Meta Financial Group, Inc.® Reports Results for 2018 Fiscal Fourth Quarter and Fiscal Year
Delivers Record Earnings of
Brad Hanson Promoted to Chief Executive Officer
The 2018 fourth quarter pre-tax results included a
"Fiscal 2018 was marked by several transformative developments, including the successful close of the Crestmark acquisition and the integration of Crestmark's operations in the fourth fiscal quarter," said President and CEO
“Fiscal 2018 also included a successful tax season, the renewal of multi-year agreements with two of our largest prepaid partners and new relationships in our national consumer lending business - all of which are expected to support our unique and diversified financial services platform and contribute to our continued success in delivering value to customers and shareholders," added Hanson. "With record fiscal year earnings of
Highlights for the 2018 Fiscal Fourth Quarter and Year Ended
- Total net loans and leases receivable increased
$1.61 billion , or 122%, to$2.93 billion atSeptember 30, 2018 , compared toSeptember 30, 2017 . When excluding Crestmark loans and leases, total net loans and leases receivables increased$454.0 million , or 34%, at September 30, 2018, compared toSeptember 30, 2017 . Crestmark loans and leases receivable were acquired at a fair value of$1.05 billion onAugust 1, 2018 and grew to$1.16 billion atSeptember 30, 2018 . - Net interest income was
$48.5 million for the 2018 fiscal fourth quarter, an increase of$24.0 million , or 98%, compared to$24.5 million for the fourth quarter of 2017. Total fiscal year 2018 net interest income was$130.5 million , representing a$37.3 million , or 40% increase from$93.2 million over the prior fiscal year.
- Net interest margin was 4.05% for the fiscal fourth quarter of 2018, increasing from 2.64% over the same period of the prior year, while the tax-equivalent net interest margin ("NIM") increased to 4.27% from 3.13% over that same period. Net interest margin for the 2018 fiscal year was 3.14% compared to 2.58% during fiscal year 2017, while NIM increased to 3.41% for fiscal year 2018 from 3.05% for fiscal year 2017. The increase in net interest margin and NIM was primarily attributable to the Crestmark acquisition.
- The Company recorded a provision for loan and lease losses of
$4.7 million in the 2018 fiscal fourth quarter, compared to a recovery of$0.1 million in the 2017 fiscal fourth quarter. During the 2018 fiscal fourth quarter, the Company charged off$14.7 million in loans and leases,$11.3 million of which were tax services loans. - Card and deposit fee income totaled
$21.0 million for the 2018 fiscal fourth quarter, a decrease of$5.9 million , or 22%, when compared to the same quarter in 2017. When excluding declining residual fee income related to the wind-down of the Company's relationships with two non-strategic payments partners, the change in card and deposit fee income would have been flat for the 2018 fiscal fourth quarter compared to the same period of the prior year. Total fiscal year 2018 card and deposit fee income was$98.9 million , compared to$95.4 million for the prior fiscal year. - The Company recorded a loss on sale of securities of
$7.0 million during the 2018 fiscal fourth quarter, which was associated with a balance sheet restructuring related to closing of the Crestmark acquisition, compared to a loss of$1.0 million during the comparable prior fiscal year period. - Rental income from the Crestmark division's equipment finance business added
$7.3 million to Meta's 2018 fiscal fourth quarter non-interest income, partially offset by$5.4 million of corresponding operating lease depreciation expense. - The Company recorded an income tax benefit of
$7.6 million for the three months endedSeptember 30, 2018 , compared to a benefit of$1.0 million for the same period of the prior year. The 2018 fiscal fourth quarter income tax benefit included a$4.6 million tax benefit recognized by the Company as a result of amending a historical tax return ofCrestmark Bancorp, Inc. During the 2018 fiscal fourth quarter, the Company also recognized an investment tax credit related to alternative energy leasing initiatives, which reduced its income tax expense by$4.0 million for the quarter. - Compensation and benefits expense for the 2018 fiscal fourth quarter was
$30.1 million , an increase of$8.2 million , or 37%, from the 2017 fiscal fourth quarter primarily due to employees joining the Company from the Crestmark acquisition, and to a lesser extent with increased staffing to support the Company's other growing business line initiatives. - The Company's 2018 fiscal fourth quarter average assets grew to
$5.38 billion , compared to$4.03 billion in the 2017 fourth quarter, an increase of 33%, primarily driven by the Crestmark acquisition. - The Payments division’s average deposits increased
$111.5 million , or 5%, to$2.36 billion for the 2018 fiscal fourth quarter when compared to the same quarter of fiscal 2017. - Non-performing assets (“NPAs”) were 0.72% of total assets at September 30, 2018, compared to 0.72% at September 30, 2017.
