Meta Financial Group, Inc.® Announces Results For 2021 Fiscal Third Quarter

SIOUX FALLS, S.D., July 28, 2021 (GLOBE NEWSWIRE) — Meta Financial Group, Inc.® (Nasdaq: CASH) (“Meta” or the “Company”) reported net income of $38.7 million, or $1.21 per share, for the three months ended June 30, 2021, compared to net income of $18.2 million, or $0.53 per share, for the three months ended June 30, 2020.

“MetaBank performed well during the third quarter, more than doubling earnings per share, as various timing items including tax season delays, additional card fee income from government stimulus programs, and reduced provision helped enhance performance year-over-year. Our results demonstrate how MetaBank’s mission of financial inclusion for all® is creating value for all our stakeholders, including our customers, employees and shareholders,” said President and CEO Brad Hanson.

Business Development Highlights for the 2021 Fiscal Third Quarter

  • Published our inaugural 2020 Environmental, Social and Governance (“ESG”) Report, building on the Company’s vision, culture, and mission of financial inclusion for all®. The Company’s 2020 ESG report can be downloaded at https://www.metafinancialgroup.com/environmental-social-governance.
  • Launched the Company’s Community Impact Program, focused on financial inclusion, personal and family financial empowerment, educational support, and disaster relief. Concentrating on these four areas positions MetaBank to encourage long-lasting positive impact in our communities.
  • Expanded our renewable energy investment tax credit financing, originating $72.0 million for the first nine months of the fiscal year 2021, resulting in $18.9 million in total net ITC.
  • Entered into a new Banking as a Service (“BaaS”) partnership with Clair, a social impact embedded fintech startup. The Company will act as both the issuing bank and bank services provider, offering digital banking services for users of Clair.

Financial Highlights for the 2021 Fiscal Third Quarter

  • Total revenue for the third quarter was $130.9 million, an increase of $27.7 million compared to $103.2 million for the same quarter in fiscal 2020 primarily driven by a timing shift of refund transfer product fees and additional payments card fee income from government stimulus programs.
  • Operating efficiency ratio improved 185 basis points to 61.75% at June 30, 2021 compared to 63.60% at June 30, 2020. See non-GAAP reconciliation table below.
  • Net interest income for the third quarter was $68.5 million, an increase of $6.4 million compared to $62.1 million in the third quarter last year, reflecting a decrease in deposit interest expense.
  • Net interest margin (“NIM”) improved to 3.75% for the third quarter from 3.28% during the same period of last year, chiefly due to the decrease of cash associated with the Company’s participation in the EIP program and an increase in national lending loans and leases.
  • Total gross loans and leases at June 30, 2021 decreased $1.5 million, to $3.50 billion, compared to June 30, 2020 and decreased $152.8 million, or 4%, when compared to March 31, 2021. The decrease was primarily driven due to the seasonal nature of the taxpayer advance loans.
  • Average deposits from the Payments businesses for the fiscal 2021 third quarter increased nearly 8% to $6.79 billion when compared to the prior year quarter largely driven by excess cash on consumer cards related to government stimulus programs.

Tax Season Recap
During the third quarter of the fiscal 2021, total tax services product revenue was $13.6 million compared to $4.6 million in the prior year quarter. The significant increase for the quarter was mostly related to delayed timing of refund-transfers income due to the extension of the tax filing deadline by the IRS. Total tax services product income, net of losses and direct product expenses, increased 19% when comparing the first nine months of fiscal 2021 to the prior year period. The 2021 tax season benefited by the addition of the H&R Block relationship and has been successful despite the challenges caused by an increase in consumer liquidity due to stimulus payments throughout the 2021 tax season.

Economic Impact Program (“EIP”) Update
Of the 16.5 million prepaid cards issued in conjunction with the three EIP stimulus programs, totaling approximately $24.15 billion, $2.81 billion were outstanding as of June 30, 2021, of which only $98.1 million was on Meta’s balance sheet with the remainder being held at other banks.

Net Interest Income
Net interest income for the third quarter of fiscal 2021 was $68.5 million, an increase of 10% 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.

Interest expense during the third quarter decreased $3.8 million, and loan and lease interest income increased $2.4 million. The third quarter average outstanding balance of loans and leases decreased by $4.2 million compared to the prior year quarter, primarily due to the decrease in community bank and healthcare receivable loan portfolios offset by growth of the remaining commercial loan portfolios. The Company’s average interest-earning assets for the third quarter decreased by $291.8 million to $7.32 billion compared with the prior year quarter, primarily due to the decrease in cash and fed funds sold, total investments, and community bank loans offset by growth of the national lending loans and leases.

