Results

Meta Financial Group Inc.

10/27/2021 | Press release | Distributed by Public on 10/27/2021 14:12

META FINANCIAL GROUP, INC.® ANNOUNCES RESULTS FOR FOURTH QUARTER AND FISCAL YEAR 2021 - Form 8-K

META FINANCIAL GROUP, INC.® ANNOUNCES RESULTS FOR FOURTH QUARTER AND FISCAL YEAR 2021
- Fiscal 2021 Fourth Quarter Net Income of $15.9 million, or $0.50 Per Diluted Share -
- Fiscal 2021 Net Income of $141.7 million, or $4.38 Per Diluted Share -
- Fiscal 2021 Earnings Per Share up 49% Versus Fiscal 2020 -
Sioux Falls, S.D., October 27, 2021 -- Meta Financial Group, Inc.® (Nasdaq: CASH) ("Meta" or the "Company") reported net income of $15.9 million, or $0.50 per share, for the three months ended September 30, 2021, compared to net income of $13.2 million, or $0.38 per share, for the three months ended September 30, 2020. The Company reported record net income of $141.7 million, or $4.38 per share, for the fiscal year ended September 30, 2021, compared to net income of $104.7 million, or $2.94 per diluted share for the fiscal year ended September 30, 2020.
"MetaBank ended fiscal year 2021 on a strong note, as we made significant progress against our three key strategic initiatives, positioning the firm for continued improvement," said CEO Brett Pharr. "As we start the new fiscal year, our Banking-as-a-Service pipeline has never been stronger and we will continue to advance our mission of financial inclusion for all®."
"I also want to thank our previous CEO Brad Hanson for his contributions to Meta for nearly 20 years. His efforts, together with those of our team, built the leadership position that Meta enjoys today," Pharr added.
"We achieved record earnings this past fiscal year that generated excess capital for our shareholders, as reflected in the Board's confidence in authorizing the new share repurchase program we announced last month," said Executive Vice President and CFO Glen Herrick. "We have a balanced approach to capital deployment and will continue to evaluate strategies that create shareholder value."
Business Development Highlights for the 2021 Fiscal Fourth Quarter and Full Fiscal Year 2021
•Named the Visa card issuer, in conjunction with Blackhawk Network, for the Excluded Workers Fund, a New York State Department of Labor program that provides one-time payments to certain New Yorkers who lost income due to COVID-19.
•Recognized a net unrealized gain of $4.1 million on a prior investment in MoneyLion Inc. ("MoneyLion") following the completion of its de-SPAC'ing process and listing on the New York Stock Exchange on September 22, 2021.
•Expanded our renewable energy financing, originating $101.1 million for the fiscal year 2021, resulting in $26.5 million in total net investment tax credits.
•Announced a new share repurchase program and during the 2021 fiscal fourth quarter repurchased 234,297 shares, at an average price of $51.18, reflecting the momentum of the business and confidence in the Company's strategy and growth trajectory. An additional 636,100 shares were purchased in October 2021 through October 22, 2021.
•Bradley C. Hanson, President and Chief Executive Officer of the Company retired from his positions at Meta Financial and MetaBank. He will remain on the Company's Board until the next annual stockholders' meeting, expected to take place in February 2022. He also will serve as a Strategic Advisor to Meta on industry and partner relations until the end of 2022. The Board appointed Brett L. Pharr as Chief Executive Officer and Anthony M. Sharett as President of Meta Financial Group and MetaBank effective October 1, 2021. For additional information, please see the associated press release from September 7, 2021.
