8-K
Pathward Financial, Inc. (CASH)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 28, 2020
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: (605) 782-1767
| Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: | |
|---|---|
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d- 2(b)) |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4 (c)) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common Stock, $.01 par value | CASH | The NASDAQ Stock Market LLC |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02 Results of Operations and Financial Condition.
On October 28, 2020, the Registrant issued a press release announcing its results of operations and financial condition as of and for the three months and year ended September 30, 2020. A copy of the press release is attached as Exhibit 99.1 to this report and is incorporated into this Item 2.02 by reference.
The information in this Item 2.02, including Exhibit 99.1, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities thereof, nor shall it be deemed to be incorporated by reference in any filing under the Exchange Act or under the Securities Act of 1933, as amended (the "Securities Act"), except to the extent specifically provided in any such filing.
Item 7.01 Regulation FD Disclosure.
Information is being furnished herein in Exhibit 99.2 with respect to the Investor Update slide presentation prepared for use with the press release. While most of the selected financial information furnished herein is derived from the Company’s consolidated financial statements and related notes prepared in accordance with generally accepted accounting principles ("GAAP") and management’s discussion and analysis of financial condition and results of operations included, or to be included, in the Company’s reports on Forms 10-K and 10-Q, this information includes selected financial and operational information through the fourth quarter of fiscal year 2020 and does not represent a complete set of financial statement and related notes prepared in conformity with GAAP. The Company’s annual financial statements are subject to independent audit. The Investor Update slide presentation is dated October 28, 2020 and the Company does not undertake to update the materials after that date.
The information in this Item 7.01, including Exhibit 99.2, shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities thereof, nor shall it be deemed to be incorporated by reference in any filing under the Exchange Act or under the Securities Act, except to the extent specifically provided in any such filing.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
| Exhibit Number | Description of Exhibit |
|---|---|
| 99.1 | Press Release of Meta Financial Group, Inc., dated October 28, 2020 regarding the results of operations and financial condition. |
| 99.2 | Investor Update slide presentation for the Fourth Quarter of Fiscal Year 2020, dated October 28, 2020, 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: October 28, 2020 | 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 FISCAL YEAR 2020
2020 Fiscal Fourth Quarter Net Income of $13.2 Million, or $0.38 Per Diluted Share -
Fiscal 2020 Net Income of $104.7 Million, or $2.94 Per Diluted Share -
Fiscal 2020 Earnings Per Share up 18% Versus Fiscal 2019 -
Sioux Falls, S.D., October 28, 2020 (GLOBE NEWSWIRE) -- Meta Financial Group, Inc.® (Nasdaq: CASH) (“Meta” or the “Company”) reported net income of $13.2 million, or $0.38 per diluted share, for the three months ended September 30, 2020, compared to net income of $20.2 million, or $0.53 per diluted share, for the three months ended September 30, 2019. The Company reported record net income of $104.7 million, or $2.94 per diluted share, for the fiscal year ended September 30, 2020, compared to net income of $97.0 million, or $2.49 per diluted share, for the fiscal year ended September 30, 2019.
“I am extremely proud of our team for executing on our plan and our ability to deliver strong financial results and value to shareholders despite numerous challenges we faced during fiscal 2020,” said President and CEO Brad Hanson. “We will continue to be diligent in monitoring credit, managing excess capital, and focusing on our long-term strategic plan in order to better serve our customers and shareholders."
Business Developments
•The Company resumed its share repurchase program ("Program"), which it had suspended during March 2020 as a result of the uncertainty related to the COVID-19 pandemic. During the quarter ended September 30, 2020, the Company repurchased 260,816 shares, at an average price of $19.13, under its Program, which is authorized through December 31, 2022. Through October 23, 2020, the Company has repurchased a total of 898,416 of its shares, at a weighted average price of $21.80, since the Company resumed repurchasing shares under the Program in September 2020.
•On August 5, 2020, MetaBank, N.A., a wholly-owned subsidiary of the Company ("MetaBank" or the "Bank"), entered into a three-year program management agreement with Emerald Financial Services, LLC, a wholly owned indirect subsidiary of H&R Block, Inc., pursuant to which MetaBank will serve as a facilitator for H&R Block’s suite of financial services products, which include: Emerald Prepaid MasterCard®, Refund Transfers, Refund Advances, Emerald Advance® lines of credit, and other products through H&R Block’s distribution channels.
•The Company continued its support of various COVID-19 relief efforts including the Economic Impact Payment ("EIP") program and the Paycheck Protection Program ("PPP"), which are further described below.
Financial Highlights for the 2020 Fiscal Fourth Quarter and Year Ended September 30, 2020
•Total gross loans and leases at September 30, 2020 decreased $337.3 million, or 9%, to $3.31 billion, compared to September 30, 2019 and decreased $182.6 million, or 5% when compared to June 30, 2020.
•Average deposits from the payments divisions for the fiscal 2020 fourth quarter increased nearly 121% to $5.82 billion when compared to the same quarter in fiscal 2019. A significant portion of the year-over-year increase reflected the Company's participation in the EIP program, as described further below. Excluding the balances on the EIP cards, average payments deposits for the fiscal 2020 fourth quarter were approximately $4.20 billion, representing an increase of 60% compared to the same quarter in fiscal 2019.
•Total revenue for the fiscal 2020 fourth quarter was $105.3 million, compared to $101.6 million for the same quarter in fiscal 2019. Total revenue for the fiscal year ended September 30, 2020 was $498.8 million, an increase of 2% from the fiscal year ended September 30, 2019.
•Net interest income for the fiscal 2020 fourth quarter was $64.5 million, compared to $65.6 million in the comparable quarter in fiscal 2019. Total fiscal year 2020 net interest income was $259.0 million versus $264.2 million in the prior fiscal year.
•Net interest margin ("NIM") decreased to 3.77% for the fiscal 2020 fourth quarter from 4.95% over the same period of the prior fiscal year, while the tax-equivalent net interest margin ("NIM, TE") decreased to 3.79% from 5.00% for that same period in fiscal 2019. NIM for the 2020 fiscal year was 4.09% compared to 4.91% during fiscal year 2019 while NIM, TE, decreased to 4.12% for fiscal year 2020 from 5.02% for fiscal year 2019. The decrease in NIM during the fiscal 2020 fourth quarter and 2020 fiscal year was primarily driven by excess cash associated with the Company's participation in the EIP program, as described further below.
COVID-19 Business Update
The Company is participating in the PPP which is being administered by the Small Business Administration ("SBA"). As of September 30, 2020, the Company had 689 loans outstanding with a total of $219.0 million in loan balances that were originated as part of the program.
From a credit perspective, the Company continues to closely monitor each of its lending portfolios. The Company has placed significant focus on its hospitality and movie theater loans and its small ticket equipment finance relationships. The credit management team has remained in regular contact with these borrowers.
The Company's community bank hospitality loan balances increased to $179.3 million as of September 30, 2020 from $169.0 million as of June 30, 2020 and the average loan-to-value ratio on those loans was 60% at both September 30, 2020 and June 30, 2020. 67% of these hospitality relationships received PPP loans and, as of September 30, 2020, 44% of the hospitality loan balances received some form of payment deferral modification and were still in their active deferment period. Community Bank loans to borrowers operating in the movie theater industry totaled $17.9 million as of both September 30, 2020 and June 30, 2020. As of September 30, 2020, all movie theater loan balances were still in their active deferment period.
As of September 30, 2020, the Company had $287.2 million in small ticket equipment finance balances, of which $255.1 million were categorized within term lending and $32.1 million were categorized within lease financing. Borrowers with respect to 8% of the balances on these small ticket equipment finance relationships that received some form of payment deferral modification were still in their active deferment period.
As of September 30, 2020, $170.0 million of the loans and leases that were granted deferral payments by the Company were still in their deferment period. As of June 30, 2020, loans and leases totaling $292.2 million were within their deferment period. In addition, the Company has made other COVID-19 related modifications, of which $23.3 million were still active as of September 30, 2020 compared to $34.6 million at June 30, 2020. The majority of the other modifications were related to adjusting the type or amount of the customer's payments.
When excluding its seasonal tax services lending portfolio, the Company increased its allowance for loan and lease losses by $1.9 million at September 30, 2020, as compared to June 30, 2020. This was primarily due to the effects of the on-going COVID-19 pandemic and the continued economic uncertainty that it has caused. The Company will continue to diligently monitor the allowance for loan and lease losses and adjust as necessary in future periods to maintain an appropriate and supportable level.
The Company's capital position remained strong as of September 30, 2020, even while absorbing the temporary impact from the EIP program, as described further below. As of September 30, 2020, the Bank's capital leverage ratio based on average assets was 7.56%. The Bank's capital leverage ratio based on September 30, 2020 period-end assets was 9.66%, which better reflects the Company's anticipated balance sheet going forward. See non-GAAP reconciliation table below. In addition, the Company has options available that can be used to effectively manage capital levels through these turbulent times, including a strong and flexible balance sheet.
EIP Program Update
On April 29, 2020, the Bank entered into an amendment of its existing agreement with the U.S. Department of the Treasury’s Bureau of the Fiscal Service (“Fiscal Service”) to provide debit card services to support the distribution of a segment of the Economic Impact Payments payable by the Internal Revenue Service under the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act").
Under the EIP program, 3.6 million cards were delivered with a total load balance of $6.42 billion. As a result of the program, the Company saw a quick influx of deposits to its balance sheet in mid-May 2020 with limited visibility into the duration of those deposits. While the EIP Program's impact to earnings was negligible, it did have a significant impact on cash and deposit balances, leading to a net drag on the NIM along with a corresponding impact on the Company's leverage capital ratios.
The total balances remaining on the EIP cards were $942.2 million as of September 30, 2020 and $828.5 million as of October 23, 2020. The funds on these cards increased the Company's quarterly average noninterest deposit balances by $1.62 billion, leading to an overall improvement in cost of deposits. This short term influx of deposits also led to excess cash balances held at the Federal Reserve during the current period, which yielded approximately 10 basis points in interest income, and increased the quarterly average of interest-earning assets compared to previous periods. This increase of lower-yielding cash balances resulted in a drag to the overall yield on total interest-earning assets during the current period. The net impact to NIM during the current quarter was approximately 110 basis points.
Net Interest Income
Net interest income for the fiscal 2020 fourth quarter was $64.5 million, a decrease of 2%, from the same quarter in fiscal 2019. The decrease was primarily driven by lower overall balances and yields realized on the loan and lease portfolios along with a decrease in investment securities balances, partially offset by a reduction in total interest expense.
During the fourth quarter of fiscal year 2020, loan and lease interest income decreased $8.6 million and investment securities interest income decreased $3.8 million, when compared to the same quarter in fiscal 2019, while interest expense decreased $11.3 million over that same period. The quarterly average outstanding balance of loans and leases as a percentage of interest-earning assets for the quarter ended September 30, 2020 decreased to 52%, from 71% for the quarter ended September 30, 2019, while the quarterly average balance of total investments as a percentage of interest-earning assets decreased to 19% from 28% over that same period. These decreases were primarily due to the increase in interest-earning cash balances related to the EIP program. The Company’s average interest-earning assets for the fiscal 2020 fourth quarter increased by $1.55 billion, to $6.81 billion from the comparable quarter in fiscal 2019, primarily due to the effects of the EIP program.
NIM decreased to 3.77% for the fiscal 2020 fourth quarter from 4.95% for the comparable quarter in fiscal 2019, primarily due to the effects of the EIP program.
