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Meta Financial Group, Inc.® Announces Results For 2021 Fiscal Third Quarter

SIOUX FALLS, S.D., July 28, 2021 (GLOBE NEWSWIRE) -- Meta Financial Group, Inc.® (Nasdaq: CASH) (“Meta” or the “Company”) reported net income of $38.7 million, or $1.21 per share, for the three months ended June 30, 2021, compared to net income of $18.2 million, or $0.53 per share, for the three months ended June 30, 2020.

“MetaBank performed well during the third quarter, more than doubling earnings per share, as various timing items including tax season delays, additional card fee income from government stimulus programs, and reduced provision helped enhance performance year-over-year. Our results demonstrate how MetaBank’s mission of financial inclusion for all® is creating value for all our stakeholders, including our customers, employees and shareholders,” said President and CEO Brad Hanson.

Business Development Highlights for the 2021 Fiscal Third Quarter

  • Published our inaugural 2020 Environmental, Social and Governance ("ESG") Report, building on the Company's vision, culture, and mission of financial inclusion for all®. The Company's 2020 ESG report can be downloaded at https://www.metafinancialgroup.com/environmental-social-governance.

  • Launched the Company's Community Impact Program, focused on financial inclusion, personal and family financial empowerment, educational support, and disaster relief. Concentrating on these four areas positions MetaBank to encourage long-lasting positive impact in our communities.

  • Expanded our renewable energy investment tax credit financing, originating $72.0 million for the first nine months of the fiscal year 2021, resulting in $18.9 million in total net ITC.

  • Entered into a new Banking as a Service ("BaaS") partnership with Clair, a social impact embedded fintech startup. The Company will act as both the issuing bank and bank services provider, offering digital banking services for users of Clair.

Financial Highlights for the 2021 Fiscal Third Quarter

  • Total revenue for the third quarter was $130.9 million, an increase of $27.7 million compared to $103.2 million for the same quarter in fiscal 2020 primarily driven by a timing shift of refund transfer product fees and additional payments card fee income from government stimulus programs.

  • Operating efficiency ratio improved 185 basis points to 61.75% at June 30, 2021 compared to 63.60% at June 30, 2020. See non-GAAP reconciliation table below.

  • Net interest income for the third quarter was $68.5 million, an increase of $6.4 million compared to $62.1 million in the third quarter last year, reflecting a decrease in deposit interest expense.

  • Net interest margin ("NIM") improved to 3.75% for the third quarter from 3.28% during the same period of last year, chiefly due to the decrease of cash associated with the Company's participation in the EIP program and an increase in national lending loans and leases.

  • Total gross loans and leases at June 30, 2021 decreased $1.5 million, to $3.50 billion, compared to June 30, 2020 and decreased $152.8 million, or 4%, when compared to March 31, 2021. The decrease was primarily driven due to the seasonal nature of the taxpayer advance loans.

  • Average deposits from the Payments businesses for the fiscal 2021 third quarter increased nearly 8% to $6.79 billion when compared to the prior year quarter largely driven by excess cash on consumer cards related to government stimulus programs.

Tax Season Recap
During the third quarter of the fiscal 2021, total tax services product revenue was $13.6 million compared to $4.6 million in the prior year quarter. The significant increase for the quarter was mostly related to delayed timing of refund-transfers income due to the extension of the tax filing deadline by the IRS. Total tax services product income, net of losses and direct product expenses, increased 19% when comparing the first nine months of fiscal 2021 to the prior year period. The 2021 tax season benefited by the addition of the H&R Block relationship and has been successful despite the challenges caused by an increase in consumer liquidity due to stimulus payments throughout the 2021 tax season.

Economic Impact Program ("EIP") Update
Of the 16.5 million prepaid cards issued in conjunction with the three EIP stimulus programs, totaling approximately $24.15 billion, $2.81 billion were outstanding as of June 30, 2021, of which only $98.1 million was on Meta’s balance sheet with the remainder being held at other banks.

Net Interest Income
Net interest income for the third quarter of fiscal 2021 was $68.5 million, an increase of 10% from the same quarter in fiscal 2020. The increase was primarily driven by a reduction in total interest expense, partially offset by lower overall yields realized on investments and loan and leases.

Interest expense during the third quarter decreased $3.8 million, and loan and lease interest income increased $2.4 million. The third quarter average outstanding balance of loans and leases decreased by $4.2 million compared to the prior year quarter, primarily due to the decrease in community bank and healthcare receivable loan portfolios offset by growth of the remaining commercial loan portfolios. The Company’s average interest-earning assets for the third quarter decreased by $291.8 million to $7.32 billion compared with the prior year quarter, primarily due to the decrease in cash and fed funds sold, total investments, and community bank loans offset by growth of the national lending loans and leases.

Fiscal 2021 third quarter NIM increased to 3.75% from 3.28% for the third quarter last year. The overall reported tax-equivalent yield (“TEY”) on average earning asset yields increased 26 basis points to 3.85% compared to the prior year quarter, primarily driven by a reduction in low-yielding cash held at the Federal Reserve. The TEY on the securities portfolio was 1.62% compared to 2.22% for the comparable period last year.

The Company's cost of funds for all deposits and borrowings averaged 0.09% during the fiscal 2021 third quarter, compared to 0.28% during the prior year quarter, primarily driven by a reduction in wholesale deposit balances. The Company's overall cost of deposits was 0.01% in the fiscal third quarter of 2021, compared to 0.17% in the same quarter last year.

Noninterest Income
Fiscal 2021 third quarter noninterest income increased to $62.5 million, compared to $41.0 million for the same period of the prior year. This increase was primarily related to card fee income and refund transfer fee income. Card fees benefited from increased card balances related to stimulus programs. Refund transfer fee income was higher compared to last year due to refund transfer volume shift from the second fiscal quarter because of the delay in the 2021 tax season.