Business Updates
- As announced in a separate press release today, the Company has appointed
Brad Hanson , currently President ofMeta Financial Group ,MetaBank and Meta Payment Systems, to the additional role of Chief Executive Officer, effective immediately. Hanson will also continue to serve on the Meta Board. Hanson replacesJ. Tyler Haahr , who has stepped down as Chief Executive Officer. It is expected that Haahr will remain Chairman of the Board and an employee through the Company’s Annual Meeting of stockholders expected to be held inJanuary 2019 .Frederick V. Moore , currently Lead Director and Vice Chairman, has been appointed to serve as Chairman of the Board effective following the date of the Annual Meeting. - The Company continues to expect fiscal year 2019 earnings per common share to be in the range of
$2.30 to $2.70 , excluding the effects related to Company executive transition costs. The Company estimates one-time executive transition agreement costs to reduce earnings per common share up to$0.15 in fiscal 2019, which costs the Company expects to incur in the quarter endingMarch 31, 2019 . The Company also affirms the earnings outlook for fiscal year 2020 GAAP earnings per common share to be in the range of$3.10 to $3.80 . - On
October 5, 2018 , Meta common stock began trading on a split-adjusted basis as a result of the 3-for-1 forward stock split with respect to Meta's common stock, which was previously announced onAugust 28, 2018 and effected onOctober 4, 2018 . As a result of the stock split, the number of issued and outstanding shares of Meta common stock increased to 39.2 million shares, which includes shares issued pursuant to the Crestmark acquisition. - The Company also announced on
August 28, 2018 that its board of directors approved an increase in the quarterly common stock dividend paid onOctober 1, 2018 to $0.05 per share, or $0.20 annualized (which amounts reflect the effectiveness of the stock split), representing a 15.4% increase over the quarterly dividend paid in the prior quarter (as adjusted to give effect to the stock split). - On
August 1, 2018 , Meta closed the previously announced acquisition ofCrestmark Bancorp, Inc. andCrestmark Bank . The following table summarizes the preliminary fair value estimates for each major class of assets acquired and liabilities assumed for the Crestmark acquisition:
As of August 1, 2018 | ||
(Dollars in Thousands) | ||
Fair value of consideration paid | ||
Stock issued | 295,773 | |
Total consideration paid | 295,773 | |
Fair value of assets acquired | ||
Cash and cash equivalents | 58,858 | |
Investment and MBS securities | 26,926 | |
Loans and leases held for sale | 17,494 | |
Loan and lease receivables | 1,046,010 | |
Federal Home Loan Bank stock, at cost | 33 | |
Accrued interest receivable | 5,381 | |
Premises, furniture, and equipment | 18,458 | |
Rental equipment | 98,977 | |
Foreclosed real estate and repossessed assets | 1,209 | |
Intangible assets | 34,759 | |
Other assets | 14,086 | |
Total assets | 1,322,192 | |
Fair value of liabilities assumed | ||
Certificate of deposits | 291,713 | |
Wholesale certificate of deposits | 828,953 | |
Short-term debt | 11,643 | |
Long-term debt | 3,609 | |
Note payable | 25,249 | |
Accrued interest payable | 3,581 | |
Accrued expenses and other liabilities | 63,052 | |
Total liabilities assumed | 1,227,799 | |
Fair value of non-controlling interest assumed | ||
Non-controlling Interest | 3,167 | |
Total Non-controlling Interest | 3,167 | |
Fair value of net assets acquired | 91,226 | |
Goodwill resulting from acquisition | 204,548 | |
Financial Summary
Revenue
Total revenue for the fiscal 2018 fourth quarter was
Net Income
The Company recorded net income of
The 2018 fiscal fourth quarter pre-tax results included a
Net Interest Income
Net interest income for the fiscal 2018 fourth quarter was
During the fiscal 2018 fourth quarter, the Company completed a balance sheet restructuring to better position the balance sheet for loan growth that Meta's commercial finance division is expected to produce in the near term. Meta sold approximately
Net Interest Margin
NIM was 4.27% in the fiscal 2018 fourth quarter, an increase of 114 basis points from 3.13% in the fourth quarter of fiscal 2017. Excluding the change in the corporate tax rate resulting from the Tax Cuts and Jobs Act (the "Tax Act"), the reported NIM in the fiscal 2018 fourth quarter would have been 4.42%. The net effect of purchase accounting accretion contributed 12 basis points to the NIM for the fourth quarter of fiscal 2018.
The overall reported tax-equivalent yield (“TEY”) on average-earning asset yields increased by 164 basis points to 5.25% when comparing the fiscal 2018 fourth quarter to the fiscal 2017 fourth quarter, driven primarily by the Company's improved earning asset mix, which was attributable to loans and leases acquired as part of the Crestmark acquisition as well as through organic growth in the Company's loan portfolio. The effect of purchase accounting accretion contributed 12 basis points to the TEY on average-earnings assets for the fourth quarter of fiscal 2018.
The fiscal 2018 fourth quarter TEY on the Company's securities portfolio decreased by 10 basis points to 3.09% compared to the comparable quarter in the prior fiscal year, primarily due to the adoption of the Tax Act, which lowered the TEY on the Company's tax-exempt securities. Had corporate tax rates not changed due to the Tax Act, reported securities portfolio TEY would have increased to 3.40% for the fiscal 2018 fourth quarter.
The Company’s average interest-earning assets for the fiscal 2018 fourth quarter grew by
Overall, the Company's cost of funds for all deposits and borrowings averaged 1.01% during the fiscal 2018 fourth quarter, compared to 0.50% for the fiscal 2017 fourth quarter. This increase was primarily due to a rising interest rate environment affecting overnight borrowing rates, as well as certain wholesale fundings and the acquired interest-bearing deposits from the Crestmark acquisition. The Company's overall cost of deposits was 0.78% in the fiscal fourth quarter of 2018, compared to 0.24% in the same quarter of fiscal 2017. When excluding wholesale deposits, the Company's cost of deposits for the fourth quarter of fiscal 2018 would have been 0.15%.
Non-Interest Income
Fiscal 2018 fourth quarter non-interest income of
The increase in the loss on sale of securities was due to the Company's balance sheet restructuring related to the Crestmark acquisition, as discussed in further detail in the Investments section below.
