cash-20200722
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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): July 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 July 22, 2020, the Registrant issued a press release announcing its results of operations and financial condition as of and for the three and nine months ended June 30, 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 third 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 July 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 July 22, 2020 regarding the results of operations and financial condition.
Investor Update slide presentation for the Third Quarter of Fiscal Year 2020, dated July 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: July 22, 2020By:/s/ Glen W. Herrick
Glen W. Herrick
Executive Vice President and Chief Financial Officer


Document

Exhibit 99.1
https://cdn.kscope.io/350c121f0943c3ed602d56d0ec3d3e9c-metalogoa2011.jpg
META FINANCIAL GROUP, INC.® ANNOUNCES RESULTS FOR 2020 FISCAL THIRD QUARTER
- 2020 Fiscal Third Quarter Net Income of $18.2 Million, or $0.53 Per Diluted Share -

Sioux Falls, S.D., July 22, 2020 (GLOBE NEWSWIRE) -- Meta Financial Group, Inc.® (Nasdaq: CASH) (“Meta” or the “Company”) reported net income of $18.2 million, or $0.53 per diluted share, for the three months ended June 30, 2020, compared to net income of $29.3 million, or $0.75 per diluted share, for the three months ended June 30, 2019.
“I am proud of our performance to date during these unique and volatile times, both operationally and financially. While credit metrics remain sound, we have taken additional provision related to the uncertainty of the COVID-19 pandemic allowing us to build our allowance and strengthen our capital position,” said President and CEO Brad Hanson. “We are keeping the health and safety of our employees at the forefront as we continue serving customers, aligning for growth, and keeping our eyes on the long game, bringing sustainable value to shareholders."
Business Developments
On May 15, 2020, MetaBank, National Association (the “Bank”), a wholly owned subsidiary of the Company entered into a letter of intent ("LOI") with Emerald Financial Services, LLC (“EFS”), a wholly owned indirect subsidiary of H&R Block, Inc. (“H&R Block”). Under the LOI and subject to the negotiation and execution of a multi-year program management agreement (“PMA”), Meta will offer selected financial products to H&R Block clients, and negotiate the transition of certain financial products under an existing program manager agreement between H&R Block and a third party.
On June 23, 2020, Brett Pharr was promoted to Co-President and Chief Operating Officer of MetaBank to better align business lines with Meta’s strategic initiatives. Brad Hanson remains Co-President and Chief Executive Officer of MetaBank and President and Chief Executive Officer of the Company.
During the fiscal 2020 third quarter, the Company extended its agreement with Blackhawk Network, Inc. ("BlackHawk") through 2040. Blackhawk is a leading prepaid and payments company, which supports the program management and distribution of gift cards, prepaid telecom products and financial service products in a number of different retail, digital and incentive channels.
The Company supported various COVID-19 relief efforts to include the Economic Impact Payment ("EIP") program and the Paycheck Protection Program ("PPP"), which are further described below.
Financial Highlights for the 2020 Fiscal Third Quarter Ended June 30, 2020
Total gross loans and leases at June 30, 2020 decreased $129.3 million, or 4%, to $3.50 billion, compared to June 30, 2019 and decreased $114.1 million, or 3% when compared to March 31, 2020.
Average deposits from the payments divisions for the fiscal 2020 third quarter increased nearly 131% to $6.32 billion when compared to the same quarter in fiscal 2019. A significant portion of the year-over-year increase reflected the Company's participation in the EIP program, as described further below. Excluding the balances on the EIP cards, average payments deposits for the fiscal 2020 third quarter were approximately $3.99 billion, representing an increase of 46% compared to the same quarter in fiscal 2019.
Total revenue for the fiscal 2020 third quarter was $103.2 million, compared to $110.8 million for the same quarter in fiscal 2019.
Net interest income for the fiscal 2020 third quarter was $62.1 million, compared to $67.0 million in the comparable quarter in fiscal 2019.
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Net interest margin ("NIM") decreased to 3.28% for the fiscal 2020 third quarter from 5.07% over the same period of the prior fiscal year, while the tax-equivalent net interest margin ("NIM, TE") decreased to 3.31% from 5.15% for that same period in fiscal 2019. The decrease in NIM during the fiscal 2020 third quarter was primarily driven by excess cash associated with the Company's participation in the Economic Impact Payment program, as described further below.
COVID-19 Business Update
The Company continues to focus on the well-being of its employees, partners and customers. Preventative health measures remain 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's COVID-19 Crisis Command Center consisting of leadership and business continuity planning resources throughout the organization continues to effectively monitor possible interruptions related to the pandemic and to ensure business continuity.
The Company is participating in the PPP which is being administered by the Small Business Administration ("SBA"). As of June 30, 2020, the Company had 686 loans outstanding with a total of $215.5 million in loan balances that were originated as part of the program.
From a credit perspective, the Company continues to monitor each of its lending portfolios through these unprecedented times. Significant focus has been placed on the Company's hospitality loans and its small ticket equipment finance relationships. The credit management team has increased the monitoring of these relationships and has been in regular contact with these borrowers.
The Company's community bank hospitality loan balances increased to $169.0 million as of June 30, 2020 from $160.1 million as of March 31, 2020 and the average loan-to-value ratio on those loans improved to 60% at June 30, 2020 from 61% at March 31, 2020. 67% of the loan balances for these hotel relationships received PPP loans and 51% received some form of payment deferral modifications.
As of June 30, 2020, the Company had $245.9 million in small ticket equipment finance balances, of which $217.3 million were categorized within term lending and $28.6 million were categorized within lease financing. 27% of the balances on these small ticket equipment finance relationships received some form of payment deferral or other modifications.
The Company has granted deferral payments on a total of $352.1 million of loan and lease balances through June 30, 2020 as a result of interagency guidance issued on March 22, 2020 encouraging companies to work with customers impacted by COVID-19. As of June 30, 2020, loans and lease totaling $292.2 million were still in their deferment period. In addition, the Company has made other COVID-19 related modifications on a total of $52.9 million, of which $34.6 million are still active as of June 30, 2020. The majority of the other modifications were related to adjusting the type or amount of the customer's payments.
The Company increased its allowance for loan and lease losses during the fiscal third quarter primarily as a result of the ongoing economic uncertainty related to 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.
The Company's capital position remained strong as of June 30, 2020, even while absorbing the temporary impact from the EIP program, as described further below. As of June 30, 2020, the Bank's capital leverage ratio based on average assets was 6.89%. 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. The Company's capital leverage ratio was impacted by approximately 278 basis points due to the increase in total asset balances as a result of the EIP program.