Noninterest Expense
Noninterest expense increased 14% to $81.5 million for the fiscal 2021 third quarter, from $71.2 million for the same quarter last year, primarily driven by increases in compensation due to a return to more normalized incentive accruals in fiscal year 2021 and additional employees to support growth. Refund transfer product expense was also higher than the same quarter last year, due largely to a shift in volume into the fiscal 2021 third quarter as a result of the delayed IRS filing date.

Income Tax Expense
The Company recorded income tax expense of $4.9 million, representing an effective tax rate of 11.0%, for the fiscal 2021 third quarter, compared to an income tax benefit of $2.4 million, representing an effective tax rate of (14.4)%, for the third quarter last year. The increase in the recorded income tax expense reflected an increase in fiscal 2021 third quarter earnings, whereas the prior year’s income tax benefit was chiefly the result of adjustments needed for the ratably recognized investment tax credits and lower earnings forecast at that time due to COVID-19.

The Company originated $13.5 million in solar leases during the fiscal 2021 third quarter, compared to $1.3 million in last year's third quarter. Investment tax credits related to solar leases are recognized ratably based on income throughout each fiscal year. The timing and impact of future solar tax credits are expected to vary from period to period, and Meta intends to undertake only those tax credit opportunities that meet the Company's underwriting and return criteria.

Investments, Loans and Leases

June 30, 2021

March 31, 2021

December 31, 2020

September 30, 2020

June 30, 2020

Total investments

$

1,981,852

$

1,552,892

$

1,309,452

$

1,360,712

$

1,268,416

Loans held for sale

Consumer credit products

12,582

6,233

234

962

391

SBA/USDA

57,208

61,402

32,983

52,542

31,438

Community Bank

18,115

100,442

130,073

48,076

Total loans held for sale

87,905

67,635

133,659

183,577

79,905

National Lending

Term lending

920,279

891,414

881,306

805,323

738,454

Asset based lending

263,237

248,735

242,298

182,419

181,130

Factoring

320,629

277,612

275,650

281,173

206,361

Lease financing

282,940

308,169

283,722

281,084

264,988

Insurance premium finance

417,652

344,841

338,227

337,940

359,147

SBA/USDA

263,709

331,917

300,707

318,387

308,611

Other commercial finance

118,081

103,234

101,209

101,658

100,214

Commercial Finance

2,586,527

2,505,922

2,423,119

2,307,984

2,158,905

Consumer credit products

105,440

104,842

88,595

89,809

102,808

Other consumer finance

122,316

130,822

162,423

134,342

138,777

Consumer Finance

227,756

235,664

251,018

224,151

241,585

Tax Services

41,268

225,921

92,548

3,066

19,168

Warehouse Finance

335,704

332,456

318,937

293,375

277,614

Total National Lending loans and leases

3,191,255

3,299,963

3,085,622

2,828,576

2,697,272

Community Banking

Commercial real estate and operating

294,810

335,587

339,141

457,371

608,303

Consumer one-to-four family real estate and other

1,349

4,567

5,077

16,486

166,479

Agricultural real estate and operating

7,825

7,911

9,724

11,707

24,655

Total Community Banking loans

303,984

348,065

353,942

485,564

799,437

Total gross loans and leases

3,495,239

3,648,028

3,439,564

3,314,140

3,496,709

Allowance for credit losses

(91,208

)

(98,892

)

(72,389

)

(56,188

)

(65,747

)

Net deferred loan and lease origination fees

1,431

9,503

9,111

8,625

5,937

Total loans and leases, net of allowance

$

3,405,462

$

3,558,639

$

3,376,286

$

3,266,577

$

3,436,899

The Company's investment security balances at June 30, 2021 totaled $1.98 billion, as compared to $1.55 billion at March 31, 2021 and $1.27 billion at June 30, 2020.

Total gross loans and leases totaled $3.50 billion at June 30, 2021, as compared to $3.65 billion at March 31, 2021 and $3.50 billion and as compared to June 30, 2020. The primary driver for the decrease on a linked quarter basis was the pay down of seasonal tax service loans.

At June 30, 2021, commercial finance loans, which comprised 74% of the Company's gross loan and lease portfolio, totaled $2.59 billion, reflecting growth of $80.6 million, or 3%, from March 31, 2021. The increase in commercial finance loans was primarily due to increases in insurance premium finance by $72.8 million and factoring by $43.0 million, partially offset by decreases in lease financing by $25.2 million and SBA/USDA loans by $68.2 million, respectively, along with slight increases spread across several of the other commercial finance categories.

As of June 30, 2021, the Company had 458 loans outstanding with total loan balances of $143.3 million originated as part of the Paycheck Protection Program ("PPP"), compared with 576 loans outstanding with total loan balances of $208.6 million for the quarter ended March 31, 2021. In total, 53% of the PPP loan balances were forgiven through June 30, 2021.

Consumer finance loans totaled $227.8 million as of June 30, 2021, a decrease compared to $235.7 million at March 31, 2021 and $241.6 million at June 30, 2020. This reduction was primarily driven by other consumer finance, which includes student loans and certain seasonal lending products for tax customers.

Tax services loans totaled $41.3 million as of June 30, 2021, a seasonal decrease as compared to $225.9 million for March 31, 2021 and an increase as compared to $19.2 million at June 30, 2020. Warehouse finance loans totaled $335.7 million at June 30, 2021, a 1% increase from March 31, 2021.

Community bank loans held for investment totaled $304.0 million as of June 30, 2021, decreasing as compared to $348.1 million at March 31, 2021 and $799.4 million at June 30, 2020. As of June 30, 2021, the Company had $18.1 million in community bank loans classified as held for sale.

