20% RELATIONSHIPS WITH FRANCHISES (H&R BLOCK, JACKSON HEWITT) RELATIONSHIPS WITH INDEPENDENTS (META TAX) Tax Season at MetaBank ramps up during the first fiscal quarter, peaks during the second fiscal quarter, and wraps up during the third fiscal quarter. As a result, performance for the nine months ended June 30 is a better reflection on the overall performance for tax season as it alleviates timing differences between quarters. TAX SEASON UPDATE 2021 1 Approximate loss rate calculated by taking provision for loan & lease losses divided by total refund advance originations. 13Meta Financial Group, Inc. (Nasdaq: CASH) | Quarterly Investor Presentation
LENDING BUSINESS LINES 14Meta Financial Group, Inc. (Nasdaq: CASH) | Quarterly Investor Presentation
HIGHLY GRANULAR AND DIVERSIFIED LOAN PORTFOLIO 15 • Collateral-based lending focused on risk management and administrative controls of borrowers’ assets. • Underwritten to ensure recovery of full loan exposure in the event of a default or liquidation. • Closely monitored and managed. • Strong credit performance during COVID-19 period1, annualized net charge-offs excl. tax services 48bps of average loans and leases. • Solar lending provides conservative lending and generates tax credits, boosting returns. • Consumer finance strategic to payments distribution potential. Loan portfolio supports mission of financial inclusion for all® 73% 7% 1% 19% Commercial Finance Consumer Finance Tax Services Corporate 15% 17% 21% 20% Working Capital Equipment Finance Commercial Finance Specialty Finance J U N E 3 0 , 2 0 2 1 1Q3 FY20-Q3 FY21 -- non-GAAP measures, see appendix. Meta Financial Group, Inc. (Nasdaq: CASH) | Quarterly Investor Presentation
OVERVIEW OF LOAN PORTFOLIO 16 Business Line Balance Sheet Category 3Q20 2Q21 3Q21 % of Portfolio 3Q21 Commercial Finance Commercial Finance Guaranteed portion of US govt SBA/USDA Loans SBA/USDA 8.5 68.5 71.9 2% Unguaranteed portion of US govt SBA/USDA Loans SBA/USDA 84.6 54.8 48.6 1% Paycheck Protection Program (PPP) Loans SBA/USDA 215.5 208.6 143.3 4% Other Term lending 332.9 454.5 449.5 13% TOTAL 641.5 786.4 713.2 20% Equipment Finance Large Ticket Lease Financing 228.9 269.5 247.0 7% Term lending 188.3 173.5 195.9 6% Small Ticket Lease Financing 28.6 30.5 27.6 1% Term lending 217.3 263.4 274.9 8% Other Lease Financing 7.5 8.2 8.3 0% TOTAL 670.6 745.1 753.7 21% Working Capital Asset-Based Lending 181.1 248.7 263.2 8% Factoring 206.4 277.6 320.6 9% TOTAL 387.5 526.3 583.8 17% Specialty Finance Insurance Premium Finance Insurance Premium Finance 359.1 344.8 417.7 12% Other commercial finance Other commercial finance 100.2 103.2 118.1 3% TOTAL 459.3 448.0 535.8 15% Consumer Finance Consumer credit programs Consumer credit programs 102.8 104.8 105.4 3% Private student loans Other consumer finance 120.0 106.3 101.4 3% Other consumer finance Other consumer finance 18.8 24.5 20.9 1% TOTAL 241.6 235.7 227.7 7% Tax Services Tax Preparer Loans Tax Services - 1.7 0.3 0% Refund Advance Loans Tax Services 19.2 224.2 41.0 1% TOTAL 19.2 225.9 41.3 1% Corporate Warehouse Finance Warehouse Finance 277.6 332.5 335.7 10% Community Banking Community Banking 799.4 348.1 304.0 9% TOTAL 1,077.0 680.6 639.7 19% Total Lending Portfolio (HFI) 3,496.7 3,648.0 3,495.2 100% Meta Financial Group, Inc. (Nasdaq: CASH) | Quarterly Investor Presentation
