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Edited Transcript of CASH.OQ earnings conference call or presentation 28-Oct-20 9:00pm GMT

·26 min read

Q4 2020 Meta Financial Group Inc Earnings Call STORM LAKE Dec 1, 2020 (Thomson StreetEvents) -- Edited Transcript of Meta Financial Group Inc earnings conference call or presentation Wednesday, October 28, 2020 at 9:00:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Bradley C. Hanson Meta Financial Group, Inc. - President, CEO & Director * Brett L. Pharr Meta Financial Group, Inc. - Co-President & COO of MetaBank * Brittany Kelley Elsasser Meta Financial Group, Inc. - Director of IR * Glen William Herrick Meta Financial Group, Inc. - Executive VP & CFO ================================================================================ Conference Call Participants ================================================================================ * Frank Joseph Schiraldi Piper Sandler & Co., Research Division - MD & Senior Research Analyst * Michael Perito Keefe, Bruyette, & Woods, Inc., Research Division - Analyst * Stephen M. Moss B. Riley Securities, Inc., Research Division - Analyst * William Jefferson Wallace Raymond James & Associates, Inc., Research Division - Research Analyst ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Ladies and gentlemen, thank you for standing by, and welcome to the Meta Financial Group Fourth Quarter and Fiscal Year 2020 Investor Conference Call. (Operator Instructions) As a reminder, this conference call is being recorded. I would now like to turn the conference call over to Brittany Kelley Elsasser, Director of Investor Relations. Please go ahead. -------------------------------------------------------------------------------- Brittany Kelley Elsasser, Meta Financial Group, Inc. - Director of IR [2] -------------------------------------------------------------------------------- Thank you, and welcome to the Meta Financial Group conference call and webcast where President and CEO, Brad Hanson; and Executive Vice President and CFO, Glen Herrick, will discuss the results of our fourth quarter and fiscal year ended September 30, 2020. Also participating in the call is Brett Pharr, Co-President and COO of MetaBank. Additional information, including the earnings release and investor presentation, may be found on our website at metafinancialgroup.com. As a reminder, our comments may include forward-looking statements. Those statements are subject to risks and uncertainties that could cause actual and anticipated results to differ. The company undertakes no obligation to update any forward-looking statements. Please refer to the cautionary language in the earnings release, investor presentation and in Meta's filings with the Securities and Exchange Commission, including our most recent filings for additional information covering factors that could cause actual results to differ materially from the forward-looking statements. Additionally, today, we will be discussing certain non-GAAP financial measures on this conference call. References to non-GAAP measures are only provided to assist you in understanding Meta's results and performance trends. Reconciliations for such non-GAAP measures are included within the appendix of the investor presentation. Now I will turn the call over to Brad Hanson. -------------------------------------------------------------------------------- Bradley C. Hanson, Meta Financial Group, Inc. - President, CEO & Director [3] -------------------------------------------------------------------------------- Thank you, Brittany. Everyone I know is talking about what a crazy year 2020 has been. So I want to start by recognizing the exemplary performance of my team during this difficult time and express my appreciation to our dedicated staff for continuing to serve our customers and shareholders from a remote working environment. Despite some of the challenges, including substantial rate cuts and sizable loan loss provision, we reported net income of $104.7 million for fiscal year 2020, an increase of 8% compared to fiscal 2019. And earnings per share increased 18% to $2.94 over the same period. While the share price is down considerably from pre-COVID-19 levels, our strong operating performance has afforded us the opportunity to start buying back shares at what we believe are favorable prices. In September, we reinstated our previously announced share repurchase program and bought back approximately 898,000 shares through October 23 at a weighted average of $21.80 per share. During the past year, we were able to close on the sale of our retail community bank just before implementing our pandemic plan in response to COVID-19. We funded $219 million of PPP loans to 689 borrowers and partnered with the U.S. Department of the Treasury's Bureau of the Fiscal Service and Fiserv to further support the government stimulus package by distributing $6.4 billion of economic impact payments on 3.6 million prepaid cards. At the same time, we closed several new relationships and extended existing relationships while maintaining focus on our 3 strategic initiatives, increasing the percentage of funding from low-cost core deposits in exchange for higher cost deposits, optimizing our interest-earning asset mix by replacing lower return assets with higher return loans and improving our efficiency ratio by managing expenses and improving operating leverage. In addition to this, we have been working hard