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Economic Impact Payment Program ("EIP") Update
On April 29, 2020, the Bank entered into an amendment of its existing agreement with the U.S. Department of the Treasury’s Bureau of the Fiscal Service (“Fiscal Service”) to provide debit card services to support the distribution of a segment of the Economic Impact Payments payable by the Internal Revenue Service under the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act").
Under the EIP program, 3.6 million cards were delivered with total loads of $6.42 billion. As a result of the program, the Company saw a quick influx of deposits to its balance sheet in mid-May 2020 with limited visibility into the duration of those deposits. While this program's impact to earnings was negligible, it did have a significant impact on cash and deposit balances, leading to a net drag on the net interest margin along with pressuring the Company's leverage capital ratios.
The total balances remaining on the EIP cards as of June 30, 2020 were $2.68 billion and $2.08 billion as of July 19, 2020. The funds on these cards increased the Company's quarterly average noninterest deposit balances by $2.32 billion, leading to an overall improvement in cost of deposits. This short term influx of deposits also led to excess cash balances held at the Federal Reserve during the current period, which yielded approximately 10 basis points in interest income, and increased the quarterly average of interest-earning assets compared to previous periods. This increase of lower yielding cash balances resulted in a drag to the overall yield on total interest-earning assets during the current period. The net impact to NIM was approximately 140 basis points.
Net Interest Income
Net interest income for the fiscal 2020 third quarter was $62.1 million, a decrease of 7%, from the same quarter in fiscal 2019. The decrease was primarily driven by lower overall balances and yields realized on the loan and lease portfolios along with a decrease in investment securities balances, partially offset by a reduction in total interest expense.
During the third quarter of fiscal year 2020, loan and lease interest income decreased $9.8 million and investment securities interest income decreased $4.4 million, when compared to the same quarter in fiscal 2019, while interest expense decreased $9.4 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 June 30, 2020 decreased to 48%, from 68% for the quarter ended June 30, 2019, while the quarterly average balance of total investments as a percentage of interest-earning assets decreased to 17% from 31% over that same period. These decreases were primarily due to the increase in interest-earning cash balances related to the EIP program. The Company’s average interest-earning assets for the fiscal 2020 third quarter increased by $2.31 billion, to $7.61 billion from the comparable quarter in fiscal 2019, primarily due to the effects of the EIP program.
NIM decreased to 3.28% for the fiscal 2020 third quarter from 5.07% for the comparable quarter in fiscal 2019, primarily due to the effects of the EIP program. The net effect of purchase accounting accretion contributed two basis points to NIM for the fiscal 2020 third quarter as compared to three basis points and 25 basis points for the quarters ended March 31, 2020 and June 30, 2019, respectively.
The overall reported tax-equivalent yield (“TEY”) on average earning asset yields decreased by 267 basis points to 3.59% for the fiscal 2020 third quarter compared to the fiscal 2019 third quarter, driven primarily by excess low-yielding cash held at the Federal Reserve, along with a lower interest rate environment. The fiscal 2020 third quarter TEY on the securities portfolio was 2.22% 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 0.28% during the fiscal 2020 third quarter, compared to 1.14% for the fiscal 2019 third quarter. This decrease was primarily due to a decrease in overnight borrowings rates as well as an increase in the average balance of the Company's noninterest-bearing deposits, mainly due to the EIP program noted above. The Company's overall cost of deposits was 0.17% in the fiscal third quarter of 2020, compared to 0.90% in the same quarter of fiscal 2019.
Noninterest Income
Fiscal 2020 third quarter noninterest income was $41.0 million, compared to $43.8 million for the same period of the prior year. This year-over-year decrease was primarily due to lower total tax product fee income and a reduction in gains on loan sales, partially offset by an increase in rental income.
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Noninterest Expense
Noninterest expense decreased 2% to $71.2 million for the fiscal 2020 third quarter, from $72.5 million for the same quarter of fiscal 2019, primarily driven by lower compensation and benefits, intangible amortization, total tax product expense, and occupancy and equipment expenses, partially offset by higher card processing expenses and operating lease equipment depreciation.
Income Tax Expense
The Company recorded an income tax benefit of $2.4 million, representing an effective tax rate of (14.4%), for the fiscal 2020 third quarter, compared to an income tax benefit of $1.2 million, representing an effective tax rate of (4.0)%, for the fiscal 2019 third quarter. The recorded income tax benefit during the current quarter was primarily due to ratably recognized investment tax credits and lower forecast earnings due to COVID-19.
The Company originated $1.3 million in solar leases during the fiscal 2020 third quarter, compared to $49.1 million during the fiscal 2019 third quarter. Investment tax credits related to solar leases are recognized ratably based on income throughout each fiscal year. The timing and impact of future solar tax credits are expected to vary from period to period, and Meta intends to undertake only those tax credit opportunities that meet the Company's underwriting and return criteria.
Investments, Loans and Leases
June 30, 2020March 31, 2020December 31, 2019September 30, 2019June 30, 2019
Total investments$1,268,416  $1,310,476  $1,337,840  $1,407,257  $1,502,640  
Loans held for sale
Consumer credit products391  —  —  122,299  45,582  
SBA/USDA31,438  13,610  13,883  26,478  17,257  
Community Bank(1)
48,076  —  250,383  —  —  
Total loans held for sale79,905  13,610  264,266  148,777  62,839  
National Lending
Term lending(2)
738,454  725,581  695,347  641,742  562,557  
Asset based lending(2)
181,130  250,211  250,633  250,465  229,573  
Factoring206,361  285,495  285,776  296,507  320,344  
Lease financing(2)
264,988  238,788  223,715  177,915  165,136  
Insurance premium finance359,147  332,800  349,299  361,105  358,772  
SBA/USDA308,611  92,000  90,269  88,831  99,791  
Other commercial finance100,214  101,472  99,617  99,665  99,677  
Commercial Finance2,158,905  2,026,347  1,994,656  1,916,230  1,835,850  
Consumer credit products102,808  113,544  115,843  106,794  155,539  
Other consumer finance138,777  144,895  154,772  161,404  164,727  
Consumer Finance241,585  258,439  270,615  268,198  320,266  
Tax Services19,168  95,936  101,739  2,240  24,410  
Warehouse Finance277,614  333,829  272,522  262,924  250,003  
Total National Lending loans and leases2,697,272  2,714,551  2,639,532  2,449,592  2,430,529  
Community Banking
Commercial real estate and operating608,303  654,429  682,399  883,932  877,412  
Consumer one-to-four family real estate and other166,479  205,046  220,588  259,425  256,853  
Agricultural real estate and operating24,655  36,759  40,778  58,464  61,169  
Total Community Banking loans799,437  896,234  943,765  1,201,821  1,195,434  
Total gross loans and leases3,496,709  3,610,785  3,583,297  3,651,413  3,625,963  
Allowance for loan and lease losses(65,747) (65,355) (30,176) (29,149) (43,505) 
Net deferred loan and lease origination fees5,937  8,139  7,177  7,434  5,068  
Total loans and leases, net of allowance(3)
$3,436,899  $3,553,569  $3,560,298  $3,629,698  $3,587,526  