The overall reported tax-equivalent yield (“TEY”) on average earning asset yields decreased by 213 basis points to 4.02% for the fiscal 2020 fourth quarter compared to the fiscal 2019 fourth quarter, driven primarily by excess low-yielding cash held at the Federal Reserve, along with a lower interest rate environment. The fiscal 2020 fourth quarter TEY on the securities portfolio was 1.78% compared to 2.83% for the same period of the prior fiscal year.
The Company's cost of funds for all deposits and borrowings averaged 0.23% during the fiscal 2020 fourth quarter, compared to 1.17% for the fiscal 2019 fourth quarter. This decrease was primarily due to a decrease in overnight borrowings rates as well as an increase in the average balance of the Company's noninterest-bearing deposits, mainly due to the EIP program noted above. The Company's overall cost of deposits was 0.12% in the fiscal fourth quarter of 2020, compared to 0.95% in the same quarter of fiscal 2019.
Noninterest Income
Fiscal 2020 fourth quarter noninterest income was $40.8 million, compared to $36.0 million for the same period of the prior year. This year-over-year increase was primarily due to higher total tax product fee income, an increase in gains on loan sales, an increase in other income, and an increase in payments cards and deposit fees, partially offset by a decrease in rental income and other bank and deposit fees.
Noninterest Expense
Noninterest expense increased 5% to $80.3 million for the fiscal 2020 fourth quarter, from $76.1 million for the same quarter of fiscal 2019, primarily driven by an increase in other expense, card processing expense, and impairment expense, partially offset by a reduction in compensation and benefits expense and amortization expense. The increase in other expense included a pre-tax charge of $1.7 million, or $0.05 per diluted share, for the early extinguishment of outstanding FHLB debt, which had a balance of $110.0 million at a weighted average cost of 2.41%. While compensation and benefits expense was reduced compared to the same quarter of fiscal 2019, it includes pre-tax employee separation-related expenses of $1.5 million, or $0.04 per diluted share, for the fiscal 2020 fourth quarter.
Income Tax Expense
The Company recorded income tax expense of $1.8 million, representing an effective tax rate of 11.2%, for the fiscal 2020 fourth quarter, compared to an income tax benefit of $0.1 million, representing an effective tax rate of (0.6)%, for the fiscal 2019 fourth quarter. The recorded income tax expense during the current quarter was primarily due to a reduction in investment tax credits from originated solar leases in fiscal year 2020 as compared to the fiscal year 2019. For the 2020 fiscal year, the Company's effective tax rate was 4.9%, compared to (3.4)% for the 2019 fiscal year.
The Company originated $41.1 million in solar leases during the fiscal 2020 fourth quarter, compared to $19.7 million during the fiscal 2019 fourth quarter. The Company originated $77.8 million in solar leases for the 2020 fiscal year, compared to $104.4 million during the 2019 fiscal year. Investment tax credits related to solar leases are recognized ratably based on income throughout each fiscal year. The timing and impact of future solar tax credits are expected to vary from period to period, and Meta intends to undertake only those tax credit opportunities that meet the Company's underwriting and return criteria.
Investments, Loans and Leases
| September 30, 2020 | June 30, 2020 | March 31, 2020 | December 31, 2019 | September 30, 2019 | ||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Total investments | $ | 1,360,712 | $ | 1,268,416 | $ | 1,310,476 | $ | 1,337,840 | $ | 1,407,257 |
| Loans held for sale | ||||||||||
| Consumer credit products | 962 | 391 | — | — | 122,299 | |||||
| SBA/USDA | 52,542 | 31,438 | 13,610 | 13,883 | 26,478 | |||||
| Community Bank(1) | 130,073 | 48,076 | — | 250,383 | — | |||||
| Total loans held for sale | 183,577 | 79,905 | 13,610 | 264,266 | 148,777 | |||||
| National Lending | ||||||||||
| Term lending(2) | 805,323 | 738,454 | 725,581 | 695,347 | 641,742 | |||||
| Asset based lending(2) | 182,419 | 181,130 | 250,211 | 250,633 | 250,465 | |||||
| Factoring | 281,173 | 206,361 | 285,495 | 285,776 | 296,507 | |||||
| Lease financing(2) | 281,084 | 264,988 | 238,788 | 223,715 | 177,915 | |||||
| Insurance premium finance | 337,940 | 359,147 | 332,800 | 349,299 | 361,105 | |||||
| SBA/USDA | 318,387 | 308,611 | 92,000 | 90,269 | 88,831 | |||||
| Other commercial finance | 101,658 | 100,214 | 101,472 | 99,617 | 99,665 | |||||
| Commercial Finance | 2,307,984 | 2,158,905 | 2,026,347 | 1,994,656 | 1,916,230 | |||||
| Consumer credit products | 89,809 | 102,808 | 113,544 | 115,843 | 106,794 | |||||
| Other consumer finance | 134,342 | 138,777 | 144,895 | 154,772 | 161,404 | |||||
| Consumer Finance | 224,151 | 241,585 | 258,439 | 270,615 | 268,198 | |||||
| Tax Services | 3,066 | 19,168 | 95,936 | 101,739 | 2,240 | |||||
| Warehouse Finance | 293,375 | 277,614 | 333,829 | 272,522 | 262,924 | |||||
| Total National Lending loans and leases | 2,828,576 | 2,697,272 | 2,714,551 | 2,639,532 | 2,449,592 | |||||
| Community Banking | ||||||||||
| Commercial real estate and operating | 457,371 | 608,303 | 654,429 | 682,399 | 883,932 | |||||
| Consumer one-to-four family real estate and other | 16,486 | 166,479 | 205,046 | 220,588 | 259,425 | |||||
| Agricultural real estate and operating | 11,707 | 24,655 | 36,759 | 40,778 | 58,464 | |||||
| Total Community Banking loans | 485,564 | 799,437 | 896,234 | 943,765 | 1,201,821 | |||||
| Total gross loans and leases | 3,314,140 | 3,496,709 | 3,610,785 | 3,583,297 | 3,651,413 | |||||
| Allowance for loan and lease losses | (56,188) | (65,747) | (65,355) | (30,176) | (29,149) | |||||
| Net deferred loan and lease origination fees | 8,625 | 5,937 | 8,139 | 7,177 | 7,434 | |||||
| Total loans and leases, net of allowance(3) | $ | 3,266,577 | $ | 3,436,899 | $ | 3,553,569 | $ | 3,560,298 | $ | 3,629,698 |
(1) The September 30, 2020 balance included approximately $77.5 million of commercial real estate and operating loans, $50.1 million of consumer one-to-four family real estate and other loans, and $2.5 million of agricultural real estate and operating loans. The June 30, 2020 balance included approximately $28.7 million of commercial real estate and operating loans, $11.3 million of consumer one-to-four family real estate and other loans, and $8.1 million of agricultural real estate and operating loans. The December 31, 2019 balance included approximately $197.5 million of commercial real estate and operating loans, $40.4 million of consumer one-to-four family real estate and other loans, and $12.7 million of agricultural real estate and operating loans.
(2) The Company updated the presentation of its loan and lease table beginning in the fiscal 2020 first quarter. The new presentation includes a new category called term lending. Certain balances previously included in the asset based lending and lease financing categories were reclassified into the new term lending category during the fiscal 2020 first quarter. Prior period balances have been conformed to the new presentation.
(3) As of September 30, 2020, the remaining balance of acquired loans and leases from the acquisition of Crestmark Bancorp, Inc. ("Crestmark") and its bank subsidiary, Crestmark Bank (the "Crestmark Acquisition") was $149.1 million and the remaining balances of the credit and interest rate mark discounts related to the acquired loans and leases held for investment were $2.8 million and $2.3 million, respectively. On August 1, 2018, the Company acquired loans and leases from the Crestmark Acquisition totaling $1.06 billion and recorded related credit and interest rate mark discounts of $12.3 million and $6.0 million, respectively.
The Company's investment security balances at September 30, 2020 totaled $1.36 billion, as compared to $1.27 billion at June 30, 2020 and $1.41 billion at September 30, 2019. The increase in balances at September 30, 2020 compared to June 30, 2020 was due to an increase in mortgage-backed securities of $114.4 million as the Company utilized its growing deposit base to fund investment securities.
Total gross loans and leases decreased $337.3 million, or 9%, to $3.31 billion at September 30, 2020, from $3.65 billion at September 30, 2019, with most of the decline attributable to the sale of community bank loan balances during the second and fourth quarters of fiscal 2020 along with a decrease in the consumer finance portfolio, partially offset by growth in the commercial finance and warehouse finance portfolios.
At September 30, 2020, commercial finance loans, which comprised 70% of the Company's gross loan and lease portfolio, totaled $2.31 billion, reflecting growth of $149.1 million, or 7%, from June 30, 2020. The increase in commercial finance loans was primarily due to increases in factoring and term lending loans of $74.8 million and $66.9 million, respectively, partially offset by a $21.2 million decrease in insurance premium finance loans. Warehouse finance loans totaled $293.4 million at September 30, 2020, a 6% increase from June 30, 2020.
Community bank loans held for investment totaled $485.6 million as of September 30, 2020, as compared to $799.4 million at June 30, 2020 and $1.20 billion at September 30, 2019. On August 4, 2020 and September 17, 2020, the Company sold an additional $58.6 million and $76.4 million, respectively, of the retained Community Bank portfolio to Central Bank. The sales did not result in any material gain to the Company. As of September 30, 2020, the Company had $130.1 million of community bank loans classified as held for sale and expects to sell those loans during the first quarter of fiscal year 2021.
Asset Quality
The Company’s allowance for loan and lease losses was $56.2 million at September 30, 2020, compared to $65.7 million at June 30, 2020 and $29.1 million at September 30, 2019. The decrease in the allowance at September 30, 2020 when compared to June 30, 2020, was primarily due to reductions of $11.4 million within the tax services portfolio and $0.6 million in the consumer finance portfolio, partially offset by increases within the retained community bank and commercial finance portfolios of $1.9 million and $0.5 million, respectively.
The year over year increase in the allowance was primarily driven by a $15.3 million increase within the commercial finance portfolio and $14.2 million increase within the retained community banking portfolio, partially offset by a reduction in the consumer lending portfolio of $2.5 million.
The following table presents the Company's allowance for loan and lease losses as a percentage of its total loans and leases.
| As of the Period Ended | ||||||
|---|---|---|---|---|---|---|
| (Unaudited) | September 30, 2020 | June 30, 2020 | September 30, 2019 | |||
| Commercial finance | 1.30 | % | 1.36 | % | 0.76 | % |
| Consumer finance | 1.64 | % | 1.75 | % | 2.30 | % |
| Tax services | 0.06 | % | 59.67 | % | — | % |
| Warehouse finance | 0.10 | % | 0.10 | % | 0.10 | % |
| National Lending | 1.20 | % | 1.68 | % | 0.86 | % |
| Community Bank | 4.59 | % | 2.55 | % | 0.68 | % |
| Total loans and leases | 1.70 | % | 1.88 | % | 0.80 | % |
The Company's allowance for loan and lease losses as a percentage of total loans and leases decreased to 1.70% at September 30, 2020 from 1.88% at June 30, 2020. This reduction was primarily due to seasonal charge-off activity within the tax services portfolio, and to a lesser extent, a lower coverage ratio within the commercial finance portfolio. The commercial finance coverage ratio decreased as a result of the Company's continued assessment of the risks associated with the ongoing COVID-19 pandemic. The decrease in the total Company coverage ratio was partially offset by an increase to the coverage ratio within the retained community bank portfolio due to identified risks impacting its movie theater relationships stemming from the ongoing COVID-19 pandemic. Consumer finance and warehouse finance remained largely unchanged due in part to the structure of the credit protections in place. The Company expects to continue to diligently monitor the allowance for loan and lease losses and adjust as necessary in future periods to maintain an appropriate and supportable level.