to solidify the foundations of our company by further enhancing operating procedures, governance programs, organizational structure, our talent pool and pay-for-performance programs. We are getting faster, safer and more efficient. We are also focused on developing our aspirational culture, corporate and social responsibility programs and diversity and inclusion initiatives. In the year ahead, we expect to see progress in our messaging and communications, our websites and our technical capabilities as we strive to upgrade and enhance the competitive advantages that our platform gives us in enabling fintech providers at scale, entering new product segments and looking for ways to leverage the vast amounts of data accumulated over the years. Now let me turn the call over to Brett Pharr. -------------------------------------------------------------------------------- Brett L. Pharr, Meta Financial Group, Inc. - Co-President & COO of MetaBank [4] -------------------------------------------------------------------------------- Thank you, Brad. In the fiscal fourth quarter of 2020, we took a provision for loan and lease losses of $9 million. Our allowance for loan and lease losses was $56.2 million as of September 30, a 15% reduction compared to June 30, 2020, due in large part to anticipated seasonal charge-off activity within our tax services business. Credit quality remains good with no material deterioration in past dues. Nonperforming loans and leases were 0.97% of total loans and leases at quarter end, 13 basis points lower than the previous quarter. We are closely monitoring our small ticket equipment finance portfolio. However, modifications in that portfolio are now just $21.8 million, and we believe reserves are adequate to cover any associated risk. We have seen no measurable change in performance in our consumer lending portfolios due to COVID-19. Our student loan portfolio has continued to pay down to $115 million at quarter end and now accounts for just 3% of total loans and losses. Movie theater and hospitality loans in our legacy Community Bank portfolio are still a concern, accounting for roughly 50% of our total deferred balances. Movie theaters have been heavily impacted by the COVID-19 pandemic, and we have approximately $18 million of exposure in this category. While these credits are currently on 3-month deferral of principal and interest, we have taken additional reserves against them to reflect the elevated level of risk. Hotel loans are trending positive but far from fully recovered. Most are in the third round deferrals, generally making interest-only payments. Excluding PPP loans, total deferments across all portfolios decreased to $193.3 million in the quarter, down from $326.9 million and now account for just 6% of total gross loans. As of September 30, 2020, we had 689 loans outstanding, totaling $219 million in loans under the Paycheck Protection Program and have recognized approximately $1.8 million in total fees from the SBA. The remaining fees will be amortized over the remaining lives of the loans. The average fee rate of approximately 2.5% equates to approximately $5.4 million of net fees on an average loan size of $318,000. We are closely following the development of the Small Business Administration PPP forgiveness rules. Now let me turn the call over to Glen Herrick, our CFO. -------------------------------------------------------------------------------- Glen William Herrick, Meta Financial Group, Inc. - Executive VP & CFO [5] -------------------------------------------------------------------------------- Thank you, Brett, and good afternoon, everyone. Today, we reported our results for the fourth fiscal quarter and full fiscal year 2020. On a GAAP basis, we generated net income of $13.2 million for the quarter or $0.38 per diluted share and $104.7 million or $2.94 and per diluted share for the year. Full year earnings per share growth of 18% included the onetime gain on sale of the Community Bank division, a key strategic accomplishment along our path to optimize our balance sheet. Despite the current rate and loan demand environment, we generated net interest income of $259 million, a decrease of only 2% compared to fiscal year 2019. We believe this reinforces our focus on remixing our balance sheet. United States Treasury EIP stimulus card deposits continue to be a drag on net interest income in the quarter, albeit at a lower level than the prior quarter. Net interest margin was 3.77% for the fiscal 2020 fourth quarter, an improvement of 49 basis points over the linked quarter. Excluding the impact from EIP deposits, NIM was 4.87% compared to 4.95% in the fiscal 2019 fourth quarter. While slower loan demand and lower yields will continue to pressure net interest income in the near term, the ongoing shift in our earning asset mix likely leads to higher net interest margins over time. Our cost of funds improved by 94 basis points compared to the same quarter in the prior fiscal year, largely as a result of the EIP card deposits, which reduced wholesale funding needs and an overall lower rate environment. Meta continues to generate above industry levels of noninterest income, and total noninterest income for the fiscal year was $240 million, an 8% increase compared to the prior year influenced by the gain on sale of the Community Bank division. Noninterest income now represents 48% of total revenue in fiscal year 2020. For the fourth quarter, noninterest