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(1) The June 30, 2020 balance included approximately $28.7 million of commercial real estate and operating loans, $11.3 million of consumer one-to-four family real estate and other loans, and $8.1 million of agricultural real estate and operating loans. The December 31, 2019 balance included approximately $197.5 million of commercial real estate and operating loans, $40.4 million of consumer one-to-four family real estate and other loans, and $12.7 million of agricultural real estate and operating loans.
(2) The Company updated the presentation of its loan and lease table beginning in the fiscal 2020 first quarter. The new presentation includes a new category called term lending. Certain balances previously included in the asset based lending and lease financing categories were reclassified into the new term lending category during the fiscal 2020 first quarter. Prior period balances have been conformed to the new presentation.
(3) As of June 30, 2020, the remaining balance of acquired loans and leases from the acquisition of Crestmark Bancorp, Inc. ("Crestmark") and its bank subsidiary, Crestmark Bank (the "Crestmark Acquisition") was $188.3 million and the remaining balances of the credit and interest rate mark discounts related to the acquired loans and leases held for investment were $3.4 million and $2.9 million, respectively. On August 1, 2018, the Company acquired loans and leases from the Crestmark Acquisition totaling $1.06 billion and recorded related credit and interest rate mark discounts of $12.3 million and $6.0 million, respectively.
The Company's investment security balances continued to decline at June 30, 2020 to a total of $1.27 billion, as compared to $1.50 billion at June 30, 2019.
Total gross loans and leases decreased $129.3 million, or 4%, to $3.50 billion at June 30, 2020, from $3.63 billion at June 30, 2019, with most of the decline attributable to the sale of community bank loan balances during the second quarter of fiscal 2020 along with a decrease in the consumer finance portfolio, partially offset by growth in the commercial finance portfolio.
At June 30, 2020, commercial finance loans, which comprised 62% of the Company's gross loan and lease portfolio, totaled $2.16 billion, reflecting growth of $132.6 million, or 7%, from March 31, 2020. SBA/USDA loans at June 30, 2020 increased by $216.6 million compared to March 31, 2020, with $215.5 million of the sequential increase related to PPP loans. Warehouse finance loans totaled $277.6 million at June 30, 2020, a 17% decrease from March 31, 2020.
Community bank loans totaled $799.4 million as of June 30, 2020, as compared to $896.2 million at March 31, 2020 and $1.20 billion at June 30, 2019. As of June 30, 2020, the Company had $48.1 million of community bank loans classified as held for sale and expects to sell those loans during the fourth quarter of fiscal 2020.
Asset Quality
The Company’s allowance for loan and lease losses was $65.7 million at June 30, 2020, compared to $43.5 million at June 30, 2019, driven primarily by increases in the allowance of $17.1 million in commercial finance and $12.0 million in the community banking portfolio, partially offset by decreases in the tax services and consumer lending portfolios of $4.0 million and $2.9 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)June 30, 2020March 31, 2020June 30, 2019
Commercial finance1.36 %1.28 %0.67 %
Consumer finance1.75 %1.74 %2.22 %
Tax services59.67 %22.22 %63.19 %
Warehouse finance0.10 %0.10 %0.10 %
National Lending1.68 %1.92 %1.44 %
Community Bank2.55 %1.49 %0.70 %
Total loans and leases1.88 %1.81 %1.20 %


