cash-20200422
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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): April 22, 2020

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

Delaware0-2214042-1406262
(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 classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $.01 par valueCASHThe 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 April 22, 2020, the Registrant issued a press release announcing its results of operations and financial condition as of and for the three and six months ended March 31, 2020. 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 second quarter of fiscal year 2020 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 April 22, 2020 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 NumberDescription of Exhibit
Press Release of Meta Financial Group, Inc., dated April 22, 2020 regarding the results of operations and financial condition.
Investor Update slide presentation for the Second Quarter of Fiscal Year 2020, dated April 22, 2020, 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: April 22, 2020By:/s/ Glen W. Herrick
Glen W. Herrick
Executive Vice President and Chief Financial Officer

Document

Exhibit 99.1
https://cdn.kscope.io/6a24a732e432188ad9383ce51313ed1f-metalogoa201.jpg
META FINANCIAL GROUP, INC.® ANNOUNCES RESULTS FOR 2020 FISCAL SECOND QUARTER
- 2020 Fiscal Second Quarter Net Income of $52.3 Million, or $1.45 Per Diluted Share -
- Committed to Further Enhancing Financial Capacity and Flexibility -
- Suspends 2020 Outlook and Share Repurchase Program -
Sioux Falls, S.D., April 22, 2020 (GLOBE NEWSWIRE) -- Meta Financial Group, Inc.® (Nasdaq: CASH) (“Meta” or the “Company”) reported net income of $52.3 million, or $1.45 per diluted share, for the three months ended March 31, 2020, compared to net income of $32.1 million, or $0.81 per diluted share, for the three months ended March 31, 2019.
“Our fiscal second quarter, which has in the past been driven by our high volume tax businesses, was met with unprecedented uncertainty and market volatility associated with the spread of COVID-19. Our priorities are the health and safety of our employees and preserving access to the financial products our customers need to make it through these difficult times”, said President and CEO Brad Hanson. “Meta proactively implemented its Pandemic Plan under its Business Continuity Program with minimal business disruption and a near seamless transition to a work from home environment. Our COVID-19 Crisis Command Center consisting of leadership and business continuity planning resources throughout the organization is coordinating extensive scenario planning focused on credit quality, regulatory capital, expense management, and viability of our partners and customers to ensure continuity of our business and financial stability under extreme circumstances related to COVID-19. Finally, I am thrilled with the engagement and productivity exhibited by our staff resulting in strong performance for the quarter and the ability to manage our businesses through and beyond this crisis.”
Business Developments
Through April 20, 2020, the Company authorized 502 applications, totaling $189.5 million in loan requests for the Paycheck Protection Program.
Effective April 1, 2020, MetaBank, N.A. ("MetaBank" or the "Bank") converted from a federal thrift charter to a national bank charter, and the Company converted from a savings and loan holding company to a bank holding company that has elected treatment as a financial holding company. The Bank now operates under the name "MetaBank, National Association." The Company and the Bank effected these conversions in order to more closely align the Bank's regulatory charter to its current and future strategy with respect to becoming a national business that provides innovative financial solutions to consumers and businesses in niche markets often overlooked by traditional banks. As a result of the bank conversion, the Bank is no longer subject to qualified thrift lending requirements.
The sale of MetaBank's Community Bank division to Central Bank closed on February 29, 2020 and included all of the Community Bank's deposits, branch locations, fixed assets, employees, and a portion of the Community Bank’s loan portfolio. The final deposit and loan balances included in the transaction totaled $290.5 million and $268.8 million, respectively. The remaining Community Bank loans not sold to Central Bank, which totaled $896.2 million at March 31, 2020, have been retained by the Company under a servicing agreement with Central Bank.
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MetaBank expanded its faster payments platform to include Visa Direct, Visa’s real-time push payments solution. Visa clients can use Visa Direct to enable businesses and payment service providers to make payments, disbursements and remittances rapidly, conveniently and cost-effectively, to more than a billion eligible debit and prepaid cards worldwide. As a leading issuer of payments services, the addition of Visa Direct builds on MetaBank’s faster payments platform that also includes MasterCard Send, ACH origination, wire transfers and more.
Financial Highlights for the 2020 Fiscal Second Quarter Ended March 31, 2020
During the fiscal 2020 second quarter, the Company recognized a $19.3 million gain on divestiture of the Community Bank division, partially offset by one-time expenses related to the transaction of $1.0 million resulting in a pre-tax net gain from the transaction of $18.3 million, or $0.51 per share.
Total gross loans and leases at March 31, 2020 increased $175.8 million, or 5%, to $3.61 billion, compared to March 31, 2019 and increased $27.5 million, or 1% when compared to December 31, 2019.
Average deposits from the payments divisions for the fiscal 2020 second quarter increased nearly 11% to $3.31 billion when compared to the same quarter in fiscal 2019.
Total revenue for the fiscal 2020 second quarter was $188.3 million, compared to $176.4 million for the same quarter in fiscal 2019, representing a 7% increase.
Net interest income for the fiscal 2020 second quarter was $67.7 million, compared to $71.4 million in the comparable quarter in fiscal 2019.
Net interest margin ("NIM") decreased to 4.78% for the fiscal 2020 second quarter from 5.06% over the same period of the prior fiscal year, while the tax-equivalent net interest margin ("NIM, TE") decreased to 4.82% from 5.18% for that same period in fiscal 2019.
During the quarter ended March 31, 2020, the Company repurchased 2,592,381 of its shares, at a weighted average price of $31.78, under its share repurchase program, which is authorized through December 31, 2022. The Company suspended repurchase activity under its share repurchase program in March. The Company had 34,607,962 shares outstanding at March 31, 2020.
COVID-19 Business Update
First and foremost, the Company is focused on the well-being of its employees, partners and customers. Preventative health measures were recently put in place to protect employees and customers including mandating remote work options and social distancing measures where possible, restricting non-essential business travel and enhancing preventative cleaning services at all office locations. The Company also enacted a COVID-19 Crisis Command Center consisting of leadership and business continuity planning resources throughout the organization to effectively monitor possible interruptions related to the pandemic and to ensure business continuity.
The Company's loan and lease portfolio is diversified by geography and industry. While asset quality remains strong at this time, the Company's focus is on actively monitoring and assisting customers. The following actions have been implemented:
tighter underwriting standards;
monitoring and placing limits on originations to industries and customers most adversely impacted by the COVID-19 pandemic, including, but not limited to transportation, travel, entertainment, and retail;
contacting customers in order to assess their credit situations and needs;
offering flexible repayment options to current customers, when appropriate; and
utilizing CARES Act, SBA and USDA programs and loan products to help our small business clients.
The Company increased its allowance for loan and lease losses during the fiscal second quarter as a result of the emerging COVID-19 pandemic. The Company will continue to diligently monitor the allowance for loan and lease losses and adjust as necessary in future periods to maintain an appropriate and supportable level.