Card and deposit fee income totaled
The new activity in the line items of rental income and gain on sale of loans and leases were attributable to the Crestmark division. Rental income is related to the operating leases that were acquired through the Crestmark acquisition. Included in rental income for the fourth fiscal quarter of 2018 is
Non-Interest Expense
Non-interest expense increased
Income Tax Expense
The Company recorded an income tax benefit of
Through the Crestmark acquisition, Meta acquired an experienced team and sophisticated processes for evaluating, underwriting, and managing alternative energy tax credit leasing opportunities. During the fiscal 2018 fourth quarter, the Company recognized an investment tax credit, which reduced the Company's income tax expense by
The fiscal 2018 fourth quarter tax benefit also included a
Loans and Leases
Total net loans and leases receivable increased
Excluding the Crestmark division, national lending loans and leases increased
Community banking loans grew
The combined allowance for loan and lease losses and fair value marks was
Provision for loan and lease losses was
Credit Quality
The Company’s NPAs at September 30, 2018 were
Investments
Investment securities and MBS decreased by
Average TEY on the securities portfolio decreased 10 basis points to 3.09% in the fourth quarter of fiscal 2018 from 3.19% in the same quarter of fiscal 2017. Overall TEY of other investment securities decreased by 44 basis points to 3.21% in the fourth quarter of fiscal 2018 from 3.65% in the same period of fiscal 2017, primarily attributable to the effects of the Tax Act and a reduction of TEY due to the Company's reduced overall tax rate. Average yields increased within MBS by 49 basis points to 2.72% in the fourth quarter of fiscal 2018 from 2.23% in the same quarter of fiscal 2017. Average yields on asset-backed securities increased to 3.26% in the fourth quarter of fiscal 2018 from 2.90% in the same quarter of fiscal 2017.
The TEY on the total securities portfolio of 3.09% for the fourth fiscal quarter of 2018 reflects the lowered corporate prorated tax rate on the Company's tax-exempt municipal portfolio. Had corporate tax rates not changed due to the Tax Act, reported total securities portfolio yield would have been 3.40%, and the TEY of investment securities would have been 3.75% at the previous corporate rate. The 3.23% overall TEY of tax-exempt investment securities reflects the lowered corporate prorated tax rate.
When comparing the fourth quarter of fiscal 2018 to the third quarter of fiscal 2018, average TEY on the total securities portfolio decreased by two basis points to 3.09% from 3.11%, of which investment securities TEY decreased 11 basis points from 3.34% to 3.23%, and MBS increased 16 basis points from 2.56% to 2.72%.
As previously noted, during the fiscal 2018 fourth quarter, after the closing of the Crestmark acquisition and after board approval, the Company completed a balance sheet restructuring to better position the balance sheet for the loan growth which Meta's commercial finance division produces and is expected to produce in the near term. Meta sold approximately
During the fiscal 2018 fourth quarter, the Company primarily purchased
Deposits, Other Borrowings and Other Liabilities
Total end-of-period deposits increased
Total average deposits for the 2018 fiscal fourth quarter increased by
The average balance of total deposits and interest-bearing liabilities was
Capital Ratios
The Company and the Bank remain above the federal regulatory minimum capital requirements to remain classified as well-capitalized institutions. Regulatory capital ratios of the Company and the Bank at September 30, 2018 are stated in the table below.
The tables below also 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.
Regulatory Capital Data (1)
Minimum | ||||||||||||
Requirement to Be | ||||||||||||
Minimum | Well Capitalized | |||||||||||
Requirement For | Under Prompt | |||||||||||
Capital Adequacy | Corrective Action | |||||||||||
At September 30, 2018 | Company | MetaBank | Purposes | Provisions | ||||||||
Tier 1 leverage ratio | 8.50 | % | 9.75 | % | 4.00 | % | 5.00 | % | ||||
Common equity Tier 1 capital ratio | 10.56 | % | 12.50 | % | 4.50 | % | 6.50 | % | ||||
Tier 1 capital ratio | 10.97 | % | 12.56 | % | 6.00 | % | 8.00 | % | ||||
Total qualifying capital ratio | 13.18 | % | 12.89 | % | 8.00 | % | 10.00 | % |
(1) Regulatory ratios are estimated.
The following table provides certain 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, 2018 | |||
(Dollars in Thousands) | |||
Total stockholders' equity | $ | 747,726 | |
Adjustments: | |||
LESS: Goodwill, net of associated deferred tax liabilities | 299,456 | ||
LESS: Certain other intangible assets | 64,716 | ||
LESS: Net unrealized gains (losses) on available-for-sale securities | (33,114 | ) | |
LESS: Non-controlling interest | 3,574 | ||
LESS: Unrealized currency gains (losses) | 3 | ||
Common Equity Tier 1 (1) | 413,091 | ||
Long-term debt and other instruments qualifying as Tier 1 | 13,661 | ||
Tier 1 minority interest not included in common equity tier 1 capital | 2,118 | ||
Total Tier 1 capital | 428,870 | ||
Allowance for loan and lease losses | 13,185 | ||
Subordinated Debentures (net of issuance costs) | 73,491 | ||
Total qualifying capital | 515,546 |
(1)Capital ratios were determined using the Basel III capital rules that became effective on
The following table provides a reconciliation of tangible common equity used in calculating tangible book value data.
September 30, 2018 | |||
(Dollars in Thousands) | |||
Total Stockholders' Equity | $ | 747,726 | |
Less: Goodwill | 303,270 | ||
Less: Intangible assets | 70,719 | ||
Tangible common equity | 373,737 | ||
Less: Accumulated Other Comprehensive Income (Loss) ("AOCI") | (33,111 | ) | |
Tangible common equity excluding AOCI (Loss) | 406,848 | ||
Due to the predictable, quarterly cyclicality of non-interest bearing deposits in connection with tax season business activity, management believes that a six-month capital calculation is a useful metric to monitor the Company’s overall capital management process. As such, the Bank’s six-month average Tier 1 leverage ratio, Common equity Tier 1 capital ratio, Tier 1 capital ratio, and Total qualifying capital ratio as of September 30, 2018 were 10.64%, 16.84%, 16.92%, and 17.37%, respectively.