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The Company continued to assess each of its loan and lease portfolios during the fiscal third quarter and increased its allowance for loan and lease losses as a percentage of total loans and leases in the community bank and commercial finance portfolios primarily as a result of the on-going COVID-19 pandemic. Tax services coverage rates were driven by typical seasonal activity and have not been materially impacted by COVID-19 as the tax-lending season is now 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 $3.4 million balance of the credit mark to the allowance for loan and lease losses, the commercial finance coverage ratio increases to 1.52% and the total loans and leases coverage ratio increases to 1.98%, as of June 30, 2020. Within commercial finance, the coverage ratio on Crestmark division loans and leases was 1.52% at June 30, 2020, as compared to 1.41% at March 31, 2020 and 0.77% at June 30, 2019, and the coverage ratio on the insurance premium finance portfolio over those same periods were 0.66%, 0.64%, and 0.28%, respectively.
Activity in the allowance for loan and lease losses for the periods presented were as follows.
(Unaudited)Three Months EndedNine Months Ended
June 30, 2020March 31, 2020June 30, 2019June 30, 2020June 30, 2019
(Dollars in thousands)
Beginning balance$65,355  $30,176  $48,672  $29,149  $13,040  
Provision - tax services loans(100) 19,596  914  20,407  24,883  
Provision - all other loans and leases15,193  17,700  8,198  35,390  26,646  
Charge-offs - tax services loans(9,797) —  (9,627) (9,797) (9,670) 
Charge-offs - all other loans and leases(5,808) (3,187) (5,124) (12,912) (14,407) 
Recoveries - tax services loans15  74  36  827  212  
Recoveries - all other loans and leases889  996  436  2,684  2,801  
Ending balance$65,747  $65,355  $43,505  $65,747  $43,505  

