Document
false0000907471 0000907471 2019-10-24 2019-10-24


 
 
 
 
 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 OR 15(d) of the
Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): October 24, 2019

META FINANCIAL GROUP, INC.
(Exact name of registrant as specified in its charter)

Delaware
0-22140
42-1406262
(State or other jurisdiction of incorporation)
(Commission File Number)
(IRS Employer Identification No.)

5501 South Broadband Lane, Sioux Falls, South Dakota 57108
(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (605) 782-1767

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 
 
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d- 2(b))
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4 (c))

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, $.01 par value
CASH
The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 
 
 
 
 






Item 2.02    Results of Operations and Financial Condition.

On October 24, 2019, the Registrant issued a press release announcing its results of operations and financial condition as of and for the three months and year ended September 30, 2019. A copy of the press release is attached as Exhibit 99.1 to this report and is incorporated into this Item 2.02 by reference.

The information in this Item 2.02, including Exhibit 99.1, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities thereof, nor shall it be deemed to be incorporated by reference in any filing under the Exchange Act or under the Securities Act of 1933, as amended (the "Securities Act"), except to the extent specifically provided in any such filing.

Item 7.01    Regulation FD Disclosure.

Information is being furnished herein in Exhibit 99.2 with respect to the Investor Update slide presentation prepared for use with the press release. While most of the selected financial information furnished herein is derived from the Company’s consolidated financial statements and related notes prepared in accordance with generally accepted accounting principles ("GAAP") and management’s discussion and analysis of financial condition and results of operations included, or to be included, in the Company’s reports on Forms 10-K and 10-Q, this information includes selected financial and operational information through the fourth quarter of fiscal year 2019 and does not represent a complete set of financial statement and related notes prepared in conformity with GAAP. The Company’s annual financial statements are subject to independent audit. The Investor Update slide presentation is dated October 24, 2019 and the Company does not undertake to update the materials after that date.

The information in this Item 7.01, including Exhibit 99.2, shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities thereof, nor shall it be deemed to be incorporated by reference in any filing under the Exchange Act or under the Securities Act, except to the extent specifically provided in any such filing.

Item 9.01    Financial Statements and Exhibits.

(d) Exhibits
Exhibit Number
 
Description of Exhibit
 
 
 
 
Press Release of Meta Financial Group, Inc., dated October 24, 2019 regarding the results of operations and financial condition.
 
 
 
 
Investor Update slide presentation for the Fourth Quarter of Fiscal Year 2019, dated October 24, 2019, prepared for use with the Press Release.









SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 
 
META FINANCIAL GROUP, INC.
 
 
 
Date: October 24, 2019
By:
/s/ Glen W. Herrick
 
 
Glen W. Herrick
 
 
Executive Vice President and Chief Financial Officer
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


Exhibit
Exhibit 99.1
http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=13163623&doc=31

META FINANCIAL GROUP, INC.® ANNOUNCES RECORD EARNINGS FOR 2019 FISCAL YEAR
- 2019 Fiscal Fourth Quarter Net Income of $20.2 million, or $0.53 Per Diluted Share -
- Fiscal 2019 Net Income of $97.0 million, or $2.49 Per Diluted Share -
- Fiscal 2019 Earnings Per Share up 49% Versus Fiscal 2018 -

Sioux Falls, S.D., October 24, 2019 (GLOBE NEWSWIRE) - Meta Financial Group, Inc.® (Nasdaq: CASH) (“Meta” or the “Company”) reported net income of $20.2 million, or $0.53 per diluted share, for the three months ended September 30, 2019, compared to net income of $8.7 million, or $0.24 per diluted share, for the three months ended September 30, 2018. The Company reported record net income of $97.0 million, or $2.49 per diluted share, for the fiscal year ended September 30, 2019, compared to net income of $51.6 million, or $1.67 per diluted share, for the fiscal year ended September 30, 2018.
“Earnings for the full fiscal year nearly doubled year-over-year, and more than doubled in the fiscal fourth quarter compared to the same period last year. This is reflective of the earnings power of the Company following our merger with Crestmark,” said President and CEO Brad Hanson. “Looking ahead, we remain focused on delivering against the key initiatives we have outlined with the goal of driving long-term value to shareholders. Finally, we continued to return excess capital to shareholders via quarterly dividends and ongoing share repurchases and plan to maintain flexibility as we continue to optimize our capital structure.”
Highlights for the 2019 Fiscal Fourth Quarter and Year Ended September 30, 2019
Total gross loans and leases at September 30, 2019 increased 24% to $3.65 billion compared to September 30, 2018, and increased by $25.5 million, or 1%, when compared to June 30, 2019.
Average deposits from the payments division increased $271.1 million, or 11%, to $2.63 billion for the 2019 fiscal fourth quarter when compared to the same quarter of fiscal 2018.
Total revenue for the fiscal 2019 fourth quarter was $101.6 million, an increase of 39% from the same period of the prior year. Total revenue for the fiscal year ended September 30, 2019 was $486.8 million, an increase of 54% from the fiscal year ended September 30, 2018.
Net interest income was $65.6 million for the 2019 fiscal fourth quarter, an increase of $17.1 million, or 35%, compared to $48.5 million for the fourth quarter of fiscal 2018. Total fiscal year 2019 net interest income was $264.2 million, representing a $133.7 million increase over the prior fiscal year.
Net interest margin ("NIM") was 4.95% for the fiscal fourth quarter of 2019, an increase from 4.05% over the same period of the prior year, while the tax-equivalent net interest margin ("NIM, TE") increased to 5.00% from 4.27% over that same period. NIM for the 2019 fiscal year was 4.91% compared to 3.14% during fiscal year 2018 while NIM, TE increased to 5.02% for fiscal year 2019 from 3.41% for fiscal year 2018.
The Company recognized $3.5 million pre-tax, or $0.07 per share on an after-tax basis, in compensation and benefits expense charges during the fiscal 2019 fourth quarter related to organizational changes, including severance, to further support its key strategic initiatives and drive enhanced operating leverage.
Repurchased $3.5 million, or 106,038 shares at an average price of $33.01 per share during the fiscal 2019 fourth quarter. For the 2019 fiscal year, the Company repurchased an aggregate of $46.5 million, or 1,680,772 shares at an average price of $27.67 per share. As of September 30, 2019, 319,228 shares remained available for repurchase under the common stock share repurchase program that was announced during the fiscal 2019 second quarter.