The following table shows notable selected income statement items from the fourth quarter of fiscal 2018:
For the Quarter Ended | September 30, 2018 | ||
Selected Income Statement Effects | (Dollars in Thousands) | ||
Loss on Sale of Securities (pre-tax) | $ | 6,979 | |
Amended historical tax return of Crestmark Bancorp, Inc. (tax benefit) | 4,644 | ||
M&A Expenses (pre-tax) | 3,215 | ||
Operational Synergies (pre-tax) | 3,051 | ||
Forward-Looking Statements
The Company and the Bank 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
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; customer retention; loan and other product demand; important components of the Company's statements of financial condition and operations; growth and expansion; new products and services, such as those offered by the Bank or MPS, a division of the Bank; credit quality and adequacy of reserves; 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: risks relating to the recently-announced management transition, the expected growth opportunities, beneficial synergies and/or operating efficiencies from the Crestmark acquisition may not be fully realized or may take longer to realize than expected; customer losses and business disruption related to the Crestmark acquisition; unanticipated or unknown losses and liabilities may be incurred by the Company following the completion of the Crestmark acquisition; maintaining our executive management team; the strength of
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
Condensed Consolidated Statements of Operations (Unaudited) (Dollars in Thousands, Except Share and per Share Data) |
|||||||||||||||||||
ASSETS | September 30, 2018 |
June 30, 2018 | March 31, 2018 |
December 31, 2017 |
September 30, 2017 |
||||||||||||||
Cash and cash equivalents | $ | 99,977 | $ | 71,276 | $ | 107,563 | $ | 1,300,409 | $ | 1,267,586 | |||||||||
Investment securities available for sale | 1,487,960 | 1,351,538 | 1,418,862 | 1,392,240 | 1,106,977 | ||||||||||||||
Mortgage-backed securities available for sale | 364,065 | 575,999 | 654,890 | 600,112 | 586,454 | ||||||||||||||
Investment securities held to maturity | 165,881 | 216,160 | 226,618 | 235,024 | 449,840 | ||||||||||||||
Mortgage-backed securities held to maturity | 7,850 | 8,218 | 8,393 | 8,468 | 113,689 | ||||||||||||||
Loans and leases held for sale | 15,606 | — | — | — | — | ||||||||||||||
Loans and leases receivable | 2,944,739 | 1,597,294 | 1,517,616 | 1,509,140 | 1,325,371 | ||||||||||||||
Allowance for loan and lease loss | (13,040 | ) | (21,950 | ) | (27,078 | ) | (8,862 | ) | (7,534 | ) | |||||||||
Federal Home Loan Bank Stock, at cost | 23,400 | 7,446 | 17,846 | 57,443 | 61,123 | ||||||||||||||
Accrued interest receivable | 22,016 | 17,825 | 17,604 | 21,089 | 19,380 | ||||||||||||||
Premises, furniture, and equipment, net | 40,458 | 20,374 | 20,278 | 20,571 | 19,320 | ||||||||||||||
Rental equipment | 107,290 | — | — | — | — | ||||||||||||||
Bank-owned life insurance | 87,293 | 86,655 | 86,021 | 85,371 | 84,702 | ||||||||||||||
Foreclosed real estate and repossessed assets | 31,638 | 29,922 | 30,050 | 128 | 292 | ||||||||||||||
Goodwill | 303,270 | 98,723 | 98,723 | 98,723 | 98,723 | ||||||||||||||
Intangible assets | 70,719 | 46,098 | 47,724 | 50,521 | 52,178 | ||||||||||||||
Prepaid assets | 27,906 | 23,211 | 26,342 | 29,758 | 28,392 | ||||||||||||||
Deferred taxes | 18,737 | 23,025 | 20,939 | 5,379 | 9,101 | ||||||||||||||
Other assets | 29,302 | 17,345 | 29,302 | 12,449 | 12,738 | ||||||||||||||
Total assets | $ | 5,835,067 | $ | 4,169,159 | $ | 4,301,693 | $ | 5,417,963 | $ | 5,228,332 | |||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||||||||||
LIABILITIES | |||||||||||||||||||
Non-interest-bearing checking | $ | 2,405,274 | $ | 2,637,987 | $ | 2,850,886 | $ | 2,779,645 | $ | 2,454,057 | |||||||||
Interest-bearing checking | 111,587 | 103,065 | 123,398 | 84,390 | 67,294 | ||||||||||||||
Savings deposits | 54,765 | 57,356 | 65,345 | 53,535 | 53,505 | ||||||||||||||
Money market deposits | 51,995 | 45,115 | 48,070 | 47,451 | 48,758 | ||||||||||||||
Time certificates of deposit | 276,180 | 57,151 | 71,712 | 128,220 | 123,637 | ||||||||||||||
Wholesale deposits | 1,531,186 | 620,959 | 181,087 | 420,404 | 476,173 | ||||||||||||||
Total deposits | 4,430,987 | 3,521,633 | 3,340,497 | 3,513,645 | 3,223,424 | ||||||||||||||
Short-term debt | 425,759 | 27,290 | 315,777 | 1,313,401 | 1,404,534 | ||||||||||||||
Long-term debt | 88,963 | 85,580 | 85,572 | 85,552 | 85,533 | ||||||||||||||
Note payable | 20,361 | — | — | — | — | ||||||||||||||
