Meta Financial Group, Inc.® Announces Results for 2021 Fiscal Second Quarter

Apr 27 2021

- Earnings Per Share Increased 27% Year-over-Year to $1.84

SIOUX FALLS, S.D., April 27, 2021 (GLOBE NEWSWIRE) -- Meta Financial Group, Inc.® (Nasdaq: CASH) (“Meta” or the “Company”) reported net income of $59.1 million, or $1.84 per share, for the three months ended March 31, 2021, compared to net income of $52.3 million, or $1.45 per share, for the three months ended March 31, 2020.

“Our Tax Services and Payments businesses and the increased interest income from our Commercial Finance business combined to produce solid second quarter revenue results,” said President and CEO Brad Hanson. “We continued to develop our Banking as a Service franchise, including the launch of a new partnership with Walgreens. During the quarter, we distributed cards for the second and third rounds of Economic Impact Payments and further developed our Environmental, Social and Governance efforts, all of which helped advance our mission of financial inclusion for all®.”

“We are pleased with our team’s ability to grow core revenues, improve efficiency, and manage credit. Excluding last year’s gain-on-sale from the divestiture of our community bank, we have seen promising fee income growth driven by both new and existing partner relationships in our payments and tax businesses. Our loan and lease portfolios also continued to perform well, reflecting the strength of our lending and collateral management programs,” said Executive Vice President and CFO Glen Herrick.

Business Development Highlights for the 2021 Fiscal Second Quarter

  • Increased revenue included the benefits of H&R Block's suite of financial services products.
  • Partnered with the U.S. Department of the Treasury’s Bureau of the Fiscal Service (“Fiscal Service”) to disburse Economic Income Payment (“EIP”) stimulus payments through the distribution of prepaid cards. During the quarter, the Company began distributing cards under the authorizations for the second round on January 4, 2021 and for the third round on March 23, 2021.
  • Selected as the issuing bank for Walgreens’ newly launched bank-account product with InComm Payments and MasterCard, adding to MetaBank’s diverse suite of Banking as a Service relationships.
  • Expanded our solar lending business, increasing our solar lending originations for the first six months of the fiscal year 2021 by 65% to $58.5 million.
  • Dedicated additional resources to our Environmental, Social, and Governance (“ESG”) activities to include the hiring of Chief People and Inclusion Officer, Kia Tang.

Financial Highlights for the 2021 Fiscal Second Quarter

  • Total revenue for the second quarter was $187.3 million, a slight decrease compared to $188.3 million for the same quarter in fiscal 2020, which benefited from the one-time $19.3 million gain on sale from the divestiture of our former Community Bank division.
  • Operating efficiency ratio was 63.1% at March 31, 2021, compared to 62.9% at March 31, 2020, which benefited from the aforementioned gain on sale of divestiture of the Community Bank division. See non-GAAP reconciliation table below.
  • Net interest income for the second quarter was $73.9 million, compared to $67.7 million in the comparable quarter last year.
  • Net interest margin (“NIM”) decreased to 3.07% for the second quarter from 4.78% during the same period of last year, chiefly reflecting excess cash associated with the Company’s participation in the EIP program, as described further below.
  • Total gross loans and leases at March 31, 2021 increased $37.2 million, or 1%, to $3.65 billion, compared to March 31, 2020 and increased $208.5 million, or 6%, when compared to December 31, 2020.
  • Average deposits from the payments division for the fiscal 2021 second quarter increased nearly 181% to $9.29 billion when compared to the prior year quarter. A significant portion of the year-over-year increase reflected the Company’s participation in the EIP program, as described further below.
  • The Company repurchased 734,984 shares during the second quarter at an average price of $40.78.

Tax Season
For the 2021 tax season, MetaBank originated $1.79 billion in refund advance loans compared to $1.33 billion during the 2020 tax season.

During the second quarter of the fiscal 2021, total tax services product revenue was $67.0 million, an increase of 17% compared to the second quarter of fiscal 2020.

While the 2021 tax services results have thus far been favorable compared to the prior year’s tax season, it has been below the Company’s expectations as a result of reduced overall demand for refund advances due to consumers having access to EIP stimulus funds, which have been partially offset by higher payments fee income. We do expect overall tax season refund transfer volumes and revenue to be similar to last year. We believe the impacts to the tax advance product are unique to this tax season and the Company anticipates more normalized results from its H&R Block and Jackson Hewitt relationships will be achieved in the 2022 tax season and beyond. Despite these stimulus-related impacts, total tax services product income, net of losses and direct product expenses, increased 14% when comparing the first six months of fiscal 2021 to the same period of the prior fiscal year.

EIP Program Update

The Bank is serving as the sole Financial Agent for distributing prepaid debit cards used in the EIP program. The Company’s Payments division, in collaboration with Fiserv and Visa, is proud to have an ongoing role in providing a safe and secure mechanism for individuals, including the underbanked, to receive their stimulus payments. In 2020, the Bank dispensed approximately $6.42 billion of the first round of EIP payments under the Coronavirus Aid, Relief, and Economic Security Act through the distribution of 3.6 million Bank-issued prepaid cards, and earlier this year dispensed approximately $7.10 billion of the second round of EIP payments under the Consolidated Appropriations Act of 2021 through the distribution of 8.1 million Bank-issued prepaid cards.

On March 11, 2021, the U.S. Congress, through the American Rescue Plan Act of 2021, directed the Internal Revenue Service (“IRS”), to distribute a third round of EIP via the U.S. Treasury to persons in the U.S. eligible to receive them. The Bank has entered into an amendment of its existing agreement with the Fiscal Service under which the Bank acts as its Financial Agent in connection with the provision of prepaid debit card services to disburse a portion of the EIP payments to eligible recipients via Bank-issued prepaid cards. Through this third round, the Bank disbursed approximately $10.64 billion of EIP payments through the distribution of 4.7 million Bank-issued prepaid cards.