1



Net Interest Income
Net interest income for the fiscal 2019 fourth quarter was $65.6 million, an increase of 35% from the same quarter in 2018. The increase was driven primarily by growth in loans and leases, largely attributable to the Company's commercial, consumer and warehouse finance portfolios.
During the fourth quarter of fiscal 2019, loan and lease interest income grew by $25.5 million, when compared to the same quarter in fiscal 2018, offset in part by an increase in interest expense of $3.5 million. The quarterly average outstanding balance of loans and leases as a percentage of interest-earning assets for the quarter ended September 30, 2019 increased to 71%, from 52% for the quarter ended September 30, 2018, while the quarterly average balance of total investments as a percentage of interest-earning assets decreased to 28% from 46% over that same period. The Company’s average interest-earning assets for the fiscal 2019 fourth quarter grew by $515.9 million, or 11%, to $5.26 billion from the same quarter of the prior year, primarily as a result of growth in loans and leases in the Company's commercial finance portfolio.
NIM was 4.95% in the fiscal 2019 fourth quarter, an increase of 90 basis points from 4.05% in the fourth quarter of fiscal 2018. The net effect of purchase accounting accretion contributed 14 basis points to NIM for the fourth quarter of fiscal 2019 and 12 basis points to NIM for the same period of the prior year.
The overall reported tax-equivalent yield (“TEY”) on average-earning asset yields increased by 90 basis points to 6.15% when comparing the fiscal 2019 fourth quarter to the fiscal 2018 fourth quarter, driven primarily by the Company's improved earning asset mix, which reflects higher balances for the national lending portfolio. The fiscal 2019 fourth quarter TEY on the securities portfolio was 2.83% compared to 3.09% for the same period of the prior fiscal year.
The Company's cost of funds for all deposits and borrowings averaged 1.17% during the fiscal 2019 fourth quarter, compared to 1.01% for the fiscal 2018 fourth quarter. This increase was primarily due to an increase in the cost of wholesale funding, including brokered deposits. The Company's overall cost of deposits was 0.95% in the fiscal fourth quarter of 2019, compared to 0.78% in the same quarter of fiscal 2018.
Noninterest Income
Fiscal 2019 fourth quarter noninterest income was $36.0 million, an increase of 46% over the same quarter of fiscal 2018, which was due in large part to increases in rental income and gain on sale of loans and leases, primarily as a result of the Crestmark merger. Also contributing to the increase were growth in deposit fees and an improvement in gain (loss) on sale of securities. Partially offsetting the increase were decreases in card fee income and other income over that same period of the prior fiscal year. The card fee income decrease was primarily related to the transition of certain fees to deposit fees.
Noninterest Expense
Noninterest expense increased to $76.1 million, or 14%, for the fiscal 2019 fourth quarter, compared to the same quarter in fiscal 2018, primarily due to increases in compensation and benefits, operating lease depreciation expense, and occupancy and equipment expense. These increases were primarily a result of the Crestmark merger. The increase in noninterest expense was partially offset by a decrease in legal and consulting expenses when comparing the fiscal 2019 fourth quarter to the same period of the prior year. The Company recognized $3.5 million pre-tax in compensation and benefits expense related to organizational changes, including severance, during the fiscal fourth quarter of 2019.
Income Tax Expense
The Company recorded an income tax benefit of $0.1 million for the fiscal 2019 fourth quarter, compared to an income tax benefit of $7.6 million for the fiscal 2018 fourth quarter. The fiscal 2018 fourth quarter results included a $4.6 million income tax benefit recognized by the Company as a result of amending a historical tax return of Crestmark, Bancorp, Inc. Also contributing to the reduced income tax benefit was an increase in net income before tax during the fourth quarter of fiscal 2019 compared to the same period of the prior year. For the 2019 fiscal year, our effective tax rate was (3.4)%, compared to 9.0% for the 2018 fiscal year.

2



The Company originated $19.7 million in solar leases during the fiscal 2019 fourth quarter, compared to $15.0 million in solar leases originated during the fiscal 2018 fourth quarter, and originated $104.4 million in solar leases for 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
(Dollars in thousands)
September 30, 2019
 
June 30, 2019
 
March 31, 2019
 
December 31, 2018
 
September 30, 2018
 
 
 
 
 
 
 
 
 
 
Total investments
$
1,407,257

 
$
1,502,640

 
$
1,649,754

 
$
1,855,791

 
$
2,019,968

 
 
 
 
 
 
 
 
 
 
Loans held for sale
 
 
 
 
 
 
 
 
 
Consumer credit products
122,299

 
45,582

 
42,342

 
24,233

 

SBA/USDA(1)
26,478

 
17,257

 
17,403

 
9,327

 
15,606

Total loans held for sale
148,777

 
62,839

 
59,745

 
33,560

 
15,606

 
 
 
 
 
 
 
 
 
 
National Lending
 
 
 
 
 
 
 
 
 
Asset based lending
688,520

 
615,309

 
572,210

 
554,072

 
477,917

Factoring
296,507

 
320,344

 
287,955

 
284,912

 
284,221

Lease financing
381,602

 
341,957

 
321,414

 
290,889

 
265,315

Insurance premium finance
361,105

 
358,772

 
307,875

 
330,712

 
337,877

SBA/USDA
88,831

 
99,791

 
77,481

 
67,893

 
59,374

Other commercial finance
99,665

 
99,677

 
98,956

 
89,402

 
85,145

Commercial Finance(2)
1,916,230

 
1,835,850

 
1,665,891

 
1,617,880

 
1,509,849

Consumer credit products
106,794

 
155,539

 
139,617

 
96,144

 
80,605

Other consumer finance
161,404

 
164,727

 
170,824

 
182,510

 
189,756

Consumer Finance
268,198

 
320,266

 
310,441

 
278,654

 
270,361

Tax Services
2,240

 
24,410

 
84,824

 
76,575

 
1,073

Warehouse Finance
262,924

 
250,003

 
186,697

 
176,134

 
65,000

Total National Lending loans and leases
2,449,592

 
2,430,529

 
2,247,853

 
2,149,243

 
1,846,283

Community Banking
 
 
 
 
 
 
 
 
 
Commercial real estate and operating
883,932

 
877,412

 
869,917

 
863,753

 
790,890

Consumer one-to-four family real estate and other
259,425

 
256,853

 
257,079

 
256,341

 
247,318

Agricultural real estate and operating
58,464

 
61,169

 
60,167

 
58,971

 
60,498

Total Community Banking loans
1,201,821

 
1,195,434

 
1,187,163

 
1,179,065

 
1,098,706

Total gross loan and leases
3,651,413

 
3,625,963

 
3,435,016

 
3,328,308

 
2,944,989

Allowance for loan and lease losses
(29,149
)
 
(43,505
)
 
(48,672
)
 
(21,290
)
 