Fiscal 2021 third quarter NIM increased to 3.75% from 3.28% for the third quarter last year. The overall reported tax-equivalent yield (“TEY”) on average earning asset yields increased 26 basis points to 3.85% compared to the prior year quarter, primarily driven by a reduction in low-yielding cash held at the Federal Reserve. The TEY on the securities portfolio was 1.62% compared to 2.22% for the comparable period last year.

The Company’s cost of funds for all deposits and borrowings averaged 0.09% during the fiscal 2021 third quarter, compared to 0.28% during the prior year quarter, primarily driven by a reduction in wholesale deposit balances. The Company’s overall cost of deposits was 0.01% in the fiscal third quarter of 2021, compared to 0.17% in the same quarter last year.

Noninterest Income
Fiscal 2021 third quarter noninterest income increased to $62.5 million, compared to $41.0 million for the same period of the prior year. This increase was primarily related to card fee income and refund transfer fee income. Card fees benefited from increased card balances related to stimulus programs. Refund transfer fee income was higher compared to last year due to refund transfer volume shift from the second fiscal quarter because of the delay in the 2021 tax season.

Noninterest Expense
Noninterest expense increased 14% to $81.5 million for the fiscal 2021 third quarter, from $71.2 million for the same quarter last year, primarily driven by increases in compensation due to a return to more normalized incentive accruals in fiscal year 2021 and additional employees to support growth. Refund transfer product expense was also higher than the same quarter last year, due largely to a shift in volume into the fiscal 2021 third quarter as a result of the delayed IRS filing date.

Income Tax Expense
The Company recorded income tax expense of $4.9 million, representing an effective tax rate of 11.0%, for the fiscal 2021 third quarter, compared to an income tax benefit of $2.4 million, representing an effective tax rate of (14.4)%, for the third quarter last year. The increase in the recorded income tax expense reflected an increase in fiscal 2021 third quarter earnings, whereas the prior year’s income tax benefit was chiefly the result of adjustments needed for the ratably recognized investment tax credits and lower earnings forecast at that time due to COVID-19.

The Company originated $13.5 million in solar leases during the fiscal 2021 third quarter, compared to $1.3 million in last year’s 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, 2021   March 31, 2021   December 31, 2020   September 30, 2020   June 30, 2020
Total investments $ 1,981,852     $ 1,552,892     $ 1,309,452     $ 1,360,712     $ 1,268,416  
                   
Loans held for sale                  
Consumer credit products 12,582     6,233     234     962     391  
SBA/USDA 57,208     61,402     32,983     52,542     31,438  
Community Bank 18,115         100,442     130,073     48,076  
Total loans held for sale 87,905     67,635     133,659     183,577     79,905  
                   
National Lending                  
Term lending 920,279     891,414     881,306     805,323     738,454  
Asset based lending 263,237     248,735     242,298     182,419     181,130  
Factoring 320,629     277,612     275,650     281,173     206,361  
Lease financing 282,940     308,169     283,722     281,084     264,988  
Insurance premium finance 417,652     344,841     338,227     337,940     359,147  
SBA/USDA 263,709     331,917     300,707     318,387     308,611  
Other commercial finance 118,081     103,234     101,209     101,658     100,214  
Commercial Finance 2,586,527     2,505,922     2,423,119     2,307,984     2,158,905  
Consumer credit products 105,440     104,842     88,595     89,809     102,808  
Other consumer finance 122,316     130,822     162,423     134,342     138,777  
Consumer Finance 227,756     235,664     251,018     224,151     241,585  
Tax Services 41,268     225,921     92,548     3,066     19,168  
Warehouse Finance 335,704     332,456     318,937     293,375     277,614  
Total National Lending loans and leases 3,191,255     3,299,963     3,085,622     2,828,576     2,697,272  
Community Banking                  
Commercial real estate and operating 294,810     335,587     339,141     457,371     608,303  
Consumer one-to-four family real estate and other 1,349     4,567     5,077     16,486     166,479  
Agricultural real estate and operating 7,825     7,911     9,724     11,707     24,655  
Total Community Banking loans 303,984     348,065     353,942     485,564     799,437  
Total gross loans and leases 3,495,239     3,648,028     3,439,564     3,314,140     3,496,709  
Allowance for credit losses (91,208 )   (98,892 )   (72,389 )   (56,188 )   (65,747 )
Net deferred loan and lease origination fees 1,431     9,503     9,111     8,625     5,937  
Total loans and leases, net of allowance $ 3,405,462     $ 3,558,639     $ 3,376,286     $ 3,266,577     $ 3,436,899  

The Company’s investment security balances at June 30, 2021 totaled $1.98 billion, as compared to $1.55 billion at March 31, 2021 and $1.27 billion at June 30, 2020.