Through March 31, 2021 the Bank has issued a combined total of 16.5 million prepaid cards totaling approximately $24.15 billion related to three stimulus programs, of which $11.64 billion is still outstanding as of March 31, 2021. Of that balance, only $869.2 million remained on Meta’s balance sheet, as MetaBank has been working with other banks to transfer these temporary deposits off the balance sheet. As of April 21st, 2021 the Bank had $131.0 million in EIP deposit balances outstanding on its balance sheet.

The Company anticipates that participating in the EIP card distribution program will continue to have a slightly positive impact on earnings and it does not expect any material impact on its risk-based capital ratios due to the participation in the card distribution program. Additionally, the Company does not expect these conditions will be sustained over the long-term.

COVID-19 Business Update

As of March 31, 2021, the Company had 576 loans outstanding with total loan balances of $208.6 million originated as part of the Paycheck Protection Program (“PPP”), compared with 612 loans outstanding with total loan balances of $194.3 million for the quarter ended December 31, 2020.

As of March 31, 2021, $66.5 million of the loans and leases that were granted deferral payments by the Company were still in their deferment period. As of December 31, 2020, loans and leases totaling $84.2 million were within their deferment period.

The Company’s capital position remained in good standing as of March 31, 2021, even while continuing to absorb the temporary impact resulting from the receipt of deposits in conjunction with EIP payments described below. In addition, the Company has options available that can be used to effectively manage capital levels, including a strong and flexible balance sheet.

Net Interest Income
Net interest income for the fiscal 2021 second quarter was $73.9 million, an increase of 9% from the same quarter in fiscal 2020. The increase was primarily driven by a reduction in total interest expense, partially offset by lower overall yields realized on investments and loan and leases.

During the second fiscal quarter of 2021, interest expense decreased $9.8 million, which was partially offset by decreases in loan and lease interest income of $2.0 million and investment securities and cash interest income of $1.7 million, when comparing to the prior year quarter. The quarterly average outstanding balance of loans and leases increased by 8% on a linked quarter basis primarily due to seasonal tax services loans with growth from Term Lending, Asset Based Lending, and SBA/USDA, partially offset by lower community bank loan balances. The Company’s average interest-earning assets for the fiscal 2021 second quarter increased by $4.07 billion, to $9.77 billion compared with the second quarter in fiscal 2020, primarily due to the effects of the EIP program.

NIM decreased to 3.07% for the fiscal 2021 second quarter from 4.78% for the comparable quarter last year. The overall reported tax-equivalent yield (“TEY”) on average earning asset yields decreased by 249 basis points to 3.15% for the fiscal 2021 second quarter compared to the prior year quarter, driven primarily by excess low-yielding cash held at the Federal Reserve, as well as the lower interest rate environment. The fiscal 2021 second quarter TEY on the securities portfolio was 1.78% compared to 2.68% for the comparable period last year.

The Company’s cost of funds for all deposits and borrowings averaged 0.08% during the fiscal 2021 second quarter, compared to 0.83% during the prior year quarter. This reflected primarily 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 0.02% in the fiscal second quarter of 2021, compared to 0.66% in the same quarter last year.

Noninterest Income
Fiscal 2021 second quarter noninterest income decreased to $113.5 million, compared with $120.5 million for the same period of the prior year. This decrease was primarily due to the $19.3 million gain on divestiture of the Community Bank division, which was recognized during the fiscal 2020 second quarter. Partially offsetting the decrease were increases in total tax product fee income and payment card and deposit fee income.

Noninterest Expense
Noninterest expense increased 5% to $96.0 million for the fiscal 2021 second quarter, from $91.7 million for the same quarter of last year, primarily driven by increases in compensation and benefits due to a return to more normalized incentive accruals and additional employees to support growth.

Income Tax Expense
The Company recorded income tax expense of $1.1 million, representing an effective tax rate of 1.9%, for the fiscal 2021 second quarter, compared to an income tax expense of $5.6 million, representing an effective tax rate of 9.5%, for the second quarter last year.

The Company originated $20.0 million in solar leases during the fiscal 2021 second quarter, compared to $17.6 million during last year’s second quarter. The investment tax credit for the second quarter reflected an adjustment to the full fiscal year’s projected investment tax credit volumes, which contributed to the overall reduction in income tax expense compared to the prior year. Investment tax credits related to solar leases are recognized ratably based on income throughout each fiscal year. The timing and impact of future solar tax credits are expected to vary from period to period, and Meta intends to undertake only those tax credit opportunities that meet the Company’s underwriting and return criteria.

Investments, Loans and Leases

  March 31, 2021   December 31, 2020   September 30, 2020   June 30, 2020   March 31, 2020
Total investments $ 1,552,892     $ 1,309,452     $ 1,360,712     $ 1,268,416     $ 1,310,476  
                   
Loans held for sale                  
Consumer credit products 6,233     234     962     391      
SBA/USDA 61,402     32,983     52,542     31,438     13,610  
Community Bank     100,442     130,073     48,076      
Total loans held for sale 67,635     133,659     183,577     79,905     13,610  
                   