income was $41 million, an increase of 13% compared to the same quarter in the prior year. The increase can be attributed to gain on sale of SBA loans, other income and an increase in payments fee income. For the fiscal year, noninterest expense was down 4% to $319 million as a result of our ongoing efficiency initiatives, including the sale of the Community Bank division. Noninterest expense was $80 million for the quarter, a 5% increase compared to the prior year. Fourth quarter expenses included a $1.7 million prepayment penalty to extinguish long-term debt and employee separation-related expenses of $1.5 million. Turning to the balance sheet. Total assets at September 30 were $6.1 billion, reflecting a more normalized level as EIP card balance is spent down and the remaining cash balances were used to pay down borrowings and reduce wholesale funding. Total gross loans and leases held for investment decreased 5% on a linked-quarter basis to $3.3 billion at fiscal year-end. The decrease was primarily related to legacy Community Bank loans that were sold or refinanced away and loans that were classified as held for sale, which we expect to sell this quarter. Commercial finance loans, which comprise 70% of the company's loan and lease portfolio totaled $2.3 billion, reflecting growth of $149 million or 7% from June 30, 2020. Growth in the commercial finance portfolio is a result of some rebound of demand in the factoring and leasing business lines. Average payments deposits were $5.8 billion for the quarter, which were inflated by $1.6 billion on EIP stimulus cards issued by MetaBank. As of October 23, $829 million in EIP balances remained outstanding. Excluding the impact from EIP cards, average payments deposits increased 60% compared to the same quarter in the prior fiscal year. A large component of the increase was driven by stimulus payments that ended up on various program partner cards and lower overall consumer spending levels. As Brad mentioned, during the quarter, we reinstated our share repurchase program. Since restarting our share repurchase program in September, we have repurchased 898,416 shares through October 23 at a weighted average price of $21.80 per share. The company has approximately 3.5 million shares remaining under its authorized share repurchase program that is scheduled to expire on December 31, 2022. We will consider further share repurchase activity within the context of our overall capital deployment strategies, including funding growth initiatives and returning excess capital to shareholders. Finally, we have adopted CECL effective October 1, 2020, and expect our day 1 entry to increase the allowance for credit losses by approximately $13.5 million. As it relates to regulatory capital, the day 1 adjustment will not impact our regulatory capital ratios in the short term as we have elected the 2-year delay in the 5-year total transition period to minimize the impact. We intend to disclose further detail of CECL adoption in our 10-K. With that, I will turn the conversation back to Brad for closing comments. -------------------------------------------------------------------------------- Bradley C. Hanson, Meta Financial Group, Inc. - President, CEO & Director [6] -------------------------------------------------------------------------------- Thanks, Glen. I'd like to thank our employees, our partners and our shareholders for all their hard work and support during the past year. Despite missing a few pre-COVID targets, we made significant progress on multiple fronts and delivered solid results for the year. We are looking forward to the new year and all the opportunities that lie ahead. With that, I'll have the operator open up the line for any questions. ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- (Operator Instructions) Our first question comes from Michael Perito with KBW. -------------------------------------------------------------------------------- Michael Perito, Keefe, Bruyette, & Woods, Inc., Research Division - Analyst [2] -------------------------------------------------------------------------------- I wanted to just spend a minute on kind of the earnings outlook for 2021. I guess kind of a long-winded question here. But if we think about kind of the core earnings power of fiscal 2020, I think plus or minus I had it in like the $93 million to $96 million range. And I guess as we think about how that transitions into 2021, is -- I guess is there still -- is it still correct to assume that this $15 million to $20 million of annual, I believe it was income from the H&R Block partnership will be additive to that core fiscal 2020 run rate? And then that there would be additional growth opportunities on the core business as well as you guys continue to move forward. Is that kind of a fair -- without putting too specific numbers around it, a fair way to think about how the earnings profile could look next year? And is there any other kind of thoughts or items that you would point us to as we kind of think about where the trend is heading? -------------------------------------------------------------------------------- Glen William Herrick, Meta Financial Group, Inc. - Executive VP & CFO [3] -------------------------------------------------------------------------------- Mike, this is Glen. I'll take a shot at that. So yes, H&R Block will be additive in '21. And as it relates to our other businesses, we would certainly expect organic growth in