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The Company's capital position remained strong as of March 31, 2020. As of March 31, 2020, the Bank's capital leverage ratio based on average assets was 8.52%, which is seasonally low due to higher asset levels driven by the tax services business. In addition, the Company has options available that can be used to effectively manage capital levels through these turbulent times, including a very strong and flexible balance sheet.
2020 Tax Season Update
For the 2020 tax season, MetaBank originated $1.33 billion in refund advance loans compared to $1.49 billion during the 2019 tax season. Additionally, the Company expects to process approximately 2.1 million in refund transfers through its tax services division for the 2020 tax season, compared to the over 2.4 million in refund transfers processed during the prior year’s tax season. These decreases can primarily be attributed to the exit of non-strategic partners for the 2020 tax season.
During the second quarter of fiscal 2020, total tax services product revenue was $57.1 million, a decrease of 11% compared to the second quarter of fiscal 2019. The Company recorded $19.6 million in loan loss provision expense related to $1.26 billion in tax services loans originated during the fiscal second quarter of 2020. The Company recorded $22.5 million in loan loss provision expense related to $1.43 billion in tax services loans originated during the fiscal second quarter of 2019.
Tax services product income, net of losses and direct product expenses, increased 1% when comparing the first six months of fiscal 2020 to the same period of the prior fiscal year.
Net Interest Income
Net interest income for the fiscal 2020 second quarter was $67.7 million, a decrease of 5%, from the same quarter in fiscal 2019. The decrease was driven primarily by a decrease in investment securities balances along with lower yields realized on the loan and lease portfolios, partially offset by a reduction in total interest expense.
During the second quarter of fiscal year 2020, investment securities interest income decreased $5.7 million and loan and lease interest income decreased $3.2 million, when compared to the same quarter in fiscal 2019, while interest expense decreased $5.3 million over that same period. The quarterly average outstanding balance of loans and leases as a percentage of interest-earning assets for the quarter ended March 31, 2020 increased to 74%, from 65% for the quarter ended March 31, 2019, while the quarterly average balance of total investments as a percentage of interest-earning assets decreased to 23% from 30% over that same period. The Company’s average interest-earning assets for the fiscal 2020 second quarter decreased by $17.5 million, to $5.70 billion from the comparable quarter in fiscal 2019.
NIM decreased to 4.78% for the fiscal 2020 second quarter from 5.06% for the comparable quarter in fiscal 2019. The net effect of purchase accounting accretion contributed three basis points to NIM for the fiscal 2020 second quarter as compared to six basis points and 18 basis points for the quarters ended December 31, 2019 and March 31, 2019, respectively.
The overall reported tax-equivalent yield (“TEY”) on average earning asset yields decreased by 74 basis points to 5.64% for the fiscal 2020 second quarter compared to the fiscal 2019 second quarter, driven primarily by a lower interest rate environment. The fiscal 2020 second quarter TEY on the securities portfolio was 2.68% compared to 3.36% for the same period of the prior fiscal year.
The Company's cost of funds for all deposits and borrowings averaged 0.83% during the fiscal 2020 second quarter, compared to 1.17% for the fiscal 2019 second quarter. This decrease was primarily due to a decrease in overnight borrowings rates as well as an increase in the average balance of the Company's noninterest-bearing deposits. The Company's overall cost of deposits was 0.66% in the fiscal second quarter of 2020, compared to 1.06% in the same quarter of fiscal 2019.