National Lending                  
Term lending 891,414     881,306     805,323     738,454     725,581  
Asset based lending 248,735     242,298     182,419     181,130     250,211  
Factoring 277,612     275,650     281,173     206,361     285,495  
Lease financing 308,169     283,722     281,084     264,988     238,788  
Insurance premium finance 344,841     338,227     337,940     359,147     332,800  
SBA/USDA 331,917     300,707     318,387     308,611     92,000  
Other commercial finance 103,234     101,209     101,658     100,214     101,472  
Commercial Finance 2,505,922     2,423,119     2,307,984     2,158,905     2,026,347  
Consumer credit products 104,842     88,595     89,809     102,808     113,544  
Other consumer finance 130,822     162,423     134,342     138,777     144,895  
Consumer Finance 235,664     251,018     224,151     241,585     258,439  
Tax Services 225,921     92,548     3,066     19,168     95,936  
Warehouse Finance 332,456     318,937     293,375     277,614     333,829  
Total National Lending loans and leases 3,299,963     3,085,622     2,828,576     2,697,272     2,714,551  
Community Banking                  
Commercial real estate and operating 335,587     339,141     457,371     608,303     654,429  
Consumer one-to-four family real estate and other 4,567     5,077     16,486     166,479     205,046  
Agricultural real estate and operating 7,911     9,724     11,707     24,655     36,759  
Total Community Banking loans 348,065     353,942     485,564     799,437     896,234  
Total gross loans and leases 3,648,028     3,439,564     3,314,140     3,496,709     3,610,785  
Allowance for credit losses (98,892 )   (72,389 )   (56,188 )   (65,747 )   (65,355 )
Net deferred loan and lease origination fees 9,503     9,111     8,625     5,937     8,139  
Total loans and leases, net of allowance $ 3,558,639     $ 3,376,286     $ 3,266,577     $ 3,436,899     $ 3,553,569  

The Company’s investment security balances at March 31, 2021 totaled $1.55 billion, as compared to $1.31 billion at December 31, 2020 and $1.31 billion at March 31, 2020.

Total gross loans and leases increased $37.2 million, or 1%, to $3.65 billion at March 31, 2021, from $3.61 billion at March 31, 2020. The increase was primarily driven by growth in the commercial finance and tax services portfolios partially offset by the continued decrease in community bank loan balances.

At March 31, 2021, commercial finance loans, which comprised 69% of the Company’s gross loan and lease portfolio, totaled $2.51 billion, reflecting growth of $82.8 million, or 3%, from December 31, 2020. The increase in commercial finance loans was primarily due to increases in SBA/USDA loans and lease financing of $31.2 million and $24.4 million, respectively, along with slight increases spread across several of the other commercial finance categories.

Consumer finance loans totaled $235.7 million as of March 31, 2021, decreasing as compared to $251.0 million at December 31, 2020 and $258.4 million at March 31, 2020. This decrease was primarily driven by other consumer finance, which includes student loans and the seasonal lending products for tax customers associated with Emerald Financial Services.

Tax services loans totaled $225.9 million as of March 31, 2021, increasing as compared to $92.5 million at December 31, 2020 and $95.9 million at March 31, 2020, as the Company originated seasonal taxpayer advances and electronic return originator (“ERO”) loans during the fiscal 2021 second quarter. Warehouse finance loans totaled $332.5 million at March 31, 2021, a 4% increase from December 31, 2020.

Community bank loans held for investment totaled $348.1 million as of March 31, 2021, decreasing as compared to $353.9 million at December 31, 2020 and $896.2 million at March 31, 2020. As of March 31, 2021, the Company had no community bank loans classified as held for sale.

Asset Quality
The Company’s allowance for credit losses totaled $98.9 million at March 31, 2021, increasing compared to $72.4 million at December 31, 2020 and $65.4 million at March 31, 2020. The increase in the allowance at March 31, 2021 when compared to December 31, 2020, was primarily due to the seasonal tax services loan portfolio, which increased $27.7 million during the fiscal 2021 second quarter.

The year-over-year increase in the allowance was primarily driven by a $18.5 million increase within the commercial finance portfolio, a $7.8 million increase in tax services, a $6.6 million increase in the consumer finance portfolio and a $0.7 million increase within the retained community banking portfolio. These increases were primarily driven by a combination of year-over-year loan growth and the adoption of the current expected credit losses (“CECL”) accounting standard, which required a day one entry to increase the allowance for credit losses in the amount of $12.8 million effective October 1, 2020.

The following table presents the Company’s allowance for credit losses as a percentage of its total loans and leases.

  As of the Period Ended
(Unaudited) March 31, 2021 December 31, 2020 October 1, 2020(1) September 30, 2020 June 30, 2020 March 31, 2020
             
Commercial finance 1.77 % 1.88 % 1.85 % 1.30 % 1.36 % 1.28 %
Consumer finance 4.70 % 4.39 % 4.31 % 1.64 % 1.75 % 1.74 %
Tax services 12.90 % 1.53 % 0.06 % 0.06 % 59.67 % 22.22 %
Warehouse finance 0.10 % 0.10 % 0.10 % 0.10 % 0.10 % 0.10 %
National Lending 2.57 % 1.89 % 1.86 % 1.20 % 1.68 % 1.92 %
Community Bank 4.03 % 4.01 % 3.37 % 4.59 % 2.55 % 1.49 %
Total loans and leases 2.71 % 2.10 % 2.08 % 1.70 % 1.88 % 1.81 %

(1) Represents the Company’s allowance coverage ratio upon the adoption of the Accounting Standards Update 2016-13 using September 30, 2020 loan and lease and allowance balances plus the CECL allowance adjustment.

The Company’s allowance for credit losses as a percentage of total loans and leases increased to 2.71% at March 31, 2021 from 2.10% at December 31, 2020. The increase in the total loans and leases coverage ratio was primarily driven by the seasonal tax services loan portfolio. The coverage ratios for the other non-tax-related loan categories remained relatively similar to the December 31, 2020 quarter. The change in the year-over-year tax services coverage ratio is primarily due to higher outstanding principal balances as of March 31, 2021 due in large part to the delayed start to the 2021 tax season. The Company expects to continue to diligently monitor the allowance for credit losses and adjust as necessary in future periods to maintain an appropriate and supportable level.

Activity in the allowance for credit losses for the periods presented was as follows.