Provision for loan and lease losses was $15.1 million for the quarter ended June 30, 2020, compared to $9.1 million for the comparable period in the prior fiscal year. The increase in provision was primarily within the remaining community banking and commercial finance portfolios, partially offset by decreases in the consumer finance and tax services portfolios. Provision increases in the community banking and commercial finance portfolios was primarily attributable to the increased stress that the hospitality loans and its small ticket equipment finance relationships have experienced stemming from the ongoing economic uncertainty related to the COVID-19 pandemic. Loans and leases that received short-term payment deferrals were also analyzed and additional provision was applied as appropriate. 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 June 30, 2020. Net charge-offs were $14.7 million for the quarter ended June 30, 2020 compared to $14.3 million for the quarter ended June 30, 2019. Total net charge-offs for the quarter ended June 30, 2020 consisted primarily of seasonal net charge-offs of $9.8 million in the tax services loan portfolio. The overall increase in total net charge-offs from the comparable quarter of the prior fiscal year was primarily within the commercial finance portfolio, offset partially by a decrease in the consumer finance portfolio.

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The Company's past due loans and leases were as follows for the periods presented.
As of June 30, 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 DueTotal Past
Due
CurrentTotal Loans and Leases
Receivable
> 89 Days Past Due and AccruingNon-accrual balanceTotal
Commercial finance$13,865  $16,005  $27,150  $57,020  $2,101,885  $2,158,905  $8,635  $22,285  $30,920  
Consumer finance650  623  909  2,182  239,403  241,585  909  —  909  
Tax services—  19,168  —  19,168  —  19,168  —  —  —  
Warehouse finance—  —  —  —  277,614  277,614  —  —  —  
Total National Lending14,515  35,796  28,059  78,370  2,618,902  2,697,272  9,544  22,285  31,829  
Total Community Banking4,910  625  6,885  12,420  787,017  799,437  4,995  2,470  7,465  
Total loans and leases held for investment$19,425  $36,421  $34,944  $90,790  $3,405,919  $3,496,709  $14,539  $24,755  $39,294  

As of March 31, 2020Accruing 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$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  

The Company's nonperforming assets at June 30, 2020, were $56.1 million, representing 0.64% of total assets, compared to $39.4 million, or 0.67% of total assets at March 31, 2020 and $51.0 million, or 0.84% of total assets at June 30, 2019. The increase in nonperforming assets on a linked quarter basis was primarily driven by an increase in commercial finance and community banking nonperforming loans and leases, as well as an increase in nonperforming operating leases. The year-over-year increase in nonperforming assets was primarily driven by an increase in commercial finance nonperforming loans and leases and an increase in nonperforming operating leases, mostly offset by a reduction in foreclosed and repossessed assets. The decrease in nonperforming assets as a percentage of total assets was primarily due to higher period-end assets at June 30, 2020 related to excess cash held at the Federal Reserve stemming from the additional EIP deposit balances.
The Company's nonperforming loans and leases at June 30, 2020, were $39.3 million, representing 1.10% of total gross loans and leases, compared to $31.5 million, or 0.87% of total gross loans and leases at March 31, 2020 and $20.8 million, or 0.57% of total gross loans and leases at June 30, 2019.