3


Noninterest Income
Fiscal 2020 second quarter noninterest income was $120.5 million, compared to $105.0 million for the same period of the prior year. This increase was primarily due to a $19.3 million gain on divestiture of the Community Bank division during the fiscal 2020 second quarter. Increases in other income and rental income, partially offset by decreases in total tax product fee income and payments card and deposit fees, also contributed to the increase when comparing the fiscal 2020 second quarter to the same period of the prior year.
Noninterest Expense
Noninterest expense decreased 17% to $91.7 million for the fiscal 2020 second quarter, from $110.3 million for the same quarter of fiscal 2019. The decrease in noninterest expense when comparing the fiscal 2020 second quarter to the same period of the prior fiscal year was primarily driven by decreases in compensation and benefits expense, impairment expense, and intangible amortization expense, partially offset by increases in operating lease equipment depreciation, legal and consulting expense, and other expense. The Company recognized $1.0 million of one-time noninterest expenses related to the Community Bank division divestiture during the fiscal second quarter of 2020. These expenses were primarily within legal and consulting expense and other expense.
Income Tax Expense
The Company recorded income tax expense of $5.6 million, representing an effective tax rate of 9.48%, for the fiscal 2020 second quarter, compared to an income tax benefit of $0.4 million, representing an effective tax rate of (1.20)%, for the fiscal 2019 second quarter. The recorded income tax expense during the current quarter was due to an increase in net income before tax, as well as less investment tax credits recognized ratably when compared to the prior year quarter.
The Company originated $17.6 million in solar leases during the fiscal 2020 second quarter and did not originate any solar leases during the fiscal 2019 second quarter. Investment tax credits related to solar leases are recognized ratably based on income throughout each fiscal year. The timing and impact of future solar tax credits are expected to vary from period to period, and Meta intends to undertake only those tax credit opportunities that meet the Company's underwriting and return criteria.


4


Investments, Loans and Leases
March 31, 2020December 31, 2019September 30, 2019June 30, 2019March 31, 2019
Total investments$1,310,476  $1,337,840  $1,407,257  $1,502,640  $1,649,754  
Loans held for sale
Consumer credit products—  —  122,299  45,582  42,342  
SBA/USDA13,610  13,883  26,478  17,257  17,403  
Community Bank(1)
—  250,383  —  —  —  
Total loans held for sale13,610  264,266  148,777  62,839  59,745  
National Lending
Term lending(2)
725,581  695,347  641,742  562,557  507,886  
Asset based lending(2)
250,211  250,633  250,465  229,573  230,557  
Factoring285,495  285,776  296,507  320,344  287,955  
Lease financing(2)
238,788  223,715  177,915  165,136  155,181  
Insurance premium finance332,800  349,299  361,105  358,772  307,875  
SBA/USDA92,000  90,269  88,831  99,791  77,481  
Other commercial finance101,472  99,617  99,665  99,677  98,956  
Commercial Finance2,026,347  1,994,656  1,916,230  1,835,850  1,665,891  
Consumer credit products113,544  115,843  106,794  155,539  139,617  
Other consumer finance144,895  154,772  161,404  164,727  170,824  
Consumer Finance258,439  270,615  268,198  320,266  310,441  
Tax Services95,936  101,739  2,240  24,410  84,824  
Warehouse Finance333,829  272,522  262,924  250,003  186,697  
Total National Lending loans and leases2,714,551  2,639,532  2,449,592  2,430,529  2,247,853  
Community Banking
Commercial real estate and operating654,429  682,399  883,932  877,412  869,917  
Consumer one-to-four family real estate and other205,046  220,588  259,425  256,853  257,079  
Agricultural real estate and operating36,759  40,778  58,464  61,169  60,167  
Total Community Banking loans896,234  943,765  1,201,821  1,195,434  1,187,163  
Total gross loans and leases3,610,785  3,583,297  3,651,413  3,625,963  3,435,016  
Allowance for loan and lease losses(65,355) (30,176) (29,149) (43,505) (48,672) 
Net deferred loan and lease origination fees8,139  7,177  7,434  5,068  2,964  
Total loans and leases, net of allowance(3)
$3,553,569  $3,560,298  $3,629,698  $3,587,526  $3,389,308  
(1) The December 31, 2019 balance included approximately $197.5 million of commercial real estate and operating loans, $40.4 million of consumer one-to-four family real estate and other loans, and $12.7 million of agricultural real estate and operating loans.
(2) The Company updated the presentation of its loan and lease table beginning in the fiscal 2020 first quarter. The new presentation included a new category called term lending. Certain balances previously included in the asset based lending and lease financing categories were reclassified into the new term lending category during the fiscal 2020 first quarter. Prior period balances have been conformed to the new presentation.
(3) As of March 31, 2020, the remaining balance of acquired loans and leases from the acquisition of Crestmark Bancorp, Inc. ("Crestmark") and its bank subsidiary, Crestmark Bank (the "Crestmark Acquisition") was $236.6 million and the remaining balances of the credit and interest rate mark discounts related to the acquired loans and leases held for investment were $4.3 million and $2.7 million, respectively, while the remaining balance of the interest rate mark premium related to the acquired loans held for sale was $0.4 million. On August 1, 2018, the Company acquired loans and leases from the Crestmark Acquisition totaling $1.06 billion and recorded related credit and interest rate mark discounts of $12.3 million and $6.0 million, respectively.
The Company continued to utilize cash flow from its amortizing securities portfolio to fund loan and lease growth. Investment securities totaled $1.31 billion at March 31, 2020, as compared to $1.65 billion at March 31, 2019.
On February 29, 2019, the Company sold $268.8 million of community bank loan balances, as part of the Community Bank division sale to Central Bank, reducing the outstanding balance to $896.2 million as of March 31, 2020.
Total gross loans and leases increased $175.8 million, or 5%, to $3.61 billion at March 31, 2020, from $3.44 billion at March 31, 2019, which was primarily attributable to growth in the commercial finance and warehouse finance portfolios, partially offset by the aforementioned sale of community bank loan balances.
5