Total gross loans and leases totaled $3.50 billion at June 30, 2021, as compared to $3.65 billion at March 31, 2021 and $3.50 billion and as compared to June 30, 2020. The primary driver for the decrease on a linked quarter basis was the pay down of seasonal tax service loans.

At June 30, 2021, commercial finance loans, which comprised 74% of the Company’s gross loan and lease portfolio, totaled $2.59 billion, reflecting growth of $80.6 million, or 3%, from March 31, 2021. The increase in commercial finance loans was primarily due to increases in insurance premium finance by $72.8 million and factoring by $43.0 million, partially offset by decreases in lease financing by $25.2 million and SBA/USDA loans by $68.2 million, respectively, along with slight increases spread across several of the other commercial finance categories.

As of June 30, 2021, the Company had 458 loans outstanding with total loan balances of $143.3 million originated as part of the Paycheck Protection Program (“PPP”), compared with 576 loans outstanding with total loan balances of $208.6 million for the quarter ended March 31, 2021. In total, 53% of the PPP loan balances were forgiven through June 30, 2021.

Consumer finance loans totaled $227.8 million as of June 30, 2021, a decrease compared to $235.7 million at March 31, 2021 and $241.6 million at June 30, 2020. This reduction was primarily driven by other consumer finance, which includes student loans and certain seasonal lending products for tax customers.

Tax services loans totaled $41.3 million as of June 30, 2021, a seasonal decrease as compared to $225.9 million for March 31, 2021 and an increase as compared to $19.2 million at June 30, 2020. Warehouse finance loans totaled $335.7 million at June 30, 2021, a 1% increase from March 31, 2021.

Community bank loans held for investment totaled $304.0 million as of June 30, 2021, decreasing as compared to $348.1 million at March 31, 2021 and $799.4 million at June 30, 2020. As of June 30, 2021, the Company had $18.1 million in community bank loans classified as held for sale.

Asset Quality
The Company’s allowance for credit losses totaled $91.2 million at June 30, 2021, a decrease compared to $98.9 million at March 31, 2021 and an increase compared to $65.7 million at June 30, 2020. The decrease in the allowance at June 30, 2021 when compared to March 31, 2021, was primarily due to the seasonal tax services loan portfolio, which decreased $4.8 million and consumer finance, which decreased $2.4 million during the fiscal 2021 third quarter.

The year-over-year increase in the allowance was primarily driven by a $16.0 million increase within the commercial finance portfolio, a $12.9 million increase in tax services, and a $4.4 million increase in the consumer finance portfolio. These increases were primarily driven by impacts from the pandemic, 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 increases noted above were partially offset by a $7.2 million decrease within the retained community banking portfolio, which has decreased along with the reduction in year-over-year loan balances.

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) June 30, 2021 March 31, 2021 December 31, 2020 October 1, 2020(1) September 30, 2020 June 30, 2020
             
Commercial finance 1.73 % 1.77 % 1.88 % 1.85 % 1.30 % 1.36 %
Consumer finance 3.80 % 4.70 % 4.39 % 4.31 % 1.64 % 1.75 %
Tax services 58.99 % 12.90 % 1.53 % 0.06 % 0.06 % 59.67 %
Warehouse finance 0.10 % 0.10 % 0.10 % 0.10 % 0.10 % 0.10 %
National Lending 2.44 % 2.57 % 1.89 % 1.86 % 1.20 % 1.68 %
Community Bank 4.36 % 4.03 % 4.01 % 3.37 % 4.59 % 2.55 %
Total loans and leases 2.61 % 2.71 % 2.10 % 2.08 % 1.70 % 1.88 %

(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 decreased to 2.61% at June 30, 2021 from 2.71% at March 31, 2021. The decrease in the total loans and leases coverage ratio reflected a seasonal reduction in the allowance of the tax services loan portfolios. The coverage ratios for the other non-tax-related loan categories remained relatively similar to the March 31, 2021 quarter. 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 Nine Months Ended
  June 30, 2021 March 31, 2021 June 30, 2020 June 30, 2021 June 30, 2020
(Dollars in thousands)          
Beginning balance $ 98,892   $ 72,389   $ 65,355   $ 56,188   $ 29,149  
Adoption of CECL accounting standard       12,773    
Provision – tax services loans 4,685   27,680   (100 ) 32,819   20,407  
Provision – all other loans and leases (36 ) 2,519   15,193   8,294   35,390  
Charge-offs – tax services loans (9,505 )   (9,797 ) (9,505 ) (9,797 )
Charge-offs – all other loans and leases (5,360 ) (4,248 ) (5,808 ) (15,284 ) (12,912 )
Recoveries – tax services loans 17   54   15   1,027   827  
Recoveries – all other loans and leases 2,515   498   889   4,896   2,684  
Ending balance $ 91,208   $ 98,892   $ 65,747   $ 91,208   $ 65,747  

Provision for credit losses was $4.6 million for the quarter ended June 30, 2021, compared to $15.1 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 third quarter of fiscal 2020. Net charge-offs were $12.3 million for the quarter ended June 30, 2021, compared to $14.7 million for the quarter ended June 30, 2020. The majority of the net charge-offs for the quarter were attributable to seasonal tax-related loan products.