Accrued interest payable | 7,794 | 3,705 | 1,315 | 4,065 | 2,280 | ||||||||||||||
Accrued expenses and other liabilities | 113,477 | 87,038 | 114,829 | 63,595 | 78,065 | ||||||||||||||
Total liabilities | 5,087,341 | 3,725,246 | 3,857,990 | 4,980,258 | 4,793,836 | ||||||||||||||
STOCKHOLDERS’ EQUITY | |||||||||||||||||||
Preferred stock, 3,000,000 shares authorized, no shares issued or outstanding at September 30, 2018, June 30, 2018, March 31, 2018, December 31, 2017 and September 30, 2017. | — | — | — | — | — | ||||||||||||||
Common stock, $.01 par value; 90,000,000, 90,000,000, 30,000,000, 15,000,000, and 15,000,000 shares authorized, 39,241,629, 29,164,578, 29,161,608, 29,056,194, and 28,879,273 shares issued and 39,167,280, 29,101,605, 29,098,773, 28,994,538 and 28,867,785 shares outstanding at September 30, 2018, June 30, 2018, March 31, 2018, December 31, 2017, and September 30, 2017. (1) | 131 | 97 | 97 | 96 | 96 | ||||||||||||||
Common stock, Nonvoting, $.01 par value; 3,000,000 shares authorized, no shares issued or outstanding at September 30, 2018, June 30, 2018, March 31, 2018, December 31, 2017, and September 30, 2017. | — | — | — | — | — | ||||||||||||||
Additional paid-in capital | 566,073 | 267,804 | 265,685 | 262,872 | 258,336 | ||||||||||||||
Retained earnings | 213,048 | 206,284 | 200,753 | 170,578 | 167,164 | ||||||||||||||
Accumulated other comprehensive (loss) income | (33,111 | ) | (28,601 | ) | (21,166 | ) | 5,782 | 9,166 | |||||||||||
Treasury stock, at cost, 74,349, 62,973, 62,835, 61,656, and 11,508 common shares at September 30, 2018, June 30, 2018, March 31, 2018, December 31, 2017, and September 30, 2017. (1) | (1,989 | ) | (1,671 | ) | (1,666 | ) | (1,623 | ) | (266 | ) | |||||||||
Total equity attributable to parent | 744,152 | 443,913 | 443,703 | 437,705 | 434,496 | ||||||||||||||
Non-controlling interest | 3,574 | — | — | — | — | ||||||||||||||
Total stockholders' equity | 747,726 | 443,913 | 443,703 | 437,705 | 434,496 | ||||||||||||||
Total liabilities and stockholders’ equity | $ | 5,835,067 | $ | 4,169,159 | $ | 4,301,693 | $ | 5,417,963 | $ | 5,228,332 |
(1) Shares issued and outstanding have been adjusted for all periods presented to reflect the 3-for-1 forward stock split effected on
Condensed Consolidated Statements of Operations (Unaudited) | |||||||||||||||||||
Three Months Ended | Year Ended | ||||||||||||||||||
(Dollars in Thousands, Except Share and Per Share Data) | 9/30/2018 | 6/30/2018 | 9/30/2017 | 9/30/2018 | 9/30/2017 | ||||||||||||||
Interest and dividend income: | |||||||||||||||||||
Loans and leases receivable, including fees | $ | 45,131 | $ | 19,056 | $ | 14,577 | $ | 98,475 | $ | 52,117 | |||||||||
Mortgage-backed securities | 3,724 | 3,950 | 4,226 | 15,479 | 16,571 | ||||||||||||||
Other investments | 11,346 | 11,098 | 10,146 | 44,580 | 39,415 | ||||||||||||||
60,201 | 34,104 | 28,949 | 158,534 | 108,103 | |||||||||||||||
Interest expense: | |||||||||||||||||||
Deposits | 8,057 | 2,264 | 1,890 | 15,163 | 6,051 | ||||||||||||||
FHLB advances and other borrowings | 3,607 | 3,429 | 2,571 | 12,822 | 8,822 | ||||||||||||||
11,664 | 5,693 | 4,461 | 27,985 | 14,873 | |||||||||||||||
Net interest income | 48,537 | 28,411 | 24,488 | 130,549 | 93,230 | ||||||||||||||
Provision (recovery) for loan and lease losses | 4,706 | 5,315 | (144 | ) | 29,432 | 10,589 | |||||||||||||
Net interest income after provision for loan and lease losses | 43,831 | 23,096 | 24,632 | 101,117 | 82,641 | ||||||||||||||
Non-interest income: | |||||||||||||||||||
Refund transfer product fees | 526 | 7,358 | 508 | 41,879 | 38,956 | ||||||||||||||
Tax advance product fees | (36 | ) | (46 | ) | 453 | 35,703 | 31,913 | ||||||||||||
Card fees | 19,536 | 22,807 | 26,694 | 94,446 | 94,707 | ||||||||||||||
Rental income | 7,333 | — | — | 7,333 | — | ||||||||||||||
Loan and lease fees | 1,025 | 1,111 | 848 | 4,470 | 3,882 | ||||||||||||||
Bank-owned life insurance | 638 | 633 | 668 | 2,590 | 2,216 | ||||||||||||||
Deposit fees | 1,487 | 1,134 | 228 | 4,451 | 736 | ||||||||||||||
(Loss) gain on sale of securities | (6,979 | ) | (22 | ) | 838 | (8,177 | ) | (493 | ) | ||||||||||
Gain on sale of loans/leases | 355 | — | — | 355 | — | ||||||||||||||
Loss on foreclosed real estate | — | — | (13 | ) | (19 | ) | (6 | ) | |||||||||||
Other income (loss) | 728 | 250 | (391 | ) | 1,494 | 261 | |||||||||||||
Total non-interest income | 24,613 | 33,225 | 29,833 | 184,525 | 172,172 | ||||||||||||||
Non-interest expense: | |||||||||||||||||||
Compensation and benefits | 30,093 | 24,439 | 21,919 | 109,044 | 88,728 | ||||||||||||||