At March 31, 2020, commercial finance loans, which comprised 56% of the Company's gross loan and lease portfolio, totaled $2.03 billion, reflecting growth of $31.7 million, or 2%, from December 31, 2019. Warehouse finance loans totaled $333.8 million at March 31, 2020, a 22% increase from December 31, 2019.
Asset Quality
The Company’s allowance for loan and lease losses was $65.4 million at March 31, 2020, compared to $48.7 million at March 31, 2019, driven primarily by increases in the allowance of $16.7 million in commercial finance and $4.6 million in the community banking portfolio, partially offset by decreases in the tax services and consumer lending portfolios of $2.8 million and $1.9 million, respectively.
The following table presents the Company's allowance for loan and lease losses as a percentage of its total loans and leases.
As of the Period Ended
(Unaudited)March 31, 2020December 31, 2019March 31, 2019
Commercial finance1.28 %0.80 %0.55 %
Consumer finance1.74 %2.22 %2.08 %
Tax services22.22 %1.62 %28.42 %
Warehouse finance0.10 %0.10 %0.10 %
National Lending1.92 %0.90 %1.77 %
Community Bank1.49 %0.68 %0.74 %
Total loans and leases1.81 %0.84 %1.42 %

The Company assessed each of its loan and lease portfolios during the fiscal second quarter and increased its allowance for loan and lease losses as a percentage of total loans and leases in the commercial finance and community bank portfolios as a result of the emerging COVID-19 pandemic. The reduction in consumer finance was largely driven by lower trending charge-off rates on student loans mainly serving students in the medical community. Tax services coverage rates were driven only by typical seasonal activity and are not expected to be materially impacted by COVID-19 as the tax lending season is substantially complete. Warehouse finance remained largely unchanged due to the structure of the credit protections in place. The Company expects to continue to diligently monitor the allowance for loan and lease losses and adjust as necessary in future periods to maintain an appropriate and supportable level. When adding the $4.3 million balance of the credit mark to the allowance for loan and lease losses, the commercial finance coverage ratio increases to 1.49% and the total loans and leases coverage ratio increases to 1.93%, as of March 31, 2020.
Activity in the allowance for loan and lease losses for the periods presented were as follows.
(Unaudited)Three Months EndedSix Months Ended
March 31, 2020December 31, 2019March 31, 2019March 31, 2020March 31, 2019
(Dollars in thousands)
Beginning balance$30,176  $29,149  $21,290  $29,149  $13,040  
Provision - tax services loans19,596  911  22,473  20,507  23,969  
Provision - all other loans and leases17,700  2,496  10,845  20,196  18,448  
Charge-offs - tax services loans—  —  (1) —  (43) 
Charge-offs - all other loans and leases(3,187) (3,918) (6,522) (7,105) (9,283) 
Recoveries - tax services loans74  739  84  813  176  
Recoveries - all other loans and leases996  799  503  1,795  2,365  
Ending balance$65,355  $30,176  $48,672  $65,355  $48,672  