(13,040
)
Net deferred loan and lease origination fees (costs)
7,434

 
5,068

 
2,964

 
1,190

 
(250
)
Total loan and leases, net of allowance
$
3,629,698

 
$
3,587,526

 
$
3,389,308

 
$
3,308,208

 
$
2,931,699

(1) The September 30, 2019 balance included $0.7 million of an interest rate mark premium related to the acquired loans and leases from the Crestmark acquisition.
(2) The September 30, 2019 balance included $5.6 million and $2.6 million of credit and interest rate mark discounts, respectively, related to the acquired loans and leases from the Crestmark acquisition.
The Company continued to utilize sales of securities and cash flow from its amortizing securities portfolio to fund loan and lease growth. Investment securities totaled $1.41 billion at September 30, 2019, as compared to $2.02 billion at September 30, 2018.
Total gross loans and leases receivable increased $706.4 million, or 24%, to $3.65 billion at September 30, 2019 from $2.94 billion at September 30, 2018, which was primarily attributable to growth in the commercial finance and warehouse finance portfolios.
At September 30, 2019, commercial finance loans, which comprised 52% of the Company's gross loan and lease portfolio, totaled $1.92 billion, reflecting growth of $80.4 million, or 4%, from June 30, 2019.

3



Community banking loans grew $103.1 million, or 9%, at September 30, 2019 compared to September 30, 2018.
Asset Quality
The Company’s allowance for loan and lease losses was $29.1 million at September 30, 2019, compared to $13.0 million at September 30, 2018, which difference was driven primarily by increases in the allowance in the commercial and consumer finance portfolios of $13.3 million and $2.6 million, respectively. The Company's allowance at September 30, 2019 decreased $14.4 million compared to June 30, 2019, primarily from net charge-offs of $18.5 million during the 2019 fiscal fourth quarter, of which $15.4 million were related to charging-off a majority of the remaining balances of tax services loans. The timing and amount of these net charge-offs within the tax services portfolio are consistent with the same period of the prior year.
The following table presents, for the periods indicated, the allowance for loan and lease loss activity.
(Unaudited)
Three Months Ended
 
Year Ended
Allowance for loan and lease loss activity
September 30, 2019
 
June 30, 2019
 
September 30, 2018
 
September 30, 2019
 
September 30, 2018
(Dollars in thousands)
 
 
 
 
 
 
 
 
 
Beginning balance
$
43,505

 
$
48,672

 
$
21,950

 
$
13,040

 
$
7,534

Provision - tax services loans
(9
)
 
914

 
1,009

 
24,873

 
21,344

Provision - all other loans and leases
4,130

 
8,198

 
3,697

 
30,776

 
8,089

Charge-offs - tax services loans
(15,426
)
 
(9,627
)
 
(11,295
)
 
(25,096
)
 
(21,802
)
Charge-offs - all other loans and leases
(3,351
)
 
(5,124
)
 
(3,420
)
 
(17,758
)
 
(4,162
)
Recoveries - tax services loans
10

 
36

 
31

 
223

 
453

Recoveries - all other loans and leases
290

 
436

 
1,068

 
3,091

 
1,584

Ending balance
$
29,149

 
$
43,505

 
$
13,040

 
$
29,149

 
$
13,040

Provision for loan and lease losses was $4.1 million for the quarter ended September 30, 2019, compared to $4.7 million for the comparable period in the prior fiscal year. The decrease in provision was primarily driven by a decrease in loan balances within the consumer finance portfolio, as well as a decrease in provision in the tax services and community bank portfolios to maintain allowance levels. As a partial offset, the provision in the commercial finance portfolio for the quarter ended September 30, 2019 increased year-over-year due to related loan and lease growth. Net charge-offs were $18.5 million for the quarter ended September 30, 2019, compared to $13.6 million for the quarter ended September 30, 2018.
For fiscal year 2019, the Company recorded a provision for loan and lease losses of $55.7 million, compared to $29.4 million for the prior fiscal year, primarily driven by loan and lease growth and increased net charge-offs within the commercial finance portfolio.
The Company’s nonperforming assets at September 30, 2019 were $56.5 million, representing 0.91% of total assets, compared to $51.0 million, or 0.84% of total assets at June 30, 2019 and $41.8 million, or 0.72% of total assets, at September 30, 2018. At September 30, 2019, foreclosed and repossessed assets were $29.5 million, representing 0.48% of total assets, compared to $29.5 million, or 0.48% of total assets at June 30, 2019 and $31.6 million, or 0.54% of total assets, at September 30, 2018. For each of these periods, the outstanding foreclosed and repossessed asset balance was primarily related to a previously disclosed agricultural relationship.
Deposits, Borrowings and Other Liabilities
Total average deposits for the 2019 fiscal fourth quarter increased by $466.6 million, or 11%, compared to the same period in fiscal 2018. Average wholesale deposits increased $265.5 million, or 20%, and noninterest-bearing checking deposits increased $219.9 million, or 9%, for the 2019 fiscal fourth quarter when compared to the same period in fiscal 2018. Average deposits from the payments division increased $271.1 million, or 11%, to $2.63 billion for the 2019 fiscal fourth quarter when compared to the same quarter of fiscal 2018.
The average balance of total deposits and interest-bearing liabilities was $5.15 billion for the three-month period ended September 30, 2019, compared to $4.58 billion for the same period in fiscal 2018, representing an increase of 12%.

4



Total end-of-period deposits decreased 2% to $4.34 billion at September 30, 2019, compared to $4.43 billion at September 30, 2018. The decrease in end-of-period deposits was primarily a result of decreases in certificates of deposits and noninterest-bearing checking deposits. The decrease in noninterest-bearing checking deposits is related to the cyclicality of the Company's business, as a portion of its noninterest-bearing deposit base can fluctuate depending on the day of the week, primarily related to payroll processing timing. As noted above, average noninterest-bearing checking deposits increased 9% for the 2019 fiscal fourth quarter when compared to the same period in fiscal 2018.
Regulatory Capital
The Company and MetaBank remained above the federal regulatory minimum capital requirements at September 30, 2019 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 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.
As of the dates indicated
September 30,
2019
 
June 30,
2019
 
March 31,
2019
 
December 31,
2018
 
September 30,
2018
Company
 
 
 
 
 
 
 
 
 
Tier 1 leverage capital ratio
8.33
%
 
8.05
%
 
7.45
%
 
7.90
%
 
8.50
%
Common equity Tier 1 capital ratio
10.35
%
 
10.19
%
 
10.94
%
 
10.10
%
 
10.56
%
Tier 1 capital ratio
10.71
%
 
10.55
%
 
11.31
%
 
10.47
%
 
10.97
%
Total capital ratio
13.01
%
 
13.22
%
 
14.20
%
 
12.69
%
 
13.18
%
MetaBank
 
 
 
 
 
 
 
 
 