(Unaudited) Three Months Ended Six Months Ended
  March 31, 2021 December 31, 2020 March 31, 2020 March 31, 2021 March 31, 2020
(Dollars in thousands)          
Beginning balance $ 72,389     $ 56,188     $ 30,176     $ 56,188     $ 29,149    
Adoption of CECL accounting standard     12,773         12,773        
Provision - tax services loans 27,680     454     19,596     28,134     20,507    
Provision - all other loans and leases 2,519     5,810     17,700     8,329     20,196    
Charge-offs - tax services loans                    
Charge-offs - all other loans and leases (4,248 )   (5,675 )   (3,187 )   (9,923 )   (7,105 )  
Recoveries - tax services loans 54     956     74     1,010     813    
Recoveries - all other loans and leases 498     1,883     996     2,381     1,795    
Ending balance $ 98,892     $ 72,389     $ 65,355     $ 98,892     $ 65,355    

Provision for credit losses was $30.3 million for the quarter ended March 31, 2021, compared to $37.3 million for the comparable period in the prior fiscal year. The decrease in the overall provision compared to the prior year was due in large part to the increase in the allowance as part of the Company’s response to the emerging COVID-19 pandemic during the second quarter of fiscal 2020. Partially offsetting that decrease was an increase in provision expense related to originating higher volumes of tax services loans for the second quarter of fiscal 2021, compared to the comparable quarter of the prior year. Net charge-offs were $3.7 million for the quarter ended March 31, 2021, compared to $2.1 million for the quarter ended March 31, 2020. The majority of the net charge-offs for the quarter were in the commercial finance portfolio.

The Company’s past due loans and leases were as follows for the periods presented.

As of March 31, 2021 Accruing and Nonaccruing Loans and Leases   Nonperforming Loans and Leases
(Dollars in Thousands) 30-59 Days
Past Due
  60-89 Days
Past Due
  > 89 Days
Past Due
  Total Past
Due
  Current   Total Loans
and Leases

Receivable
  > 89 Days Past Due and Accruing   Non-accrual balance   Total
                                   
Commercial finance $ 34,675     $ 8,730     $ 9,488     $ 52,893     $ 2,453,029     $ 2,505,922     $ 4,810     $ 18,305     $ 23,115  
Consumer finance 2,033     4,162     2,294     8,489     227,175     235,664     517         517  
Tax services 507             507     225,414     225,921              
Warehouse finance                 332,456     332,456              
Total National Lending 37,215     12,892     11,782     61,889     3,238,074     3,299,963     5,327     18,305     23,632  
Total Community Banking 12         1,818     1,830     346,235     348,065         19,824     19,824  
Total loans and leases held for investment $ 37,227     $ 12,892     $ 13,600     $ 63,719     $ 3,584,309     $ 3,648,028     $ 5,327     $ 38,129     $ 43,456  


As of December 31, 2020 Accruing and Nonaccruing Loans and Leases   Nonperforming Loans and Leases
(Dollars in Thousands) 30-59 Days
Past Due
  60-89 Days
Past Due
  > 89 Days
Past Due
  Total Past
Due
  Current   Total Loans
and Leases Receivable
  > 89 Days Past Due and Accruing   Non-accrual balance   Total
                                   
Commercial finance $ 23,448     $ 7,358     $ 14,900     $ 45,706     $ 2,377,413     $ 2,423,119     $ 2,092     $ 18,707     $ 20,799  
Consumer finance 1,415     404     1,132     2,951     248,067     251,018     1,132         1,132  
Tax services                 92,548     92,548              
Warehouse finance                 318,937     318,937              
Total National Lending 24,863     7,762     16,032     48,657     3,036,965     3,085,622     3,224     18,707     21,931  
Total Community Banking 13         2,379     2,392     351,550     353,942         20,389     20,389  
Total loans and leases held for investment $ 24,876     $ 7,762     $ 18,411     $ 51,049     $ 3,388,515     $ 3,439,564     $ 3,224     $ 39,096     $ 42,320  

The Company’s nonperforming assets at March 31, 2021 were $46.7 million, representing 0.48% of total assets, compared to $53.2 million, or 0.73% of total assets at December 31, 2020 and $39.4 million, or 0.67% of total assets at March 31, 2020. The decrease in nonperforming assets on a linked quarter basis was primarily driven by a $5.7 million reduction in commercial finance repossessed and foreclosed assets and a $1.9 million decrease in nonperforming operating leases, which were partially offset by a $2.3 million increase in the commercial finance nonperforming loans and leases when compared to December 31, 2020. The improvement in nonperforming assets as a percentage of total assets at March 31, 2021 was due to a combination of the lower nonperforming assets along with higher period-end assets, when compared to December 31, 2020.

The Company’s nonperforming loans and leases at March 31, 2021, were $43.5 million, representing 1.17% of total gross loans and leases, compared to $42.3 million, or 1.18% of total gross loans and leases at December 31, 2020 and $31.5 million, or 0.87% of total gross loans and leases at March 31, 2020.

Loan and lease balances that were within their active deferment period decreased to $66.5 million at March 31, 2021 from $84.2 million at December 31, 2020.

Deposits, Borrowings and Other Liabilities
Total average deposits for the fiscal 2021 second quarter increased by $4.51 billion to $9.57 billion compared to the same period in fiscal 2020, primarily due to the EIP program. Average noninterest-bearing deposits increased $5.77 billion, or 180%, for the fiscal 2021 second quarter when compared to the same period in fiscal 2020, while average wholesale deposits decreased $1.30 billion, or 88%. Average deposits from the payments division increased 181% to $9.29 billion for the fiscal 2021 second quarter when compared to the same period in fiscal 2020. Excluding the balances on the EIP cards, average payments deposits for the fiscal 2021 second quarter were $6.43 billion, representing an increase of 100% compared to the same period of the prior year, which was largely driven by other stimulus payments loaded on various partner cards.

The average balance of total deposits and interest-bearing liabilities was $9.66 billion for the three-month period ended March 31, 2021, compared to $5.64 billion for the same period in the prior fiscal year, representing an increase of 71%.

Total end-of-period deposits increased 118% to $8.64 billion at March 31, 2021, compared to $3.96 billion at March 31, 2020. The increase in end-of-period deposits was primarily driven by an increase in noninterest-bearing deposits of $5.03 billion, of which $869.2 million was attributable to the balances on the EIP cards. The increase in total end-of-period deposits was partially offset by a decrease of $705.5 million in wholesale deposits.