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Provision for loan and lease losses was $37.3 million for the quarter ended March 31, 2020, compared to $33.3 million for the comparable period in the prior fiscal year. The increase in provision was primarily due to $15.8 million in additional allowance for the Company's loan and lease portfolio, specifically for the commercial finance portfolio and the remaining community bank portfolio, associated with the emerging COVID-19 pandemic. Management believes that given the structure of the credit protections put in place for the consumer and warehouse finance lending lines, the coverage ratio for those loan portfolios was adequate as of March 31, 2020. Net charge-offs were $2.1 million for the quarter ended March 31, 2020 compared to $5.9 million for the quarter ended March 31, 2019. The overall decrease in total net charge-offs from the comparable quarter of the prior fiscal year was primarily within the commercial finance and consumer finance portfolios.
The Company's past due loans and leases were as follows for the periods presented.
As of March 31, 2020Accruing and Nonaccruing Loans and LeasesNonperforming Loans and Leases
(Dollars in Thousands)30-59 Days
Past Due
60-89 Days
Past Due
>
89 Days Past Due
Total Past
Due
CurrentTotal Loans and Leases
Receivable
> 89 Days Past Due and AccruingNon-accrual balanceTotal
Commercial finance$35,810  $7,487  $18,721  $62,018  $1,964,329  $2,026,347  $9,372  $16,024  $25,396  
Consumer finance1,781  1,078  1,345  4,204  254,235  258,439  1,345  —  1,345  
Tax services668  —  —  668  95,268  95,936  —  —  —  
Warehouse finance—  —  —  —  333,829  333,829  —  —  —  
Total National Lending38,259  8,565  20,066  66,890  2,647,661  2,714,551  10,717  16,024  26,741  
Total Community Banking1,012  2,735  4,723  8,470  887,764  896,234  2,905  1,818  4,723  
Total loans and leases held for investment$39,271  $11,300  $24,789  $75,360  $3,535,425  $3,610,785  $13,622  $17,842  $31,464  

As of December 31, 2019Accruing and Nonaccruing Loans and LeasesNonperforming Loans and Leases
(Dollars in Thousands)30-59 Days Past Due60-89 Days Past Due> 89 Days Past DueTotal Past DueCurrentTotal Loans and Leases Receivable> 89 Days Past Due and AccruingNon-accrual balanceTotal
Commercial finance$24,127  $4,642  $17,732  $46,501  $1,948,155  $1,994,656  $5,733  $16,593  $22,326  
Consumer finance2,295  1,234  1,648  5,177  265,438  270,615  1,648  —  1,648  
Tax services—  —  —  —  101,739  101,739  —  —  —  
Warehouse finance—  —  —  —  272,522  272,522  —  —  —  
Total National Lending26,422  5,876  19,380  51,678  2,587,854  2,639,532  7,381  16,593  23,974  
Total Community Banking376  1,612   1,997  941,768  943,765  —    
Total loans and leases held for investment$26,798  $7,488  $19,389  $53,675  $3,529,622  $3,583,297  $7,381  $16,602  $23,983  

The Company had not experienced significant asset deterioration as of March 31, 2020, but has made short term deferments of payments on $9.5 million of loan balances as a result of interagency guidance issued on March 22, 2020 encouraging companies to work with customers impacted by COVID-19. Short term payment deferral modifications of $152.0 million and $62.4 million in other COVID-19 related modifications were completed by the Company as of April 19, 2020.
The Company's nonperforming assets at March 31, 2020, were $39.4 million, representing 0.67% of total assets, compared to $29.8 million, or 0.48% of total assets at December 31, 2019 and $40.9 million, or 0.68% of total assets at March 31, 2019. The increase in nonperforming assets on a linked quarter basis was primarily driven by an increase in foreclosed and repossessed assets, two nonperforming agricultural loan relationships in the community bank portfolio, and an increase in term lending nonperforming loans. The year-over-year decrease in nonperforming assets was primarily driven by a reduction in foreclosed and repossessed assets, mostly offset by an increase in commercial finance nonperforming loans and leases.
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The Company's nonperforming loans and leases at March 31, 2020, were $31.5 million, representing 0.87% of total gross loans and leases, compared to $24.0 million, or 0.62% of total gross loans and leases at December 31, 2019 and $9.6 million, or 0.28% of total gross loans and leases at March 31, 2019.
Deposits, Borrowings and Other Liabilities
Total average deposits for the fiscal 2020 second quarter decreased by $590.0 million to $5.06 billion compared to the same period in fiscal 2019. Average wholesale deposits decreased $807.0 million, or 35%, while average noninterest-bearing deposits increased $245.9 million, or 8%, for the fiscal 2020 second quarter when compared to the same period in fiscal 2019. Average deposits from the payments divisions increased 11% to $3.31 billion for the fiscal 2020 second quarter when compared to the same period in fiscal 2019.
The average balance of total deposits and interest-bearing liabilities was $5.64 billion for the three-month period ended March 31, 2020, compared to $5.86 billion for the same period in the prior fiscal year, representing a decrease of 4%.
Total end-of-period deposits decreased 20% to $3.96 billion at March 31, 2020, compared to $4.97 billion at March 31, 2019. The decrease in end-of-period deposits was primarily driven by a decrease of $672.4 million in wholesale deposits, as well as the aforementioned sale of $290.5 million of community bank deposits during the second quarter of fiscal 2020.
Regulatory Capital
The Company and MetaBank, remained above the federal regulatory minimum capital requirements at March 31, 2020 and continued to be classified as well-capitalized institutions. Regulatory capital ratios of the Company and the Bank are stated in the table below.
The tables below include certain non-GAAP financial measures that are used by investors, analysts and bank regulatory agencies to assess the capital position of financial services companies. Management reviews these measures along with other measures of capital as part of its financial analysis.
As of the dates indicatedMarch 31,
2020
December 31,
2019
September 30,
2019
June 30,
2019
March 31,
2019
Company
Tier 1 leverage capital ratio7.28 %8.28 %8.33 %8.05 %7.45 %
Common equity Tier 1 capital ratio10.24 %10.10 %10.35 %10.19 %10.94 %
Tier 1 capital ratio 10.60 %10.46 %10.71 %10.55 %11.31 %
Total capital ratio13.57 %12.74 %13.01 %13.22 %14.20 %
MetaBank
Tier 1 leverage capital ratio8.52 %9.70 %9.65 %9.37 %8.42 %
Common equity Tier 1 capital ratio12.36 %12.18 %12.31 %12.22 %12.72 %
Tier 1 capital ratio 12.41 %12.24 %12.37 %12.27 %12.76 %
Total capital ratio13.66 %12.90 %13.02 %13.26 %13.92 %

