Meta Financial Group, Inc.® Announces Results For Fiscal Year 2020

Oct 28 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., Oct. 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
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 $ 13,338   $ 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,
2020
  June 30,
2020
  March 31,
2020
  December 31,
2019
  September 30,
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,
2020
  June 30,
2020
  March 31,
2020
  December 31,
2019
  September 30,
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,
2020
  June 30,
2020
  March 31,
2020
  December 31,
2019
  September 30,
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, 2020   September 30, 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
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 $ 1,960,020     $ 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,
2020
  June 30,
2020
  March 31,
2020
  December 31,
2019
  September 30,
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,
2020
Dec 31,
2020
Mar 31,
2021
Jun 30,
2021
Sep 30,
2021
Dec 31,
2021
Mar 31,
2022
Jun 30,
2022
Sep 30,
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  


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