• Permanent debt financing | $111.7 million outstanding (Investment Advisor) and $98.3 million outstanding (Insurance Agency) – Financed through both SBA 7(a) ($77.9 million) and Conventional ($132.1 million) product offerings. – Repeatable and predictable cash flows of insurance premiums and asset management fees are supported by underlying intangible, book of business collateral, that is generally diversified across hundreds or thousands of clients. SELECT COMMERCIAL FINANCE AREAS 17 Renewable Energy Significant lender for both solar and fuel cell power generation projects. Debt financing for renewable energy via conventional term loans and United States Department of Agriculture (“USDA”) Guaranteed Loan Programs. Investment tax credit financing via sale-leasebacks. • Renewable energy debt financing | $382.1 million outstanding1 – Safe and conservative lending characteristics with long-term power purchase agreements and low loan-to-values generates predictable cash flow and safeguards the loan’s debt service coverage capability. – Originations: $24.8 million in USDA solar loans for the third quarter of 2021 and $75.1 million in USDA solar loans in fiscal 2021. • Renewable energy investment tax credit (“ITC”) financing • Originations: $13.5 million in ITC eligible alternative energy sale-leasebacks for the third quarter of 2021, $3.4 million in total net ITC. • Total originations fiscal year-to-date 2021 of $72.0 million, resulted in $18.9 million in total net ITC. Insurance / Investment Advisory Provide business acquisition financing for insurance agencies and investment advisory practices. 1 Majority in Term Lending balance sheet category. Meta Financial Group, Inc. (Nasdaq: CASH) | Quarterly Investor Presentation
Commercial Real Estate Industry Composition ($ in millions) OUTSTANDING BALANCE % OF TOTAL¹ Commercial Real Estate $287.1 7.7% Commercial Operating 7.7 0.2% Agricultural 7.8 0.2% 1-4 Family Real Estate 1.4 0.1% Total $304.0 8.2% • All hospitality loans have resumed principal and interest payments according to the loan terms except for one loan relationship. – Occupancy and revenue per available room are showing improving trends as the summer season is underway. • $19.8 million in nonperforming community banking loans as of June 30, 2021 – Theater relationship makes up 90% of community bank nonperforming loans. – Received $7.3 million in July 2021 of shuttered venue operators grant funds of which were used to bring all payments current on the relationship. – Since June, outlook is trending favorably as reports show theater attendance that would support all operating expenses and debt service. 62% 17% 8% 6% 6% 1% Hotel/Motel Multifamily Retail Theater Office Building Other² During the quarter classified $18.1 million of community bank loans as held for sale. LEGACY COMMUNITY BANK PORTFOLIO AS OF JUNE 30, 2021 | SERVICED BY CENTRAL BANK 18 ¹ Total includes total gross loans & leases of $3.50 billion and rental equipment, net of $211.4 million, as of June 30, 2021, exposures are based on current outstanding balances as of June 30, 2021 ² Other includes subsectors comprised of less than 1% of total commercial real estate as of June 30, 2021 ($287.1 million) Meta Financial Group, Inc. (Nasdaq: CASH) | Quarterly Investor Presentation
ASSET QUALITY, INTEREST RATE RISK, & CAPITAL 19Meta Financial Group, Inc. (Nasdaq: CASH) | Quarterly Investor Presentation
$4.9 $5.5 $3.8 $3.8 $2.8 0.55% 0.63% 0.44% 0.44% 0.32% 3Q20 4Q20 1Q21 2Q21 3Q21 Period Ended NCOs NCOs / Average Loans Adjusted Net Charge-Offs (“NCOs”)¹ Excludes Tax Services NCOs and Related Seasonal Average Loans ($ in millions) KEY CREDIT METRICS • Annualized adjusted net charge-offs1: – 0.32% of average loans in 3Q21 – 0.46% of average loans over last 12 months • Allowance for credit loss $91.2 million, or 2.61% of total loans and leases, a decrease from the linked-quarter. $56.1 $48.0 $53.2 $46.7 $45.1 0.64% 0.79% 0.73% 0.48% 0.64% 3Q20 4Q20 1Q21 2Q21 3Q21 Period Ended NPAs NPAs / Total Assets ASSET QUALITY 20 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. $39.3 $34.0 $42.3 $43.5 $41.9 1.10% 0.97% 1.18% 1.17% 1.17% 3Q20 4Q20 1Q21 2Q21 3Q21 Period Ended NPLs NPLs / Total Loans Nonperforming Assets (“NPAs”) ($ 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 6,000 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 JUNE 30, 2021 21 11% 25% 11% 53% • Low-rate environment -- focus is on reducing wholesale funding and redeploying deposits and assets 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 also 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