a number of them. I would also point we have some runoff portfolios, though, primarily in the Community Bank and also the student loan portfolio that year-over-year will be a drag on absolute dollar earnings. And what we've also talked about is remixing our balance sheet, and we think that will drive earnings increase without increasing the overall size of our balance sheet. -------------------------------------------------------------------------------- Bradley C. Hanson, Meta Financial Group, Inc. - President, CEO & Director [4] -------------------------------------------------------------------------------- And remember that the -- we'll have a full year coming in, in September. We had 6 months of earnings at a higher interest rate than in 2020, and we'll have a full year of the impact of the reduction in interest rates in '21. -------------------------------------------------------------------------------- Michael Perito, Keefe, Bruyette, & Woods, Inc., Research Division - Analyst [5] -------------------------------------------------------------------------------- Right. Okay. That's very helpful. And then for my follow-up, Brad, I was curious if you could just maybe comment, I think the -- I'm sure someone else will ask about kind of Crestmark and pipelines, but there's obviously the balance sheet side here. But as we think about the fees and the payments side of the business here, what are the kind of 1 or 2 or biggest growth opportunities that you see on the horizon for 2021 that you think could be the most impactful for Meta at this point? -------------------------------------------------------------------------------- Bradley C. Hanson, Meta Financial Group, Inc. - President, CEO & Director [6] -------------------------------------------------------------------------------- Well, as we said, we signed some new deals. H&R Block will certainly have an impact on that side as well since we took over the breadth of their business, which includes their card programs in addition to their tax loans and business. So that will have an impact on that portfolio as well. We also have started to see the genesis of the faster payments business taking hold. I think that's a good key income play for us, and we have several programs launching. It will be a ramp-up period from the start. So we will start to -- probably the end of '21, I think, see an impact from that more so and then in '22 and beyond as that continues to grow. There's a lot of interest in that in the marketplace. So we have high hopes for the future of that business line as well. We also entered some other business lines in acquiring, and that should ramp up a little bit. I think, also that starting from scratch there will be a longer ramp-up period before that's truly material. But we'll see some more business from that. And if you start compounding those new opportunities, I think that they start to have an impact in aggregate even earlier. Do you have any follow-up, Brett? -------------------------------------------------------------------------------- Brett L. Pharr, Meta Financial Group, Inc. - Co-President & COO of MetaBank [7] -------------------------------------------------------------------------------- I think it's it. -------------------------------------------------------------------------------- Michael Perito, Keefe, Bruyette, & Woods, Inc., Research Division - Analyst [8] -------------------------------------------------------------------------------- Okay. And you guys think that, that will be -- some of those broader initiatives will be on display in the 2021 fiscal kind of financials to a certain extent? -------------------------------------------------------------------------------- Bradley C. Hanson, Meta Financial Group, Inc. - President, CEO & Director [9] -------------------------------------------------------------------------------- And there's also other business we've signed and are continuing to sign. So there's MoneyLion launching, which we announced that we'll start to see that ramp up. And we're excited about the prospects of that business. So there's a number of new initiatives, I think, that have come on recently as well that will start to have an impact as the year progresses. -------------------------------------------------------------------------------- Operator [10] -------------------------------------------------------------------------------- Our next question comes from Steve Moss with B. Riley Securities. -------------------------------------------------------------------------------- Stephen M. Moss, B. Riley Securities, Inc., Research Division - Analyst [11] -------------------------------------------------------------------------------- Starting with just kind of like loan yields, they were up nicely over quarter-over-quarter and definitely seeing a remixing within the portfolio here this quarter, especially on an EOP basis. Just kind of curious how you're thinking about loan yields going forward here, just into the fourth quarter? It seems like a potential for decent leg up. -------------------------------------------------------------------------------- Glen William Herrick, Meta Financial Group, Inc. - Executive VP & CFO [12] -------------------------------------------------------------------------------- Yes. Sorry, Steve, your last part cut out on you there. -------------------------------------------------------------------------------- Stephen M. Moss, B. Riley Securities, Inc., Research