Refund transfer product expense | 85 | 1,694 | 292 | 11,750 | 11,885 | ||||||||||||||
Tax advance product expense | 81 | (19 | ) | (257 | ) | 1,817 | 3,241 | ||||||||||||
Card processing | 5,485 | 7,068 | 5,753 | 26,283 | 24,130 | ||||||||||||||
Occupancy and equipment | 5,653 | 4,720 | 4,263 | 19,740 | 16,465 | ||||||||||||||
Operating lease equipment depreciation expense | 5,386 | — | — | 5,386 | — | ||||||||||||||
Legal and consulting | 6,628 | 2,781 | 2,781 | 15,064 | 8,384 | ||||||||||||||
Marketing | 1,037 | 416 | 656 | 2,674 | 2,117 | ||||||||||||||
Data processing | 268 | 301 | 350 | 1,226 | 1,449 | ||||||||||||||
Intangible amortization expense | 3,564 | 1,664 | 1,868 | 9,641 | 12,362 | ||||||||||||||
Intangible impairment | 18 | — | 10,248 | 18 | 10,248 | ||||||||||||||
Other expense | 8,342 | 5,988 | 5,873 | 25,589 | 20,654 | ||||||||||||||
Total non-interest expense | 66,640 | 49,053 | 53,746 | 228,232 | 199,663 | ||||||||||||||
Income before income tax expense | 1,804 | 7,268 | 719 | 57,410 | 55,150 | ||||||||||||||
Income tax expense (benefit) | (7,591 | ) | 476 | (1,025 | ) | 5,117 | 10,233 | ||||||||||||
Net income before non-controlling interest | 9,395 | 6,792 | 1,744 | 52,293 | 44,917 | ||||||||||||||
Net income attributable to non-controlling interest | 673 | — | — | 673 | — | ||||||||||||||
Net income attributable to parent | $ | 8,722 | $ | 6,792 | $ | 1,744 | $ | 51,620 | $ | 44,917 | |||||||||
Earnings per common share | |||||||||||||||||||
Basic | $ | 0.24 | $ | 0.23 | $ | 0.06 | $ | 1.68 | $ | 1.62 | |||||||||
Diluted | $ | 0.24 | $ | 0.23 | $ | 0.06 | $ | 1.67 | $ | 1.61 | |||||||||
Shares used in computing earnings per share | |||||||||||||||||||
Basic | 35,711,400 | 29,099,472 | 28,082,457 | 30,737,499 | 27,741,276 | ||||||||||||||
Diluted | 35,823,162 | 29,218,980 | 28,243,353 | 30,853,050 | 27,908,232 | ||||||||||||||
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 rates. Only the yield/rate has tax-equivalent adjustments. Non-Accruing loans have been included in the table as loans carrying a zero yield.
Three Months Ended September 30, | 2018(1) | 2017(2) | |||||||||||||||||||
(Dollars in Thousands) |
Average Outstanding Balance |
Interest Earned / Paid |
Yield / Rate |
Average Outstanding Balance |
Interest Earned / Paid |
Yield / Rate |
|||||||||||||||
Interest-earning assets: | |||||||||||||||||||||
Cash and fed funds sold | $ | 60,946 | $ | 532 | 3.47 | % | $ | 73,189 | $ | 171 | 0.93 | % | |||||||||
Mortgage-backed securities | 543,042 | 3,724 | 2.72 | % | 751,364 | 4,226 | 2.23 | % | |||||||||||||
Tax exempt investment securities | 1,314,380 | 8,069 | 3.23 | % | 1,346,915 | 8,388 | 3.80 | % | |||||||||||||
Asset-backed securities | 273,625 | 2,251 | 3.26 | % | 109,231 | 799 | 2.90 | % | |||||||||||||
Other investment securities | 74,408 | 494 | 2.63 | % | 118,241 | 788 | 2.64 | % | |||||||||||||
Total investments | 2,205,455 | 14,538 | 3.09 | % | 2,325,751 | 14,201 | 3.19 | % | |||||||||||||
Total commercial finance loans and leases | 1,091,459 | 27,035 | 9.83 | % | 259,396 | 2,979 | 4.56 | % | |||||||||||||
Total consumer finance loans | 302,633 | 5,922 | 7.76 | % | 125,486 | 2,077 | 6.57 | % | |||||||||||||
Total tax services loans | 13,210 | (14 | ) | (0.41 | )% | 5,198 | — | — | % | ||||||||||||
Total national lending loans and leases (3) | 1,407,302 | 32,943 | 9.29 | % | 390,080 | 5,056 | 5.14 | % | |||||||||||||
Total community lending loans (4) | 1,075,586 | 12,188 | 4.50 | % | 885,993 | 9,521 | 4.26 | % | |||||||||||||
Total loans and leases | 2,482,888 | 45,131 | 7.21 | % | 1,276,073 | 14,577 | 4.53 | % | |||||||||||||
Total interest-earning assets | 4,749,289 | $ | 60,201 | 5.25 | % | 3,675,013 | $ | 28,949 | 3.61 | % | |||||||||||
Non-interest-earning assets | 631,289 | 359,438 | |||||||||||||||||||
Total assets | $ | 5,380,578 | $ | 4,034,451 | |||||||||||||||||
Interest-bearing liabilities: | |||||||||||||||||||||
Interest-bearing checking | 90,627 | 56 | 0.24 | % | 45,741 | 47 | 0.41 | % | |||||||||||||
Savings | 55,163 | 10 | 0.07 | % | 53,717 | 8 | 0.06 | % | |||||||||||||
Money markets | 49,822 | 41 | 0.33 | % | 48,823 | 26 | 0.21 | % | |||||||||||||
Time deposits | 214,946 | 926 | 1.71 | % | 103,992 | 260 | 0.99 | % | |||||||||||||
Wholesale deposits | 1,328,128 | 7,024 | 2.10 | % | 549,539 | 1,549 | 1.12 | % | |||||||||||||
Total interest-bearing deposits | 1,738,686 | 8,057 | 1.84 | % | 801,812 | 1,890 | 0.94 | % | |||||||||||||
FHLB advances | 362,076 | 2,051 | 2.25 | % | 179,750 | 619 | 1.37 | % | |||||||||||||
Overnight fed funds purchased | — | — | — | % | 174,380 | 656 | 1.49 | % | |||||||||||||