Asset Quality
The Company’s allowance for credit losses totaled $91.2 million at June 30, 2021, a decrease compared to $98.9 million at March 31, 2021 and an increase compared to $65.7 million at June 30, 2020. The decrease in the allowance at June 30, 2021 when compared to March 31, 2021, was primarily due to the seasonal tax services loan portfolio, which decreased $4.8 million and consumer finance, which decreased $2.4 million during the fiscal 2021 third quarter.

The year-over-year increase in the allowance was primarily driven by a $16.0 million increase within the commercial finance portfolio, a $12.9 million increase in tax services, and a $4.4 million increase in the consumer finance portfolio. These increases were primarily driven by impacts from the pandemic, year-over-year loan growth and the adoption of the current expected credit losses ("CECL") accounting standard, which required a day one entry to increase the allowance for credit losses in the amount of $12.8 million effective October 1, 2020. The increases noted above were partially offset by a $7.2 million decrease within the retained community banking portfolio, which has decreased along with the reduction in year-over-year loan balances.

The following table presents the Company's allowance for credit losses as a percentage of its total loans and leases.

As of the Period Ended

(Unaudited)

June 30, 2021

March 31, 2021

December 31, 2020

October 1, 2020(1)

September 30, 2020

June 30, 2020

Commercial finance

1.73

%

1.77

%

1.88

%

1.85

%

1.30

%

1.36

%

Consumer finance

3.80

%

4.70

%

4.39

%

4.31

%

1.64

%

1.75

%

Tax services

58.99

%

12.90

%

1.53

%

0.06

%

0.06

%

59.67

%

Warehouse finance

0.10

%

0.10

%

0.10

%

0.10

%

0.10

%

0.10

%

National Lending

2.44

%

2.57

%

1.89

%

1.86

%

1.20

%

1.68

%

Community Bank

4.36

%

4.03

%

4.01

%

3.37

%

4.59

%

2.55

%

Total loans and leases

2.61

%

2.71

%

2.10

%

2.08

%

1.70

%

1.88

%

(1) Represents the Company's allowance coverage ratio upon the adoption of the Accounting Standards Update 2016-13 using September 30, 2020 loan and lease and allowance balances plus the CECL allowance adjustment.

The Company's allowance for credit losses as a percentage of total loans and leases decreased to 2.61% at June 30, 2021 from 2.71% at March 31, 2021. The decrease in the total loans and leases coverage ratio reflected a seasonal reduction in the allowance of the tax services loan portfolios. The coverage ratios for the other non-tax-related loan categories remained relatively similar to the March 31, 2021 quarter. The Company expects to continue to diligently monitor the allowance for credit losses and adjust as necessary in future periods to maintain an appropriate and supportable level.

Activity in the allowance for credit losses for the periods presented was as follows.

(Unaudited)

Three Months Ended

Nine Months Ended

June 30, 2021

March 31, 2021

June 30, 2020

June 30, 2021

June 30, 2020

(Dollars in thousands)

Beginning balance

$

98,892

$

72,389

$

65,355

$

56,188

$

29,149

Adoption of CECL accounting standard

12,773

Provision - tax services loans

4,685

27,680

(100

)

32,819

20,407

Provision - all other loans and leases

(36

)

2,519

15,193

8,294

35,390

Charge-offs - tax services loans

(9,505

)

(9,797

)

(9,505

)

(9,797

)

Charge-offs - all other loans and leases

(5,360

)

(4,248

)

(5,808

)

(15,284

)

(12,912

)

Recoveries - tax services loans

17

54

15

1,027

827

Recoveries - all other loans and leases

2,515

498

889

4,896

2,684

Ending balance

$

91,208

$

98,892

$

65,747

$

91,208

$

65,747

Provision for credit losses was $4.6 million for the quarter ended June 30, 2021, compared to $15.1 million for the comparable period in the prior fiscal year. The decrease in the overall provision compared to the prior year was due in large part to the increase in the allowance as part of the Company's response to the emerging COVID-19 pandemic during the third quarter of fiscal 2020. Net charge-offs were $12.3 million for the quarter ended June 30, 2021, compared to $14.7 million for the quarter ended June 30, 2020. The majority of the net charge-offs for the quarter were attributable to seasonal tax-related loan products.

The Company's past due loans and leases were as follows for the periods presented.

As of June 30, 2021

Accruing and Nonaccruing Loans and Leases

Nonperforming Loans and Leases

(Dollars in Thousands)

30-59 Days
Past Due

60-89 Days
Past Due

> 89 Days Past Due

Total Past
Due

Current

Total Loans and Leases
Receivable

> 89 Days Past Due and Accruing

Non-accrual balance

Total

Commercial finance

$

22,117

$

10,650

$

8,844

$

41,611

$

2,544,916

$

2,586,527

$

4,350

$

17,315

$

21,665

Consumer finance

843

1,009

525

2,377

225,379

227,756

469

469

Tax services

40,958

40,958

310

41,268

Warehouse finance

335,704

335,704

Total National Lending

22,960

52,617

9,369

84,946

3,106,309

3,191,255

4,819

17,315

22,134

Total Community Banking

62

1,769

1,831

302,153

303,984

19,773

19,773

Total loans and leases held for investment

$

23,022

$

52,617

$

11,138

$

86,777

$

3,408,462

$

3,495,239

$

4,819

$

37,088

$

41,907


As of March 31, 2021

Accruing and Nonaccruing Loans and Leases

Nonperforming Loans and Leases

(Dollars in Thousands)

30-59 Days Past Due

60-89 Days Past Due

> 89 Days Past Due

Total Past Due

Current

Total Loans and Leases Receivable

> 89 Days Past Due and Accruing

Non-accrual balance

Total

Commercial finance

$

34,675

$

8,730

$

9,488

$

52,893

$

2,453,029

$

2,505,922

$

4,810

$

18,305

$

23,115

Consumer finance

2,033

4,162

2,294

8,489

227,175

235,664

517

517

Tax services

507

507

225,414

225,921

Warehouse finance

332,456

332,456

Total National Lending

37,215

12,892

11,782

61,889

3,238,074

3,299,963

5,327

18,305

23,632

Total Community Banking

12

1,818

1,830

346,235

348,065

19,824

19,824

Total loans and leases held for investment

$

37,227

$

12,892

$

13,600

$

63,719

$

3,584,309

$

3,648,028

$

5,327

$

38,129

$

43,456

The Company's nonperforming assets at June 30, 2021 were $45.1 million, representing 0.64% of total assets, compared to $46.7 million, or 0.48% of total assets at March 31, 2021 and $56.1 million, or 0.64% of total assets at June 30, 2020. The changes in the nonperforming assets as a percentage of total assets at June 30, 2021 were driven in large part by a significant reduction in period-end total assets as the total nonperforming assets for June 30, 2021 decreased when compared to both the linked-quarter and the prior year.