Tier 1 leverage capital ratio
9.65
%
 
9.37
%
 
8.42
%
 
9.01
%
 
9.75
%
Common equity Tier 1 capital ratio
12.31
%
 
12.22
%
 
12.72
%
 
11.87
%
 
12.50
%
Tier 1 capital ratio
12.37
%
 
12.27
%
 
12.76
%
 
11.91
%
 
12.56
%
Total capital ratio
13.02
%
 
13.26
%
 
13.92
%
 
12.41
%
 
12.89
%
The following table provides 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:

5



 Standardized Approach(1)
September 30,
2019
 
June 30,
2019
 
March 31,
2019
 
December 31,
2018
 
September 30,
2018
 
(Dollars in Thousands)
Total stockholders' equity
$
843,958

 
$
822,901

 
$
823,709

 
$
770,728

 
$
747,726

Adjustments:
 
 
 
 
 
 
 
 
 
   LESS: Goodwill, net of associated deferred tax liabilities
304,020

 
302,850

 
302,768

 
299,037

 
299,456

   LESS: Certain other intangible assets
50,501

 
53,249

 
56,456

 
61,317

 
64,716

LESS: Net deferred tax assets from operating loss and tax credit carry-forwards
15,569

 
13,858

 
7,381

 
4,720

 

   LESS: Net unrealized gains (losses) on available-for-sale securities
6,458

 
2,329

 
(10,022
)
 
(28,829
)
 
(33,114
)
   LESS: Non-controlling interest
4,047

 
3,508

 
3,528

 
3,267

 
3,574

   LESS: Unrealized currency gains (losses)

 

 
(242
)
 
(357
)
 
3

Common Equity Tier 1 (1)
463,363

 
447,107

 
463,840

 
431,573

 
413,091

   Long-term debt 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
2,350

 
2,119

 
2,064

 
1,796

 
2,118

Total Tier 1 capital
479,374

 
462,887

 
479,565

 
447,030

 
428,870

   Allowance for loan and lease losses
29,272

 
43,641

 
48,812

 
21,422

 
13,185

   Subordinated Debentures (net of issuance costs)
73,644

 
73,605

 
73,566

 
73,528

 
73,491

Total qualifying capital
$
582,290

 
$
580,133

 
$
601,963

 
$
541,980

 
$
515,546

(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 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,
2019
 
June 30,
2019
 
March 31,
2019
 
December 31,
2018
 
September 30,
2018
 
(Dollars in Thousands)
Total Stockholders' Equity
$
843,958

 
$
822,901

 
$
823,709

 
$
770,728

 
$
747,726

Less: Goodwill
309,505

 
307,941

 
307,464

 
303,270

 
303,270

Less: Intangible assets
52,810

 
56,153

 
60,506

 
66,366

 
70,719

     Tangible common equity
481,643

 
458,807

 
455,739

 
401,092

 
373,737

Less: Accumulated Other Comprehensive Income (Loss) ("AOCI")
6,339

 
2,308

 
(10,264
)
 
(29,186
)
 
(33,111
)
     Tangible common equity excluding AOCI (Loss)
$
475,304

 
$
456,499

 
$
466,003

 
$
430,278

 
$
406,848

Future Outlook
The Company currently expects full-year fiscal 2020 GAAP earnings per common share to range between $3.30 to $3.50.
Conference Call
The Company will host a conference call and earnings webcast at 4:00 p.m. CDT (5:00 p.m. EDT) on October 24, 2019. 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 6288753 upon request. International callers should dial (636) 812-6634. A webcast replay will also be archived at www.metafinancialgroup.com for one year.

6



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 Securities and Exchange Commission (“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; 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; 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: maintaining our executive management team; 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 Crestmark acquisition; the costs, risks and effects on the Company of the ongoing federal investigation and bankruptcy proceedings involving DC Solar Solutions, Inc., DC Solar Distribution, Inc., and their affiliates, including the potential financial impact of those matters on the net book value of Company assets leased to DC Solar Distribution and the Company’s ability to recognize certain investment tax credits associated with such assets; factors relating to the Company’s share repurchase program; 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 conducts operations; the effects of, and changes in, trade, monetary, and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System (the “Federal Reserve”), as well as efforts of the United States Congress and the United States Treasury in conjunction with bank regulatory agencies to stimulate the economy and protect the financial system; 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 acceptance of usage of Meta’s strategic partners’ refund advance products; any actions which may be initiated by our regulators in the future; 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; our relationship with our primary regulators, the Office of the Comptroller of the Currency and the Federal Reserve, as well as the Federal Deposit Insurance Corporation, which insures MetaBank’s deposit accounts up to applicable limits; technological changes, including, but not limited to, the protection of electronic files or databases; acquisitions; litigation risk, in general, including, but not limited to, those risks involving MetaBank's divisions; 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 growing deposit base, a portion of which has been characterized as “brokered”; changes in consumer spending and saving habits; 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, 2018, 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.


7



Condensed Consolidated Statements of Operations (Unaudited)
(Dollars in Thousands, Except Share and per Share Data)
ASSETS
September 30, 2019
 
June 30, 2019
 
March 31, 2019
 
December 31, 2018
 
September 30, 2018
Cash and cash equivalents
$
126,545

 
$
100,732

 
$
156,461

 
$
164,169

 
$
99,977

Investment securities available for sale, at fair value
889,947

 
961,897

 
1,081,663

 
1,340,870

 
1,484,160

Mortgage-backed securities available for sale, at fair value
382,546

 
395,201

 
413,493

 
354,186

 
364,065

Investment securities held to maturity, at cost
127,582

 
138,128

 
146,992

 
153,075

 
163,893

Mortgage-backed securities held to maturity, at cost
7,182

 
7,414

 
7,606

 
7,661

 
7,850

Loans held for sale
148,777

 
62,839

 
59,745

 
33,560

 
15,606

Loans and leases
3,658,847

 
3,631,031

 
3,437,980

 
3,329,498

 
2,944,739

Allowance for loan and lease losses
(29,149
)
 
(43,505
)
 
(48,672
)
 
(21,290
)
 
(13,040
)
Federal Home Loan Bank Stock, at cost
30,916

 
17,236

 
7,436

 
15,600

 
23,400

Accrued interest receivable
20,400

 
19,722

 
20,281

 
22,076

 
22,016

Premises, furniture, and equipment, net
45,932

 
46,360

 
45,457

 
44,299

 
40,458

Rental equipment, net
208,537

 
184,732

 
140,087

 
146,815

 
107,290

Bank-owned life insurance
89,827

 
89,193

 
88,565

 
87,934

 
87,293

Foreclosed real estate and repossessed assets
29,494

 
29,514

 
29,548

 
31,548

 
31,638

Goodwill
309,505

 
307,941

 
307,464

 
303,270

 
303,270

Intangible assets
52,810

 
56,153

 
60,506

 
66,366

 
70,719

Prepaid assets
9,476

 
22,023

 
26,597

 
31,483

 
27,906

Deferred taxes
18,884

 
21,630

 
19,079

 
23,607

 
18,737

Other assets
54,832

 
52,831

 
49,754

 
48,038

 
35,090

        Total assets
$
6,182,890

 
$
6,101,072

 
$
6,050,042

 
$
6,182,765

 
5,835,067

 
 