7


Deposits, Borrowings and Other Liabilities
Total average deposits for the fiscal 2020 third quarter increased by $2.61 billion to $7.22 billion compared to the same period in fiscal 2019, primarily due to the effects of the EIP program. Average noninterest-bearing deposits increased $3.35 billion, or 123%, for the fiscal 2020 third quarter when compared to the same period in fiscal 2019, while average wholesale deposits decreased $704.2 million, or 46%. Average deposits from the payments divisions increased 131% to $6.32 billion for the fiscal 2020 third quarter when compared to the same period in fiscal 2019. Excluding the balances on the EIP cards, average payments deposits for the fiscal 2020 third quarter were $3.99 billion, representing an increase of 46% compared to the same period of the prior year, which was largely driven by various stimulus payments loaded on partner cards along with lower levels of consumer spending.
The average balance of total deposits and interest-bearing liabilities was $7.49 billion for the three-month period ended June 30, 2020, compared to $5.14 billion for the same period in the prior fiscal year, representing an increase of 46%.
Total end-of-period deposits increased 59% to $7.59 billion at June 30, 2020, compared to $4.78 billion at June 30, 2019. The increase in end-of-period deposits was primarily driven by an increase in noninterest bearing deposits of $4.18 billion, of which $2.68 billion was attributable to the balances on the EIP cards. The increase in total end-of-period deposits was partially offset by a decrease of $884.2 million in wholesale deposits, as well as the sale of $290.5 million of community bank deposits during the second quarter of fiscal 2020.
Regulatory Capital
The Company and MetaBank, remained above the federal regulatory minimum capital requirements at June 30, 2020 and continued to be classified as well-capitalized institutions. Regulatory capital ratios of the Company and the Bank are stated in the table below.
The tables below include certain non-GAAP financial measures that are used by investors, analysts and bank regulatory agencies to assess the capital position of financial services companies. Management reviews these measures along with other measures of capital as part of its financial analysis.
As of the dates indicatedJune 30,
2020
March 31,
2020
December 31,
2019
September 30,
2019
June 30,
2019
Company
Tier 1 leverage capital ratio5.91 %7.28 %8.28 %8.33 %8.05 %
Common equity Tier 1 capital ratio11.51 %10.27 %10.10 %10.35 %10.19 %
Tier 1 capital ratio 11.90 %10.63 %10.46 %10.71 %10.55 %
Total capital ratio14.99 %13.61 %12.74 %13.01 %13.22 %
MetaBank
Tier 1 leverage capital ratio6.89 %8.52 %9.70 %9.65 %9.37 %
Common equity Tier 1 capital ratio13.82 %12.39 %12.18 %12.31 %12.22 %
Tier 1 capital ratio 13.86 %12.44 %12.24 %12.37 %12.27 %
Total capital ratio15.12 %13.69 %12.90 %13.02 %13.26 %


8


The following table provides the non-GAAP financial measures used to compute certain of the ratios included in the table above, as well as a reconciliation of such non-GAAP financial measures to the most directly comparable financial measure in accordance with GAAP:
Standardized Approach(1)
June 30,
2020
March 31,
2020
December 31,
2019
September 30,
2019
June 30,
2019
(Dollars in Thousands)
Total stockholders' equity$829,909  $805,074  $837,068  $843,958  $822,901  
Adjustments:
LESS: Goodwill, net of associated deferred tax liabilities302,814  303,625  304,020  304,020  302,850  
LESS: Certain other intangible assets42,865  44,909  47,855  50,501  53,249  
LESS: Net deferred tax assets from operating loss and tax credit carry-forwards10,360  11,589  16,876  15,569  13,858  
LESS: Net unrealized gains (losses) on available-for-sale securities8,382  2,337  3,897  6,458  2,329  
LESS: Non-controlling interest3,787  3,762  4,305  4,047  3,508  
Common Equity Tier 1(1)
461,701  438,852  460,115  463,363  447,107  
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 capital1,894  2,036  2,372  2,350  2,119  
Total Tier 1 Capital477,256  454,549  476,148  479,374  462,887  
Allowance for loan and lease losses50,338  53,580  30,239  29,272  43,641  
Subordinated debentures (net of issuance costs)73,765  73,724  73,684  73,644  73,605  
Total qualifying capital$601,359  $581,853  $580,071  $582,290  $580,133  
(1) Capital ratios were determined using the Basel III capital rules that became effective on January 1, 2015. Basel III revised the definition of capital, increased minimum capital ratios, and introduced a minimum CET1 ratio; those changes are being fully phased in through the end of 2021.

The following table provides a reconciliation of tangible common equity and tangible common equity excluding accumulated other comprehensive income ("AOCI"), each of which is used in calculating tangible book value data, to Total Stockholders' Equity. Each of tangible common equity and tangible common equity excluding AOCI is a non-GAAP financial measure that is commonly used within the banking industry.
June 30,
2020
March 31,
2020
December 31,
2019
September 30,
2019
June 30,
2019
(Dollars in Thousands)
Total Stockholders' Equity$829,909  $805,074  $837,068  $843,958  $822,901  
Less: Goodwill309,505  309,505  309,505  309,505  307,941  
Less: Intangible assets43,974  46,766  50,151  52,810  56,153  
     Tangible common equity476,430  448,803  477,412  481,643  458,807  
Less: Accumulated other comprehensive income (loss) ("AOCI")7,995  1,654  3,895  6,339  2,308  
     Tangible common equity excluding AOCI$468,435  $447,149  $473,517  $475,304  $456,499  