5.91% 6.58% 7.39% 4.75% 6.85%6.89% 7.56% 8.60% 5.47% 7.83% 3Q20 4Q20 1Q21 2Q21 3Q21 CAPITAL AND SOURCES OF LIQUIDITY REGULATORY CAPITAL AS OF JUNE 30, 2021 Minimum Requirement to be Well-Capitalized under Prompt Corrective Action Provisions Meta Financial Group, Inc. MetaBank, N.A. Capital Ratio Trends At June 30, 2021¹ Meta Financial Group, Inc. MetaBank, N.A. Tier 1 Leverage 6.85% 7.83% Tier 1 Leverage – EIP-adjusted² N/A 7.95% Common Equity Tier 1 12.76% 14.94% Tier 1 Capital 13.11% 14.96% Total Capital 16.18% 16.22% • MetaBank remains well-capitalized. Granted temporary exemption from meeting certain capital leverage ratios by the OCC, related to participation in distributing Bank-issued EIP cards. • Tier 1 Leverage ratios impacted from government stimulus programs mentioned above. – MetaBank EIP-adjusted Tier 1 Leverage of 7.95% better reflects the balance sheet reducing the impact from the temporary EIP card-related balances. Primary & Secondary Liquidity Sources ($ in millions) Cash and Cash Equivalents $720 Unpledged Investment Securities $1,020 FHLB Borrowing Capacity $780 Funds Available through Fed Discount Window $235 PPP Loan Collateral $140 Unsecured Lines of Credit $1,265 - $1,535 EIP Deposit Balances Held at Other Banks $2,710 14.99% 15.30% 14.14% 14.65% 16.18% 15.12% 15.26% 14.14% 14.66% 16.22% 3Q20 4Q20 1Q21 2Q21 3Q21 10% 5% 22 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 23Meta Financial Group, Inc. (Nasdaq: CASH) | Quarterly Investor Presentation
June 30, 2021 March 31, 2021 COUNT $ BALANCE COUNT $ BALANCE COMMUNITY BANK 9 $ 36.6 15 $58.7 Hospitality 9 36.6 11 40.8 Movie Theater 0 - 4 17.9 COMMERCIAL FINANCE 24 $3.2 55 $5.8 Small ticket equipment finance 23 1.6 55 5.8 Other commercial finance 1 1.6 0 - CONSUMER 50 $1.6 76 $1.9 TOTAL 83 $41.5 146 $66.4 % TOTAL LOANS AND LEASES (excl. PPP) 1% 2% ACTIVE COVID-19 LOAN AND LEASE MODIFICATIONS AND DEFERRALS 24 Excluding PPP loans, active deferments and modifications decreased from $66.4 million or 2% of total gross loans and leases at March 31, 2021 to $43.1 million or 1% of total gross loans and leases at June 30, 2021. Meta Financial Group, Inc. (Nasdaq: CASH) | Quarterly Investor Presentation
THREE MONTHS ENDED ($ in millions) JUNE 30, 2021 MARCH 31, 2021 DECEMBER 31, 2020 SEPTEMBER 30, 2020 JUNE 30, 2020 Average interest-earning assets 7,316,820 9,768,242 5,636,445 6,806,366 7,608,616 Net interest income 68,475 73,850 65,999 64,513 62,137 Net interest margin 3.75% 3.07% 4.65% 3.77% 3.28% Interest-earning assets 7,316,820 9,768,242 5,636,445 6,806,366 7,608,618 LESS: Estimated cash adjustment 125,365 2,679,372 624,857 1,573,727 2,323,425 EIP-ADJUSTED AVERAGE INTEREST-EARNING ASSETS 7,191,455 7,088,870 5,011,588 5,232,639 5,285,193 Net interest income 68,475 73,850 65,999 64,513 62,137 LESS: Estimated cash interest adjustment 31 661 157 396 578 EIP-ADJUSTED NET INTEREST INCOME 68,444 73,189 65,842 64,177 61,559 EIP-ADJUSTED NET INTEREST MARGIN 3.82% 4.19% 5.21% 4.87% 4.68% Interest-earning assets 7,316,820 9,768,242 LESS: Estimated cash adjustment 1,867,987 4,187,558 ADJUSTED AVERAGE INTEREST-EARNING ASSETS 5,448,833 5,580,684 Net interest income 68,475 73,850 LESS: Estimated cash interest adjustment 528 1,090 ADJUSTED NET INTEREST INCOME 67,947 72,760 ADJUSTED NET INTEREST MARGIN 5.00% 5.29% RETURN ON AVERAGE ASSETS (“ROAA”) JUNE 30, 2021 MARCH 31, 2021 DECEMBER 31, 2020 SEPTEMBER 30, 2020 JUNE 30, 2020 Net income 38,701 59,066 28,037 