The Company's nonperforming loans and leases at June 30, 2021, were $41.9 million, representing 1.17% of total gross loans and leases, compared to $43.5 million, or 1.17% of total gross loans and leases at March 31, 2021 and $39.3 million, or 1.10% of total gross loans and leases at June 30, 2020.

Loan and lease balances that were within their active deferment period decreased to $41.5 million at June 30, 2021 from $66.5 million at March 31, 2021.

Meta is now revising its credit administration policies and reviewing its loan portfolio to better align with OCC guidance for national banks, a process that began during the quarter ending June 30, 2021 and is expected to be completed by September 30, 2021. We expect these credit policy revisions will have an impact on our loan and lease risk ratings, resulting in downgrades of certain credits in several categories. Our loan and collateral management practices have proven effective in managing losses during previous economic cycles; and while we expect this process will result in setting a new baseline for portfolio metrics going forward, it does not indicate a deterioration in our portfolio's expected performance. Further, these changes do not reflect an increase in credit risk for past or future periods and thus we do not anticipate any increase in losses as a result of these one-time administrative adjustments to these credits' risk ratings.

The Company has various portfolios of consumer finance and tax services loans that present unique risks. Due to the unique risks associated with these portfolios, the Company monitors other credit quality indicators in their evaluation of the appropriateness of the allowance for credit losses on these portfolios, and as such, these loans are not included in the asset classification table below. The Company's loans and leases by asset classification were as follows for the periods presented.

Asset Classification

Pass

Watch

Special Mention

Substandard

Doubtful

Total

As of June 30, 2021

(Dollars in Thousands)

Commercial finance

$

2,370,132

$

135,691

$

55,805

$

74,941

$

7,166

$

2,643,735

Warehouse finance

335,704

335,704

Total National Lending

2,705,836

135,691

55,805

74,941

7,166

2,979,439

Total Community Banking

212,283

33,494

16,126

60,196

322,099

Total Loans and Leases

$

2,918,119

$

169,185

$

71,931

$

135,137

$

7,166

$

3,301,538


Asset Classification

Pass

Watch

Special Mention

Substandard

Doubtful

Total

As of March 31, 2021

(Dollars in Thousands)

Commercial finance

$

2,310,043

$

142,506

$

59,904

$

52,492

$

2,378

$

2,567,323

Warehouse finance

332,456

332,456

Total National Lending

2,642,499

142,506

59,904

52,492

2,378

2,899,779

Total Community Banking

239,650

84,107

684

23,625

348,066

Total Loans and Leases

$

2,882,149

$

226,613

$

60,588

$

76,117

$

2,378

$

3,247,845

Deposits, Borrowings and Other Liabilities
Total average deposits for the fiscal 2021 third quarter decreased by $240.7 million to $6.98 billion compared to the same period in fiscal 2020, due to a reduction in wholesale deposits partially offset by increases in all other non-maturity deposit categories. Average wholesale deposits decreased $731.1 million, or 89%, while noninterest-bearing deposits increased $323.1 million, or 5%, for the fiscal 2021 third quarter when compared to the same period in fiscal 2020. Average deposits from the Payments division increased nearly 8% to $6.79 billion for the fiscal 2021 third quarter when compared to the same period in fiscal 2020. Excluding the balances on the EIP cards, average payments deposits for the fiscal 2021 second quarter were $6.67 billion, representing an increase of 42% compared to the same period of the prior year, which continues to be largely driven by other stimulus-related dollars loaded on various partner cards.

The average balance of total deposits and interest-bearing liabilities was $7.08 billion for the three-month period ended June 30, 2021, compared to $7.49 billion for the same period in the prior fiscal year, representing a decrease of 6%.

Total end-of-period deposits decreased 22% to $5.89 billion at June 30, 2021, compared to $7.59 billion at June 30, 2020. The reduction in end-of-period deposits was primarily driven by decreases in noninterest-bearing deposits of $1.15 billion and wholesale deposits of $665.0 million. The decrease in noninterest-bearing deposits was driven by a $2.58 billion reduction in EIP program card balances from June 30, 2020 to June 30, 2021 as Meta was able to shift most of the remaining EIP program card balances from its balance sheet to other banks. That decrease in EIP balances was partially offset by growth in payments deposits that has been largely driven by excess cash on consumer cards related to government stimulus programs.

Regulatory Capital
The Company and MetaBank remained above the federal regulatory minimum capital requirements at June 30, 2021, continued to be classified as well-capitalized, and in good standing with the regulatory agencies. A temporary exemption was granted by the Office of the Comptroller of the Currency related to the financial impacts of distributing prepaid debit cards as part of the EIP program. Regulatory capital ratios of the Company and the Bank are stated in the table below.

The tables below include certain non-GAAP financial measures that are used by investors, analysts and bank regulatory agencies to assess the capital position of financial services companies. Management reviews these measures along with other measures of capital as part of its financial analysis.