Division - Analyst [13] -------------------------------------------------------------------------------- It just seems like for loan yields -- I'm sorry, into the December quarter, it seems like there could be another step-up in loan yields here for the upcoming quarter, given the EOP remix? -------------------------------------------------------------------------------- Glen William Herrick, Meta Financial Group, Inc. - Executive VP & CFO [14] -------------------------------------------------------------------------------- Yes. We would agree with that. It's in certain portfolios are going to come in higher than others or lower given the rate environment. But as we continue to shift that mix, the Community Bank has lower yields, those run off, we do more commercial finance. So we run off securities portfolio and Community Bank. Just that swap set will help the overall yields. -------------------------------------------------------------------------------- Stephen M. Moss, B. Riley Securities, Inc., Research Division - Analyst [15] -------------------------------------------------------------------------------- Okay. And then just on the business front, just kind of curious as to what you're seeing for noninterest-bearing deposit growth from your card business? I know the EIP deposits kind of steer what's going on there. -------------------------------------------------------------------------------- Bradley C. Hanson, Meta Financial Group, Inc. - President, CEO & Director [16] -------------------------------------------------------------------------------- Yes. This is Brad. When we take out the IP piece, we still have some growth that has occurred year-over-year the last couple of years. and would expect that to continue to go. We're in that business. We're seeking that business, and we'll be picking more up. The EIP bubble just hides it a little bit. -------------------------------------------------------------------------------- Glen William Herrick, Meta Financial Group, Inc. - Executive VP & CFO [17] -------------------------------------------------------------------------------- Yes. What's hard though, Steve, is so we have the very discrete card, the stimulus cards that were loaded on our cards that were issued from Treasury. So those are the numbers we've been calling out. We've also called out, we've seen above-normal growth in overall deposits, twofold, a little bit slower consumer spending, we believe, but also folks that are getting stimulus money and then taking it and putting it on 1 of our partner GPR cards. And so it's hard to tell exactly that the money is fungible where that came from, but that's pretty consistent with what talking to our peers across the industry that everyone is at elevated levels of deposits. So in absolute terms, probably card deposits will come down year-over-year. If you try to back out our core business, we would still continue to expect some growth there. -------------------------------------------------------------------------------- Bradley C. Hanson, Meta Financial Group, Inc. - President, CEO & Director [18] -------------------------------------------------------------------------------- And there are the new programs I discussed, H&R Block, MoneyLion and others. So some of those like H&R Block is converting a portfolio. So we'll see some immediate impact from that business and then the others are -- will be growing over the year as well. So we should -- we still expect to see strength and opportunity and growth in our payments business over the coming years. -------------------------------------------------------------------------------- Stephen M. Moss, B. Riley Securities, Inc., Research Division - Analyst [19] -------------------------------------------------------------------------------- Okay. And then I'm not sure that this was answered. Just on the commercial finance portfolio, you had good quarter-over-quarter growth. I know you guys alluded to more normalization in certain portfolios. But how is that pipeline looking? And how are you thinking about loan growth? You tend to see pretty good growth in the December quarter. -------------------------------------------------------------------------------- Glen William Herrick, Meta Financial Group, Inc. - Executive VP & CFO [20] -------------------------------------------------------------------------------- Yes. I mean I think we're seeing more transactions to take a look at in the pure commercial finance. So you're talking about your asset-based lending and your factoring some of the other things because of yield, the markets are coming down, and there are some cases where we're choosing not to play because the yield is too low. So I think you're going to have some mix in that. But if you think naturally through the economic cycle, this is the time that commercial finance starts to build and shine. -------------------------------------------------------------------------------- Operator [21] -------------------------------------------------------------------------------- And our next question comes from Frank Schiraldi with Piper Sandler. -------------------------------------------------------------------------------- Frank Joseph Schiraldi, Piper Sandler & Co., Research Division - MD & Senior Research Analyst [22] -------------------------------------------------------------------------------- Just on the deferrals, where they were at the end of the quarter, is there any