Subordinated debentures | 73,466 | 1,158 | 6.25 | % | 73,324 | 1,113 | 6.02 | % | |||||||||||||
Other borrowings | 31,593 | 398 | 5.00 | % | 17,568 | 183 | 4.13 | % | |||||||||||||
Total borrowings | 467,135 | 3,607 | 3.06 | % | 445,022 | 2,571 | 2.29 | % | |||||||||||||
Total interest-bearing liabilities | 2,205,821 | 11,664 | 2.10 | % | 1,246,834 | 4,461 | 1.42 | % | |||||||||||||
Non-interest-bearing deposits | 2,375,499 | $ | — | — | % | 2,286,630 | $ | — | — | % | |||||||||||
Total deposits and interest-bearing liabilities | 4,581,320 | $ | 11,664 | 1.01 | % | 3,533,464 | $ | 4,461 | 0.50 | % | |||||||||||
Other non-interest-bearing liabilities | 146,148 | 64,065 | |||||||||||||||||||
Total liabilities | 4,727,468 | 3,597,529 | |||||||||||||||||||
Shareholders' equity | 653,110 | 436,922 | |||||||||||||||||||
Total liabilities and shareholders' equity | $ | 5,380,578 | $ | 4,034,451 | |||||||||||||||||
Net interest income and net interest rate spread including non-interest-bearing deposits | $ | 48,537 | 4.24 | % | $ | 24,488 | 3.11 | % | |||||||||||||
Net interest margin | 4.05 | % | 2.64 | % | |||||||||||||||||
Tax equivalent effect | 0.22 | % | 0.49 | % | |||||||||||||||||
Net interest margin, tax-equivalent (5) | 4.27 | % | 3.13 | % |
(1) Tax rate used to arrive at the TEY for the three months ended
(2) Tax rate used to arrive at the TEY for the three months ended
(3) Previously stated Specialty Finance Loans have been renamed as National Lending Loans. National Lending Loans are comprised of loan portfolios that are not generated by the
(4) Previously stated
(5) 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. We believe that it is a standard practice in the banking industry to present net interest margin expressed on a fully taxable equivalent basis, and accordingly believe the presentation of this non-GAAP financial measure may be useful for peer comparison purposes.
The following table presents, for the periods indicated, loan and lease receivables balances of the Company's lending portfolio.
September 30, 2018 | June 30, 2018 | March 31, 2018 | December 31, 2017 | September 30, 2017 | |||||||||||||||
National Lending | |||||||||||||||||||
Asset Based Lending | $ | 477,917 | $ | — | $ | — | $ | — | $ | — | |||||||||
Factored Receivables | 284,221 | — | — | — | — | ||||||||||||||
Lease Receivables | 265,315 | — | — | — | — | ||||||||||||||
CML Insurance Premium Finance | 337,877 | 303,603 | 240,640 | 235,671 | 250,459 | ||||||||||||||
SBA/USDA | 59,374 | — | — | — | — | ||||||||||||||
Other Commercial Finance | 85,145 | 11,418 | 8,041 | 6,306 | 4,849 | ||||||||||||||
Commercial Finance (1) | 1,509,849 | 315,021 | 248,681 | 241,977 | 255,308 | ||||||||||||||
Student Loans | 168,663 | 176,253 | 184,184 | 190,707 | 123,742 | ||||||||||||||
Credit Products | 80,605 | 26,583 | — | — | — | ||||||||||||||
Other Specialty Finance | 65,000 | — | — | — | — | ||||||||||||||
Other Consumer Finance | 21,093 | 18,091 | 17,758 | 18,430 | 16,487 | ||||||||||||||
Consumer Finance | 335,361 | 220,927 | 201,942 | 209,137 | 140,229 | ||||||||||||||
Taxpayer Advances | 1,073 | 14,281 | 57,008 | 43,970 | — | ||||||||||||||
ERO Advances | — | — | 1,786 | 23,454 | 192 | ||||||||||||||
Tax Services | 1,073 | 14,281 | 58,794 | 67,424 | 192 | ||||||||||||||
Total National Lending Loans and Leases | 1,846,283 | 550,229 | 509,417 | 518,538 | 395,729 | ||||||||||||||
Community Banking | |||||||||||||||||||
Commercial and Multifamily Real Estate | 748,579 | 716,495 | 685,457 | 654,029 | 585,510 | ||||||||||||||
1-4 Family Real Estate | 223,482 | 214,754 | 205,994 | 203,967 | 196,706 | ||||||||||||||
Agricultural Loans | 60,498 | 60,096 | 58,773 | 85,999 | 95,394 | ||||||||||||||
Commercial Operating Loans | 42,311 | 34,651 | 37,634 | 26,756 | 30,718 | ||||||||||||||
Consumer Loans | 23,836 | 22,950 | 22,421 | 21,874 | 22,775 | ||||||||||||||
Total Community Banking Loans | 1,098,706 | 1,048,946 | 1,010,279 | 992,625 | 931,103 | ||||||||||||||
Total Gross Loan and Lease Receivables (2) | 2,944,989 | 1,599,175 | 1,519,696 | 1,511,163 | 1,326,832 | ||||||||||||||
Allowance for Loan and Lease Losses | (13,040 | ) | (21,950 | ) | (27,078 | ) | (8,862 | ) | (7,534 | ) | |||||||||
Net Deferred Loan Origination Fees | (250 | ) | (1,881 | ) | (2,080 | ) | (2,023 | ) | (1,461 | ) | |||||||||
Total Loan and Lease Receivables, net of allowance | $ | 2,931,699 | $ | 1,575,344 | $ | 1,490,538 | $ | 1,500,278 | $ | 1,317,837 |
(1) The
(2) Held for sale loan balances totaled
The following table presents, for the periods indicated, allowance for loan and lease loss activity.