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•Subsequent to September 30, 2021, MetaBank sold $30.2 million in community banking loans to Central Bank and has agreements in place to sell another approximately $161.0 million. Following the sale, the legacy community bank loan portfolio will be less than $8 million. The Company expects community bank balances to be at $0 at the end of the first fiscal quarter of 2022. Included in the sales, are approximately $108.0 million of substandard and doubtful loans, of which $14.9 million are nonaccrual loans, as of September 30, 2021, representing 39% of MetaBank's substandard and doubtful loan and lease balances and 44% of our nonaccrual balances.
Financial Highlights for the 2021 Fiscal Fourth Quarter
•Total revenue for the fourth quarter was $120.2 million, an increase of $14.9 million compared to the same quarter in fiscal 2020 primarily driven by higher net interest income, payments fee income and $4.1 million in other income related to the MoneyLion valuation.
•Operating efficiency ratio improved 146 basis points to 62.5% at September 30, 2021 compared to 64.0% at September 30, 2020. See non-GAAP reconciliation table below.
•Net interest income for the fourth quarter was $70.7 million, an increase of $6.2 million compared to $64.5 million in the fourth quarter last year.
•Net interest margin ("NIM") improved to 4.35% for the fourth quarter from 3.77% during the same period of last year, chiefly due to the decrease in cash associated with the Company's participation in the Economic Impact Program ("EIP") program, as well as an increase in commercial and warehouse finance loans and leases.
•Total gross loans and leases at September 30, 2021 increased $293.7 million, to $3.61 billion, or 9%, compared to September 30, 2020 and increased $112.6 million, or 3%, when compared to June 30, 2021. The increase was primarily driven by growth in commercial finance, warehouse finance and consumer finance loans partially offset by a decrease in community bank loans, which was driven by a loan sale of $75.1 million during the quarter.
Net Interest Income
Net interest income for the fourth quarter of fiscal 2021 was $70.7 million, an increase of 10% from the same quarter in fiscal 2020. The increase was mainly attributable to the continued optimization of our earning asset and liability mix, along with increased loan balances.
The fourth quarter average outstanding balance of loans and leases increased $109.3 million compared to the prior year quarter, primarily due to increases in the commercial finance, warehouse finance and consumer finance loan and lease portfolios, partially offset by a decrease in the retained community bank portfolio. The Company's average interest-earning assets for the fourth quarter decreased by $367.8 million to $6.44 billion compared with the same quarter in fiscal 2020, primarily due to the decrease in cash and fed funds sold, partially offset by growth in total investments and total loans and leases.
Fiscal 2021 fourth quarter NIM increased to 4.35% from 3.77% in the fourth quarter of last year. The overall reported tax-equivalent yield ("TEY") on average earning asset yields increased 43 basis points to 4.45% 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 1.50% compared to 1.78% for the comparable period last year.
The Company's cost of funds for all deposits and borrowings averaged 0.09% during the fiscal 2021 fourth quarter, compared to 0.23% 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 fourth quarter of 2021, compared to 0.12% in the same quarter last year.