When adding the $2.8 million balance of the credit mark to the allowance for loan and lease losses, the commercial finance coverage ratio increases to 1.41% and the total loans and leases coverage ratio increases to 1.77%, as of September 30, 2020. Within commercial finance, the coverage ratio on Crestmark division loans and leases was 1.42% at September 30, 2020, as compared to 1.52% at June 30, 2020 and 0.88% at September 30, 2019, and the coverage ratio on the insurance premium finance portfolio over those same periods were 0.63%, 0.66%, and 0.28%, respectively.
Activity in the allowance for loan and lease losses for the periods presented were as follows.
| (Unaudited) | Three Months Ended | Year Ended | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| September 30, 2020 | June 30, 2020 | September 30, 2019 | September 30, 2020 | September 30, 2019 | ||||||
| (Dollars in thousands) | ||||||||||
| Beginning balance | $ | 65,747 | $ | 65,355 | $ | 43,505 | $ | 29,149 | $ | 13,040 |
| Provision - tax services loans | 1,599 | (100) | (9) | 22,006 | 24,873 | |||||
| Provision - all other loans and leases | 7,381 | 15,193 | 4,130 | 42,770 | 30,776 | |||||
| Charge-offs - tax services loans | (13,037) | (9,797) | (15,426) | (22,834) | (25,096) | |||||
| Charge-offs - all other loans and leases | (6,015) | (5,807) | (3,351) | (18,927) | (17,758) | |||||
| Recoveries - tax services loans | 3 | 14 | 10 | 830 | 223 | |||||
| Recoveries - all other loans and leases | 510 | 889 | 290 | 3,194 | 3,091 | |||||
| Ending balance | $ | 56,188 | $ | 65,747 | $ | 29,149 | $ | 56,188 | $ | 29,149 |
Provision for loan and lease losses was $9.0 million for the quarter ended September 30, 2020, compared to $4.1 million for the comparable period in the prior fiscal year. The increase in provision was primarily within the retained community bank, tax services, and commercial finance portfolios, partially offset by a decrease in the consumer finance portfolio. Provision increases in the community bank and commercial finance portfolios were primarily attributable to movie theater, hospitality, and small ticket equipment finance relationships that have experienced ongoing stress related to the COVID-19 pandemic. Additional provisions were also applied to loans and leases that received short-term payment deferrals. Net charge-offs were $18.5 million for the quarter ended September 30, 2020 compared to $18.5 million for the quarter ended September 30, 2019. Total net charge-offs for the quarter ended September 30, 2020 consisted primarily of seasonal net charge-offs of $13.0 million in the tax services loan portfolio.
The Company's past due loans and leases were as follows for the periods presented.
| As of September 30, 2020 | 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 | $ | 13,338 | $ | 14,345 | $ | 16,663 | $ | 44,346 | $ | 2,263,638 | $ | 2,307,984 | $ | 7,400 | $ | 21,553 | $ | 28,953 |
| Consumer finance | 977 | 894 | 872 | 2,743 | 221,408 | 224,151 | 872 | — | 872 | |||||||||
| Tax services | — | — | 1,743 | 1,743 | 1,323 | 3,066 | 1,744 | — | 1,744 | |||||||||
| Warehouse finance | — | — | — | — | 293,375 | 293,375 | — | — | — | |||||||||
| Total National Lending | 14,315 | 15,239 | 19,278 | 48,832 | 2,779,744 | 2,828,576 | 10,016 | 21,553 | 31,569 | |||||||||
| Total Community Banking | 905 | 114 | 2,449 | 3,468 | 482,096 | 485,564 | 50 | 2,399 | 2,449 | |||||||||
| Total loans and leases held for investment | $ | 15,220 | $ | 15,353 | $ | 21,727 | $ | 52,300 | $ | 3,261,840 | $ | 3,314,140 | $ | 10,066 | $ | 23,952 | $ | 34,018 |
| As of June 30, 2020 | 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 | $ | 13,865 | $ | 16,005 | $ | 27,150 | $ | 57,020 | $ | 2,101,885 | $ | 2,158,905 | $ | 8,635 | $ | 22,285 | $ | 30,920 |
| Consumer finance | 650 | 623 | 909 | 2,182 | 239,403 | 241,585 | 909 | — | 909 | |||||||||
| Tax services | — | 19,168 | — | 19,168 | — | 19,168 | — | — | — | |||||||||
| Warehouse finance | — | — | — | — | 277,614 | 277,614 | — | — | — | |||||||||
| Total National Lending | 14,515 | 35,796 | 28,059 | 78,370 | 2,618,902 | 2,697,272 | 9,544 | 22,285 | 31,829 | |||||||||
| Total Community Banking | 4,910 | 625 | 6,885 | 12,420 | 787,017 | 799,437 | 4,995 | 2,470 | 7,465 | |||||||||
| Total loans and leases held for investment | $ | 19,425 | $ | 36,421 | $ | 34,944 | $ | 90,790 | $ | 3,405,919 | $ | 3,496,709 | $ | 14,539 | $ | 24,755 | $ | 39,294 |
The Company's nonperforming assets at September 30, 2020, were $48.0 million, representing 0.79% of total assets, compared to $56.1 million, or 0.64% of total assets at June 30, 2020 and $56.5 million, or 0.91% of total assets at September 30, 2019. The decrease in nonperforming assets on a linked quarter basis was primarily driven by a decrease in nonperforming operating leases, a decrease in community bank nonperforming loans, and a decrease in commercial finance nonperforming loans and leases, partially offset by an increase in foreclosed and repossessed assets and an increase in nonperforming tax services loans. The year-over-year decrease in nonperforming assets was primarily driven by a reduction in foreclosed and repossessed assets, partially offset by an increase in nonperforming loans and leases within the commercial finance and community bank portfolios, as well as an increase in nonperforming operating leases. The increase in nonperforming assets as a percentage of total assets at September 30, 2020 was primarily due to lower period-end assets, when compared to June 30, 2020.
The Company's nonperforming loans and leases at September 30, 2020, were $34.0 million, representing 0.97% of total gross loans and leases, compared to $39.3 million, or 1.10% of total gross loans and leases at June 30, 2020 and $26.5 million, or 0.70% of total gross loans and leases at September 30, 2019.
At September 30, 2020, the balance of the Company's loans and leases past due 30 days or greater decreased 42% to $52.3 million when compared to June 30, 2020. When excluding tax services loans, the balance of loans and leases past due 30 days or greater decreased to $50.6 million at September 30, 2020 from $71.6 million at June 30, 2020. Loan and lease balances that were within their active deferment period decreased to $170.0 million at September 30, 2020 from $292.2 million at June 30, 2020.
Adoption of Current Expected Credit Losses ("CECL") Accounting Standard
The Company adopted CECL effective October 1, 2020, and expects its day one entry to increase the allowance for credit losses to be between $13 million and $14 million. Aside from the loan and lease portfolio, management does not expect any other meaningful impacts on the balance sheet or regulatory capital ratios in the near term based on the election of the two-year delay and the five-year total transition period as allowed by the Office of the Comptroller of the Currency.
Deposits, Borrowings and Other Liabilities
Total average deposits for the fiscal 2020 fourth quarter increased by $1.89 billion to $6.47 billion compared to the same period in fiscal 2019, primarily due to the effects of the EIP program. Average noninterest-bearing deposits increased $3.01 billion, or 116%, for the fiscal 2020 fourth quarter when compared to the same period in fiscal 2019, while average wholesale deposits decreased $1.03 billion, or 65%. Average deposits from the payments divisions increased 121% to $5.82 billion for the fiscal 2020 fourth quarter when compared to the same period in fiscal 2019. Excluding the balances on the EIP cards, average payments deposits for the fiscal 2020 fourth quarter were $4.20 billion, representing an increase of 60% compared to the same period of the prior year, which was largely driven by stimulus payments loaded on various partner cards along with lower levels of consumer spending.
The average balance of total deposits and interest-bearing liabilities was $6.66 billion for the three-month period ended September 30, 2020, compared to $5.15 billion for the same period in the prior fiscal year, representing an increase of 29%.
Total end-of-period deposits increased 10% to $4.98 billion at September 30, 2020, compared to $4.52 billion at September 30, 2019. The increase in end-of-period deposits was primarily driven by an increase in noninterest bearing deposits of $2.00 billion, of which $942.2 million was attributable to the balances on the EIP cards. The increase in total end-of-period deposits was partially offset by a decrease of $1.09 billion in wholesale deposits, as well as the sale of $290.5 million of community bank deposits during the second quarter of fiscal 2020.
Regulatory Capital
The Company and MetaBank remained above the federal regulatory minimum capital requirements at September 30, 2020 and continued to be classified as well-capitalized institutions. Regulatory capital ratios of the Company and the Bank are stated in the table below.
The tables below include certain non-GAAP financial measures that are used by investors, analysts and bank regulatory agencies to assess the capital position of financial services companies. Management reviews these measures along with other measures of capital as part of its financial analysis.
| As of the dates indicated | September 30,<br>2020 | June 30,<br>2020 | March 31,<br>2020 | December 31,<br>2019 | September 30,<br>2019 | |||||
|---|---|---|---|---|---|---|---|---|---|---|
| Company | ||||||||||
| Tier 1 leverage capital ratio | 6.58 | % | 5.91 | % | 7.28 | % | 8.28 | % | 8.33 | % |
| Common equity Tier 1 capital ratio | 11.78 | % | 11.51 | % | 10.27 | % | 10.10 | % | 10.35 | % |
| Tier 1 capital ratio | 12.18 | % | 11.90 | % | 10.63 | % | 10.46 | % | 10.71 | % |
| Total capital ratio | 15.30 | % | 14.99 | % | 13.61 | % | 12.74 | % | 13.01 | % |
| MetaBank | ||||||||||
| Tier 1 leverage capital ratio | 7.56 | % | 6.89 | % | 8.52 | % | 9.70 | % | 9.65 | % |
| Common equity Tier 1 capital ratio | 13.96 | % | 13.82 | % | 12.39 | % | 12.18 | % | 12.31 | % |
| Tier 1 capital ratio | 14.00 | % | 13.86 | % | 12.44 | % | 12.24 | % | 12.37 | % |
| Total capital ratio | 15.26 | % | 15.12 | % | 13.69 | % | 12.90 | % | 13.02 | % |
The following table provides the non-GAAP financial measures used to compute certain of the ratios included in the table above, as well as a reconciliation of such non-GAAP financial measures to the most directly comparable financial measure in accordance with GAAP:
| Standardized Approach(1) | September 30,<br>2020 | June 30,<br>2020 | March 31,<br>2020 | December 31,<br>2019 | September 30,<br>2019 | |||||
|---|---|---|---|---|---|---|---|---|---|---|
| (Dollars in Thousands) | ||||||||||
| Total stockholders' equity | $ | 847,308 | $ | 829,909 | $ | 805,074 | $ | 837,068 | $ | 843,958 |
| Adjustments: | ||||||||||
| LESS: Goodwill, net of associated deferred tax liabilities | 302,396 | 302,814 | 303,625 | 304,020 | 304,020 | |||||
| LESS: Certain other intangible assets | 40,964 | 42,865 | 44,909 | 47,855 | 50,501 | |||||
| LESS: Net deferred tax assets from operating loss and tax credit carry-forwards | 18,361 | 10,360 | 11,589 | 16,876 | 15,569 | |||||
| LESS: Net unrealized gains (losses) on available-for-sale securities | 17,762 | 8,382 | 2,337 | 3,897 | 6,458 | |||||
| LESS: Non-controlling interest | 3,603 | 3,787 | 3,762 | 4,305 | 4,047 | |||||
| Common Equity Tier 1(1) | 464,222 | 461,701 | 438,852 | 460,115 | 463,363 | |||||
| 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 | 1,894 | 1,894 | 2,036 | 2,372 | 2,350 | |||||
| Total Tier 1 Capital | 479,777 | 477,256 | 454,549 | 476,148 | 479,374 | |||||
| Allowance for loan and lease losses | 49,343 | 50,338 | 53,580 | 30,239 | 29,272 | |||||
| Subordinated debentures (net of issuance costs) | 73,807 | 73,765 | 73,724 | 73,684 | 73,644 | |||||
| Total qualifying capital | $ | 602,927 | $ | 601,359 | $ | 581,853 | $ | 580,071 | $ | 582,290 |
(1) Capital ratios were determined using the Basel III capital rules that became effective on January 1, 2015. Basel III revised the definition of capital, increased minimum capital ratios, and introduced a minimum CET1 ratio; those changes are being fully phased in through the end of 2021.