Regulatory Capital
The Company and MetaBank remained above the federal regulatory minimum capital requirements at March 31, 2021, continued to be classified as well-capitalized, and in good standing with the regulatory agencies. A temporary exemption was granted by the Office of the Comptroller of the Currency related to the financial impacts of distributing prepaid debit cards as part of the EIP program. Regulatory capital ratios of the Company and the Bank are stated in the table below.

The tables below include certain non-GAAP financial measures that are used by investors, analysts and bank regulatory agencies to assess the capital position of financial services companies. Management reviews these measures along with other measures of capital as part of its financial analysis.

As of the dates indicated March 31,
2021
(1)
  December 31,
2020
  September 30,
2020
  June 30,
2020
  March 31,
2020
Company                  
Tier 1 leverage capital ratio 4.75 %   7.39 %   6.58 %   5.91 %   7.28 %
Common equity Tier 1 capital ratio 11.24 %   10.72 %   11.78 %   11.51 %   10.27 %
Tier 1 capital ratio 11.58 %   11.07 %   12.18 %   11.90 %   10.63 %
Total capital ratio 14.59 %   14.14 %   15.30 %   14.99 %   13.61 %
MetaBank                  
Tier 1 leverage capital ratio 5.47 %   8.60 %   7.56 %   6.89 %   8.52 %
Common equity Tier 1 capital ratio 13.32 %   12.87 %   13.96 %   13.82 %   12.39 %
Tier 1 capital ratio 13.33 %   12.89 %   14.00 %   13.86 %   12.44 %
Total capital ratio 14.60 %   14.14 %   15.26 %   15.12 %   13.69 %

(1) March 31, 2021 amounts are preliminary pending completion and filing of the Company’s regulatory reports. Regulatory capital presented for periods in fiscal year 2021 reflect the Company’s election of the five-year CECL transition for regulatory capital purposes.

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) March 31,
2021
  December 31,
2020
  September 30,
2020
  June 30,
2020
  March 31,
2020
(Dollars in Thousands)                  
Total stockholders’ equity $ 835,258     $ 813,210     $ 847,308     $ 829,909     $ 805,074  
Adjustments:                  
LESS: Goodwill, net of associated deferred tax liabilities 301,602     301,999     302,396     302,814     303,625  
LESS: Certain other intangible assets 36,779     39,403     40,964     42,865     44,909  
LESS: Net deferred tax assets from operating loss and tax credit carry-forwards 19,306     24,105     18,361     10,360     11,589  
LESS: Net unrealized gains (losses) on available-for-sale securities 12,458     19,894     17,762     8,382     2,337  
LESS: Non-controlling interest 1,092     1,536     3,603     3,787     3,762  
ADD: Adoption of Accounting Standards Update 2016-13 10,439     10,439              
Common Equity Tier 1(1) 474,460     436,712     464,222     461,701     438,852  
Long-term borrowings and other instruments qualifying as Tier 1 13,661     13,661     13,661     13,661     13,661  
Tier 1 minority interest not included in common equity tier 1 capital 690     749     1,894     1,894     2,036  
Total Tier 1 Capital 488,811     451,122     479,777     477,256     454,549  
Allowance for credit losses 53,232     51,070     49,343     50,338     53,580  
Subordinated debentures (net of issuance costs) 73,892     73,850     73,807     73,765     73,724  
Total qualifying capital $ 615,935     $ 576,042     $ 602,927     $ 601,359     $ 581,853  

(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,
2021
  December 31,
2020
  September 30,
2020
  June 30,
2020
  March 31,
2020
(Dollars in Thousands)                  
Total Stockholders’ Equity $ 835,258     $ 813,210     $ 847,308     $ 829,909     $ 805,074  
Less: Goodwill 309,505     309,505     309,505     309,505     309,505  
Less: Intangible assets 36,903     39,660     41,692     43,974     46,766  
Tangible common equity 488,850     464,045     496,111     476,430     448,803  
Less: Accumulated other comprehensive income (loss) (“AOCI”) 12,809     20,119     17,542     7,995     1,654  
Tangible common equity excluding AOCI $ 476,041     $ 443,926     $ 478,569     $ 468,435     $ 447,149  

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 Tuesday, April 27, 2021. 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 6896972 upon request. International callers should dial (636) 812-6634. A webcast replay will also be archived at www.metafinancialgroup.com for one year.

Upcoming Investor Events

  • Piper Sandler Fintech and Payments Conference, June 10, 2021 | Virtual

Forward-Looking Statements
The Company and MetaBank may from time to time make written or oral “forward-looking statements,” including statements contained in this press release, the Company’s filings with the SEC, the Company’s reports to stockholders, and in other communications by the Company and MetaBank, which are made in good faith by the Company pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995.