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

As of June 30, 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 $ 22,117     $ 10,650     $ 8,844     $ 41,611     $ 2,544,916     $ 2,586,527     $ 4,350     $ 17,315     $ 21,665  
Consumer finance 843     1,009     525     2,377     225,379     227,756     469         469  
Tax services     40,958         40,958     310     41,268              
Warehouse finance                 335,704     335,704              
Total National Lending 22,960     52,617     9,369     84,946     3,106,309     3,191,255     4,819     17,315     22,134  
Total Community Banking 62         1,769     1,831     302,153     303,984         19,773     19,773  
Total loans and leases held for investment $ 23,022     $ 52,617     $ 11,138     $ 86,777     $ 3,408,462     $ 3,495,239     $ 4,819     $ 37,088     $ 41,907  
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   

The Company’s nonperforming assets at June 30, 2021 were $45.1 million, representing 0.64% of total assets, compared to $46.7 million, or 0.48% of total assets at March 31, 2021 and $56.1 million, or 0.64% of total assets at June 30, 2020. The changes in the nonperforming assets as a percentage of total assets at June 30, 2021 were driven in large part by a significant reduction in period-end total assets as the total nonperforming assets for June 30, 2021 decreased when compared to both the linked-quarter and the prior year.

The Company’s nonperforming loans and leases at June 30, 2021, were $41.9 million, representing 1.17% of total gross loans and leases, compared to $43.5 million, or 1.17% of total gross loans and leases at March 31, 2021 and $39.3 million, or 1.10% of total gross loans and leases at June 30, 2020.

Loan and lease balances that were within their active deferment period decreased to $41.5 million at June 30, 2021 from $66.5 million at March 31, 2021.

Meta is now revising its credit administration policies and reviewing its loan portfolio to better align with OCC guidance for national banks, a process that began during the quarter ending June 30, 2021 and is expected to be completed by September 30, 2021. We expect these credit policy revisions will have an impact on our loan and lease risk ratings, resulting in downgrades of certain credits in several categories. Our loan and collateral management practices have proven effective in managing losses during previous economic cycles; and while we expect this process will result in setting a new baseline for portfolio metrics going forward, it does not indicate a deterioration in our portfolio’s expected performance. Further, these changes do not reflect an increase in credit risk for past or future periods and thus we do not anticipate any increase in losses as a result of these one-time administrative adjustments to these credits’ risk ratings.

The Company has various portfolios of consumer finance and tax services loans that present unique risks. Due to the unique risks associated with these portfolios, the Company monitors other credit quality indicators in their evaluation of the appropriateness of the allowance for credit losses on these portfolios, and as such, these loans are not included in the asset classification table below. The Company’s loans and leases by asset classification were as follows for the periods presented.

Asset Classification Pass Watch Special Mention Substandard Doubtful Total
As of June 30, 2021 (Dollars in Thousands)
Commercial finance $ 2,370,132   $ 135,691   $ 55,805   $ 74,941   $ 7,166   $ 2,643,735  
Warehouse finance 335,704           335,704  
Total National Lending 2,705,836   135,691   55,805   74,941   7,166   2,979,439  
Total Community Banking 212,283   33,494   16,126   60,196     322,099  
Total Loans and Leases $ 2,918,119   $ 169,185   $ 71,931   $ 135,137   $ 7,166   $ 3,301,538  
Asset Classification Pass Watch Special Mention Substandard Doubtful Total
As of March 31, 2021 (Dollars in Thousands)
Commercial finance $ 2,310,043   $ 142,506   $ 59,904   $ 52,492   $ 2,378   $ 2,567,323  
Warehouse finance 332,456           332,456  
Total National Lending 2,642,499   142,506   59,904   52,492   2,378   2,899,779  
Total Community Banking 239,650   84,107   684   23,625     348,066  
Total Loans and Leases $ 2,882,149   $ 226,613   $ 60,588   $ 76,117   $ 2,378   $ 3,247,845  

Deposits, Borrowings and Other Liabilities
Total average deposits for the fiscal 2021 third quarter decreased by $240.7 million to $6.98 billion compared to the same period in fiscal 2020, due to a reduction in wholesale deposits partially offset by increases in all other non-maturity deposit categories. Average wholesale deposits decreased $731.1 million, or 89%, while noninterest-bearing deposits increased $323.1 million, or 5%, for the fiscal 2021 third quarter when compared to the same period in fiscal 2020. Average deposits from the Payments division increased nearly 8% to $6.79 billion for the fiscal 2021 third 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 $6.67 billion, representing an increase of 42% compared to the same period of the prior year, which continues to be largely driven by other stimulus-related dollars loaded on various partner cards.