Conference Call
The Company will host a conference call and earnings webcast at 4:00 p.m. Central Time (5:00 p.m. Eastern Time) on Wednesday, July 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 8468707 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 our business, our industry and the capital markets; customer retention; loan and other product demand; expectations concerning the acquisitions and divestitures; new products and services, including those offered by Meta Payment Systems, Refund Advantage, EPS Financial and Specialty Consumer Services divisions; credit quality 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; 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; 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”); 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 Company's ability to finalize a definitive program management agreement with H&R Block and the terms thereof; the risks of dealing with or utilizing third parties, including, in connection with the Company’s refund advance business, the risk of reduced volume of refund advance loans as a result of reduced customer demand for or usage of Meta’s strategic partners’ refund advance products; our relationship with, and any actions which may be initiated by, our regulators; the impact of changes in financial services laws and regulations, including, but not limited to, laws and regulations relating to the tax refund industry and the insurance premium finance industry and recent and potential changes in response to the COVID-19 pandemic such as the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") and the rules and regulations that may be promulgated thereunder; technological changes, including, but not limited to, the protection of our electronic systems and information; the impact of acquisitions and divestitures; litigation risk; the growth of the Company’s business, as well as expenses related thereto; continued maintenance by MetaBank of its status as a well-capitalized institution, particularly in light of our deposit base, a portion of which has been characterized as “brokered;” changes in consumer spending and saving habits; 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)
ASSETSJune 30, 2020March 31, 2020December 31, 2019September 30, 2019June 30, 2019
Cash and cash equivalents$3,108,141  $108,733  $152,189  $126,545  $100,732  
Investment securities available for sale, at fair value825,579  840,525  852,603  889,947  961,897  
Mortgage-backed securities available for sale, at fair value338,250  355,094  362,120  382,546  395,201  
Investment securities held to maturity, at cost98,205  108,105  116,313  127,582  138,128  
Mortgage-backed securities held to maturity, at cost6,382  6,752  6,804  7,182  7,414  
Loans held for sale79,905  13,610  264,266  148,777  62,839  
Loans and leases3,502,646  3,618,924  3,590,474  3,658,847  3,631,031  
Allowance for loan and lease losses(65,747) (65,355) (30,176) (29,149) (43,505) 
Federal Reserve Bank and Federal Home Loan Bank stocks, at cost31,836  29,944  13,796  30,916  17,236  
Accrued interest receivable17,545  16,958  18,687  20,400  19,722  
Premises, furniture, and equipment, net40,361  38,871  38,671  45,932  46,360  
Rental equipment, net216,336  200,837  211,673  208,537  184,732  
Bank-owned life insurance91,697  91,081  90,458  89,827  89,193  
Foreclosed real estate and repossessed assets6,784  7,249  1,328  29,494  29,514  
Goodwill309,505  309,505  309,505  309,505  307,941  
Intangible assets43,974  46,766  50,151  52,810  56,153  
Prepaid assets6,806  9,727  14,813  9,476  22,023  
Deferred taxes15,944  20,887  19,752  18,884  21,630  
Other assets104,877  85,652  97,499  54,832  52,831  
Total assets$8,779,026  $5,843,865  $6,180,926  6,182,890  $6,101,072  
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES
Deposits held for sale$—  $—  $288,975  $—  $—  
Deposits:
Noninterest-bearing checking6,537,809  2,900,484  2,927,967  2,358,010  2,751,931  
Interest-bearing checking187,003  152,504  67,642  185,768  157,802  
Savings deposits55,896  37,615  17,436  49,773  52,179  
Money market deposits40,811  37,266  42,286  76,911  68,604  
Time certificates of deposit25,000  25,492  23,454  109,275  116,698  
Wholesale deposits743,806  809,043  1,438,820  1,557,268  1,628,000  
Total deposits7,590,325  3,962,404  4,517,605  4,337,005  4,775,214  
Short-term borrowings—  717,000  194,000  646,019  146,613  
Long-term borrowings209,781  211,353  213,070  215,838  209,765  
Accrued interest payable4,332  3,607  6,620  9,414  12,350  
Accrued expenses and other liabilities144,679  144,427  123,588  130,656  134,229  
Total liabilities7,949,117  5,038,791  5,343,858  5,338,932  5,278,171  
STOCKHOLDERS’ EQUITY 
Preferred stock—  —  —  —  —  
Common stock, $.01 par value346  346  372  378  379  
Common stock, Nonvoting, $.01 par value—  —  —  —  —  
Additional paid-in capital592,693  590,682  587,678  580,826  578,715  
Retained earnings228,500  212,027  244,005  252,813  238,004  
Accumulated other comprehensive income7,995  1,654  3,895  6,339  2,308  
Treasury stock, at cost(3,412) (3,397) (3,187) (445) (13) 
Total equity attributable to parent826,122  801,312  832,763  839,911  819,393  
Noncontrolling interest3,787  3,762  4,305  4,047  3,508  
Total stockholders’ equity829,909  805,074  837,068  843,958  822,901  
Total liabilities and stockholders’ equity$8,779,026  $5,843,865  $6,180,926  $6,182,890  $6,101,072  
11