13,158 18,190 Average assets 8,158,558 10,655,852 6,481,823 7,672,773 8,439,206 ROAA 1.90% 2.22% 1.73% 0.69% 0.86% LESS: Estimated cash adjustment 125,365 2,679,372 624,857 1,573,727 2,323,425 LESS: Estimated cash interest adjustment 31 661 157 396 578 EIP-ADJUSTED AVERAGE ASSETS 8,033,193 7,976,480 5,856,966 6,099,046 6,115,781 EIP-ADJUSTED NET INCOME 38,670 58,405 27,880 12,762 17,612 EIP-ADJUSTED ROAA 1.93% 2.93% 1.90% 0.84% 1.15% NON-GAAP RECONCILIATIONS EIP-RELATED ADJUSTMENTS 25 ADJ USTMENT INFLATED CASH BALANCES ADJ USTMENT FOR EIP -RELATED ASSETS Net Interest Margin Meta Financial Group, Inc. (Nasdaq: CASH) | Quarterly Investor Presentation
($ in millions) JUNE 30, 2020 MARCH 31, 2020 DECEMBER 31, 2020 SEPTEMBER 30, 2020 JUNE 30, 2020 Total stockholder's equity $ 980,163 $ 934,010 $ 912,143 $ 933,430 $ 923,520 LESS: Goodwill, net of associated deferred tax liabilities 301,179 301,602 301,999 302,396 302,815 LESS: Certain other intangible assets 35,100 36,780 39,403 40,964 42,865 LESS: Net deferred tax assets from operating loss and tax credit carry-forwards 17,754 19,306 24,105 18,361 10,360 LESS: Net unrealized gains (losses) on available-for-sale securities 14,750 12,458 19,894 17,762 8,382 LESS: Non-controlling interest 1,490 1,092 1,536 3,603 3,787 Common Equity Tier 1 Capital ("CET1") 609,891 562,772 525,206 550,344 555,311 Tier 1 minority interest not included in common equity tier 1 capital 932 690 750 1,894 1,894 Total Tier 1 capital 610,823 563,462 525,956 552,238 557,205 Total Assets (Quarter Average) $ 8,160,147 $ 10,662,731 $ 6,487,231 $ 7,679,897 $ 8,446,393 ADD: Available for sale securities amortized cost (20,713) (20,219) (24,694) (22,844) (8,420) ADD: Deferred tax 5,206 5,077 6,201 5,724 2,104 ADD: CECL adoption 13,913 10,439 10,439 0 0 LESS: Deductions from CET1 354,032 357,688 365,507 361,721 356,040 ADJUSTED TOTAL ASSETS $ 7,804,521 $ 10,300,340 $ 6,113,671 $ 7,301,056 $ 8,084,037 METABANK REGULATORY TIER 1 LEVERAGE 7.83 % 5.47 % 8.60 % 7.56 % 6.89% Adjusted total assets $ 7,804,521 $ 10,300,340 $ 6,113,671 $ 7,301,056 $ 8,084,037 LESS: EIP prepaid card-related assets (cash) 125,365 2,679,372 624,857 1,573,727 2,323,425 EIP-ADJUSTED TOTAL ASSETS $ 7,679,156 $ 7,620,968 $ 5,488,814 $ 5,727,329 $ 5,760,612 METABANK EIP-ADJUSTED TIER 1 LEVERAGE 7.95 % 7.39 % 9.58 % 9.64 % 9.67% NON-GAAP RECONCILIATIONS EIP-RELATED CAPITAL ADJUSTMENTS 26 ADJ USTMENT FOR EIP -RELATED ASSETS MetaBank Tier 1 Leverage Meta 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 27 For the last twelve months ended ($ in thousands) Jun 30, 2021 Mar 31, 2021 Dec 31, 2020 Sep 30, 2020 Jun 30, 2020 Noninterest Expense - GAAP 330,352 320,070 315,828 319,051 314,911 Net Interest Income 272,837 266,499 260,386 259,038 260,142 Noninterest Income 262,111 240,706 247,766 239,794 235,024 Total Revenue: GAAP 534,948 507,205 508,152 498,832 495,166 Efficiency Ratio, LTM 61.75% 63.10% 62.15% 63.96% 63.60% For the quarter ended ($ in thousands) Jun 30, 2021 Mar 31, 2021 Dec 31, 2020 Sep 30, 2020 Jun 30, 2020 Net Charge-offs 12,333 3,696 2,836 18,538 14,700 Less: Tax services net charge-offs 9,488 (54) (956) 13,034 9,782 Adjusted Net Charge-offs $2,845 $3,750 $3,792 $5,504 $4,918 Quarterly Average Loans and Leases 3,618,733 4,120,555 3,495,696 3,536,997 3,622,928 Less: Quarterly Average Tax Services Loans 91,804 714,789 25,104 16,650 39,845 Adjusted Quarterly Loans and Leases $3,526,929 $3,405,766 $3,470,592 $3,520,347 $3,583,083 Annualized NCOs/Average Loans and Leases 1.36% 0.36% 0.32% 2.10% 1.62% Adjusted Annualized NCOs/Adjusted Average Loans and Leases1 0.32% 0.44% 0.44% 0.63% 0.55% Efficiency Ratio Non-GAAP Reconciliation Adjusted Annualized NCOs and Adjusted Average Loans and Leases Meta Financial Group, Inc. (Nasdaq: CASH) | Quarterly Investor Presentation