The average balance of total deposits and interest-bearing liabilities was $7.08 billion for the three-month period ended June 30, 2021, compared to $7.49 billion for the same period in the prior fiscal year, representing a decrease of 6%.

Total end-of-period deposits decreased 22% to $5.89 billion at June 30, 2021, compared to $7.59 billion at June 30, 2020. The reduction in end-of-period deposits was primarily driven by decreases in noninterest-bearing deposits of $1.15 billion and wholesale deposits of $665.0 million. The decrease in noninterest-bearing deposits was driven by a $2.58 billion reduction in EIP program card balances from June 30, 2020 to June 30, 2021 as Meta was able to shift most of the remaining EIP program card balances from its balance sheet to other banks. That decrease in EIP balances was partially offset by growth in payments deposits that has been largely driven by excess cash on consumer cards related to government stimulus programs.

Regulatory Capital
The Company and MetaBank remained above the federal regulatory minimum capital requirements at June 30, 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 June 30,
2021
(1)
  March 31,
2021
  December 31,
2020
  September 30,
2020
  June 30,
2020
Company                  
Tier 1 leverage capital ratio 6.85 %   4.75 %   7.39 %   6.58 %   5.91 %
Common equity Tier 1 capital ratio 12.76 %   11.29 %   10.72 %   11.78 %   11.51 %
Tier 1 capital ratio 13.11 %   11.63 %   11.07 %   12.18 %   11.90 %
Total capital ratio 16.18 %   14.65 %   14.14 %   15.30 %   14.99 %
MetaBank                  
Tier 1 leverage capital ratio 7.83 %   5.47 %   8.60 %   7.56 %   6.89 %
Common equity Tier 1 capital ratio 14.94 %   13.39 %   12.87 %   13.96 %   13.82 %
Tier 1 capital ratio 14.96 %   13.40 %   12.89 %   14.00 %   13.86 %
Total capital ratio 16.22 %   14.66 %   14.14 %   15.26 %   15.12 %

(1) June 30, 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) June 30,
2021
  March 31,
2021
  December 31,
2020
  September 30,
2020
  June 30,
2020
(Dollars in Thousands)                  
Total stockholders’ equity $ 876,633     $ 835,258     $ 813,210     $ 847,308     $ 829,909  
Adjustments:                  
LESS: Goodwill, net of associated deferred tax liabilities 301,179     301,602     301,999     302,396     302,814  
LESS: Certain other intangible assets 35,100     36,779     39,403     40,964     42,865  
LESS: Net deferred tax assets from operating loss and tax credit carry-forwards 17,753     19,306     24,105     18,361     10,360  
LESS: Net unrealized gains (losses) on available-for-sale securities 14,750     12,458     19,894     17,762     8,382  
LESS: Non-controlling interest 1,490     1,092     1,536     3,603     3,787  
ADD: Adoption of Accounting Standards Update 2016-13 13,913     10,439     10,439          
Common Equity Tier 1(1) 520,274     474,460     436,712     464,222     461,701  
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 932     690     749     1,894     1,894  
Total Tier 1 Capital 534,867     488,811     451,122     479,777     477,256  
Allowance for credit losses 51,317     53,232     51,070     49,343     50,338  
Subordinated debentures (net of issuance costs) 73,936     73,892     73,850     73,807     73,765  
Total qualifying capital $ 660,119     $ 615,935     $ 576,042     $ 602,927     $ 601,359  

(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,
2021
  March 31,
2021
  December 31,
2020
  September 30,
2020
  June 30,
2020
(Dollars in Thousands)                  
Total Stockholders’ Equity $ 876,633     $ 835,258     $ 813,210     $ 847,308     $ 829,909  
Less: Goodwill 309,505     309,505     309,505     309,505     309,505  
Less: Intangible assets 34,898     36,903     39,660     41,692     43,974  
Tangible common equity 532,230     488,850     464,045     496,111     476,430  
Less: Accumulated other comprehensive income (loss) (“AOCI”) 15,222     12,809     20,119     17,542     7,995  
Tangible common equity excluding AOCI $ 517,008     $ 476,041     $ 443,926     $ 478,569     $ 468,435  