The following table provides a reconciliation of tangible common equity and tangible common equity excluding accumulated other comprehensive income ("AOCI"), each of which is used in calculating tangible book value data, to Total Stockholders' Equity. Each of tangible common equity and tangible common equity excluding AOCI is a non-GAAP financial measure that is commonly used within the banking industry.
| September 30,<br>2020 | June 30,<br>2020 | March 31,<br>2020 | December 31,<br>2019 | September 30,<br>2019 | ||||||
|---|---|---|---|---|---|---|---|---|---|---|
| (Dollars in Thousands) | ||||||||||
| Total Stockholders' Equity | $ | 847,308 | $ | 829,909 | $ | 805,074 | $ | 837,068 | $ | 843,958 |
| Less: Goodwill | 309,505 | 309,505 | 309,505 | 309,505 | 309,505 | |||||
| Less: Intangible assets | 41,692 | 43,974 | 46,766 | 50,151 | 52,810 | |||||
| Tangible common equity | 496,111 | 476,430 | 448,803 | 477,412 | 481,643 | |||||
| Less: Accumulated other comprehensive income (loss) ("AOCI") | 17,542 | 7,995 | 1,654 | 3,895 | 6,339 | |||||
| Tangible common equity excluding AOCI | $ | 478,569 | $ | 468,435 | $ | 447,149 | $ | 473,517 | $ | 475,304 |
Conference Call
The Company will host a conference call and earnings webcast at 4:00 p.m. Central Time (5:00 p.m. Eastern Time) on Wednesday, October 28, 2020. 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 3938037 upon request. International callers should dial (636) 812-6634. A webcast replay will also be archived at www.metafinancialgroup.com for one year.
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 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, 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 and recent and potential changes in response to the COVID-19 pandemic such as the CARES Act and the rules and regulations that may be promulgated thereunder; 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, particularly in light of our deposit base, a portion of which has been characterized as “brokered;” changes in consumer spending and saving habits; 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, 2019, and in other filings made with the SEC. The Company expressly disclaims any intent or obligation to update any forward-looking statements, whether written or oral, that may be made from time to time by or on behalf of the Company or its subsidiaries, whether as a result of new information, changed circumstances, or future events or for any other reason.
Condensed Consolidated Statements of Financial Condition (Unaudited)
(Dollars in Thousands, Except Share Data)
| ASSETS | September 30, 2020 | June 30, 2020 | March 31, 2020 | December 31, 2019 | September 30, 2019 | |||||
|---|---|---|---|---|---|---|---|---|---|---|
| Cash and cash equivalents | $ | 427,367 | $ | 3,108,141 | $ | 108,733 | $ | 152,189 | $ | 126,545 |
| Investment securities available for sale, at fair value | 814,495 | 825,579 | 840,525 | 852,603 | 889,947 | |||||
| Mortgage-backed securities available for sale, at fair value | 453,607 | 338,250 | 355,094 | 362,120 | 382,546 | |||||
| Investment securities held to maturity, at cost | 87,183 | 98,205 | 108,105 | 116,313 | 127,582 | |||||
| Mortgage-backed securities held to maturity, at cost | 5,427 | 6,382 | 6,752 | 6,804 | 7,182 | |||||
| Loans held for sale | 183,577 | 79,905 | 13,610 | 264,266 | 148,777 | |||||
| Loans and leases | 3,322,765 | 3,502,646 | 3,618,924 | 3,590,474 | 3,658,847 | |||||
| Allowance for loan and lease losses | (56,188) | (65,747) | (65,355) | (30,176) | (29,149) | |||||
| Federal Reserve Bank and Federal Home Loan Bank stocks, at cost | 27,138 | 31,836 | 29,944 | 13,796 | 30,916 | |||||
| Accrued interest receivable | 16,628 | 17,545 | 16,958 | 18,687 | 20,400 | |||||
| Premises, furniture, and equipment, net | 41,608 | 40,361 | 38,871 | 38,671 | 45,932 | |||||
| Rental equipment, net | 205,964 | 216,336 | 200,837 | 211,673 | 208,537 | |||||
| Bank-owned life insurance | 92,315 | 91,697 | 91,081 | 90,458 | 89,827 | |||||
| Foreclosed real estate and repossessed assets | 9,957 | 6,784 | 7,249 | 1,328 | 29,494 | |||||
| Goodwill | 309,505 | 309,505 | 309,505 | 309,505 | 309,505 | |||||
| Intangible assets | 41,692 | 43,974 | 46,766 | 50,151 | 52,810 | |||||
| Prepaid assets | 8,328 | 6,806 | 9,727 | 14,813 | 9,476 | |||||
| Deferred taxes | 17,723 | 15,944 | 20,887 | 19,752 | 18,884 | |||||
| Other assets | 82,983 | 104,877 | 85,652 | 97,499 | 54,832 | |||||
| Total assets | $ | 6,092,074 | $ | 8,779,026 | $ | 5,843,865 | $ | 6,180,926 | $ | 6,182,890 |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||
| LIABILITIES | ||||||||||
| Deposits held for sale | $ | — | $ | — | $ | — | $ | 288,975 | $ | — |
| Deposits: | ||||||||||
| Noninterest-bearing checking | 4,356,630 | 6,537,809 | 2,900,484 | 2,927,967 | 2,358,010 | |||||
| Interest-bearing checking | 157,571 | 187,003 | 152,504 | 67,642 | 185,768 | |||||
| Savings deposits | 47,866 | 55,896 | 37,615 | 17,436 | 49,773 | |||||
| Money market deposits | 48,494 | 40,811 | 37,266 | 42,286 | 76,911 | |||||
| Time certificates of deposit | 20,223 | 25,000 | 25,492 | 23,454 | 109,275 | |||||
| Wholesale deposits | 348,416 | 743,806 | 809,043 | 1,438,820 | 1,557,268 | |||||
| Total deposits | 4,979,200 | 7,590,325 | 3,962,404 | 4,517,605 | 4,337,005 | |||||
| Short-term borrowings | — | — | 717,000 | 194,000 | 646,019 | |||||
| Long-term borrowings | 98,224 | 209,781 | 211,353 | 213,070 | 215,838 | |||||
| Accrued interest payable | 1,923 | 4,332 | 3,607 | 6,620 | 9,414 | |||||
| Accrued expenses and other liabilities | 165,419 | 144,679 | 144,427 | 123,588 | 130,656 | |||||
| Total liabilities | 5,244,766 | 7,949,117 | 5,038,791 | 5,343,858 | 5,338,932 | |||||
| STOCKHOLDERS’ EQUITY | ||||||||||
| Preferred stock | — | — | — | — | — | |||||
| Common stock, $.01 par value | 344 | 346 | 346 | 372 | 378 | |||||
| Common stock, Nonvoting, $.01 par value | — | — | — | — | — | |||||
| Additional paid-in capital | 594,569 | 592,693 | 590,682 | 587,678 | 580,826 | |||||
| Retained earnings | 234,927 | 228,500 | 212,027 | 244,005 | 252,813 | |||||
| Accumulated other comprehensive income | 17,542 | 7,995 | 1,654 | 3,895 | 6,339 | |||||
| Treasury stock, at cost | (3,677) | (3,412) | (3,397) | (3,187) | (445) | |||||
| Total equity attributable to parent | 843,705 | 826,122 | 801,312 | 832,763 | 839,911 | |||||
| Noncontrolling interest | 3,603 | 3,787 | 3,762 | 4,305 | 4,047 | |||||
| Total stockholders’ equity | 847,308 | 829,909 | 805,074 | 837,068 | 843,958 | |||||
| Total liabilities and stockholders’ equity | $ | 6,092,074 | $ | 8,779,026 | $ | 5,843,865 | $ | 6,180,926 | $ | 6,182,890 |
Consolidated Statements of Operations (Unaudited)
(Dollars in Thousands, Except Share and Per Share Data)
| Three Months Ended | Year Ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| September 30, 2020 | June 30, 2020 | September 30, 2019 | September 30,<br>2020 | September 30,<br>2019 | ||||||
| Interest and dividend income: | ||||||||||
| Loans and leases, including fees | $ | 62,022 | $ | 59,911 | $ | 70,628 | $ | 261,128 | $ | 274,528 |
| Mortgage-backed securities | 1,877 | 2,269 | 2,768 | 9,028 | 11,390 | |||||
| Other investments | 4,508 | 5,226 | 7,432 | 22,685 | 39,811 | |||||
| 68,407 | 67,406 | 80,828 | 292,841 | 325,729 | ||||||
| Interest expense: | ||||||||||
| Deposits | 1,904 | 3,130 | 10,917 | 22,616 | 46,648 | |||||
| FHLB advances and other borrowings | 1,990 | 2,139 | 4,294 | 11,187 | 14,874 | |||||
| 3,894 | 5,269 | 15,211 | 33,803 | 61,522 | ||||||
| Net interest income | 64,513 | 62,137 | 65,617 | 259,038 | 264,207 | |||||
| Provision for loan for lease losses | 8,980 | 15,093 | 4,121 | 64,776 | 55,650 | |||||
| Net interest income after provision for loan and lease losses | 55,533 | 47,044 | 61,496 | 194,262 | 208,557 | |||||
| Noninterest income: | ||||||||||
| Refund transfer product fees | 2,335 | 4,595 | 639 | 36,061 | 39,198 | |||||
| Tax advance product fees | (14) | 28 | (70) | 31,826 | 34,687 | |||||
| Payments card and deposit fees | 21,422 | 21,302 | 20,276 | 87,379 | 87,130 | |||||
| Other bank and deposit fees | 228 | 214 | 492 | 1,310 | 1,942 | |||||
| Rental income | 10,144 | 11,231 | 10,886 | 44,826 | 41,053 | |||||
| Gain on sale of securities available-for-sale, net | 51 | — | 80 | 51 | 729 | |||||
| Gain on divestitures | — | — | — | 19,275 | — | |||||
| Gain (loss) on sale of other | 3,455 | 1,214 | 1,715 | 4,425 | 7,831 | |||||
| Other income | 3,129 | 2,464 | 1,962 | 14,641 | 9,975 | |||||
| Total noninterest income | 40,750 | 41,048 | 35,980 | 239,794 | 222,545 | |||||
| Noninterest expense: | ||||||||||
| Compensation and benefits | 35,616 | 32,102 | 38,461 | 136,247 | 155,811 | |||||
| Refund transfer product expense | 162 | (139) | 48 | 7,644 | 7,526 | |||||
| Tax advance product expense | (97) | (11) | 1 | 2,723 | 3,102 | |||||
| Card processing | 6,524 | 7,128 | 5,008 | 25,956 | 23,677 | |||||
| Occupancy and equipment expense | 6,826 | 6,502 | 7,265 | 26,995 | 28,071 | |||||
| Operating lease equipment depreciation | 7,594 | 8,536 | 7,901 | 32,831 | 26,181 | |||||
| Legal and consulting | 5,615 | 4,660 | 4,968 | 20,858 | 17,310 | |||||
| Intangible amortization | 2,283 | 2,636 | 3,358 | 10,997 | 17,711 | |||||
| Impairment expense | 1,232 | — | — | 1,982 | 9,660 | |||||
| Other expense | 14,528 | 9,827 | 9,133 | 52,818 | 44,111 | |||||
| Total noninterest expense | 80,283 | 71,241 | 76,143 | 319,051 | 333,160 | |||||
| Income before income tax expense | 16,000 | 16,851 | 21,333 | 115,005 | 97,942 | |||||
| Income tax expense (benefit) | 1,791 | (2,426) | (130) | 5,661 | (3,374) | |||||
| Net income before noncontrolling interest | 14,209 | 19,277 | 21,463 | 109,344 | 101,316 | |||||
| Net income attributable to noncontrolling interest | 1,051 | 1,087 | 1,268 | 4,624 | 4,312 | |||||
| Net income attributable to parent | $ | 13,158 | $ | 18,190 | $ | 20,195 | $ | 104,720 | $ | 97,004 |
| Earnings per common share | ||||||||||
| Basic | $ | 0.38 | $ | 0.53 | $ | 0.53 | $ | 2.94 | $ | 2.49 |
| Diluted | $ | 0.38 | $ | 0.53 | $ | 0.53 | $ | 2.94 | $ | 2.49 |
| Shares used in computing earnings per share | ||||||||||
| Basic | 34,596,422 | 34,616,038 | 37,868,788 | 35,651,709 | 38,880,919 | |||||
| Diluted | 34,596,422 | 34,623,114 | 37,912,616 | 35,651,709 | 38,921,637 |
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. Non-accruing loans and leases have been included in the table as loans carrying a zero yield.