 
 
 
 
 
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
LIABILITIES
 

 
 
 
 
 
 
 
 
Noninterest-bearing checking
$
2,358,010

 
$
2,751,931

 
$
3,034,428

 
$
2,739,757

 
2,405,274

Interest-bearing checking
185,768

 
157,802

 
183,492

 
128,662

 
111,587

Savings deposits
49,773

 
52,179

 
59,978

 
52,229

 
54,765

Money market deposits
76,911

 
68,604

 
56,563

 
54,559

 
51,995

Time certificates of deposit
109,275

 
116,698

 
154,401

 
170,629

 
276,180

Wholesale deposits
1,557,268

 
1,628,000

 
1,481,445

 
1,790,611

 
1,531,186

        Total deposits
4,337,005

 
4,775,214

 
4,970,307

 
4,936,447

 
4,430,987

Short-term borrowings
646,019

 
146,613

 
11,583

 
231,293

 
425,759

Long-term borrowings
215,838

 
209,765

 
99,800

 
88,983

 
88,963

Accrued interest payable
9,414

 
12,350

 
9,239

 
11,280

 
7,794

Accrued expenses and other liabilities
130,656

 
134,229

 
135,404

 
144,034

 
133,838

          Total liabilities
5,338,932

 
5,278,171

 
5,226,333

 
5,412,037

 
5,087,341

 
 
 
 
 
 
 
 
 
 
STOCKHOLDERS’ EQUITY
 

 
 
 
 
 
 
 
 
Preferred stock

 

 

 

 

Common stock, $.01 par value
378

 
379

 
395

 
394

 
393

Common stock, Nonvoting, $.01 par value

 

 

 

 

Additional paid-in capital
580,826

 
578,715

 
576,406

 
572,156

 
565,811

Retained earnings
252,813

 
238,004

 
258,600

 
228,453

 
213,048

Accumulated other comprehensive income (loss)
6,339

 
2,308

 
(10,264
)
 
(29,186
)
 
(33,111
)
Treasury stock, at cost
(445
)
 
(13
)
 
(4,956
)
 
(4,356
)
 
(1,989
)
Total equity attributable to parent
839,911

 
819,393

 
820,181

 
767,461

 
744,152

Non-controlling interest
4,047

 
3,508

 
3,528

 
3,267

 
3,574

Total stockholders' equity
843,958

 
822,901

 
823,709

 
770,728

 
747,726

         Total liabilities and stockholders’ equity
$
6,182,890

 
$
6,101,072

 
$
6,050,042

 
$
6,182,765

 
$
5,835,067



8



Condensed Consolidated Statements of Operations (Unaudited)
 
Three Months Ended
 
Year Ended
(Dollars in Thousands, Except Share and Per Share Data)
September 30, 2019
 
June 30, 2019
 
September 30, 2018
 
September 30, 2019
 
September 30, 2018
Interest and dividend income:
 
 
 
 
 
 
 
 
 
Loans and leases, including fees
$
70,628

 
$
69,732

 
$
45,131

 
$
274,528

 
$
98,475

Mortgage-backed securities
2,768

 
3,063

 
3,724

 
11,390

 
15,479

Other investments
7,432

 
8,837

 
11,346

 
39,811

 
44,580

 
80,828

 
81,632

 
60,201

 
325,729

 
158,534

Interest expense:
 
 
 
 
 
 
 
 
 
Deposits
10,917

 
10,395

 
8,057

 
46,648

 
15,163

FHLB advances and other borrowings
4,294

 
4,269

 
3,607

 
14,874

 
12,822

 
15,211

 
14,664

 
11,664

 
61,522

 
27,985

 
 
 
 
 
 
 
 
 
 
Net interest income
65,617

 
66,968

 
48,537

 
264,207

 
130,549

 
 
 
 
 
 
 
 
 
 
Provision for loan and lease losses
4,121

 
9,112

 
4,706

 
55,650

 
29,432

 
 
 
 
 
 
 
 
 
 
Net interest income after provision for loan and lease losses
61,496

 
57,856

 
43,831

 
208,557

 
101,117

 
 
 
 
 
 
 
 
 
 
Noninterest income:
 
 
 
 
 
 
 
 
 
Refund transfer product fees
639

 
6,697

 
526

 
39,198

 
41,879

Tax advance product fees
(70
)
 
34

 
(36
)
 
34,687

 
35,703

Card fees
18,043

 
19,537

 
19,536

 
79,982

 
94,446

Rental income
10,886

 
9,386

 
7,333

 
41,053

 
7,333

Loan and lease fees
1,107

 
1,012

 
1,025

 
4,292

 
4,470

Bank-owned life insurance
634

 
628

 
638

 
2,535

 
2,590

Deposit fees
2,725

 
2,335

 
1,487

 
9,090

 
4,451

Gain (loss) on sale of securities available-for-sale, net
80

 
440

 
(6,979
)
 
729

 
(8,177
)
Gain on sale of loans and leases
1,380

 
1,913

 
355

 
5,244

 
355

Loss on foreclosed real estate
(93
)
 

 

 
(278
)
 
(19
)
Other income
649

 
1,808

 
728

 
6,013

 
1,494

Total noninterest income
35,980

 
43,790

 
24,613

 
222,545

 
184,525

 
 
 
 
 
 
 
 
 
 
Noninterest expense:
 
 
 
 
 
 
 

 
 

Compensation and benefits
38,461

 
35,176

 
30,093

 
155,811

 
109,044

Refund transfer product expense
48

 
287

 
85

 
7,526

 
11,750

Tax advance product expense
1

 
425

 
81

 
3,102

 
1,817

Card processing
5,008

 
4,613

 
5,485

 
23,677

 
26,283

Occupancy and equipment
7,265

 
7,136

 
5,653

 
28,071

 
19,740

Operating lease equipment depreciation
7,901

 
6,029

 
5,386

 
26,181

 
5,386

Legal and consulting
4,968

 
4,065

 
6,628

 
17,310

 
15,064

Marketing
1,195

 
368

 
1,037

 
2,688

 
2,674

Data processing
453

 
260

 
268

 
1,471

 
1,226

Intangible amortization
3,358

 
4,374

 
3,564

 
17,711

 
9,641

Impairment expense

 