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 28, 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 5084665 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

  • Raymond James U.S. Bank Conference, September 8, 2021 | Chicago, IL

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; 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 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 June 30, 2021   March 31, 2021   December 31, 2020   September 30, 2020   June 30, 2020
Cash and cash equivalents $ 720,243     $ 3,724,242     $ 1,586,451     $ 427,367     $ 3,108,141  
Investment securities available for sale, at fair value 854,023     921,947     797,363     814,495     825,579  
Mortgage-backed securities available for sale, at fair value 1,063,582     558,833     430,761     453,607     338,250  
Investment securities held to maturity, at cost 60,228     67,709     76,176     87,183     98,205  
Mortgage-backed securities held to maturity, at cost 4,019     4,403     5,152     5,427     6,382  
Loans held for sale 87,905     67,635     133,659     183,577     79,905  
Loans and leases 3,496,670     3,657,531     3,448,675     3,322,765     3,502,646  
Allowance for credit losses (91,208 )   (98,892 )   (72,389 )   (56,188 )   (65,747 )
Federal Reserve Bank and Federal Home Loan Bank stocks, at cost 28,433     28,433     27,138     27,138     31,836  
Accrued interest receivable 16,230     17,429     17,133     16,628     17,545  
Premises, furniture, and equipment, net 44,107     41,510     39,932     41,608     40,361  
Rental equipment, net 211,368     211,397     206,732     205,964     216,336  
Bank-owned life insurance 94,142     93,542     92,937     92,315     91,697  
Foreclosed real estate and repossessed assets, net 1,204     1,483     7,186     9,957     6,784  
Goodwill 309,505     309,505     309,505     309,505     309,505  
Intangible assets 34,898     36,903     39,660     41,692     43,974  
Prepaid assets 7,482     10,201     11,270     8,328     6,806  
Deferred taxes 20,072     25,435     24,411     17,723     15,944  
Other assets 88,909     110,877     82,763     82,983     104,877  
                   
Total assets $ 7,051,812     $ 9,790,123     $ 7,264,515     $ 6,092,074     $ 8,779,026  
                   
LIABILITIES AND STOCKHOLDERS’ EQUITY                  
                   
LIABILITIES                  
Deposits:                  
Noninterest-bearing checking 5,385,569     7,928,235     5,581,597     4,356,630     6,537,809  
Interest-bearing checking 255,509     416,164     274,504     157,571     187,003  
Savings deposits 93,608     126,834     54,080     47,866     55,896  
Money market deposits 63,920     55,045     56,440     48,494     40,811  
Time certificates of deposit 11,425     12,614     13,522     20,223     25,000  
Wholesale deposits 78,840     103,521     227,648     348,416     743,806  
Total deposits 5,888,871     8,642,413     6,207,791     4,979,200     7,590,325  
Short-term borrowings                  
Long-term borrowings 93,634     95,336     96,760     98,224     209,781  
Accrued interest payable 1,853     679     2,068     1,923     4,332  
Accrued expenses and other liabilities 190,821     216,437     144,686     165,419     144,679  
Total liabilities 6,175,179     8,954,865     6,451,305     5,244,766     7,949,117  
                   
STOCKHOLDERS’ EQUITY                  
Preferred stock                  
Common stock, $.01 par value 319     319     326     344     346  
Common stock, Nonvoting, $.01 par value                  
Additional paid-in capital 602,720     601,222     598,669     594,569     592,693  
Retained earnings 262,578     225,471     198,000     234,927     228,500  
Accumulated other comprehensive income 15,222     12,809     20,119     17,542     7,995  
Treasury stock, at cost (5,696 )   (5,655 )   (5,440 )   (3,677 )   (3,412 )
Total equity attributable to parent 875,143     834,166     811,674     843,705     826,122  
Noncontrolling interest 1,490     1,092     1,536     3,603     3,787  
Total stockholders’ equity 876,633     835,258     813,210     847,308     829,909  
                   
Total liabilities and stockholders’ equity $ 7,051,812     $ 9,790,123     $ 7,264,515     $ 6,092,074     $ 8,779,026  

Consolidated Statements of Operations (Unaudited)

(Dollars in Thousands, Except Share and Per Share Data)

  Three Months Ended   Year Ended
  June 30, 2021   March 31, 2021   June 30, 2020   June 30,
2021
  June 30,
2020
Interest and dividend income:                  
Loans and leases, including fees $ 62,287     $ 68,472     $ 59,911     $ 192,415     $ 199,107  
Mortgage-backed securities 3,446     2,608     2,269     8,176     7,151  
Other investments 4,250     4,589     5,226     13,207     18,176  
  69,983     75,669     67,406     213,798     224,434  
Interest expense:                  
Deposits 188     445     3,130     1,429     20,712  
FHLB advances and other borrowings 1,320     1,374     2,139     4,045     9,197  
  1,508     1,819     5,269     5,474     29,909  
                   