(Dollars in thousands) | |||||||||||||||||||
(Unaudited) | Three Months Ended | Year Ended | |||||||||||||||||
Allowance for loan and lease loss activity | September 30, 2018 |
June 30, 2018 | September 30, 2017 |
September 30, 2018 |
September 30, 2017 |
||||||||||||||
Beginning balance | $ | 21,950 | $ | 27,078 | $ | 14,968 | $ | 7,534 | $ | 5,635 | |||||||||
Provision - tax services loans | 1,009 | 1,189 | (954 | ) | 21,344 | 7,612 | |||||||||||||
Provision - all other loans and leases | 3,697 | 4,126 | 810 | 8,089 | 2,976 | ||||||||||||||
Charge-offs - tax services loans | (11,295 | ) | (10,507 | ) | (7,083 | ) | (21,802 | ) | (7,842 | ) | |||||||||
Charge-offs - all other loans and leases | (3,420 | ) | (243 | ) | (412 | ) | (4,162 | ) | (1,155 | ) | |||||||||
Recoveries - tax services loans | 31 | 1 | 200 | 454 | 229 | ||||||||||||||
Recoveries - all other loans and leases | 1,068 | 306 | 5 | 1,583 | 79 | ||||||||||||||
Ending balance | $ | 13,040 | $ | 21,950 | $ | 7,534 | $ | 13,040 | $ | 7,534 | |||||||||
Selected Financial Information | ||||||||||||||||||||
At Period Ended: | September 30, 2018 |
June 30, 2018 |
March 31, 2018 |
December 31, 2017 |
September 30, 2017 |
|||||||||||||||
Equity to total assets | 12.81 | % | 10.65 | % | 10.31 | % | 8.08 | % | 8.31 | % | ||||||||||
Book value per common share outstanding | $ | 19.09 | $ | 15.25 | $ | 15.25 | $ | 15.10 | $ | 15.05 | ||||||||||
Tangible book value per common share outstanding | $ | 9.54 | $ | 10.28 | $ | 10.22 | $ | 9.95 | $ | 9.82 | ||||||||||
Tangible book value per common share outstanding excluding AOCI | $ | 10.39 | $ | 11.26 | $ | 10.94 | $ | 9.75 | $ | 9.51 | ||||||||||
Common shares outstanding | 39,167,280 | 29,101,605 | 29,098,773 | 28,994,538 | 28,867,785 | |||||||||||||||
Non-performing assets to total assets | 0.72 | % | 0.86 | % | 0.84 | % | 0.61 | % | 0.72 | % | ||||||||||
Full-time equivalent employees | 1,219 | 932 | 916 | 878 | 827 | |||||||||||||||
Three Months Ended | Year Ended | |||||||||||||||||||
September 30, 2018 |
June 30, 2018 |
September 30, 2017 |
September 30, 2018 |
September 30, 2017 |
||||||||||||||||
Net interest margin | 4.05 | % | 2.94 | % | 2.64 | % | 3.14 | % | 2.58 | % | ||||||||||
Net interest margin, tax-equivalent | 4.27 | % | 3.23 | % | 3.13 | % | 3.41 | % | 3.05 | % | ||||||||||
Return on average assets | 0.65 | % | 0.64 | % | 0.17 | % | 1.12 | % | 1.13 | % | ||||||||||
Return on average equity | 5.34 | % | 6.11 | % | 1.60 | % | 10.44 | % | 11.20 | % | ||||||||||
Select Quarterly Expenses | |||||||||||||||||||||||||||
(Dollars in Thousands) | Actual | Anticipated | |||||||||||||||||||||||||
For the Three Months Ended | Sep 30, 2018 |
Dec 31, 2018 |
Mar 31, 2019 |
Jun 30, 2019 |
Sep 30, 2019 |
Dec 31, 2019 |
Mar 31, 2020 |
Jun 30, 2020 |
Sep 30, 2020 |
||||||||||||||||||
Amortization of Intangibles (1) | $ | 3,564 | $ | 4,383 | $ | 5,602 | $ | 4,383 | $ | 3,366 | $ | 2,683 | $ | 3,409 | $ | 2,640 | $ | 2,286 | |||||||||
Executive Officer Stock Compensation (2) | $ | 1,338 | $ | 941 | $ | 700 | $ | 708 | $ | 715 | $ | 593 | $ | 609 | $ | 609 | $ | 615 | |||||||||
(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.
(2) These amounts are based upon the employment agreements signed in the first and second quarters of fiscal 2017 by the Company’s two highest paid executives. This table makes no assumption for expenses related to any additional agreements entered into, or to be entered into, after such quarters.
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About Meta Financial Group®
Investor Relations Contact:
Director of Investor Relations
605.362.2423
bkelley@metabank.com
Media Contact:
Sard Verbinnen & Co
312.895.4700
MetaFinancial-SVC@sardverb.com
Source: MetaBank