 
18

 
9,660

 
18

Other expense
7,485

 
9,735

 
8,342

 
39,952

 
25,589

Total noninterest expense
76,143

 
72,468

 
66,640

 
333,160

 
228,232

 
 
 
 
 
 
 
 
 
 
Income before income tax expense
21,333

 
29,178

 
1,804

 
97,942

 
57,410

 
 
 
 
 
 
 
 
 
 
Income tax (benefit) expense
(130
)
 
(1,158
)
 
(7,591
)
 
(3,374
)
 
5,117

 
 
 
 
 
 
 
 
 
 
Net income before noncontrolling interest
21,463

 
30,336

 
9,395

 
101,316

 
52,293

Net income attributable to noncontrolling interest
1,268

 
1,045

 
673

 
4,312

 
673

Net income attributable to parent
$
20,195

 
$
29,291

 
$
8,722

 
$
97,004

 
$
51,620

 
 
 
 
 
 
 
 
 
 
Earnings per common share(1)
 
 
 
 
 
 
 

 
 

Basic
$
0.53

 
$
0.75

 
$
0.24

 
$
2.49

 
$
1.68

Diluted
$
0.53

 
$
0.75

 
$
0.24

 
$
2.49

 
$
1.67

Shares used in computing earnings per share(1)
 
 
 
 
 
 
 
 
 
Basic
37,868,788

 
38,903,266

 
35,711,400

 
38,880,919

 
30,737,499

Diluted
37,912,616

 
38,977,690

 
35,823,162

 
38,921,637

 
30,853,050


9



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 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,
2019
 
2018
(Dollars in Thousands)
Average
Outstanding
Balance
 
Interest
Earned /
Paid
 
Yield /
Rate
(1)
 
Average
Outstanding
Balance
 
Interest
Earned /
Paid
 
Yield /
Rate
(2)
Interest-earning assets:
 
 
 
 
 
 
 
 
 
 
 
Cash and fed funds sold
$
68,435

 
$
505

 
2.93
 %
 
$
60,946

 
$
532

 
3.47
 %
Mortgage-backed securities
396,075

 
2,768

 
2.77
 %
 
543,042

 
3,724

 
2.72
 %
Tax exempt investment securities
555,285

 
2,743

 
2.48
 %
 
1,314,380

 
8,069

 
3.23
 %
Asset-backed securities
307,080

 
2,615

 
3.38
 %
 
273,625

 
2,251

 
3.26
 %
Other investment securities
204,695

 
1,569

 
3.04
 %
 
70,380

 
494

 
2.79
 %
Total investments
1,463,135

 
9,695

 
2.83
 %
 
2,201,427

 
14,538

 
3.09
 %
Commercial finance loans and leases
1,882,699

 
44,375

 
9.35
 %
 
1,091,459

 
27,035

 
9.83
 %
Consumer finance loans
381,165

 
8,268

 
8.61
 %
 
245,405

 
5,043

 
8.15
 %
Tax services loans
21,445

 
(13
)
 
(0.25
)%
 
13,210

 
(14
)
 
(0.41
)%
Warehouse finance loans
249,022

 
3,913

 
6.24
 %
 
57,228

 
879

 
6.09
 %
National lending loans and leases
2,534,331

 
56,543

 
8.85
 %
 
1,407,302

 
32,943

 
9.29
 %
Community banking loans
1,195,214

 
14,085

 
4.68
 %
 
1,075,586

 
12,188

 
4.50
 %
Total loans and leases
3,729,545

 
70,628

 
7.51
 %
 
2,482,888

 
45,131

 
7.21
 %
Total interest-earning assets
5,261,115

 
$
80,828

 
6.15
 %
 
4,745,261

 
$
60,201

 
5.25
 %
Non-interest-earning assets
869,171

 
 
 
 
 
635,317

 
 
 
 
Total assets
$
6,130,286

 
 
 
 
 
$
5,380,578

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest-bearing liabilities:
 
 
 
 
 
 
 
 
 
 
 
Interest-bearing checking
155,099

 
136

 
0.35
 %
 
90,627

 
56

 
0.24
 %
Savings
49,846

 
9

 
0.07
 %
 
55,163

 
10

 
0.07
 %
Money markets
71,793

 
157

 
0.86
 %
 
49,822

 
41

 
0.33
 %
Time deposits
115,036

 
601

 
2.07
 %
 
214,946

 
926

 
1.71
 %
Wholesale deposits
1,593,616

 
10,014

 
2.49
 %
 
1,328,128

 
7,024

 
2.10
 %
Total interest-bearing deposits
1,985,390

 
10,917

 
2.18
 %
 
1,738,686

 
8,057

 
1.84
 %
Overnight fed funds purchased
336,457

 
1,999

 
2.36
 %
 
362,076

 
2,051

 
2.25
 %
FHLB advances
115,707

 
713

 
2.44
 %
 

 

 
 %
Subordinated debentures
73,618

 
1,162

 
6.26
 %
 
73,466

 
1,158

 
6.25
 %
Other borrowings
45,302

 
420

 
3.68
 %
 
31,593

 
398

 
5.00
 %
Total borrowings
571,084

 
4,294

 
2.98
 %
 
467,135

 
3,607

 
3.06
 %
Total interest-bearing liabilities
2,556,474

 
15,211

 
2.36
 %
 
2,205,821

 
11,664

 
2.10
 %
Non-interest-bearing deposits
2,595,386

 

 
 %
 
2,375,499

 

 
 %
Total deposits and interest-bearing liabilities
5,151,860

 
$
15,211

 
1.17
 %
 
4,581,320

 
$
11,664

 
1.01
 %
Other non-interest-bearing liabilities
144,703

 
 
 
 
 
146,148

 
 
 
 
Total liabilities
5,296,563

 
 
 
 
 
4,727,468

 
 
 
 
Shareholders' equity
833,723

 
 
 
 
 
653,110

 
 
 
 
Total liabilities and shareholders' equity
$
6,130,286

 
 
 
 
 
$
5,380,578

 
 
 
 
Net interest income and net interest rate spread including non-interest-bearing deposits
 
 
$
65,617

 
4.98
 %
 
 
 
$
48,537

 
4.24
 %
 
 
 
 
 
 
 
 
 
 
 
 
Net interest margin
 
 
 
 
4.95
 %
 
 
 
 
 
4.05
 %
Tax equivalent effect
 
 
 
 
0.05
 %
 
 
 
 
 
0.22
 %
Net interest margin, tax-equivalent(3)
 
 
 
 
5.00
 %
 
 
 
 
 
4.27
 %
(1) Tax rate used to arrive at the TEY for the three months ended September 30, 2019 was 21%.
(2) Tax rate used to arrive at the TEY for the three months ended September 30, 2018 was 24.53%.
(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.