Net interest income 68,475     73,850     62,137     208,324     194,525  
                   
Provision for credit losses 4,612     30,290     15,093     40,991     55,796  
                   
Net interest income after provision for credit losses 63,863     43,560     47,044     167,333     138,729  
                   
Noninterest income:                  
Refund transfer product fees 12,073     22,680     4,595     35,400     33,726  
Tax advance product fees 891     44,562     28     47,413     31,840  
Payments card and deposit fees 29,203     29,875     21,302     81,641     65,957  
Other bank and deposit fees 338     133     214     709     1,083  
Rental income 9,976     9,846     11,231     29,707     34,682  
Net gain realized on investment securities     6         6      
Gain on divestitures                 19,275  
Gain (loss) on sale of other 5,955     2,133     1,214     10,935     969  
Other income 4,017     4,218     2,464     15,550     11,512  
Total noninterest income 62,453     113,453     41,048     221,361     199,044  
                   
Noninterest expense:                  
Compensation and benefits 38,604     43,932     32,102     114,867     100,631  
Refund transfer product expense 2,435     6,146     (139 )   8,642     7,482  
Tax advance product expense (25 )   2,189     (11 )   2,534     2,820  
Card processing 6,809     7,212     7,128     20,138     19,432  
Occupancy and equipment expense 7,381     6,748     6,502     21,017     20,169  
Operating lease equipment depreciation 8,122     7,419     8,536     23,122     25,237  
Legal and consulting 5,680     6,045     4,660     16,972     15,242  
Intangible amortization 2,013     2,757     2,636     6,784     8,714  
Impairment expense 505     554         2,217     750  
Other expense 9,999     12,969     9,827     33,775     38,291  
Total noninterest expense 81,523     95,971     71,241     250,068     238,768  
                   
Income before income tax expense 44,793     61,042     16,851     138,626     99,005  
                   
Income tax expense (benefit) 4,934     1,133     (2,426 )   9,600     3,870  
                   
Net income before noncontrolling interest 39,859     59,909     19,277     129,026     95,135  
Net income attributable to noncontrolling interest 1,158     843     1,087     3,221     3,573  
Net income attributable to parent $ 38,701     $ 59,066     $ 18,190     $ 125,805     $ 91,562  
                   
Less: Allocation of Earnings to participating securities(1)   729       1,113       432       2,411       2,097  
Net income attributable to common shareholders(1)   37,972       57,953       17,758       123,394       89,465  
Earnings per common share                  
Basic $ 1.21     $ 1.84     $ 0.53     $ 3.87     $ 2.54  
Diluted $ 1.21     $ 1.84     $ 0.53     $ 3.87     $ 2.54  
Shares used in computing earnings per common share                  
Basic 31,320,893     31,520,505     33,794,154     31,880,653     35,180,068  
Diluted 31,338,947     31,535,022     33,815,651     31,900,597     35,201,702  

(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 June 30, 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 $ 1,867,988     $ 528     0.11 %   $ 2,692,270     $ 783     0.12 %
Mortgage-backed securities 882,042     3,446     1.57 %   342,174     2,269     2.67 %
Tax exempt investment securities 263,401     884     1.70 %   417,042     1,658     2.02 %
Asset-backed securities 438,163     1,651     1.51 %   336,562     1,770     2.11 %
Other investment securities 246,493     1,187     1.93 %   197,643     1,014     2.06 %
Total investments 1,830,099     7,168     1.62 %   1,293,420     6,711     2.22 %
Total commercial finance 2,616,942     48,641     7.46 %   2,160,175     40,375     7.52 %
Total consumer finance 241,813     3,916     6.50 %   247,824     4,635     7.52 %
Total tax services 91,804     604     2.64 %   39,845         %
Total warehouse finance 332,759     5,151     6.21 %   304,839     4,582     6.05 %
National lending loans and leases 3,283,318     58,312     7.12 %   2,752,683     49,592     7.25 %
Community Banking loans 335,415     3,975     4.75 %   870,245     10,319     4.77 %
Total loans and leases 3,618,733     62,287     6.90 %   3,622,928     59,911     6.65 %
Total interest-earning assets $ 7,316,820     $ 69,983     3.85 %   $ 7,608,618     $ 67,406     3.59 %
Noninterest-earning assets 841,738             830,589          
Total assets $ 8,158,558             $ 8,439,206          
                       