As of the dates indicated

June 30,
2021
(1)

March 31,
2021

December 31,
2020

September 30,
2020

June 30,
2020

Company

Tier 1 leverage capital ratio

6.85

%

4.75

%

7.39

%

6.58

%

5.91

%

Common equity Tier 1 capital ratio

12.76

%

11.29

%

10.72

%

11.78

%

11.51

%

Tier 1 capital ratio

13.11

%

11.63

%

11.07

%

12.18

%

11.90

%

Total capital ratio

16.18

%

14.65

%

14.14

%

15.30

%

14.99

%

MetaBank

Tier 1 leverage capital ratio

7.83

%

5.47

%

8.60

%

7.56

%

6.89

%

Common equity Tier 1 capital ratio

14.94

%

13.39

%

12.87

%

13.96

%

13.82

%

Tier 1 capital ratio

14.96

%

13.40

%

12.89

%

14.00

%

13.86

%

Total capital ratio

16.22

%

14.66

%

14.14

%

15.26

%

15.12

%

(1) June 30, 2021 amounts are preliminary pending completion and filing of the Company's regulatory reports. Regulatory capital presented for periods in fiscal year 2021 reflect the Company's election of the five-year CECL transition for regulatory capital purposes.

The following table provides the non-GAAP financial measures used to compute certain of the ratios included in the table above, as well as a reconciliation of such non-GAAP financial measures to the most directly comparable financial measure in accordance with GAAP:

Standardized Approach(1)

June 30,
2021

March 31,
2021

December 31,
2020

September 30,
2020

June 30,
2020

(Dollars in Thousands)

Total stockholders' equity

$

876,633

$

835,258

$

813,210

$

847,308

$

829,909

Adjustments:

LESS: Goodwill, net of associated deferred tax liabilities

301,179

301,602

301,999

302,396

302,814

LESS: Certain other intangible assets

35,100

36,779

39,403

40,964

42,865

LESS: Net deferred tax assets from operating loss and tax credit carry-forwards

17,753

19,306

24,105

18,361

10,360

LESS: Net unrealized gains (losses) on available-for-sale securities

14,750

12,458

19,894

17,762

8,382

LESS: Non-controlling interest

1,490

1,092

1,536

3,603

3,787

ADD: Adoption of Accounting Standards Update 2016-13

13,913

10,439

10,439

Common Equity Tier 1(1)

520,274

474,460

436,712

464,222

461,701

Long-term borrowings and other instruments qualifying as Tier 1

13,661

13,661

13,661

13,661

13,661

Tier 1 minority interest not included in common equity tier 1 capital

932

690

749

1,894

1,894

Total Tier 1 Capital

534,867

488,811

451,122

479,777

477,256

Allowance for credit losses

51,317

53,232

51,070

49,343

50,338

Subordinated debentures (net of issuance costs)

73,936

73,892

73,850

73,807

73,765

Total qualifying capital

$

660,119

$

615,935

$

576,042

$

602,927

$

601,359

(1) Capital ratios were determined using the Basel III capital rules that became effective on January 1, 2015. Basel III revised the definition of capital, increased minimum capital ratios, and introduced a minimum CET1 ratio; those changes are being fully phased in through the end of 2021.

The following table provides a reconciliation of tangible common equity and tangible common equity excluding accumulated other comprehensive income ("AOCI"), each of which is used in calculating tangible book value data, to Total Stockholders' Equity. Each of tangible common equity and tangible common equity excluding AOCI is a non-GAAP financial measure that is commonly used within the banking industry.

June 30,
2021

March 31,
2021

December 31,
2020

September 30,
2020

June 30,
2020

(Dollars in Thousands)

Total Stockholders' Equity

$

876,633

$

835,258

$

813,210

$

847,308

$

829,909

Less: Goodwill

309,505

309,505

309,505

309,505

309,505

Less: Intangible assets

34,898

36,903

39,660

41,692

43,974

Tangible common equity

532,230

488,850

464,045

496,111

476,430

Less: Accumulated other comprehensive income (loss) ("AOCI")

15,222

12,809

20,119

17,542

7,995

Tangible common equity excluding AOCI

$

517,008

$

476,041

$

443,926

$

478,569

$

468,435

Conference Call
The Company will host a conference call and earnings webcast at 4:00 p.m. Central Time (5:00 p.m. Eastern Time) on Wednesday, July 28, 2021. The live webcast of the call can be accessed from Meta’s Investor Relations website at www.metafinancialgroup.com. Telephone participants may access the live conference call by dialing (844) 461-9934 beginning approximately 10 minutes prior to start time. Please ask to join the Meta Financial conference call, and provide conference ID 5084665 upon request. International callers should dial (636) 812-6634. A webcast replay will also be archived at www.metafinancialgroup.com for one year.

Upcoming Investor Events

  • Raymond James U.S. Bank Conference, September 8, 2021 | Chicago, IL

Forward-Looking Statements
The Company and MetaBank may from time to time make written or oral “forward-looking statements,” including statements contained in this press release, the Company’s filings with the SEC, the Company’s reports to stockholders, and in other communications by the Company and MetaBank, which are made in good faith by the Company pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995.