The following table provides the non-GAAP financial measures used to compute certain of the ratios included in the table above, as well as a reconciliation of such non-GAAP financial measures to the most directly comparable financial measure in accordance with GAAP:
8


Standardized Approach(1)
March 31,
2020
December 31,
2019
September 30,
2019
June 30,
2019
March 31,
2019
(Dollars in Thousands)
Total stockholders' equity$805,074  $837,068  $843,958  $822,901  $823,709  
Adjustments:
LESS: Goodwill, net of associated deferred tax liabilities303,625  304,020  304,020  302,850  302,768  
LESS: Certain other intangible assets44,909  47,855  50,501  53,249  56,456  
LESS: Net deferred tax assets from operating loss and tax credit carry-forwards11,589  16,876  15,569  13,858  7,381  
LESS: Net unrealized gains (losses) on available-for-sale securities2,337  3,897  6,458  2,329  (10,022) 
LESS: Non-controlling interest3,762  4,305  4,047  3,508  3,528  
LESS: Unrealized currency gains (losses)—  —  —  —  (242) 
Common Equity Tier 1(1)
438,852  460,115  463,363  447,107  463,840  
Long-term borrowings and other instruments qualifying as Tier 113,661  13,661  13,661  13,661  13,661  
Tier 1 minority interest not included in common equity tier 1 capital2,036  2,372  2,350  2,119  2,064  
Total Tier 1 Capital454,549  476,148  479,374  462,887  479,565  
Allowance for loan and lease losses53,580  30,239  29,272  43,641  48,812  
Subordinated debentures (net of issuance costs)73,724  73,684  73,644  73,605  73,566  
Total qualifying capital$581,853  $580,071  $582,290  $580,133  $601,963  
(1) Capital ratios were determined using the Basel III capital rules that became effective on January 1, 2015. Basel III revised the definition of capital, increased minimum capital ratios, and introduced a minimum CET1 ratio; those changes are being fully phased in through the end of 2021.

The following table provides a reconciliation of tangible common equity and tangible common equity excluding accumulated other comprehensive income ("AOCI"), each of which is used in calculating tangible book value data, to Total Stockholders' Equity. Each of tangible common equity and tangible common equity excluding AOCI is a non-GAAP financial measure that is commonly used within the banking industry.
March 31,
2020
December 31,
2019
September 30,
2019
June 30,
2019
March 31,
2019
(Dollars in Thousands)
Total Stockholders' Equity$805,074  $837,068  $843,958  $822,901  $823,709  
Less: Goodwill309,505  309,505  309,505  307,941  307,464  
Less: Intangible assets46,766  50,151  52,810  56,153  60,506  
     Tangible common equity448,803  477,412  481,643  458,807  455,739  
Less: Accumulated other comprehensive income (loss) ("AOCI")1,654  3,895  6,339  2,308  (10,264) 
     Tangible common equity excluding AOCI$447,149  $473,517  $475,304  $456,499  $466,003  


Outlook
Given the deteriorating economic environment and the uncertainty of the impact on the business following the emergence of the COVID-19 pandemic, the Company is suspending fiscal 2020 earnings per share guidance.
Conference Call
The Company will host a conference call and earnings webcast at 4:00 p.m. Central Time (5:00 p.m. Eastern Time) on Wednesday, April 22, 2020. The live webcast of the call can be accessed from Meta’s Investor Relations website at www.metafinancialgroup.com. Telephone participants may access the live conference call by dialing (844) 461-9934 beginning approximately 10 minutes prior to start time. Please ask to join the Meta Financial conference call, and provide conference ID 4942497 upon request. International callers should dial (636) 812-6634. A webcast replay will also be archived at www.metafinancialgroup.com for one year.
9