Consolidated Statements of Operations (Unaudited)
(Dollars in Thousands, Except Share and Per Share Data)
 Three Months EndedNine Months Ended
June 30, 2020March 31, 2020June 30, 2019June 30,
2020
June 30,
2019
Interest and dividend income:   
Loans and leases, including fees$59,911  $70,493  $69,732  $199,107  $203,900  
Mortgage-backed securities2,269  2,493  3,063  7,151  8,622  
Other investments5,226  6,417  8,837  18,176  32,380  
 67,406  79,403  81,632  224,434  244,902  
Interest expense:  
Deposits3,130  8,242  10,395  20,712  35,731  
FHLB advances and other borrowings2,139  3,424  4,269  9,197  10,581  
 5,269  11,666  14,664  29,909  46,312  
Net interest income62,137  67,737  66,968  194,525  198,590  
Provision for loan for lease losses15,093  37,296  9,112  55,796  51,529  
Net interest income after provision for loan and lease losses47,044  30,441  57,856  138,729  147,061  
Noninterest income:    
Refund transfer product fees4,595  28,939  6,697  33,726  38,559  
Tax advance product fees28  29,536  34  31,840  34,757  
Payments card and deposit fees21,302  23,156  21,377  65,957  66,855  
Other bank and deposit fees214  381  495  1,083  1,449  
Rental income11,231  11,100  9,386  34,682  30,167  
Gain on sale of securities available-for-sale, net—  —  440  —  649  
Gain on divestitures—  19,275  —  19,275  —  
Gain (loss) on sale of other1,214  2,325  2,620  969  6,117  
Other income2,464  5,801  2,741  11,512  8,012  
Total noninterest income41,048  120,513  43,790  199,044  186,565  
Noninterest expense:    
Compensation and benefits32,102  34,260  35,176  100,631  117,350  
Refund transfer product expense(139) 7,449  287  7,482  7,478  
Tax advance product expense(11) 1,698  425  2,820  3,101  
Card processing 7,128  6,696  4,613  19,432  18,670  
Occupancy and equipment expense6,502  7,013  7,136  20,169  20,806  
Operating lease equipment depreciation8,536  8,421  6,029  25,237  18,280  
Legal and consulting4,660  5,909  4,065  15,242  12,341  
Intangible amortization2,636  3,402  4,374  8,714  14,352  
Impairment expense—  507  —  750  9,660  
Other expense9,827  16,374  10,363  38,291  34,978  
Total noninterest expense71,241  91,729  72,468  238,768  257,016  
Income before income tax expense16,851  59,225  29,178  99,005  76,610  
Income tax expense (benefit) (2,426) 5,617  (1,158) 3,870  (3,244) 
Net income before noncontrolling interest19,277  53,608  30,336  95,135  79,854  
Net income attributable to noncontrolling interest1,087  1,304  1,045  3,573  3,045  
Net income attributable to parent$18,190  $52,304  $29,291  $91,562  $76,809  
Earnings per common share  
Basic$0.53  $1.45  $0.75  $2.54  $1.96  
Diluted$0.53  $1.45  $0.75  $2.54  $1.95  
Shares used in computing earnings per share
Basic34,616,038  35,948,799  38,903,266  36,004,877  39,220,793  
Diluted34,623,114  35,970,296  38,977,690  36,016,037  39,289,011  
12


Average Balances, Interest Rates and Yields
The following table presents, for the periods indicated, the total dollar amount of interest income from average interest-earning assets and the resulting yields, as well as the interest expense on average interest-bearing liabilities, expressed both in dollars and in rates. Only the yield/rate reflects tax-equivalent adjustments. Non-accruing loans and leases have been included in the table as loans carrying a zero yield.
Three Months Ended June 30,20202019
(Dollars in Thousands)Average
Outstanding
Balance
Interest
Earned /
Paid
Yield /
Rate(1)
Average
Outstanding
Balance
Interest
Earned /
Paid
Yield /
Rate(1)
Interest-earning assets:      
Cash and fed funds sold$2,692,270  $783  0.12 %$80,100  $521  2.61 %
Mortgage-backed securities342,174  2,269  2.67 %421,725  3,063  2.91 %
Tax exempt investment securities417,042  1,658