You can identify forward-looking statements by words such as “may,” “hope,” “will,” “should,” “expect,” “plan,” “anticipate,” “intend,” “believe,” “estimate,” “predict,” “potential,” “continue,” “could,” “future,” or the negative of those terms, or other words of similar meaning or similar expressions. You should carefully read statements that contain these words because they discuss our future expectations or state other “forward-looking” information. These forward-looking statements are based on information currently available to us and assumptions about future events, and include statements with respect to the Company’s beliefs, expectations, estimates, and intentions, which are subject to significant risks and uncertainties, and are subject to change based on various factors, some of which are beyond the Company’s control. Such risks, uncertainties and other factors may cause our actual growth, results of operations, financial condition, cash flows, performance and business prospects and opportunities to differ materially from those expressed in, or implied by, these forward-looking statements. Such statements address, among others, the following subjects: future operating results; expectations in connection with the impact of the ongoing COVID-19 pandemic and related government actions on our business, our industry and the capital markets; customer retention; loan and other product demand; expectations concerning acquisitions and divestitures; new products and services, including those offered by Meta Payment Systems, Refund Advantage, EPS Financial and Specialty Consumer Services divisions; credit quality; the level of net charge-offs and the adequacy of the allowance for credit losses; technology; and the Company’s employees. The following factors, among others, could cause the Company’s financial performance and results of operations to differ materially from the expectations, estimates, and intentions expressed in such forward-looking statements: maintaining our executive management team; expected growth opportunities may not be realized or may take longer to realize than expected; the potential adverse effects of the ongoing COVID-19 pandemic and any governmental or societal responses thereto including the deployment and efficacy of the COVID-19 vaccines, or other unusual and infrequently occurring events; actual changes in interest rates and the Fed Funds rate; additional changes in tax laws; the strength of the United States’ economy, in general, and the strength of the local economies in which the Company operates; changes in trade, monetary, and fiscal policies and laws, including interest rate policies of the Federal Reserve; inflation, market, and monetary fluctuations; the timely and efficient development of, and acceptance of, new products and services offered by the Company or its strategic partners, as well as risks (including reputational and litigation) attendant thereto, and the perceived overall value of these products and services by users; the risks of dealing with or utilizing third parties, including, in connection with the Company’s refund advance business, the risk of reduced volume of refund advance loans as a result of reduced customer demand for or usage of Meta’s strategic partners’ refund advance products; our relationship with, and any actions which may be initiated by, our regulators; the impact of changes in financial services laws and regulations, including, but not limited to, laws and regulations relating to the tax refund industry and the insurance premium finance industry and recent and potential changes in response to the COVID-19 pandemic such as the CARES Act and the rules and regulations that may be promulgated thereunder; technological changes, including, but not limited to, the protection of our electronic systems and information; the impact of acquisitions and divestitures; litigation risk; the growth of the Company’s business, as well as expenses related thereto; continued maintenance by MetaBank of its status as a well-capitalized institution; changes in consumer spending and saving habits; the impact of our participation as prepaid card issuer for the EIP program and potentially similar programs in the future; losses from fraudulent or illegal activity; technological risks and developments and cyber threats, attacks, or events; and the success of the Company at maintaining its high quality asset level and managing and collecting assets of borrowers in default should problem assets increase.

The foregoing list of factors is not exclusive. We caution you not to place undue reliance on these forward-looking statements. The forward-looking statements included in this press release speak only as of the date hereof. Additional discussions of factors affecting the Company’s business and prospects are reflected under the caption “Risk Factors” and in other sections of the Company’s Annual Report on Form 10-K for the Company’s fiscal year ended September 30, 2020, and in other filings made with the SEC. The Company expressly disclaims any intent or obligation to update any forward-looking statements, whether written or oral, that may be made from time to time by or on behalf of the Company or its subsidiaries, whether as a result of new information, changed circumstances, or future events or for any other reason.



Condensed Consolidated Statements of Financial Condition (Unaudited)
(Dollars in Thousands, Except Share Data)

ASSETS March 31,
2021
  December 31,
2020
  September 30,
2020
  June 30,
2020
  March 31,
2020
Cash and cash equivalents $ 3,724,242     $ 1,586,451     $ 427,367     $ 3,108,141     $ 108,733  
Investment securities available for sale, at fair value 921,947     797,363     814,495     825,579     840,525  
Mortgage-backed securities available for sale, at fair value 558,833     430,761     453,607     338,250     355,094  
Investment securities held to maturity, at cost 67,709     76,176     87,183     98,205     108,105  
Mortgage-backed securities held to maturity, at cost 4,403     5,152     5,427     6,382     6,752  
Loans held for sale 67,635     133,659     183,577     79,905     13,610  
Loans and leases 3,657,531     3,448,675     3,322,765     3,502,646     3,618,924  
Allowance for credit losses (98,892 )   (72,389 )   (56,188 )   (65,747 )   (65,355 )
Federal Reserve Bank and Federal Home Loan Bank stocks, at cost 28,433     27,138     27,138     31,836     29,944  
Accrued interest receivable 17,429     17,133     16,628     17,545     16,958  
Premises, furniture, and equipment, net 41,510     39,932     41,608     40,361     38,871  
Rental equipment, net 211,397     206,732     205,964     216,336     200,837  
Bank-owned life insurance 93,542     92,937     92,315     91,697     91,081  
Foreclosed real estate and repossessed assets 1,483     7,186     9,957     6,784     7,249  
Goodwill 309,505     309,505     309,505     309,505     309,505  
Intangible assets 36,903     39,660     41,692     43,974     46,766  
Prepaid assets 10,201     11,270     8,328     6,806     9,727  
Deferred taxes 25,435     24,411     17,723     15,944     20,887  
Other assets 110,877     82,763     82,983     104,877     85,652  
                   
Total assets $ 9,790,123     $ 7,264,515     $ 6,092,074     $ 8,779,026     $ 5,843,865  
                   
LIABILITIES AND STOCKHOLDERS’ EQUITY                  
                   
LIABILITIES                  
Deposits:                  
Noninterest-bearing checking 7,928,235     5,581,597     4,356,630     6,537,809     2,900,484  
Interest-bearing checking 416,164     274,504     157,571     187,003     152,504  
Savings deposits 126,834     54,080     47,866     55,896     37,615  
Money market deposits 55,045     56,440     48,494     40,811     37,266  
Time certificates of deposit 12,614     13,522     20,223     25,000     25,492  
Wholesale deposits 103,521     227,648     348,416     743,806     809,043  
Total deposits 8,642,413     6,207,791     4,979,200     7,590,325     3,962,404  
Short-term borrowings                 717,000  
Long-term borrowings 95,336     96,760     98,224     209,781     211,353  
Accrued interest payable 679     2,068     1,923     4,332     3,607  
Accrued expenses and other liabilities 216,437     144,686     165,419     144,679     144,427  
Total liabilities 8,954,865     6,451,305     5,244,766     7,949,117     5,038,791  
                   