| Three Months Ended September 30, | 2020 | 2019 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (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 | $ | 1,960,020 | $ | 891 | 0.18 | % | $ | 68,435 | $ | 505 | 2.93 | % |
| Mortgage-backed securities | 394,456 | 1,877 | 1.89 | % | 396,075 | 2,768 | 2.77 | % | ||||
| Tax exempt investment securities | 374,876 | 1,347 | 1.81 | % | 555,285 | 2,743 | 2.48 | % | ||||
| Asset-backed securities | 331,939 | 1,241 | 1.49 | % | 307,080 | 2,615 | 3.38 | % | ||||
| Other investment securities | 208,078 | 1,029 | 1.97 | % | 204,695 | 1,569 | 3.04 | % | ||||
| Total investments | 1,309,349 | 5,494 | 1.78 | % | 1,463,135 | 9,695 | 2.83 | % | ||||
| Commercial finance loans and leases | 2,240,591 | 42,390 | 7.53 | % | 1,882,699 | 44,375 | 9.35 | % | ||||
| Consumer finance loans | 234,468 | 3,998 | 6.78 | % | 381,165 | 8,268 | 8.61 | % | ||||
| Tax services loans | 16,651 | 5 | 0.13 | % | 21,445 | (13) | (0.25) | % | ||||
| Warehouse finance loans | 287,294 | 4,378 | 6.06 | % | 249,022 | 3,913 | 6.24 | % | ||||
| National lending loans and leases | 2,779,004 | 50,771 | 7.27 | % | 2,534,331 | 56,543 | 8.85 | % | ||||
| Community banking loans | 757,993 | 11,251 | 5.91 | % | 1,195,214 | 14,085 | 4.68 | % | ||||
| Total loans and leases | 3,536,997 | 62,022 | 6.98 | % | 3,729,545 | 70,628 | 7.51 | % | ||||
| Total interest-earning assets | $ | 6,806,366 | $ | 68,407 | 4.02 | % | $ | 5,261,115 | $ | 80,828 | 6.15 | % |
| Non-interest-earning assets | 866,407 | 869,171 | ||||||||||
| Total assets | $ | 7,672,773 | $ | 6,130,286 | ||||||||
| Interest-bearing liabilities: | ||||||||||||
| Interest-bearing checking(2) | $ | 186,952 | $ | — | — | % | $ | 155,099 | $ | 136 | 0.35 | % |
| Savings | 52,616 | 1 | 0.01 | % | 49,846 | 9 | 0.07 | % | ||||
| Money markets | 41,179 | 32 | 0.31 | % | 71,793 | 157 | 0.86 | % | ||||
| Time deposits | 21,947 | 92 | 1.66 | % | 115,036 | 601 | 2.07 | % | ||||
| Wholesale deposits | 562,828 | 1,779 | 1.26 | % | 1,593,616 | 10,014 | 2.49 | % | ||||
| Total interest-bearing deposits | 865,522 | 1,904 | 0.88 | % | 1,985,390 | 10,917 | 2.18 | % | ||||
| Overnight fed funds purchased | — | — | — | % | 336,457 | 1,999 | 2.36 | % | ||||
| FHLB advances | 94,457 | 619 | 2.61 | % | 115,707 | 713 | 2.44 | % | ||||
| Subordinated debentures | 73,779 | 1,147 | 6.19 | % | 73,618 | 1,162 | 6.26 | % | ||||
| Other borrowings | 25,431 | 224 | 3.50 | % | 45,302 | 420 | 3.68 | % | ||||
| Total borrowings | 193,667 | 1,990 | 4.09 | % | 571,084 | 4,294 | 2.98 | % | ||||
| Total interest-bearing liabilities | 1,059,189 | 3,894 | 1.46 | % | 2,556,474 | 15,211 | 2.36 | % | ||||
| Noninterest-bearing deposits | 5,601,052 | — | — | % | 2,595,386 | — | — | % | ||||
| Total deposits and interest-bearing liabilities | $ | 6,660,241 | $ | 3,894 | 0.23 | % | $ | 5,151,860 | $ | 15,211 | 1.17 | % |
| Other noninterest-bearing liabilities | 164,766 | 144,703 | ||||||||||
| Total liabilities | 6,825,007 | 5,296,563 | ||||||||||
| Shareholders' equity | 847,766 | 833,723 | ||||||||||
| Total liabilities and shareholders' equity | $ | 7,672,773 | $ | 6,130,286 | ||||||||
| Net interest income and net interest rate spread including noninterest-bearing deposits | $ | 64,513 | 3.79 | % | $ | 65,617 | 4.98 | % | ||||
| Net interest margin | 3.77 | % | 4.95 | % | ||||||||
| Tax-equivalent effect | 0.02 | % | 0.05 | % | ||||||||
| Net interest margin, tax-equivalent(3) | 3.79 | % | 5.00 | % |
(1) Tax rate used to arrive at the TEY for the three months ended September 30, 2020 and 2019 was 21%.
(2) Of the total balance, $186.7 million are interest-bearing deposits where interest expense is paid by a third party and not by the Company.
(3) Net interest margin expressed on a fully-taxable-equivalent basis ("net interest margin, tax-equivalent") is a non-GAAP financial measure. The tax-equivalent adjustment to net interest income recognizes the estimated income tax savings when comparing taxable and tax-exempt assets and adjusting for federal and state exemption of interest income. The Company believes that it is a standard practice in the banking industry to present net interest margin expressed on a fully taxable equivalent basis and, accordingly, believes the presentation of this non-GAAP financial measure may be useful for peer comparison purposes.
Selected Financial Information
| As of and For the Three Months Ended | September 30,<br>2020 | June 30,<br>2020 | March 31,<br>2020 | December 31,<br>2019 | September 30,<br>2019 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity to total assets | 13.91 | % | 9.45 | % | 13.78 | % | 13.54 | % | 13.65 | % | |||||
| Book value per common share outstanding | $ | 24.66 | $ | 23.96 | $ | 23.26 | $ | 22.52 | $ | 22.32 | |||||
| Tangible book value per common share outstanding | $ | 14.44 | $ | 13.76 | $ | 12.97 | $ | 12.84 | $ | 12.74 | |||||
| Tangible book value per common share outstanding excluding AOCI | $ | 13.93 | $ | 13.53 | $ | 12.92 | $ | 12.74 | $ | 12.57 | |||||
| Common shares outstanding | 34,360,890 | 34,631,160 | 34,607,962 | 37,172,081 | 37,807,064 | ||||||||||
| Non-performing assets to total assets | 0.79 | % | 0.64 | % | 0.67 | % | 0.48 | % | 0.91 | % | |||||
| Non-performing loans and leases to total loans and leases | 0.97 | % | 1.10 | % | 0.87 | % | 0.62 | % | 0.70 | % | |||||
| Net interest margin | 3.77 | % | 3.28 | % | 4.78 | % | 4.94 | % | 4.95 | % | |||||
| Net interest margin, tax-equivalent | 3.79 | % | 3.31 | % | 4.82 | % | 4.99 | % | 5.00 | % | |||||
| Return on average assets | 0.69 | % | 0.86 | % | 3.16 | % | 1.38 | % | 1.32 | % | |||||
| Return on average equity | 6.21 | % | 8.83 | % | 25.15 | % | 10.04 | % | 9.69 | % | |||||
| Full-time equivalent employees | 1,015 | 999 | 992 | 1,088 | 1,186 |
Quarterly Amortization of Intangibles Expense
| (Dollars in Thousands) | Actual | Anticipated | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| For the Three Months Ended | Sep 30,<br>2020 | Dec 31,<br>2020 | Mar 31,<br>2021 | Jun 30,<br>2021 | Sep 30,<br>2021 | Dec 31,<br>2021 | Mar 31,<br>2022 | Jun 30,<br>2022 | Sep 30,<br>2022 | |||||||||
| Amortization of intangibles(1) | $ | 2,283 | $ | 2,014 | $ | 2,758 | $ | 2,014 | $ | 1,762 | $ | 1,489 | $ | 2,171 | $ | 1,177 | $ | 1,092 |
(1) These amounts are based upon the current reporting period’s intangible assets only. This table makes no assumption for expenses related to future acquired intangible assets.