You can identify forward-looking statements by words such as “may,” “hope,” “will,” “should,” “expect,” “plan,” “anticipate,” “intend,” “believe,” “estimate,” “predict,” “potential,” “continue,” “could,” “future,” or the negative of those terms, or other words of similar meaning or similar expressions. You should carefully read statements that contain these words because they discuss our future expectations or state other “forward-looking” information. These forward-looking statements are based on information currently available to us and assumptions about future events, and include statements with respect to the Company’s beliefs, expectations, estimates, and intentions, which are subject to significant risks and uncertainties, and are subject to change based on various factors, some of which are beyond the Company’s control. Such risks, uncertainties and other factors may cause our actual growth, results of operations, financial condition, cash flows, performance and business prospects and opportunities to differ materially from those expressed in, or implied by, these forward-looking statements. Such statements address, among others, the following subjects: future operating results; expectations in connection with the impact of the ongoing COVID-19 pandemic and related government actions on our business, our industry and the capital markets; customer retention; loan and other product demand; expectations concerning acquisitions and divestitures; new products and services, including those offered by Meta Payment Systems, Refund Advantage, EPS Financial and Specialty Consumer Services divisions; credit quality; the level of net charge-offs and the adequacy of the allowance for credit losses; technology; and the Company's employees. The following factors, among others, could cause the Company's financial performance and results of operations to differ materially from the expectations, estimates, and intentions expressed in such forward-looking statements: maintaining our executive management team; expected growth opportunities may not be realized or may take longer to realize than expected; the potential adverse effects of the ongoing COVID-19 pandemic and any governmental or societal responses thereto including the deployment and efficacy of the COVID-19 vaccines, or other unusual and infrequently occurring events; actual changes in interest rates and the Fed Funds rate; additional changes in tax laws; the strength of the United States' economy, in general, and the strength of the local economies in which the Company operates; changes in trade, monetary, and fiscal policies and laws, including interest rate policies of the Federal Reserve; inflation, market, and monetary fluctuations; the timely and efficient development of, and acceptance of, new products and services offered by the Company or its strategic partners, as well as risks (including reputational and litigation) attendant thereto, and the perceived overall value of these products and services by users; the risks of dealing with or utilizing third parties, including, in connection with the Company’s refund advance business, the risk of reduced volume of refund advance loans as a result of reduced customer demand for or usage of Meta’s strategic partners’ refund advance products; our relationship with, and any actions which may be initiated by, our regulators; the impact of changes in financial services laws and regulations, including, but not limited to, laws and regulations relating to the tax refund industry and the insurance premium finance industry; technological changes, including, but not limited to, the protection of our electronic systems and information; the impact of acquisitions and divestitures; litigation risk; the growth of the Company’s business, as well as expenses related thereto; continued maintenance by MetaBank of its status as a well-capitalized institution; changes in consumer spending and saving habits; the impact of our participation as prepaid card issuer for the EIP program and similar programs in the future; losses from fraudulent or illegal activity; technological risks and developments and cyber threats, attacks, or events; and the success of the Company at maintaining its high quality asset level and managing and collecting assets of borrowers in default should problem assets increase.

The foregoing list of factors is not exclusive. We caution you not to place undue reliance on these forward-looking statements. The forward-looking statements included in this press release speak only as of the date hereof. Additional discussions of factors affecting the Company’s business and prospects are reflected under the caption “Risk Factors” and in other sections of the Company’s Annual Report on Form 10-K for the Company’s fiscal year ended September 30, 2020, and in other filings made with the SEC. The Company expressly disclaims any intent or obligation to update any forward-looking statements, whether written or oral, that may be made from time to time by or on behalf of the Company or its subsidiaries, whether as a result of new information, changed circumstances, or future events or for any other reason.

Condensed Consolidated Statements of Financial Condition (Unaudited)

(Dollars in Thousands, Except Share Data)

ASSETS

June 30, 2021

March 31, 2021

December 31, 2020

September 30, 2020

June 30, 2020

Cash and cash equivalents

$

720,243

$

3,724,242

$

1,586,451

$

427,367

$

3,108,141

Investment securities available for sale, at fair value

854,023

921,947

797,363

814,495

825,579

Mortgage-backed securities available for sale, at fair value

1,063,582

558,833

430,761

453,607

338,250

Investment securities held to maturity, at cost

60,228

67,709

76,176

87,183

98,205

Mortgage-backed securities held to maturity, at cost

4,019

4,403

5,152

5,427

6,382

Loans held for sale

87,905

67,635

133,659

183,577

79,905

Loans and leases

3,496,670

3,657,531

3,448,675

3,322,765

3,502,646

Allowance for credit losses

(91,208

)

(98,892

)

(72,389

)

(56,188

)

(65,747

)

Federal Reserve Bank and Federal Home Loan Bank stocks, at cost

28,433

28,433

27,138

27,138

31,836

Accrued interest receivable

16,230

17,429

17,133

16,628

17,545

Premises, furniture, and equipment, net

44,107

41,510

39,932

41,608

40,361

Rental equipment, net

211,368

211,397

206,732

205,964

216,336

Bank-owned life insurance

94,142

93,542

92,937

92,315

91,697

Foreclosed real estate and repossessed assets, net

1,204

1,483

7,186

9,957

6,784

Goodwill

309,505

309,505

309,505

309,505

309,505

Intangible assets

34,898

36,903

39,660

41,692

43,974

Prepaid assets

7,482

10,201

11,270

8,328

6,806

Deferred taxes

20,072

25,435

24,411

17,723

15,944

Other assets

88,909

110,877

82,763

82,983

104,877

Total assets

$

7,051,812

$

9,790,123

$

7,264,515

$

6,092,074

$

8,779,026

LIABILITIES AND STOCKHOLDERS’ EQUITY

LIABILITIES

Deposits:

Noninterest-bearing checking

5,385,569

7,928,235

5,581,597

4,356,630

6,537,809

Interest-bearing checking

255,509

416,164

274,504

157,571

187,003

Savings deposits

93,608

126,834

54,080

47,866

55,896

Money market deposits

63,920

55,045

56,440

48,494

40,811

Time certificates of deposit

11,425

12,614

13,522

20,223

25,000

Wholesale deposits

78,840

103,521

227,648

348,416

743,806

Total deposits

5,888,871

8,642,413

6,207,791

4,979,200

7,590,325

Short-term borrowings

Long-term borrowings

93,634

95,336

96,760

98,224

209,781

Accrued interest payable

1,853

679

2,068

1,923

4,332

Accrued expenses and other liabilities

190,821

216,437

144,686

165,419

144,679

Total liabilities

6,175,179

8,954,865

6,451,305

5,244,766

7,949,117

STOCKHOLDERS’ EQUITY

Preferred stock

Common stock, $.01 par value

319

319

326

344

346

Common stock, Nonvoting, $.01 par value

Additional paid-in capital

602,720

601,222

598,669

594,569

592,693

Retained earnings

262,578

225,471

198,000

234,927

228,500

Accumulated other comprehensive income

15,222

12,809

20,119

17,542

7,995

Treasury stock, at cost

(5,696

)