STOCKHOLDERS’ EQUITY                  
Preferred stock                  
Common stock, $.01 par value 319     326     344     346     346  
Common stock, Nonvoting, $.01 par value                  
Additional paid-in capital 601,222     598,669     594,569     592,693     590,682  
Retained earnings 225,471     198,000     234,927     228,500     212,027  
Accumulated other comprehensive income 12,809     20,119     17,542     7,995     1,654  
Treasury stock, at cost (5,655 )   (5,440 )   (3,677 )   (3,412 )   (3,397 )
Total equity attributable to parent 834,166     811,674     843,705     826,122     801,312  
Noncontrolling interest 1,092     1,536     3,603     3,787     3,762  
Total stockholders’ equity 835,258     813,210     847,308     829,909     805,074  
                   
Total liabilities and stockholders’ equity $ 9,790,123     $ 7,264,515     $ 6,092,074     $ 8,779,026     $ 5,843,865  



Consolidated Statements of Operations (Unaudited)
(Dollars in Thousands, Except Share and Per Share Data)

  Three Months Ended   Year Ended
  March 31,
2021
  December 31,
2020
  March 31,
2020
  March 31,
2021
  March 31,
2020
Interest and dividend income:                  
Loans and leases, including fees $ 68,472     $ 61,655     $ 70,493     $ 130,128     $ 139,195  
Mortgage-backed securities 2,608     2,123     2,493     4,730     4,882  
Other investments 4,589     4,368     6,417     8,956     12,952  
  75,669     68,146     79,403     143,814     157,029  
Interest expense:                  
Deposits 445     797     8,242     1,241     17,583  
FHLB advances and other borrowings 1,374     1,350     3,424     2,724     7,058  
  1,819     2,147     11,666     3,965     24,641  
                   
Net interest income 73,850     65,999     67,737     139,849     132,388  
                   
Provision for credit losses 30,290     6,089     37,296     36,379     40,703  
                   
Net interest income after provision for loan and lease losses 43,560     59,910     30,441     103,470     91,685  
                   
Noninterest income:                  
Refund transfer product fees 22,680     647     28,939     23,327     29,131  
Tax advance product fees 44,562     1,960     29,536     46,522     31,812  
Payments card and deposit fees 29,875     22,564     23,156     52,439     44,655  
Other bank and deposit fees 133     237     381     370     868  
Rental income 9,846     9,885     11,100     19,731     23,451  
Gain on sale of securities available-for-sale, net 6             6      
Gain on divestitures         19,275         19,275  
Gain (loss) on sale of other 2,133     2,847     2,325     4,981     (244 )
Other income 4,218     7,315     5,801     11,532     9,047  
Total noninterest income 113,453     45,455     120,513     158,908     157,995  
                   
Noninterest expense:                  
Compensation and benefits 43,932     32,331     34,260     76,263     68,529  
Refund transfer product expense 6,146     61     7,449     6,207     7,621  
Tax advance product expense 2,189     370     1,698     2,559     2,830  
Card processing 7,212     6,117     6,696     13,329     12,303  
Occupancy and equipment expense 6,748     6,888     7,013     13,636     13,668  
Operating lease equipment depreciation 7,419     7,581     8,421     15,000     16,701  
Legal and consulting 6,045     5,247     5,909     11,292     10,583  
Intangible amortization 2,757     2,013     3,402     4,770     6,077  
Impairment expense 554     1,159     507     1,713     750  
Other expense 12,969     10,808     16,374     23,777     28,464  
Total noninterest expense 95,971     72,575     91,729     168,546     167,526  
                   
Income before income tax expense 61,042     32,790     59,225     93,832     82,154  
                   
Income tax expense 1,133     3,533     5,617     4,665     6,297  
                   
Net income before noncontrolling interest 59,909     29,257     53,608     89,167     75,857  
Net income attributable to noncontrolling interest 843     1,220     1,304     2,064     2,485  
Net income attributable to parent $ 59,066     $ 28,037     $ 52,304     $ 87,103     $ 73,372  
                   
Less: Allocation of Earnings to participating securities(1) 1,113     554     1,215     1,683     1,652  
Net income attributable to common shareholders(1) 57,953     27,483     51,089     85,420     71,720  
Earnings per common share                  
Basic $ 1.84     $ 0.84     $ 1.45     $ 2.66     $ 2.00  
Diluted $ 1.84     $ 0.84     $ 1.45     $ 2.65     $ 2.00  
Shares used in computing earnings per common share                  
Basic 31,520,505     32,782,285     35,114,053     32,158,994     35,865,443  
Diluted 31,535,022     32,790,895     35,135,550     32,175,484     35,887,077  

(1) Amounts presented are used in the two-class earnings per common share calculation.



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. Nonaccruing loans and leases have been included in the table as loans carrying a zero yield.

Three Months Ended March 31, 2021   2020
(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 $ 4,187,558     $ 1,090     0.11 %   $ 196,754     $ 739     1.51 %
Mortgage-backed securities 543,256     2,607     1.95 %   358,103     2,493     2.80 %
Tax exempt investment securities 297,299     1,132     1.96 %   454,177     2,132     2.39 %
Asset-backed securities 389,406     1,290     1.34 %   304,674     2,271     3.00 %
Other investment securities 230,168     1,077     1.90 %   192,379     1,275     2.67 %
Total investments 1,460,129     6,106     1.78 %   1,309,333     8,171     2.68 %
Commercial finance loans and leases 2,471,694     46,299     7.60 %   2,020,358     41,643     8.29 %
Consumer finance loans 255,625     6,968     11.06 %   264,307     5,386     8.20 %
Tax services loans 714,789     6,544     3.71 %   516,491     6,351     4.95 %
Warehouse finance loans 315,162     4,845     6.23 %   314,474     4,785     6.12 %
National lending loans and leases 3,757,270     64,656     6.98 %   3,115,630     58,165     7.51 %
Community banking loans 363,285     3,817     4.26 %   1,080,142     12,328     4.59 %
Total loans and leases 4,120,555     68,473     6.74 %   4,195,772     70,493     6.76 %
Total interest-earning assets $ 9,768,242     $ 75,669     3.15 %   $ 5,701,859     $ 79,403     5.64 %
Non-interest-earning assets 887,610             909,040          
Total assets $ 10,655,852             $ 6,610,899          
                       