Forward-Looking Statements
The Company and MetaBank, N.A. ("MetaBank") may from time to time make written or oral “forward-looking statements,” including statements contained in this press release, the Company’s filings with the SEC, the Company’s reports to stockholders, and in other communications by the Company and MetaBank, which are made in good faith by the Company pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995.
You can identify forward-looking statements by words such as “may,” “hope,” “will,” “should,” “expect,” “plan,” “anticipate,” “intend,” “believe,” “estimate,” “predict,” “potential,” “continue,” “could,” “future,” or the negative of those terms, or other words of similar meaning or similar expressions. You should carefully read statements that contain these words because they discuss our future expectations or state other “forward-looking” information. These forward-looking statements are based on information currently available to us and assumptions about future events, and include statements with respect to the Company’s beliefs, expectations, estimates, and intentions, which are subject to significant risks and uncertainties, and are subject to change based on various factors, some of which are beyond the Company’s control. Such risks, uncertainties and other factors may cause our actual growth, results of operations, financial condition, cash flows, performance and business prospects and opportunities to differ materially from those expressed in, or implied by, these forward-looking statements. Such statements address, among others, the following subjects: future operating results; expectations in connection with the impact of the ongoing COVID-19 pandemic and related government actions on the Company and MetaBank; the extent in which the COVID-19 pandemic and measures taken in response thereto impact our business, our industry and the capital markets; customer retention; loan and other product demand; important components of the Company's statements of financial condition and operations; growth and expansion; expectations concerning the Company's acquisitions and divestitures, including potential benefits of, and other expectations for the Company in connection with, such transactions; new products and services, such as those offered by MetaBank or the Company's Payments divisions (which include Meta Payment Systems, Refund Advantage, EPS Financial and Specialty Consumer 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; expected growth opportunities may not be realized or may take longer to realize than expected; the potential adverse effects of the ongoing COVID-19 pandemic and any governmental or societal responses thereto, or other unusual and infrequently occurring events; 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 and recent and potential changes in response to the COVID-19 pandemic such as the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") and the rules and regulations that may be promulgated thereunder; 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 and divestitures; litigation risk; the growth of the Company’s business, as well as expenses related thereto; continued maintenance by MetaBank of its status as a well-capitalized institution, particularly in light of our deposit base, a portion of which has been characterized as “brokered;” changes in consumer spending and saving habits; and the success of the Company at maintaining its high quality asset level and managing and collecting assets of borrowers in default should problem assets increase.
The foregoing list of factors is not exclusive. We caution you not to place undue reliance on these forward-looking statements. The forward-looking statements included in this press release speak only as of the date hereof. Additional discussions of factors affecting the Company’s business and prospects are reflected under the caption “Risk Factors” and in other sections of the Company’s Annual Report on Form 10-K for the Company’s fiscal year ended September 30, 2019, and in other filings made with the SEC. The Company expressly disclaims any intent or obligation to update any forward-looking statements, whether written or oral, that may be made from time to time by or on behalf of the Company or its subsidiaries, whether as a result of new information, changed circumstances, or future events or for any other reason.