Non-GAAP Reconciliation
| MetaBank Period-End Tier 1 Leverage | September 30, 2020 | ||
|---|---|---|---|
| Total stockholders' equity | $ | 933,430 | |
| Adjustments: | |||
| LESS: Goodwill, net of associated deferred tax liabilities | 302,396 | ||
| LESS: Certain other intangible assets | 40,964 | ||
| LESS: Net deferred tax assets from operating loss and tax credit carry-forwards | 18,361 | ||
| LESS: Net unrealized gains (losses) on available-for-sale securities | 17,762 | ||
| LESS: Non-controlling interest | 3,603 | ||
| Common Equity Tier 1 | 550,344 | ||
| Tier 1 minority interest not included in common equity tier 1 capital | 1,894 | ||
| Total Tier 1 Capital | $ | 552,238 | |
| Total Assets (Quarter Average) | $ | 7,679,897 | |
| ADD: Available for sale securities amortized cost | (22,844) | ||
| ADD: Deferred tax | 5,724 | ||
| LESS: Deductions from CET1 | 361,721 | ||
| Adjusted total assets | $ | 7,301,056 | |
| MetaBank Regulatory Tier 1 Leverage | 7.56 | % | |
| Total Assets (Period End) | $ | 6,095,030 | |
| ADD: Available for sale securities amortized cost | (23,718) | ||
| ADD: Deferred tax | 5,956 | ||
| LESS: Deductions from CET1 | 361,721 | ||
| Adjusted total assets | $ | 5,715,547 | |
| MetaBank Period-end Tier 1 Leverage | 9.66 | % |
About Meta Financial Group®
Meta Financial Group, Inc.® (Nasdaq: CASH) is a South Dakota-based financial holding company. Meta Financial Group’s banking subsidiary, MetaBank®, N.A., (“Meta”), is a leader in providing innovative financial solutions to consumers and businesses in under-served niche markets and believes in financial inclusion for all. Meta’s commercial lending division works with high-value niche industries, rapid-growth companies and technology adopters to grow their businesses and build more profitable customer relationships nationwide. Meta is one of the largest issuers of prepaid cards in the U.S., having issued more than a billion cards in partnership with banks, program managers, payments providers and other businesses, and offers a total payments services solution that includes ACH origination, wire transfers, and more. For more information, visit the Meta Financial Group website.
| Investor Relations Contact: |
|---|
| Brittany Kelley Elsasser |
| Director of Investor Relations |
| 605-362-2423 |
| bkelley@metabank.com |
| Media Relations: |
| mediarelations@metabank.com |
16
cashinvestordeck4qfy20_1
QUARTERLY INVESTOR UPDATE FOURTH QUARTER & FISCAL YEAR END 2020
FORWARD - LOOKING STATEMENTS 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, 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 and recent and potential changes in response to the COVID-19 pandemic such as the CARES Act and the rules and regulations that may be promulgated thereunder; 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, particularly in light of our deposit base, a portion of which has been characterized as “brokered;” changes in consumer spending and saving habits; 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, 2019 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. 2 Fourth Quarter & Fiscal Year End 2020 | Nasdaq: CASH
UPDATE ON KEY STRATEGIC INITIATIVES INCREASE PERCENTAGE OF OPTIMIZE INTEREST-EARNING IMPROVE OPERATING FUNDING FROM CORE DEPOSITS ASSET MIX EFFICIENCIES Partnered with Department of the Treasury’s Bureau of the Fiscal Service and Fiserv to facilitate portions of Economic Impact Sold off community bank division in Efficiency ratio improved from 69% for Payments (“EIP”). February 2020 – reduced legacy fiscal year 2019 to 64% for fiscal year community bank portfolio 60% to $485.6 Increased fiscal year average payments 2020. million as of September 30, 2020. deposits 32%, year-over-year, excluding EIP Pause on material mergers and related balances. Portfolio will continue to pay down over acquisitions. time or be sold. PROGRESSExtended and entered into agreements with FISCAL 2020strategic partners and continued the building out of our Faster Payments Platform. • Optimization and utilization of • Further enhancement of interest- • Explore and develop new niche existing business platforms. earning asset mix. deposit products and services. • Driving 2x operating leverage • Focus on commercial finance • Broaden existing relationships. across business lines. business lines to drive net interest • Add new strategic relationships. margin expansion. • Invest in technology to help drive F O C U S F O R A N D B E Y O N D FISCAL 2021 future efficiencies. LONG - TERM STRATEGY TO DRIVE SHAREHOLDER VALUE 3 Fourth Quarter & Fiscal Year End 2020 | Nasdaq: CASH
S E L E C T E D FINANCIAL HIGHLIGHTS Fourth Quarter Ended September 30, 2020 INCOME STATEMENT ($ in thousands, except per share data) 4Q20 3Q20 4Q19 FY 2020 FY 2019 Net interest income 64,513 62,137 65,617 259,038 264,207 Provision for loan and lease losses 8,980 15,093 4,121 64,776 55,650 Payments card & deposit fees 21,422 21,302 20,276 87,379 87,130 Total noninterest income 40,750 41,048 35,980 239,794 222,545 Total noninterest expense 80,283 71,241 76,143 319,051 333,160 Net income before taxes 16,000 16,851 21,333 115,005 97,942 Income tax expense (benefit) 1,791 (2,426) (130) 5,661 (3,374) Net income before non-controlling interest 14,209 19,277 21,463 109,344 101,316 Net income attributable to non-controlling interest 1,051 1,087 1,268 4,624 4,312 Net income attributable to parent $ 13,158 $ 18,190 $ 20,195 $ 104,720 $ 97,004 Earnings per share, diluted $ 0.38 $ 0.53 $ 0.53 $ 2.94 $ 2.49 Average diluted shares 34,596,422 34,623,114 37,912,616 35,651,709 38,921,637 BALANCE SHEET PERIOD ENDING AVERAGE ($ in thousands) 4Q20 3Q20 4Q19 FY 2020 FY 2019 Loans and leases 3,322,765 3,502,646 3,658,847 3,672,848 3,496,754 Allowance for loan and lease losses (56,188) (65,747) (29,149) (48,784) (35,592) Total assets $ 6,092,074 $ 8,779,026 $ 6,182,890 $ 7,209,631 $ 6,252,187 Noninterest-bearing checking 4,356,630 6,537,809 2,358,010 4,386,724 2,865,502 Total deposits 4,979,200 7,590,325 4,337,005 5,758,003 4,857,035 Total liabilities 5,244,766 7,949,117 5,338,932 6,373,786 5,450,510 Total stockholders' equity 847,308 829,909 843,958 835,845 801,677 Total liabilities and stockholders equity $ 6,092,074 $ 8,779,026 $ 6,182,890 $ 7,209,631 $ 6,252,187 Loans / Deposits 67 % 46 % 79 % 64 % 72 % Net Interest Margin 3.77 % 3.28 % 4.95 % 4.09 % 4.91 % Return on Average Assets 0.69 % 0.86 % 1.32 % 1.45 % 1.55 % Return on Average Equity 6.21 % 8.83 % 9.69 % 12.53 % 12.10 % 4 Fourth Quarter & Fiscal Year End 2020 | Nasdaq: CASH
DIFFERENTIATED BUSINESS REDUCES RISK AND PROVIDES GROWTH OPPORTUNITIES IN VARIOUS ECONOMIC ENVIRONMENTS REVENUE MAKEUP FISCAL YEAR 2020 COMMERCIAL ($ in millions) Provide customized business capital 48% solutions for small-and medium-sized Other Income Noninterest Income as a $39.7 businesses with innovative financial percent of Total Revenue solutions to niche markets nationwide. in Fiscal Year 2020 Rental Income $44.8 CONSUMER Tailored solutions enable payments Tax Product Income providers to grow their businesses and $67.9 build more profitable customer Net Interest Income relationships by creating and delivering $259.0 payment solutions nationwide. Generates stable funding source to Payments Fee deploy into lending business lines. Fee Income income generation from payments and $87.4 tax services business lines. TARGET NICHE COMMERCIAL AND CONSUMER INDUSTRIES TO PROVIDE OPPORTUNITIES FOR GROWTH. 5 Fourth Quarter & Fiscal Year End 2020 | Nasdaq: CASH
DIVERSIFIED EARNING ASSET PORTFOLIO QUARTERLY AVERAGE EARNING ASSET MIX At the Quarter Ended % in charts represent % of total interest earning assets September 30, 2020 September 30, 2019 ($ in thousands) 4 Q 2 0 4 Q 1 9 Y/Y Δ COMMERCIAL FINANCE 2,307,984 1,916,230 20 % 33% Term lending 805,323 641,742 25 % 29% Asset-based lending 182,419 250,465 (27) % SEP 2020 Factoring 281,173 296,507 (5) % $7.67 billion Lease financing 281,084 177,915 58 % INTEREST EARNING ASSETS 52% Insurance premium finance 337,940 361,105 (6) % SBA/USDA 318,387 88,831 258 % 11% Other commercial finance 101,658 99,665 2 % 19% 8% CONSUMER FINANCE 224,151 268,198 (16) % Consumer credit programs 89,809 106,794 (16) % Other consumer finance 134,342 161,404 (17) % 1% TAX SERVICES 3,066 2,240 37 % 36% 28% WAREHOUSE FINANCE 293,375 262,924 12 % NATIONAL LENDING 2,828,576 2,449,592 15 % SEP 2019 $5.26 billion INTEREST EARNING ASSETS COMMUNITY BANKING 485,564 1,201,821 (60) % 12% TOTAL GROSS LOANS & LEASES 3,314,140 3,651,413 (9) % 71% 23% CASH & INVESTMENTS 1,716,594 1,477,172 16 % TOTAL EARNING ASSETS 5,030,734 5,128,585 (2) % LOANS & LEASES INVESTMENTS CASH & FED FUNDS RENTAL EQUIPMENT, NET 205,964 208,537 (1) % Commercial Community Bank Consumer & Warehouse ASPIRATIONAL >55% 0% <15% TARGETS 6 Fourth Quarter & Fiscal Year End 2020 | Nasdaq: CASH
ASSET QUALITY 1 Excludes Tax Services NCOs and Related Seasonal Average Loans 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. Allowance for loan and lease losses (“ALLL”) $56.2 million, or 1.70% of total loans and leases as of September 30, 2020. • ALLL 165% of nonperforming loans • Legacy community bank hospitality and theater exposures ALLL coverage of 7.95% • Small ticket equipment finance ALLL coverage of 2.62% NPAs improved $8.1 million from the linked-quarter, increase in NPA ratio result of lower assets. As of September 30, 2020, nonperforming loans decreased $5.3 million, or 13%, to $34.0 million, on a linked-quarter basis. $2.2 million of NCOs were related to small ticket equipment finance relationships in the fiscal 2020 fourth quarter. Cumulative net charge-offs during the Great Recession³ were 2.59%, for 1 Non-GAAP measures, see appendix for reconciliations. Crestmark Bank and 0.01%, for the legacy community bank portfolio. ² Small ticket equipment finance NPLs include $8.9 million in term lending and $0.7 million in lease financing. ³ Source: S&P Global Market Intelligence for data prior to acquisition on August 1, 2018. 7 Fourth Quarter & Fiscal Year End 2020 | Nasdaq: CASH
ASSET QUALITY Excluding PPP loans, active deferments and modifications decreased from $327, or 10% of total gross loans and leases at June 30, 2020 to $193 million or 6% of total gross loans at September 30, 2020. COVID-19 LOAN AND LEASE MODIFICATIONS AND DEFERRALS September 30, 2020 Allowance build as a result of COVID-19 modifications and deferrals as well as economic uncertainty. ACTIVE COUNT $ BALANCE • Monitoring and placing limits on originations to higher risk industries and customers, and tightened underwriting standards. COMMERCIAL FINANCE 192 $66.8 • The Company has placed significant focus on hospitality and movie Term Lending 150 26.6 theater loans as well as small ticket equipment finance relationships. Asset based lending 5 7.9 Factoring 2 18.4 Lease financing 28 5.9 Past Due Loans & Leases + COVID-10 Modifications & Insurance premium finance 2 0.2 Deferrals SBA/USDA 4 7.7 Other commercial finance 1 0.0 Past Due / Total Loans and Leases 1.04% 3.98% 1.57% CONSUMER 276 $5.8 Past Due + COVID-19 Modifications & Deferrals / Total Loans and Leases COMMUNITY BANK 35 $120.7 1.04% 13.33% 7.41% Hospitality relationships 26 79.0 Theater Relationships 4 17.9 Other community bank 5 23.8 TOTAL 503 $193.3 $ in $ millions in $326.9 % TOTAL LOANS AND LEASES (excl. PPP) 6% There were 153 active modifications for small ticket equipment $193.3 finance¹ relationships representing $21.8 million in balances. $139.2 $38.0 $52.3 4Q19 3Q20 4Q20 Total Past Due COVID-19 Modifications & Deferrals 1 Small ticket equipment finance includes balances of $19.6 million in term lending and $2.2 million in lease receivables. 8 Fourth Quarter & Fiscal Year End 2020 | Nasdaq: CASH