Interest-bearing liabilities:                      
Interest-bearing checking(2) $ 275,982     $     %   $ 182,107     $ 105     0.23 %
Savings deposits 77,562     4     0.02 %   46,592     6     0.05 %
Money market deposits 56,352     42     0.30 %   68,421     153     0.90 %
Time certificates of deposit 12,820     34     1.07 %   84,940     427     2.02 %
Wholesale deposits 175,777     365     0.84 %   1,476,085     7,551     2.06 %
Total interest-bearing deposits 598,493     445     0.30 %   1,858,145     8,242     1.78 %
Overnight fed funds purchased         %   372,596     1,307     1.41 %
FHLB advances         %   110,000     670     2.45 %
Subordinated debentures 73,864     1,147     6.30 %   73,698     1,158     6.32 %
Other borrowings 22,377     227     4.12 %   28,714     289     4.04 %
Total borrowings 96,241     1,374     5.79 %   585,008     3,424     2.35 %
Total interest-bearing liabilities 694,734     1,819     1.06 %   2,443,153     11,666     1.92 %
Noninterest-bearing deposits 8,967,067         %   3,199,148         %
Total deposits and interest-bearing liabilities $ 9,661,801     $ 1,819     0.08 %   $ 5,642,301     $ 11,666     0.83 %
Other noninterest-bearing liabilities 177,372             136,759          
Total liabilities 9,839,173             5,779,060          
Shareholders’ equity 816,679             831,839          
Total liabilities and shareholders’ equity $ 10,655,852             $ 6,610,899          
Net interest income and net interest rate spread including noninterest-bearing deposits     $ 73,850     3.08 %       $ 67,737     4.81 %
                       
Net interest margin         3.07 %           4.78 %
Tax-equivalent effect         0.01 %           0.04 %
Net interest margin, tax-equivalent(3)         3.08 %           4.82 %

(1) Tax rate used to arrive at the TEY for the three months ended March 31, 2021 and 2020 was 21%.
(2) Of the total balance, $275.7 million are interest-bearing deposits where interest expense is paid by a third party and not by the Company.
(3) Net interest margin expressed on a fully-taxable-equivalent basis (“net interest margin, tax-equivalent”) is a non-GAAP financial measure. The tax-equivalent adjustment to net interest income recognizes the estimated income tax savings when comparing taxable and tax-exempt assets and adjusting for federal and state exemption of interest income. The Company believes that it is a standard practice in the banking industry to present net interest margin expressed on a fully taxable equivalent basis and, accordingly, believes the presentation of this non-GAAP financial measure may be useful for peer comparison purposes.


Selected Financial Information

As of and For the Three Months Ended March 31,
2021
  December 31,
2020
  September 30,
2020
  June 30,
2020
  March 31,
2020
Equity to total assets 8.53 %   11.19 %   13.91 %   9.45 %   13.78 %
Book value per common share outstanding $ 26.16     $ 24.93     $ 24.66     $ 23.96     $ 23.26  
Tangible book value per common share outstanding $ 15.31     $ 14.23     $ 14.44     $ 13.76     $ 12.97  
Tangible book value per common share outstanding excluding AOCI $ 14.91     $ 13.61     $ 13.93     $ 13.53     $ 12.92  
Common shares outstanding 31,926,008     32,620,251     34,360,890     34,631,160     34,607,962  
Nonperforming assets to total assets 0.48 %   0.73 %   0.79 %   0.64 %   0.67 %
Nonperforming loans and leases to total loans and leases 1.17 %   1.18 %   0.97 %   1.10 %   0.87 %
Net interest margin 3.07 %   4.65 %   3.77 %   3.28 %   4.78 %
Net interest margin, tax-equivalent 3.08 %   4.67 %   3.79 %   3.31 %   4.82 %
Return on average assets 2.22 %   1.73 %   0.69 %   0.86 %   3.16 %
Return on average equity 28.93 %   13.91 %   6.21 %   8.83 %   25.15 %
Full-time equivalent employees 1,075     1,038     1,015     999     992  


Non-GAAP Reconciliation

Efficiency Ratio For the last twelve months ended
(Dollars in Thousands) March 31,
2021
  December 31,
2020
  September 30,
2020
  June 30,
2020
  March 31,
2020
Noninterest Expense - GAAP $ 320,070     $ 315,828     $ 319,051     $ 314,911     $ 316,138  
Net Interest Income 266,499     260,386     259,038     260,142     264,973  
Noninterest Income 240,706     247,766     239,794     235,024     237,766  
Total Revenue: GAAP $ 507,205     $ 508,152     $ 498,832     $ 495,166     $ 502,739  
Efficiency Ratio, last twelve months 63.10 %   62.15 %   63.96 %   63.60 %   62.88 %


About Meta Financial Group, Inc.®

Meta Financial Group, Inc.® (Nasdaq: CASH) is a South Dakota-based financial holding company. Meta Financial Group’s subsidiary, MetaBank® N.A., is a financial enablement company that works to increase financial availability, choice, and opportunity for all. MetaBank strives to remove barriers that traditional institutions put in the way of financial access, and promote economic mobility by providing responsible, secure, high quality financial products that contribute to individuals and communities at the core of the real economy. Additional information can be found by visiting www.metafinancialgroup.com or www.metabank.com.

Investor Relations Contact  
Brittany Kelley Elsasser  
605-362-2423  
bkelley@metabank.com  
   
Media Relations Contact  
mediarelations@metabank.com  

 


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Source: Meta Financial Group, Inc.