Interest-bearing liabilities:                      
Interest-bearing checking(2) $ 336,576     $     %   $ 226,382     $     %
Savings 107,803     5     0.02 %   55,572     1     0.01 %
Money markets 58,517     66     0.45 %   40,091     33     0.33 %
Time deposits 11,877     27     0.91 %   25,392     113     1.78 %
Wholesale deposits 86,295     90     0.42 %   817,414     2,983     1.47 %
Total interest-bearing deposits 601,068     188     0.13 %   1,164,852     3,130     1.08 %
Overnight fed funds purchased 11         0.25 %   59,055     48     0.33 %
FHLB advances         %   110,000     670     2.45 %
Subordinated debentures 73,907     1,148     6.23 %   73,738     1,153     6.29 %
Other borrowings 20,657     172     3.35 %   27,032     268     3.98 %
Total borrowings 94,575     1,320     5.60 %   269,825     2,139     3.19 %
Total interest-bearing liabilities 695,643     1,508     0.87 %   1,434,677     5,269     1.48 %
Noninterest-bearing deposits 6,380,371         %   6,057,314         %
Total deposits and interest-bearing liabilities $ 7,076,014      $ 1,508      0.09  %   $ 7,491,991      $ 5,269      0.28  %
Other noninterest-bearing liabilities 225,862             122,940          
Total liabilities 7,301,876             7,614,931          
Shareholders’ equity 856,682             824,276          
Total liabilities and shareholders’ equity $ 8,158,558             $ 8,439,206          
Net interest income and net interest rate spread including noninterest-bearing deposits     $ 68,475     3.76 %       $ 62,137     3.30 %
                       
Net interest margin         3.75 %           3.28 %
Tax-equivalent effect         0.02 %           0.02 %
Net interest margin, tax-equivalent(3)         3.77 %           3.31 %

(1) Tax rate used to arrive at the TEY for the three months ended June 30, 2021 and 2020 was 21%.
(2) Of the total balance, $336.2 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 June 30,
2021
  March 31,
2021
  December 31,
2020
  September 30,
2020
  June 30,
2020
Equity to total assets 12.43 %   8.53 %   11.19 %   13.91 %   9.45 %
Book value per common share outstanding $ 27.46     $ 26.16     $ 24.93     $ 24.66     $ 23.96  
Tangible book value per common share outstanding $ 16.67     $ 15.31     $ 14.23     $ 14.44     $ 13.76  
Tangible book value per common share outstanding excluding AOCI $ 16.20     $ 14.91     $ 13.61     $ 13.93     $ 13.53  
Common shares outstanding 31,919,780     31,926,008     32,620,251     34,360,890     34,631,160  
Nonperforming assets to total assets 0.64 %   0.48 %   0.73 %   0.79 %   0.64 %
Nonperforming loans and leases to total loans and leases 1.17 %   1.17 %   1.18 %   0.97 %   1.10 %
Net interest margin 3.75 %   3.07 %   4.65 %   3.77 %   3.28 %
Net interest margin, tax-equivalent 3.77 %   3.08 %   4.67 %   3.79 %   3.31 %
Return on average assets 1.90 %   2.22 %   1.73 %   0.69 %   0.86 %
Return on average equity 18.07 %   28.93 %   13.91 %   6.21 %   8.83 %
Full-time equivalent employees 1,109     1,075     1,038     1,015     999  

Non-GAAP Reconciliation

Efficiency Ratio For the last twelve months ended
(Dollars in Thousands) June 30,
2021
  March 31,
2021
  December 31,
2020
  September 30,
2020
  June 30,
2020
Noninterest Expense – GAAP $ 330,352     $ 320,070     $ 315,828     $ 319,051     $ 314,911  
Net Interest Income 272,837     266,499     260,386     259,038     260,142  
Noninterest Income 262,111     240,706     247,766     239,794     235,024  
Total Revenue: GAAP $ 534,948     $ 507,205     $ 508,152     $ 498,832     $ 495,166  
Efficiency Ratio, last twelve months 61.75 %   63.10 %   62.15 %   63.96 %   63.60 %

About Meta Financial Group, Inc.®

Meta Financial Group, Inc.® (“Meta”) (Nasdaq: CASH) is a South Dakota-based financial holding company. At Meta, our mission is financial inclusion for all®. Through our subsidiary, MetaBank®, N.A., we strive to remove barriers to financial access and promote economic mobility by working with third parties to provide responsible, secure, high quality financial products that contribute to the social and economic benefit of communities at the core of the real economy. Meta works to increase financial availability, choice, and opportunity for all. Additional information can be found by visiting www.metafinancialgroup.com.

Investor Relations Contact
Brittany Kelley Elsasser
605-362-2423
[email protected]

Media Relations Contact
[email protected] 


(GlobeNewsWire)

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