expectation or any color you can give based on your conversations with borrowers of what percentage -- what piece of that 6% may need further attention at the end of the deferral period? -------------------------------------------------------------------------------- Glen William Herrick, Meta Financial Group, Inc. - Executive VP & CFO [23] -------------------------------------------------------------------------------- Well, so obviously, the biggest piece of that is the hotel-motel portfolio that we have in the residual Community Bank. And we are seeing improvement, particularly with the type of properties that we have. But certainly, they're going to need continued assistance through the winter months. And then when we come out in the spring, we'll kind of see what happens and are they getting closer to the normal levels where they can resume traditional P&I payments. So that's the big thing. We've mentioned in there the theater relationship, relatively small, but you have that. And then there's some things that are in the small ticket finance, again, not very large at all. And all that depends on what's going on in particular marketplace, geography. There's a lot of variability around the country on who's open and who's not and where there's -- those that are still shut down to a bit, they're going to struggle for a period of time yet. So we'll see what happens with those. -------------------------------------------------------------------------------- Bradley C. Hanson, Meta Financial Group, Inc. - President, CEO & Director [24] -------------------------------------------------------------------------------- And I think it's important to understand that a lot of the hotels as well are paying some interest payments not just -- it's not full principal and interest being deferred. So they are making some contribution. -------------------------------------------------------------------------------- Frank Joseph Schiraldi, Piper Sandler & Co., Research Division - MD & Senior Research Analyst [25] -------------------------------------------------------------------------------- Okay. And then you also talked about if we look at where Crestmark sort of the net charge -- cumulative net charge-offs in the last downturn, in the Great Recession, I think you put it at 2.5%. Is there any -- as we sit here today and as you look out and obviously, a lot of uncertainty still on the credit side. But do you expect that, that is likely to be lower this time around higher? Is it just too early to say? Or any thoughts on that front. -------------------------------------------------------------------------------- Glen William Herrick, Meta Financial Group, Inc. - Executive VP & CFO [26] -------------------------------------------------------------------------------- Well, one of the things that's a good indicator of how that's going to go is the pure commercial finance. I'm talking about asset-based lending and factoring. You'll notice the balances have gone down considerably, which means that those products are working exactly as designed, which as the volume comes down, you collect the receivables, you pay down the debt. And that's why you have even in a downturn environment, such a low loss rate. So if the balances help you, that gives you some indicator of where we think that's headed. We're continuing to watch delinquencies in that space other than the areas that I called out, there's no specific thing that's happening. You're not seeing much of a change at all. So we feel pretty good about where that portfolio is today. -------------------------------------------------------------------------------- Bradley C. Hanson, Meta Financial Group, Inc. - President, CEO & Director [27] -------------------------------------------------------------------------------- However, our crystal ball isn't any better than yours as Frank. So we continue to monitor the portfolios very closely, and we'll react to their performance as is required. -------------------------------------------------------------------------------- Frank Joseph Schiraldi, Piper Sandler & Co., Research Division - MD & Senior Research Analyst [28] -------------------------------------------------------------------------------- Okay. And then just finally, I wondered if you could provide any help with the run rate on the expense side, particularly, I don't know if there's anything you can break out of other expense and where that might trend going forward. -------------------------------------------------------------------------------- Glen William Herrick, Meta Financial Group, Inc. - Executive VP & CFO [29] -------------------------------------------------------------------------------- Yes. We called out a couple onetime items. We prepaid $110 million of long-term debt that we don't need anymore and our borrowings. And then there were some employee severance costs and some other year-end type of expenses as we prepared to invest for 2021. I would expect outside of the March quarter that our expenses in the other 3 quarters would -- in '21 would be less than they were in this quarter. So certainly under $80 million outside the tax quarter. -------------------------------------------------------------------------------- Frank Joseph Schiraldi, Piper Sandler & Co., Research Division - MD & Senior Research Analyst [30] -------------------------------------------------------------------------------- Okay. And I'm sorry, I did -- I might have missed while