10



Selected Financial Information
As of and for the three months ended:
September 30,
2019
 
June 30,
2019
 
March 31,
2019
 
December 31,
2018
 
September 30,
2018
 
 
 
 
 
 
 
 
 
 
Equity to total assets
13.65
%
 
13.49
%
 
13.61
%
 
12.47
%
 
12.81
%
Book value per common share outstanding
$
22.32

 
$
21.72

 
$
20.88

 
$
19.56

 
$
19.09

Tangible book value per common share outstanding
$
12.74

 
$
12.11

 
$
11.55

 
$
10.18

 
$
9.54

Tangible book value per common share outstanding excluding AOCI
$
12.57

 
$
12.05

 
$
11.81

 
$
10.92

 
$
10.39

Common shares outstanding
37,807,064

 
37,878,205

 
39,450,938

 
39,405,508

 
39,167,280

Non-performing assets to total assets
0.91
%
 
0.84
%
 
0.68
%
 
0.73
%
 
0.72
%
Non-performing loans and leases to total loans and leases
0.70
%
 
0.57
%
 
0.28
%
 
0.42
%
 
0.35
%
Net interest margin
4.95
%
 
5.07
%
 
5.06
%
 
4.60
%
 
4.05
%
Net interest margin, tax-equivalent
5.00
%
 
5.15
%
 
5.18
%
 
4.76
%
 
4.27
%
Return on average assets
1.32
%
 
1.91
%
 
1.89
%
 
1.03
%
 
0.65
%
Return on average equity
9.69
%
 
14.17
%
 
16.18
%
 
8.19
%
 
5.34
%
Full-time equivalent employees
1,186

 
1,218

 
1,231

 
1,229

 
1,219

Quarterly Amortization of Intangibles Expense
(Dollars in Thousands)
Actual
Anticipated
For the Three Months Ended
Sep 30,
2019
Dec 31,
2019
Mar 31,
2020
Jun 30,
2020
Sep 30,
2020
Dec 31,
2020
Mar 31,
2021
Jun 30,
2021
Sep 30,
2021
 
 
 
 
 
 
 
 
 
 
Amortization of Intangibles(1)
$
3,358

$
2,675

$
3,400

$
2,632

$
2,277

$
2,008

$
2,752

$
2,008

$
1,756

(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.

About Meta Financial Group®
Meta Financial Group, Inc. ® (Nasdaq: CASH) is the holding company for the financial services company MetaBank® (“Meta”). Founded in 1954, Meta has grown to operate in several different financial sectors: payments, commercial finance, tax services, community banking and consumer lending. Meta works with high-value niche industries, strategic-growth companies and technology adopters to grow their businesses and build more profitable customer relationships. Meta tailors solutions for bank and non-bank businesses, and provides a focused collaborative approach. The organization is helping to shape the evolving financial services landscape by directly investing in innovation and complementary businesses that strategically expand its suite of services. Meta has a national presence and over 1,200 employees, with corporate headquarters in Sioux Falls, S.D. For more information, visit the Meta Financial Group website or LinkedIn.
Investor Relations and Media Contact:
 
Brittany Kelley Elsasser
 
Director of Investor Relations
 
605.362.2423
 
bkelley@metabank.com
 


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Quarterly Investor Update Fourth Quarter & Fiscal Year End 2019


 
Forward-Looking Statements The Company and MetaBank may from time to time make written or oral “forward-looking statements,” including statements contained in this investor update, the Company’s filings with the Securities and Exchange Commission (“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; 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; 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: maintaining our executive management team; 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 Crestmark acquisition; the costs, risks and effects on the Company of the ongoing federal investigation and bankruptcy proceedings involving DC Solar Solutions, Inc., DC Solar Distribution, Inc., and their affiliates, including the potential financial impact of those matters on the net book value of Company assets leased to DC Solar Distribution and the Company’s ability to recognize certain investment tax credits associated with such assets; factors relating to the Company’s share repurchase program; 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 conducts operations; the effects of, and changes in, trade, monetary, and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System (the “Federal Reserve”), as well as efforts of the United States Congress and the United States Treasury in conjunction with bank regulatory agencies to stimulate the economy and protect the financial system; 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 acceptance of usage of Meta’s strategic partners’ refund advance products; any actions which may be initiated by our regulators in the future; 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; our relationship with our primary regulators, the Office of the Comptroller of the Currency and the Federal Reserve, as well as the Federal Deposit Insurance Corporation, which insures MetaBank’s deposit accounts up to applicable limits; technological changes, including, but not limited to, the protection of electronic files or databases; acquisitions; litigation risk, in general, including, but not limited to, those risks involving MetaBank's divisions; 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 growing deposit base, a portion of which has been characterized as “brokered;” changes in consumer spending and saving habits; 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 herein speak only as of the date of this investor update. All subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this cautionary note. 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, 2018 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. 2 Fourth Quarter & Fiscal Year End 2019 | Nasdaq: CASH


 
Financial Highlights For the Applicable Period Ended September 30, 2019 Fourth Quarter Fiscal Year • Net income of $20.2 million, or $0.53 per diluted • Net income of $97.0 million, or $2.49 per diluted share, for the quarter. share, for the full fiscal year. • Net interest margin ("NIM") increased to 4.95% for • Earnings per diluted share increased 49% the fiscal 2019 fourth quarter, up 90 basis points compared to $1.67 per diluted share in the prior from the fiscal 2018 fourth quarter. year. • Total gross loans and leases increased by $25.5 • NIM increased to 4.91% for fiscal year 2019, up million, or 1%, compared to the immediately 177 basis points from fiscal year 2018. preceding linked-quarter in fiscal 2019. • Total gross loans and leases increased by • Average payments deposits grew $271.1 million, or $706.4 million, or 24%, compared to the prior 11%, compared to the prior fiscal year fourth year. quarter average. • Repurchased a total of 1,680,772 shares under the share repurchase program at an average price of $27.67 per share. 3 Fourth Quarter & Fiscal Year End 2019 | Nasdaq: CASH


 
Compelling Asset Mix Driving Differentiated NIM Expansion 1 Earning Asset Mix Yields Aspirational Selected Quarterly Average September 2018 June 2019 September 2019 September 2019 Earning Asset Mix Commercial Finance 23% 34% 36% 9.35% >55% Consumer & Warehouse Finance 6% 11% 12% 7.67% <15% Community Bank 23% 22% 23% 4.68% <15% Investments 46% 31% 28% 2.83% <20% 1 Quarterly average, excludes Tax Services Loans and Cash & Fed Funds Sold Loan Yields and Net Interest Margin Five Quarter Trend Yield on Loans Net Interest Margin SNL U.S. Banks $2B-$10B1 Net Interest Margin 1 SNL U.S. Bank $2-10B; includes all Banks in SNL's coverage universe with $2B to $10B in Assets. Q4 2019 (September 30) SNL data not yet available. 4 Fourth Quarter & Fiscal Year End 2019 | Nasdaq: CASH