COMMERCIAL FINANCE & COMMUNITY BANK PORTFOLIOS 9 Fourth Quarter & Fiscal Year End 2020 | Nasdaq: CASH
LIMITED TOTAL EXPOSURE TO COVID - 19 HIGH IMPACT INDUSTRIES HIGH IMPACT INDUSTRY EXPOSURES COMMUNITY COMMERCIAL ($ in millions) BANK FINANCE PPP LOANS TOTAL % OF TOTAL¹ HOSPITALITY $179.3 $46.9 $0.8 $227.0 6.4% RETAIL (excl. consumer staples²) $48.2 $40.5 $1.4 $90.1 2.6% FITNESS AND RECREATIONAL CENTERS $1.5 $19.9 $1.0 $22.4 0.6% MOVIE THEATERS $17.9 $0.8 - $18.7 0.5% RESTAURANTS $1.0 $12.3 $1.7 $14.9 0.4% TOTAL $247.9 $113.7 $11.6 $373.2 10.6% As of September 30, 2020, funded 689 loans totaling $219.0 million for the Paycheck Protection Program (“PPP”) administered by the Small Business Administration; 5.3% of PPP loans are in high impact industries. ¹ Total includes total gross loans & leases of $3.52 billion and rental equipment, net of $206.0M, as of September 30, 2020, exposures are based on current outstanding balances as of September 30, 2020 ² Consumer staples incudes grocery, pharmacy, gas stations, and convenience stores 10 Fourth Quarter & Fiscal Year End 2020 | Nasdaq: CASH
COMMERCIAL FINANCE LOAN AND LEASE PORTFOLIO TERM LENDING. Collateralized conventional term loans and notes receivable, weighted average life Rental Equipment, of 53 months. Exposure is concentrated in solar/alternative energy, most of which are construction net projects that will convert to longer term government guaranteed facilities upon completion. Small Other $206.0M ticket equipment financing relationships, through equipment finance agreements and installment $101.7M NA% purchase agreements, make up $255.1 million or 32% of term lending portfolio. Average loan size 6.60% approximately $180 thousand; small ticket equipment finance approximately $70 thousand ASSET-BASED LENDING. Asset-based loans secured by accounts receivable, inventory, machinery SBA/USDA Term Lending & equipment, work-in-process and other assets. Approximately 70% backed by accounts receivable, $318.4M $805.3M generally 85% advance rates. Exposure managed within a collateral borrowing base. Well diversified 3.97% $2.51 billion 7.49% in terms of industry and geographic concentrations. Average loan size approximately $1.4 million. COMMERCIAL FINANCE PORTFOLIO (includes Rental Equipment, net) FACTORING. Factoring services where clients provide detailed inventory, accounts receivable, and as of September 30, 2020 work-in-process reports for lending arrangements. Bank secures dominion of funds which secures repayment when applicable accounts receivables or invoices are paid. Approximately 95% backed by Insurance accounts receivable, generally 85% advance rates. Average loan size approximately $320 thousand. Premium 7.53% Finance 4Q20 Quarterly Yield LEASE FINANCING. Leasing solutions for technology, capital equipment and select transportation $337.9M % in chart represents assets like tractors, trailers and construction equipment. Majority of portfolio relationships are to 5.61% current quarter yield Asset-Based Fortune 1000 clients. Average lease size approximately $145 thousand. Lending $182.4M INSURANCE PREMIUM FINANCE. Short-term, primarily collateralized financing to facilitate the 9.84% Lease purchase of commercial insurance for various forms of risk. Over 90% of insurance company Factoring Financing partners have an investment grade rating through AM Best as well as an internal risk rating system. $281.2M $281.1M 13.45% Average loan size approximately $30 thousand. 8.25% SBA/USDA. Originate loans through SBA or USDA programs, primarily SBA 7(a), USDA B&I, USDA REAP. Focus on specific verticals such as investment advisory practices, insurance agencies and solar. Includes $219.0 million of PPP loans. Average loan size approximately $530 thousand, Top geographic state concentrations1 by % excluding PPP loans. 1. California 17.3% OTHER COMMERCIAL FINANCE. Includes healthcare receivables loan portfolio primarily 2. Texas 11.9% comprised of loans to individuals for medical services received. Majority of these loans are 3. Michigan 8.6% guaranteed by the referring hospital. 4. Florida 7.6% 5. North Carolina 5.6% RENTAL EQUIPMENT. Leased assets related to operating leases generated from the commercial 6. New York 4.7% finance business line. Primarily consists of solar panels, motor vehicles, and computers and IT 7. Illinois 3.7% networking equipment. 8. Pennsylvania 3.1% 1 Excludes certain joint ventures; percentages calculated based on aggregate principal amount of commercial finance loans and leases includes operating lease rental equipment of $206.0M 11 Fourth Quarter & Fiscal Year End 2020 | Nasdaq: CASH
DISTRIBUTION OF COMMERCIAL FINANCE PORTFOLIO BY I N D U S T R Y ¹ $ in millions $- $50 $100 $150 $200 $250 $300 $350 $400 $450 Manufacturing Transportation and Warehousing Utilities Finance and Insurance Health Care and Social Assistance Construction Wholesale Trade Admin and Support and Waste Mgmt and Remediation Services Mining, Quarrying, and Oil and Gas Extraction Professional, Scientific, and Technical Services Other Real Estate and Rental and Leasing Accommodation and Food Services Other Services (except Public Administration) Retail Trade Information Arts, Entertainment, and Recreation Agriculture, Forestry, Fishing and Hunting Educational Services Management of Companies and Enterprises Public Administration MANUFACTURING TRANSPORTATION & WAREHOUSING UTILITIES OIL & GAS 22% Term lending 41% Factoring 50% Term lending 48% Term lending 21% Lease financing 27% Term lending 23% Rental equipment, net 21% SBA/USDA 20% Asset-based lending 22% Insurance premium finance 22% SBA/USDA 10% Lease financing 14% SBA/USDA 8% Insurance premium finance 10% Factoring 1 Distribution by NAICS codes; excludes certain joint ventures; percentages calculated based on aggregate principal amount of commercial finance loans and leases includes operating lease rental equipment of $206.0M 12 Fourth Quarter & Fiscal Year End 2020 | Nasdaq: CASH
COMMERCIAL FINANCE MIX¹ MANUFACTURING UTILITIES Total Exposure $413.8 million % of Total² 11.8% Total Exposure $311.9 million % of Total² 8.9% • Limited exposure to single borrowers • 97% of Utilities exposure is to Solar Electric Power Generation, majority of • Diversified across multiple subsectors – greatest concentration of subsectors which is related to permanent solar generators. is 2.0% of total² • Well collateralized, majority backed by power purchase agreements with highly rated, large public utilities Outstanding % of Balance Total² MANUFACTURING $413. 8 11. 8% Computer and Electronic Product Manufacturing 70.8 2.0% Fabricated Metal Product Manufacturing 51.0 1.5% Transportation Equipment Manufacturing 47.3 1.3% Chemical Manufacturing 29.8 0.8% Plastics and Rubber Products Manufacturing 29.8 0.8% Solar Electric Power Generation Electrical Equipment, Appliance, and Component Manufacturing 27.4 0.8% Nonmetallic Mineral Product Manufacturing 26.9 0.8% Machinery Manufacturing 25.7 0.7% Printing and Related Support Activities 23.5 0.7% Other Utilities Food Manufacturing 19.1 0.6% Other³ 62.5 1.8% TRANSPORTATION & WAREHOUSING OIL & GAS Total Exposure $376.7 million % of Total² 10.7% Total Exposure $51.6 million % of Total² 1.5% • $250.7 million exposure to truck transportation, over 89% in general freight trucking. • $47.3 million exposure related to support activities for Oil & Gas Operations • Less than $17.0 million exposure to passenger air transportation and support - Approximately half of outstandings are in working capital lines, primarily activities. collateralized by accounts receivable, remaining collateralized by • Receive invoices and back-up, verify a portion of the purchases and monitor these machinery and equipment accounts under a Dominion of Funds to ensure that our balances are covered by collateral 1 Excludes certain joint ventures; percentages calculated based on aggregate principal amount of loans includes operating lease rental equipment of $206.0M ² Total includes total gross loans & leases of $3.52 billion and rental equipment, net of $206.0M, as of September 30, 2020, exposures are based on current outstanding balances as of September 30, 2020 3 Other includes manufacturing subsectors comprised of less than 0.5% of total² 13 Fourth Quarter & Fiscal Year End 2020 | Nasdaq: CASH
LEGACY COMMUNITY BANK PORTFOLIO BREAKDOWN As of September 30, 2020 | Serviced by Central Bank During the quarter, sold $135 million loans and classified Outstanding another $130 million as held for sale. ($ in millions) Balance % of Total¹ • Sales did not result in any material gain. Commercial Real Estate $440.4 12.5% As a result of COVID-19, tightened focus on directly impacted Commercial Operating 17.0 0.5% industries – Hospitality & Movie Theater 1-4 Family Real Estate 15.2 0.4% • 65% and 15% of active community bank COVID-related modifications and deferrals tied to hospitality and theater Agricultural 11.7 0.3% exposures, respectively. Consumer 1.3 0.1% Total $485.6 13.8% COMMERCIAL REAL ESTATE Portfolio Composition Type Insurance Theater Other² Agencies and 3.9% 2.1% • 76% commercial mortgage, 24% commercial construction Brokerages 4.5% • ALLL coverage of 4.75% of total commercial real estate loans, primarily Multifamily Office Building 29.9% related to the hospitality and theater commercial real estate loans 9.3% - Low historical charge-offs (2bps 5-year average NCO/average loans) • Past due commercial real estate balances were 0.01%, as of September 30, Retail 2020 10.9% • $50 thousand in nonperforming loans as of September 30, 2020 ¹ Total includes total gross loans & leases of $3.52 billion and rental equipment, net of $206.0M, as of September 30, 2020, exposures are based on Hotel/Motel current outstanding balances as of September 30, 2020 39.4% ² Other includes subsectors comprised of less than 1% of total commercial real estate as of September 30, 2020 ($440.4 million) 14 Fourth Quarter & Fiscal Year End 2020 | Nasdaq: CASH