10


Condensed Consolidated Statements of Financial Condition (Unaudited)
(Dollars in Thousands, Except Share Data)
ASSETSMarch 31, 2020December 31, 2019September 30, 2019June 30, 2019March 31, 2019
Cash and cash equivalents$108,733  $152,189  $126,545  $100,732  $156,461  
Investment securities available for sale, at fair value840,525  852,603  889,947  961,897  1,081,663  
Mortgage-backed securities available for sale, at fair value355,094  362,120  382,546  395,201  413,493  
Investment securities held to maturity, at cost108,105  116,313  127,582  138,128  146,992  
Mortgage-backed securities held to maturity, at cost6,752  6,804  7,182  7,414  7,606  
Loans held for sale13,610  264,266  148,777  62,839  59,745  
Loans and leases3,618,924  3,590,474  3,658,847  3,631,031  3,437,980  
Allowance for loan and lease losses(65,355) (30,176) (29,149) (43,505) (48,672) 
Federal Home Loan Bank Stock, at cost29,944  13,796  30,916  17,236  7,436  
Accrued interest receivable16,958  18,687  20,400  19,722  20,281  
Premises, furniture, and equipment, net38,871  38,671  45,932  46,360  45,457  
Rental equipment, net200,837  211,673  208,537  184,732  140,087  
Bank-owned life insurance91,081  90,458  89,827  89,193  88,565  
Foreclosed real estate and repossessed assets7,249  1,328  29,494  29,514  29,548  
Goodwill309,505  309,505  309,505  307,941  307,464  
Intangible assets46,766  50,151  52,810  56,153  60,506  
Prepaid assets9,727  14,813  9,476  22,023  26,597  
Deferred taxes20,887  19,752  18,884  21,630  19,079  
Other assets85,652  97,499  54,832  52,831  49,754  
Total assets$5,843,865  $6,180,926  6,182,890  $6,101,072  $6,050,042  
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES
Deposits held for sale$—  $288,975  $—  $—  $—  
Deposits:
Noninterest-bearing checking2,900,484  2,927,967  2,358,010  2,751,931  3,034,428  
Interest-bearing checking152,504  67,642  185,768  157,802  183,492  
Savings deposits37,615  17,436  49,773  52,179  59,978  
Money market deposits37,266  42,286  76,911  68,604  56,563  
Time certificates of deposit25,492  23,454  109,275  116,698  154,401  
Wholesale deposits809,043  1,438,820  1,557,268  1,628,000  1,481,445  
Total deposits3,962,404  4,517,605  4,337,005  4,775,214  4,970,307  
Short-term borrowings717,000  194,000  646,019  146,613  11,583  
Long-term borrowings211,353  213,070  215,838  209,765  99,800  
Accrued interest payable3,607  6,620  9,414  12,350  9,239  
Accrued expenses and other liabilities144,427  123,588  130,656  134,229  135,404  
Total liabilities5,038,791  5,343,858  5,338,932  5,278,171  5,226,333  
STOCKHOLDERS’ EQUITY 
Preferred stock—  —  —  —  —  
Common stock, $.01 par value346  372  378  379  395  
Common stock, Nonvoting, $.01 par value—  —  —  —  —  
Additional paid-in capital590,682  587,678  580,826  578,715  576,406  
Retained earnings212,027  244,005  252,813  238,004  258,600  
Accumulated other comprehensive income (loss)1,654  3,895  6,339  2,308  (10,264) 
Treasury stock, at cost(3,397) (3,187) (445) (13) (4,956) 
Total equity attributable to parent801,312  832,763  839,911  819,393  820,181  
Noncontrolling interest3,762  4,305  4,047  3,508  3,528  
Total stockholders’ equity805,074  837,068  843,958  822,901  823,709  
Total liabilities and stockholders’ equity$5,843,865  $6,180,926  $6,182,890  $6,101,072  $6,050,042  
11


Consolidated Statements of Operations (Unaudited)
(Dollars in Thousands, Except Share and Per Share Data)
 Three Months EndedSix Months Ended
March 31, 2020December 31, 2019March 31, 2019March 31,
2020
March 31,
2019
Interest and dividend income:   
Loans and leases, including fees$70,493  $68,702  $73,670  $139,195  $134,168  
Mortgage-backed securities2,493  2,389  2,861  4,882  5,559  
Other investments6,417  6,534  11,763  12,952  23,543  
 79,403  77,625  88,294  157,029  163,270  
Interest expense:  
Deposits8,242  9,340  14,740  17,583  25,336  
FHLB advances and other borrowings3,424  3,634  2,204  7,058  6,312  
 11,666  12,974  16,944  24,641  31,648  
Net interest income67,737  64,651  71,350  132,388  131,622  
Provision for loan for lease losses37,296  3,407  33,318  40,703  42,417  
Net interest income after provision for loan and lease losses30,441  61,244  38,032  91,685  89,205  
Noninterest income:    
Refund transfer product fees28,939  192  31,601  29,131  31,862  
Tax advance product fees29,536  2,276  33,038  31,812  34,723  
Payments card and deposit fees23,156  21,499  24,671  44,655  45,477  
Other bank and deposit fees381  487  474  868  957  
Rental income11,100  12,351  9,890  23,451  20,780  
Gain on sale of securities available-for-sale, net—  —  231  —  209  
Gain on divestitures19,275  —  —  19,275  —  
Gain (loss) on sale of other2,325  (2,568) 2,230  (244) 3,496  
Other income5,801  3,246  2,890  9,047  5,272  
Total noninterest income120,513  37,483  105,025  157,995  142,776  
Noninterest expense:    
Compensation and benefits34,260  34,268  49,164  68,529  82,174  
Refund transfer product expense7,449  173  7,181  7,621  7,191  
Tax advance product expense1,698  1,132  2,225  2,830  2,677  
Card processing 6,696  5,607  6,971  12,303  14,056  
Occupancy and equipment expense7,013  6,655  7,212  13,668  13,670  
Operating lease equipment depreciation8,421  8,280  4,485  16,701  12,251  
Legal and consulting5,909  4,674  4,308  10,583  8,277  
Intangible amortization3,402  2,676  5,596  6,077  9,978  
Impairment expense507  242  9,660  750  9,660  
Other expense16,374  12,091  13,452  28,464  24,615  
Total noninterest expense91,729  75,798  110,254  167,526  184,549  
Income before income tax expense59,225  22,929  32,803  82,154  47,432  
Income tax expense (benefit) 5,617  680  (395) 6,297  (2,086) 
Net income before noncontrolling interest53,608  22,249  33,198  75,857  49,518  
Net income attributable to noncontrolling interest1,304  1,181  1,078  2,485  2,000  
Net income attributable to parent$52,304  $21,068  $32,120  $73,372  $47,518  
Earnings per common share  
Basic$1.45  $0.56  $0.81  </