 
Diversified Loan Portfolio At the Quarter Ended September 30, 2019 June 30, 2019 March 31, 2019 December 31, 2018 September 30, 2018 4Q19 % Change From ($ in thousands) 4Q19 3Q19 2Q19 1Q19 4Q18 3Q19 4Q18 Commercial Finance 1,916,230 1,835,850 1,665,891 1,617,880 1,509,849 4.4% 26.9% Asset-based lending 688,520 615,309 572,210 554,072 477,917 11.9% 44.1% Factoring 296,507 320,344 287,955 284,912 284,221 (7.4)% 4.3% Lease financing 381,602 341,957 321,414 290,889 265,315 11.6% 43.8% Insurance premium finance 361,105 358,772 307,875 330,712 337,877 0.7% 6.9% SBA/USDA 88,831 99,791 77,481 67,893 59,374 (11.0)% 49.6% Other commercial finance 99,665 99,677 98,956 89,402 85,145 —% 17.1% Consumer Finance 268,198 320,266 310,441 278,654 270,361 (16.3)% (0.8)% National National Lending Consumer credit programs 106,794 155,539 139,617 96,144 80,605 (31.3)% 32.5% Other consumer finance 161,404 164,727 170,824 182,510 189,756 (2.0)% (14.9)% Tax Services 2,240 24,410 84,824 76,575 1,073 (90.8)% 108.8% Warehouse Finance 262,924 250,003 186,697 176,134 65,000 5.2% 304.5% Community Banking 1,201,821 1,195,434 1,187,163 1,179,065 1,098,706 0.5% 9.4% Commercial Real Estate & Op. 883,932 877,412 869,917 863,753 790,890 0.7% 11.8% 1-4 Family Real Estate & Other 259,425 256,853 257,079 256,341 247,318 1.0% 4.9% Agricultural loans 58,464 61,169 60,167 58,971 60,498 (4.4)% (3.4)% Total National Lending 2,449,592 2,430,529 2,247,853 2,149,243 1,846,283 0.8% 32.7% Total Community Banking 1,201,821 1,195,434 1,187,163 1,179,065 1,098,706 0.5% 9.4% Total Gross Loans & Leases 3,651,413 3,625,963 3,435,016 3,328,308 2,944,989 0.7% 24.0% 5 Fourth Quarter & Fiscal Year End 2019 | Nasdaq: CASH


 
Commercial Finance Growth Engine Asset-Based Lending. Provide asset-based loans secured by assets such as inventory, accounts receivable, machinery & equipment, work-in-process and other assets. Other $99.7M SBA/USDA $88.8M Lease Financing. Provide flexible leasing solutions for technology, capital equipment and select transportation assets like tractors, trailers and construction equipment. Factoring $296.5M Asset-Based Lending $688.5M Insurance Premium Finance. Provide short-term, primarily collateralized financing to facilitate the commercial $1.92 billion customers’ purchase of insurance for various forms of risk. National Commercial Finance Portfolio as of September 30, 2019 Factoring. Provide factoring services where clients provide detailed inventory, accounts receivable, and work-in-process reports for lending arrangements. Lease Financing $381.6M SBA/USDA. Originate loans through programs partially Insurance Premium Finance guaranteed by the SBA or USDA. $361.1M Other Commercial Finance. Includes healthcare receivables loan portfolio primarily comprised of loans to individuals for medical services received. Majority of these loans are See Appendix, slide 21, for an overview of the underlying credit philosophy for the Company's commercial finance portfolio guaranteed by the hospital. Also includes providing other lending solutions to commercial finance customers. 6 Fourth Quarter & Fiscal Year End 2019 | Nasdaq: CASH


 
Diversified Commercial Finance Portfolio Commercial Finance Commercial Finance Geographic Concentrations1 Industry Concentrations1 Other 1.7% Midwest 25.9% Northeast West 16.1% 23.1% Southwest 12.3% 2 Southeast 20.9% • Experienced management team offers consultative approach to targeted commercial finance clients on nationwide basis • Well-known to turnaround specialists, lawyers and CPAs for assisting highly-leveraged companies with low liquidity and cash needs • Active involvement in trade associations and cooperatives to develop referral sources • Competition includes independent factoring companies, merchant cash advances, finance companies, equipment leasing companies and middle-market banks Asset-Based Lending Lease Financing Insurance Premium Finance Factoring Balance as of September 30, 2019 $688.5M $381.6M $361.1M $296.5M Approximate Average Loan or Lease Balance as of $80K capital lease September 30, 2019 $775,000 $250K operating lease $28,000 $300,000 Q4 FY2019 Quarterly Yield 9.67% 9.77% 6.44% 13.77% Approximate 3-year average net charge-offs / average loans and leases 0.60% 0.75% 0.26% 0.90% Manufacturing: 23.3% Manufacturing: 23.3% Transportation: 42.7% Top three industry concentrations1 by % Utilities: 23.0% Utilities: 12.2% N/A Manufacturing: 13.2% Finance and Insurance: 16.0% Wholesale Trade: 7.5% Wholesale Trade: 12.1% 1 Excludes joint ventures and commercial insurance premium finance portfolios; percentages calculated based on aggregate principal amount of loans 2 Other represents any concentration that makes up less than 5% of a given industry 7 Fourth Quarter & Fiscal Year End 2019 | Nasdaq: CASH


 
Disciplined Credit Culture Drives Strong Asset Quality 1 Excludes Tax Services NCOs and Related Seasonal Average Loans Tax Services NCOs and related seasonal average loans are excluded to adjust for the cyclicality of activity related to the overall economics of the tax services business line. Source: S&P Global Market Intelligence for data prior to acquisition on August 1, 2018 1Non-GAAP measures, see appendix for reconciliations. 8 Fourth Quarter & Fiscal Year End 2019 | Nasdaq: CASH


 
Ongoing Growth in Payments Deposits Driving Differentiated Funding Mix Fourth Quarter Fiscal 2019 Primary deposit source derived from Payments division, which generates low- cost deposits, including prepaid and demand deposit solutions Generated $89.1 million in card and deposit fee income in fiscal year 2019. $4.58 billion Quarterly Average Deposits Growth strategy includes gaining greater share of deposits from existing relationships and adding new strategic relationships. 0.95% Average Cost of Deposits See appendix for overview on MetaBank's Payments Solutions 14% CAGR 2015 - 2019 Payments: low-cost deposits including prepaid and demand deposit products Banking: traditional bank deposit products including demand deposits, savings, money market, and time deposits Corporate: wholesale deposits 9 Fourth Quarter