LEGACY COMMUNITY BANK | HOTEL PORTFOLIO As of September 30, 2020 | Serviced by Central Bank $179.3 million outstanding, total exposure of $201.3 million including unfunded commitments $170.6 million in commercial real estate and $8.7 million in C&I • Portfolio comprised of 30 relationships representing 33 individual hotels and 3,146 total rooms • Five borrowers, or $7.7 million outstanding, currently have property improvement projects (“PIP”) in place, $45.6 million related to construction • 10% of current outstanding are participation loans • 99% flagged hotel relationships (i.e. Holiday Inn Express, Hampton Inn, Hyatt Place, etc.); 100% limited-service • 26% of balances located in South Dakota and Iowa with majority of the remaining balances through developers headquartered in South Dakota and Iowa - Lower unemployment rate in Sioux Falls & Des Moines MSA, relative to National rates sign of stronger local economies • Majority of loans have guarantors by individuals with a strong combined net worth • Average loan-to-value of 60% at September 30, 2020 • One nonperforming loan representing $50 thousand as of September 30, 2020 COVID-19 Response and Monitoring • 67% of hotel relationships received PPP loans • Active third-round COVID-related deferrals and modifications on $79.0 million in hospitality balances outstanding • Frequent monitoring and discussions with impacted borrowers, including short-term planning (90-day deferrals) 15 Fourth Quarter & Fiscal Year End 2020 | Nasdaq: CASH
PAYMENTS 16 Fourth Quarter & Fiscal Year End 2020 | Nasdaq: CASH
PAYMENTS BUSINESS SOLUTIONS PAYMENTS BUSINESS PROVIDES PRIMARY DEPOSIT SOURCE GENERATES STABLE, LOW COST CORE DEPOSITS AND FEE INCOME PREPAID BANKING AS A SERVICE DEPOSITS + FEE INCOME DEPOSITS + FEE INCOME Leading prepaid card issuer. Facilitate Transactional Payments: Faster Payments, ACH, merchant Partner to top prepaid program managers. acquiring and ATM Sponsorship. Leader in applying innovative prepaid MetaBank ranked among Top 50 solutions to address key consumer and on Nacha’s 2019 Top ACH business payments needs. Originators & Receivers By Volume Loyalty 11% Provide deposit account services Awards Promotion for fintech/neobank/challenger banks. 12% Gift Named Partner Bank of the Year by Tearsheet for MoneyLion’s PREPAID CARD RoarMoney banking product. General DISTRIBUTION 59% Purpose based on balances as of Reloadable September 30, 2020 18% Payroll 17 Fourth Quarter & Fiscal Year End 2020 | Nasdaq: CASH
PAYMENTS BUSINESS UPDATE Payments Card and Deposit Fee Income Breakout Fourth Quarter Fiscal 2020 • Increased monitoring of our partners due to COVID-19; providing payment 9% modifications and deferrals where necessary, immaterial impact to date. • Selected as the prepaid debit card issuer for Economic Impact Payments (“EIP 11% Cards”) as Treasury’s financial agent. – Issued 3.6 million cards representing $6.42 billion in funding. – As of September 30, 2020, $942.2 million in balances remained outstanding. • Payments deposits, excluding EIP Cards, represented 87% of total average deposits for the fiscal 2020 fourth quarter. 80% Prepaid Deposit Banking Services Banking Services includes ATM, ACH/Faster Payments, Merchant Acquiring Average Payments Deposits Payments Card and Deposit Fee Income ($ in billions) ($ in millions) Percent of Total Revenue 21% CAGR 20% 21% 12% 21% 20% 2018 – 2020 Excl. EIP Card Balances $1.62 EIP Card Balances $0.98 EIP Card $4.20 Balances $23.2 $3.57 $21.5 $21.3 $21.4 $20.3 $2.71 $2.63 $2.45 2018 2019 2020 4Q19 4Q20 4Q19 1Q20 2Q20 3Q20 4Q20 Fiscal Year Average Quarter Average 18 Fourth Quarter & Fiscal Year End 2020 | Nasdaq: CASH
INTEREST RATE RISK AND CAPITAL 19 Fourth Quarter & Fiscal Year End 2020 | Nasdaq: CASH
INTEREST RATE RISK MANAGEMENT September 30, 2020 12-Month Interest Rate Sensitivity from Base Net Interest Income • Lower for longer rate environment -- focus is on reducing wholesale funding and redeploying deposits 25% and assets into positive carry opportunities. 20% 15% • Interest rate risk shows asset sensitive balance sheet - net interest income modeled under an instantaneous, 10% parallel rate shock and a gradual parallel ramp. 5% 0% • Management also employs rigorous modeling techniques under a variety of yield curve shapes, twists -5% -100 +100 +200 +300 and ramps. Parallel Shock Ramp 1 Earning Asset Pricing Attributes Asset/Liability Gap Analysis 7% 3,500 3,000 2,500 28% 2,000 1,500 52% 1,000 500 Volume ($MM) Volume 13% 0 -500 -1,000 Fixed Rate > 1 Year Floating or Variable Month 1-12 Month 13-36 Month 37-60 Month 61-180 Fixed Rate < 1 Year Federal Reserve Bank Deposits Period Variance Total Assets Total Liabilities (Floating or Variable) 1 Fixed rate securities, loans and leases are shown for contractual periods less than 12 months and greater than 12 months. 20 Fourth Quarter & Fiscal Year End 2020 | Nasdaq: CASH
STRONG CAPITAL AND SOURCES OF LIQUIDITY Regulatory Capital as of September 30, 2020 At September 30, 2020 Meta Financial Group, Inc. MetaBank Tier 1 Leverage 6.58% 7.56% Capital Ratio Trends Tier 1 Leverage – Adjusted¹ N/A 9.66% Common Equity Tier 1 11.78% 13.96% Tier 1 Capital 12.18% 14.00% Total Capital 15.30% 15.26% • MetaBank period end Tier 1 Leverage of 9.66% better reflects the go-forward balance sheet reducing the impact from the temporary EIP Card balances. • MetaBank remains well-capitalized. • Repurchased 898,416 shares at a weighted average price of $21.80 since resuming share repurchases in September 2020 through October 23, 2020. Primary & Secondary Liquidity Sources ($ in millions) Cash and Cash Equivalents $425 Unpledged Investment Securities $325 FHLB Borrowing Capacity $1,005 Funds Available through Fed Discount Window $345 PPP Loan Collateral $215 Meta Financial Group, Inc. MetaBank Unsecured Lines of Credit $1,265 - $1,535 Minimum Requirement to be Well-Capitalized under Prompt Corrective Action Provisions 1 Non-GAAP measure, see appendix for reconciliations. 21 Fourth Quarter & Fiscal Year End 2020 | Nasdaq: CASH
APPENDIX 22 Fourth Quarter & Fiscal Year End 2020 | Nasdaq: CASH
WAREHOUSE FINANCE Total Exposure $293.4 million % of Total¹ 8.3% All Loan/Collateral Cash Flows Asset-backed warehouse lines of credit used to support strategic initiatives. • Lines are primarily secured by consumer receivables, whereby Meta is in a senior, secured position as the first out participant. Admin Fees (0-5%) • Have never had a charge off or loss. • Agreements trigger waterfall protection for the “First Out” participant: First-Out Tranche (Meta - The waterfall could be “triggered” due to items such as: collateral Position) underperformance, collateral days past due, covenant breaches, $55MM (55%) concentration limit breaches, missed payments, regulatory events, material adverse effects, etc. $100M Junior Tranche Facility EXAMPLE $35MM (35%) EXAMPLE In the example $100M scenario, all cash flows of the outstanding facility are used to pay the First Out Tranche’s (i.e. – Meta’s) outstanding principal and interest. The First Out’s position must be paid down in full prior to the junior and equity tranches receiving any cash flow. Effectively, the First Out receives the benefit of $100M of Equity Tranche loans/collateral to pay down its $55M full principal and interest $10MM (10%) position. ¹ Total includes total gross loans & leases of $3.52 billion and rental equipment, net of $206.0M, as of September 30, 2020 23 Fourth Quarter & Fiscal Year End 2020 | Nasdaq: CASH
CONSUMER CREDIT PROGRAMS Consumer Payments Principal, Interest, Fees Total Exposure $89.8 million % of Total¹ 2.6% Consumer credit programs offer Meta a risk adjusted return, protected by certain layers of credit support and balance sheet flexibility. Programs are offered to strategic partners with Collection Account payments distribution potential. • Agreements typically provide for “excess spread” build-up and protection through a priority of payment within a waterfall Principal • Consumer interest rate and fees flow through a waterfall: Principal Losses Repayment to Servicing to Meta - Covers principal losses and Meta’s required rate of interest. Meta’s Meta interest rate is substantially less than the consumer’s APR - Structure provides for a build up of excess spread to allow protection from loan losses and ensure Meta’s contractual rate of interest is covered Meta’s Agreed upon interest return - Structure provides for ALLL on a portfolio basis rather than loan level basis - Excess spread in the escrow account only released to partner when certain conditions are satisfied Remaining Excess Spread to Meta-owned escrow - Escrow account balance has increased since program inception reserve Reserve release to partner is conditional (subordinate) based on product performance ¹ Total includes total gross loans & leases of $3.52 billion and rental equipment, net of $206.0M, as of September 30, 2020 24 Fourth Quarter & Fiscal Year End 2020 | Nasdaq: CASH
FINANCIAL MEASURE RECONCILIATIONS Efficiency Ratio For the last twelve months ended ($ in thousands) Sep 30, 2020 Jun 30, 2020 Mar 31, 2020 Dec 31, 2019 Sep 30, 2019 Noninterest Expense - GAAP 319,051 314,911 316,138 334,663 333,160 Net Interest Income 259,038 260,142 264,973 268,586 264,207 Noninterest Income 239,794 235,024 237,766 222,278 222,545 Total Revenue: GAAP 498,832 495,166 502,739 490,864 486,752 Efficiency Ratio, LTM 63.96 % 63.60 % 62.88 % 68.18 % 68.45 % Non-GAAP Reconciliation Adjusted Annualized NCOs and Adjusted Average Loans and Leases For the quarter ended ($ in thousands) Sep 30, 2020 Jun 30, 2020 Mar 31, 2020 Dec 31, 2019 Sep 30, 2019 Net Charge-offs 18,538 14,700 2,117 2,380 18,476 Less: Tax services net charge-offs 13,034 9,782 (74) (739) 15,416 Adjusted Net Charge-offs $ 5,504 $ 4,918 $ 2,191 $ 3,119 $ 3,060 Quarterly Average Loans and Leases 3,536,997 3,622,928 4,195,772 3,735,196 3,729,545 Less: Quarterly Average Tax Services Loans 16,650 39,845 516,491 24,429 21,445 Adjusted Quarterly Loans and Leases $ 3,520,347 $ 3,583,083 $ 3,679,281 $ 3,710,767 $ 3,708,100 Annualized NCOs/Average Loans and Leases 2.10 % 1.62 % 0.20 % 0.25 % 1.98 % Adjusted Annualized NCOs/Adjusted Average Loans and Leases1 0.63 % 0.55 % 0.24 % 0.34 % 0.33 % 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. 25 Fourth Quarter & Fiscal Year End 2020 | Nasdaq: CASH
NON - GAAP RECONCILIATIONS Three Months Ended MetaBank Period-end Tier 1 Leverage September 30, 2020 Adjusted Net Interest Margin September 30, 2020 Total stockholder's equity $ 933,430 Average interest-earning assets 6,806,366 ADJUSTMENTS: Net interest income 64,513 LESS: Goodwill, net of associated deferred tax liabilities 302,396 Net interest margin 3.77 % LESS: Certain other intangible assets 40,964 LESS: Net deferred tax assets from operating loss and tax credit carry- ADJUSTMENTS FOR EIP CARDS forwards 18,361 Interest-earning assets 6,806,366 LESS: Net unrealized gains (losses) on available-for-sale securities 17,762 LESS: Cash adjustment 1,573,727 LESS: Non-controlling interest 3,603 Adjusted average interest-earning assets 5,232,639 Common Equity Tier 1 Capital ("CET1") (1) 550,344 Tier 1 minority interest not included in common equity tier 1 capital 1,894 Net Interest Income 64,513 Total Tier 1 capital 552,238 LESS: Cash interest adjustment 396 Adjusted net interest income 64,117 Total Assets (Quarter Average) $ 7,679,897 Adjusted net Interest margin 4.87 % ADD: Available for sale securities amortized cost (22,844) ADD: Deferred tax 5,724 LESS: Deductions from CET1 361,721 Adjusted total assets $ 7,301,056 MetaBank Regulatory Tier 1 Leverage 7.56 % Total Assets (Period End) $ 6,095,030 ADD: Available for sale securities amortized cost (23,718) ADD: Deferred tax 5,956 LESS: Deductions from CET1 $ 361,721 Adjusted total assets $ 5,715,547 MetaBank Period-end Tier 1 Leverage 9.66 % 26 Fourth Quarter & Fiscal Year End 2020 | Nasdaq: CASH