(5,655

)

(5,440

)

(3,677

)

(3,412

)

Total equity attributable to parent

875,143

834,166

811,674

843,705

826,122

Noncontrolling interest

1,490

1,092

1,536

3,603

3,787

Total stockholders’ equity

876,633

835,258

813,210

847,308

829,909

Total liabilities and stockholders’ equity

$

7,051,812

$

9,790,123

$

7,264,515

$

6,092,074

$

8,779,026

Consolidated Statements of Operations (Unaudited)

(Dollars in Thousands, Except Share and Per Share Data)

Three Months Ended

Year Ended

June 30, 2021

March 31, 2021

June 30, 2020

June 30,
2021

June 30,
2020

Interest and dividend income:

Loans and leases, including fees

$

62,287

$

68,472

$

59,911

$

192,415

$

199,107

Mortgage-backed securities

3,446

2,608

2,269

8,176

7,151

Other investments

4,250

4,589

5,226

13,207

18,176

69,983

75,669

67,406

213,798

224,434

Interest expense:

Deposits

188

445

3,130

1,429

20,712

FHLB advances and other borrowings

1,320

1,374

2,139

4,045

9,197

1,508

1,819

5,269

5,474

29,909

Net interest income

68,475

73,850

62,137

208,324

194,525

Provision for credit losses

4,612

30,290

15,093

40,991

55,796

Net interest income after provision for credit losses

63,863

43,560

47,044

167,333

138,729

Noninterest income:

Refund transfer product fees

12,073

22,680

4,595

35,400

33,726

Tax advance product fees

891

44,562

28

47,413

31,840

Payments card and deposit fees

29,203

29,875

21,302

81,641

65,957

Other bank and deposit fees

338

133

214

709

1,083

Rental income

9,976

9,846

11,231

29,707

34,682

Net gain realized on investment securities

6

6

Gain on divestitures

19,275

Gain (loss) on sale of other

5,955

2,133

1,214

10,935

969

Other income

4,017

4,218

2,464

15,550

11,512

Total noninterest income

62,453

113,453

41,048

221,361

199,044

Noninterest expense:

Compensation and benefits

38,604

43,932

32,102

114,867

100,631

Refund transfer product expense

2,435

6,146

(139

)

8,642

7,482

Tax advance product expense

(25

)

2,189

(11

)

2,534

2,820

Card processing

6,809

7,212

7,128

20,138

19,432

Occupancy and equipment expense

7,381

6,748

6,502

21,017

20,169

Operating lease equipment depreciation

8,122

7,419

8,536

23,122

25,237

Legal and consulting

5,680

6,045

4,660

16,972

15,242

Intangible amortization

2,013

2,757

2,636

6,784

8,714

Impairment expense

505

554

2,217

750

Other expense

9,999

12,969

9,827

33,775

38,291

Total noninterest expense

81,523

95,971

71,241

250,068

238,768

Income before income tax expense

44,793

61,042

16,851

138,626

99,005

Income tax expense (benefit)

4,934

1,133

(2,426

)

9,600

3,870

Net income before noncontrolling interest

39,859

59,909

19,277

129,026

95,135

Net income attributable to noncontrolling interest

1,158

843

1,087

3,221

3,573

Net income attributable to parent

$

38,701

$

59,066

$

18,190

$

125,805

$

91,562

Less: Allocation of Earnings to participating securities(1)

729

1,113

432

2,411

2,097

Net income attributable to common shareholders(1)

37,972

57,953

17,758

123,394

89,465

Earnings per common share

Basic

$

1.21

$

1.84

$

0.53

$

3.87

$

2.54

Diluted

$

1.21

$

1.84

$

0.53

$

3.87

$

2.54

Shares used in computing earnings per common share

Basic

31,320,893

31,520,505

33,794,154

31,880,653

35,180,068

Diluted

31,338,947

31,535,022

33,815,651

31,900,597

35,201,702

(1) Amounts presented are used in the two-class earnings per common share calculation.

Average Balances, Interest Rates and Yields

The following table presents, for the periods indicated, the total dollar amount of interest income from average interest-earning assets and the resulting yields, as well as the interest expense on average interest-bearing liabilities, expressed both in dollars and in rates. Only the yield/rate reflects tax-equivalent adjustments. Nonaccruing loans and leases have been included in the table as loans carrying a zero yield.

Three Months Ended June 30,

2021

2020

(Dollars in Thousands)

Average
Outstanding
Balance

Interest
Earned /
Paid

Yield /
Rate(1)

Average
Outstanding
Balance

Interest
Earned /
Paid

Yield /
Rate(1)

Interest-earning assets:

Cash and fed funds sold

$

1,867,988

$

528

0.11

%

$

2,692,270

$

783

0.12

%

Mortgage-backed securities

882,042

3,446

1.57

%

342,174

2,269

2.67

%

Tax exempt investment securities

263,401

884

1.70

%

417,042

1,658

2.02

%

Asset-backed securities

438,163

1,651

1.51

%

336,562

1,770

2.11

%

Other investment securities

246,493

1,187

1.93

%

197,643

1,014

2.06

%

Total investments

1,830,099

7,168

1.62

%

1,293,420

6,711

2.22

%

Total commercial finance

2,616,942

48,641

7.46

%

2,160,175

40,375

7.52

%

Total consumer finance

241,813

3,916

6.50

%

247,824

4,635

7.52

%

Total tax services

91,804

604

2.64

%

39,845

%

Total warehouse finance

332,759

5,151

6.21

%

304,839

4,582

6.05

%

National lending loans and leases

3,283,318

58,312

7.12

%

2,752,683

49,592

7.25

%

Community Banking loans

335,415

3,975

4.75

%

870,245

10,319

4.77

%

Total loans and leases

3,618,733

62,287

6.90

%

3,622,928

59,911

6.65

%

Total interest-earning assets

$

7,316,820

$

69,983

3.85

%

$

7,608,618

$

67,406

3.59

%

Noninterest-earning assets

841,738

830,589

Total assets

$

8,158,558

$

8,439,206

Interest-bearing liabilities:

Interest-bearing checking(2)

$

336,576

$

%

$

226,382

$

%

Savings

107,803

5

0.02

%

55,572

1

0.01

%

Money markets

58,517

66

0.45

%

40,091

33

0.33

%

Time deposits

11,877

27

0.91

%

25,392

113

1.78

%

Wholesale deposits

86,295

90

0.42

%

817,414

2,983

1.47

%

Total interest-bearing deposits

601,068

188

0.13

%

1,164,852

3,130

1.08

%

Overnight fed funds purchased

11

0.25

%

59,055

48

0.33

%

FHLB advances

%

110,000

670

2.45

%

Subordinated debentures

73,907

1,148

6.23

%

73,738

1,153

6.29

%

Other borrowings

20,657

172

3.35

%

27,032

268

3.98

%

Total borrowings

94,575

1,320

5.60

%

269,825

2,139

3.19

%

Total interest-bearing liabilities

695,643

1,508

0.87

%

1,434,677

5,269

1.48

%

Noninterest-bearing deposits

6,380,371

%

6,057,314

%

Total deposits and interest-bearing liabilities

$

7,076,014

$

1,508

0.09

%

$

7,491,991

$

5,269

0.28

%

Other noninterest-bearing liabilities

225,862

122,940

Total liabilities

7,301,876

7,614,931

Shareholders' equity

856,682

824,276

Total liabilities and shareholders' equity

$

8,158,558

$

8,439,206

Net interest income and net interest rate spread including noninterest-bearing deposits

$

68,475

3.76

%

$

62,137

3.30

%

Net interest margin

3.75

%

3.28

%

Tax-equivalent effect

0.02

%

0.02

%

Net interest margin, tax-equivalent(3)

3.77

%

3.31

%

(1) Tax rate used to arrive at the TEY for the three months ended June 30, 2021 and 2020 was 21%.
(2) Of the total balance, $336.2 million are interest-bearing deposits where interest expense is paid by a third party and not by the Company.
(3) Net interest margin expressed on a fully-taxable-equivalent basis ("net interest margin, tax-equivalent") is a non-GAAP financial measure. The tax-equivalent adjustment to net interest income recognizes the estimated income tax savings when comparing taxable and tax-exempt assets and adjusting for federal and state exemption of interest income. The Company believes that it is a standard practice in the banking industry to present net interest margin expressed on a fully taxable equivalent basis and, accordingly, believes the presentation of this non-GAAP financial measure may be useful for peer comparison purposes.

Selected Financial Information

As of and For the Three Months Ended

June 30,
2021

March 31,
2021

December 31,
2020

September 30,
2020

June 30,
2020

Equity to total assets

12.43

%

8.53

%

11.19

%

13.91

%

9.45

%

Book value per common share outstanding

$

27.46

$

26.16

$

24.93

$

24.66

$

23.96

Tangible book value per common share outstanding

$

16.67

$

15.31

$

14.23

$

14.44

$

13.76

Tangible book value per common share outstanding excluding AOCI

$

16.20

$

14.91

$

13.61

$

13.93

$

13.53

Common shares outstanding

31,919,780

31,926,008

32,620,251

34,360,890

34,631,160

Nonperforming assets to total assets

0.64

%

0.48

%

0.73

%

0.79

%

0.64

%

Nonperforming loans and leases to total loans and leases

1.17

%

1.17

%

1.18

%

0.97

%

1.10

%

Net interest margin

3.75

%

3.07

%

4.65

%

3.77

%

3.28

%

Net interest margin, tax-equivalent

3.77

%

3.08

%

4.67

%

3.79

%

3.31

%

Return on average assets

1.90

%

2.22

%

1.73

%

0.69

%

0.86

%

Return on average equity

18.07

%

28.93

%

13.91

%

6.21

%

8.83

%

Full-time equivalent employees

1,109

1,075

1,038

1,015

999

Non-GAAP Reconciliation

Efficiency Ratio

For the last twelve months ended

(Dollars in Thousands)

June 30,
2021

March 31,
2021

December 31,
2020

September 30,
2020

June 30,
2020

Noninterest Expense - GAAP

$

330,352

$

320,070

$

315,828

$

319,051

$

314,911

Net Interest Income

272,837

266,499

260,386

259,038

260,142

Noninterest Income

262,111

240,706

247,766

239,794

235,024

Total Revenue: GAAP

$

534,948

$

507,205

$

508,152

$

498,832

$

495,166

Efficiency Ratio, last twelve months

61.75

%

63.10

%

62.15

%

63.96

%

63.60

%

About Meta Financial Group, Inc.®

Meta Financial Group, Inc.® ("Meta") (Nasdaq: CASH) is a South Dakota-based financial holding company. At Meta, our mission is financial inclusion for all®. Through our subsidiary, MetaBank®, N.A., we strive to remove barriers to financial access and promote economic mobility by working with third parties to provide responsible, secure, high quality financial products that contribute to the social and economic benefit of communities at the core of the real economy. Meta works to increase financial availability, choice, and opportunity for all. Additional information can be found by visiting www.metafinancialgroup.com.

Investor Relations Contact
Brittany Kelley Elsasser
605-362-2423
bkelley@metabank.com

Media Relations Contact
mediarelations@metabank.com


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