you broke out of the other expense line, but is that more $9 million, $10 million as opposed to $15 million, $16 million going forward? Or did you break out a onetime item out of that? -------------------------------------------------------------------------------- Glen William Herrick, Meta Financial Group, Inc. - Executive VP & CFO [31] -------------------------------------------------------------------------------- Well, what we called out for, again, in the earnings release and in the script was $1.7 million prepayment, penalties for paying down long-term debt at the FHLB and then $1.5 million of severance costs. -------------------------------------------------------------------------------- Operator [32] -------------------------------------------------------------------------------- And our next question comes from William Wallace with Raymond James. -------------------------------------------------------------------------------- William Jefferson Wallace, Raymond James & Associates, Inc., Research Division - Research Analyst [33] -------------------------------------------------------------------------------- Maybe just trying to think about some of the moving parts on net interest margin first. Could you, one, just break out what the purchase accounting accretion was in the quarter? What the expense savings will be from the FHLB prepay? And then it looks like of the 110 basis points of pressure from the EIP deposits, it looks like as it stands at October 2020, you're probably going to get about half of that back with the balances sitting at about [829] right now. Do you think that those deposits -- do they go to 0? Or do you -- do they level out somewhere and then you start to deploy that liquidity elsewhere on the balance sheet? -------------------------------------------------------------------------------- Glen William Herrick, Meta Financial Group, Inc. - Executive VP & CFO [34] -------------------------------------------------------------------------------- Wally, this is Glen. The latter. We think the final tail, they'll pay down another leg this quarter, but the final tail peers -- people are using them for the savings account or certain folks are. And so we expect to have some level of those deposits throughout fiscal year '21, and we'll deploy them as we have opportunities with earning assets. Purchase accretion as -- that's run itself off. So we're not getting any more benefit from that. Think of that the Crestmark portfolio is primarily short term in nature. So it might be a basis point left, and that's about it from there. What was the third part of your question, Wally? -------------------------------------------------------------------------------- William Jefferson Wallace, Raymond James & Associates, Inc., Research Division - Research Analyst [35] -------------------------------------------------------------------------------- The FHLB expense. -------------------------------------------------------------------------------- Glen William Herrick, Meta Financial Group, Inc. - Executive VP & CFO [36] -------------------------------------------------------------------------------- Yes. So it's about a 10-month payback. So we'll benefit all things being equal, save about $2 million of interest expense next year. -------------------------------------------------------------------------------- William Jefferson Wallace, Raymond James & Associates, Inc., Research Division - Research Analyst [37] -------------------------------------------------------------------------------- Okay. And then my follow-up question. On the buyback, you said I believe that your appetite would be governed by your internal capital constraints. Any commentary you could provide around what capital levels would make a buyback unlikely or however you could frame the capital conversation? And then also, are there any constraints at the holding company as it relates to just cash on hand to continue to buyback or plenty of opportunity to dividend up, et cetera? -------------------------------------------------------------------------------- Glen William Herrick, Meta Financial Group, Inc. - Executive VP & CFO [38] -------------------------------------------------------------------------------- Yes. No constraints at this time. And we've signaled on a -- our capital ratios will move around a little bit during the year, i.e., tax season. But on an average, we're going to be looking in the 9% leverage or north of that and 12.5%, 13% on risk-weighted. -------------------------------------------------------------------------------- Operator [39] -------------------------------------------------------------------------------- And I'm showing no further questions in the queue at this time. I'd like to turn the call back to the speakers for any closing remarks. -------------------------------------------------------------------------------- Bradley C. Hanson, Meta Financial Group, Inc. - President, CEO & Director [40] -------------------------------------------------------------------------------- I'd like to thank everybody for joining the call today, and I hope you have a great evening. Thank you so much. -------------------------------------------------------------------------------- Operator [41] -------------------------------------------------------------------------------- Ladies and gentlemen, thank you for your participation on today's conference. This does conclude your program. You may now disconnect.