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Noninterest Income
Fiscal 2021 fourth quarter noninterest income increased to $49.5 million, compared to $40.8 million for the same period of the prior year. The significant increase was primarily driven by payments fee income, a net unrealized gain of $4.1 million in the MoneyLion investment and $1.5 million of other income on a student loan insurance recovery, which were partially offset by a net loss on a sale of community bank loans in the quarter of $1.8 million. The payments fee income was aided by an increase in activity related to government stimulus programs.
Noninterest Expense
Noninterest expense increased 17% to $93.6 million for the fiscal 2021 fourth quarter, from $80.3 million for the same quarter last year. The increase in expense was primarily driven by $9.0 million in one-time technology and product investments. CEO transition expenses of $1.3 million related to accelerated vesting of CEO shares and associated professional expenses also contributed to the year-over-year increase.
Income Tax Expense
The Company recorded income tax expense of $1.1 million, representing an effective tax rate of 6.2%, for the fiscal 2021 fourth quarter, compared to $1.8 million, representing an effective tax rate of 11.2%, for the fourth quarter last year.
The Company originated $29.1 million in solar leases during the fiscal 2021 fourth quarter, compared to $41.1 million in last year's fourth 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
September 30, 2021 June 30, 2021 March 31, 2021 December 31, 2020 September 30, 2020
Total investments $ 1,921,568 $ 1,981,852 $ 1,552,892 $ 1,309,452 $ 1,360,712
Loans held for sale
Consumer credit products 23,111 12,582 6,233 234 962
SBA/USDA 33,083 57,208 61,402 32,983 52,542
Community Bank - 18,115 - 100,442 130,073
Total loans held for sale 56,194 87,905 67,635 133,659 183,577
Term lending 961,019 920,279 891,414 881,306 805,323
Asset based lending 300,225 263,237 248,735 242,298 182,419
Factoring 363,670 320,629 277,612 275,650 281,173
Lease financing 266,050 282,940 308,169 283,722 281,084
Insurance premium finance 428,867 417,652 344,841 338,227 337,940
SBA/USDA 247,756 263,709 331,917 300,707 318,387
Other commercial finance 157,908 118,081 103,234 101,209 101,658
Commercial Finance 2,725,495 2,586,527 2,505,922 2,423,119 2,307,984
Consumer credit products 129,251 105,440 104,842 88,595 89,809
Other consumer finance 123,606 122,316 130,822 162,423 134,342
Consumer Finance 252,857 227,756 235,664 251,018 224,151
Tax Services 10,405 41,268 225,921 92,548 3,066
Warehouse Finance 419,926 335,704 332,456 318,937 293,375
Community Banking 199,132 303,984 348,065 353,942 485,564
Total gross loans and leases 3,607,815 3,495,239 3,648,028 3,439,564 3,314,140
Allowance for credit losses (68,281) (91,208) (98,892) (72,389) (56,188)
Net deferred loan and lease origination fees 1,748 1,431 9,503 9,111 8,625
Total loans and leases, net of allowance $ 3,541,282 $ 3,405,462 $ 3,558,639 $ 3,376,286 $ 3,266,577
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The Company's investment security balances at September 30, 2021 totaled $1.92 billion, as compared to $1.98 billion at June 30, 2021 and $1.36 billion at September 30, 2020.
Total gross loans and leases totaled $3.61 billion at September 30, 2021, as compared to $3.50 billion at June 30, 2021 and $3.31 billion and as compared to September 30, 2020. The primary drivers for the increase on a prior quarter basis were commercial finance, consumer credit, and warehouse finance loans, partially offset by the decrease in community bank and tax service loans.
At September 30, 2021, commercial finance loans, which comprised 76% of the Company's gross loan and lease portfolio, totaled $2.73 billion, reflecting growth of $139.0 million, or 5%, from June 30, 2021.
As of September 30, 2021, the Company had 370 loans outstanding with total loan balances of $96.0 million originated as part of the Paycheck Protection Program ("PPP"), compared with 458 loans outstanding with total loan balances of $143.3 million for the quarter ended June 30, 2021. In total, 69% of the PPP loan balances were forgiven through September 30, 2021.
Community bank loans held for investment totaled $199.1 million as of September 30, 2021, decreasing as compared to $304.0 million at June 30, 2021 and $485.6 million at September 30, 2020. The Company sold additional loans from the retained Community Bank portfolio in the amount of $75.1 million during the fiscal 2021 fourth quarter, which resulted in a net loss on sale of $1.8 million for the quarter.
Asset Quality
The Company's allowance for credit losses ("ACL") totaled $68.3 million at September 30, 2021, a decrease compared to $91.2 million at June 30, 2021 and an increase compared to $56.2 million at September 30, 2020. The decrease in the ACL at September 30, 2021, when compared to June 30, 2021, was primarily due to a $24.3 million decrease in the allowance for seasonal tax services loan portfolio as we recorded season-end charge-downs, a $1.3 million decrease in consumer lending and a $1.0 million decrease in the retained community banking portfolio, partially offset by a $4.3 million increase in commercial finance and $0.1 million increase in warehouse finance.
The $12.1 million year-over-year increase in the ACL was primarily driven by an $18.3 million increase within the commercial finance portfolio and a $3.7 million increase in the consumer lending portfolio. These increases were driven by the 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 $10.0 million reduction within the retained community banking portfolio, which decreased year-over-year.
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) September 30, 2021 June 30, 2021 March 31, 2021 December 31, 2020 October 1, 2020(1) September 30, 2020
Commercial finance 1.77 % 1.73 % 1.77 % 1.88 % 1.85 % 1.30 %
Consumer finance 2.91 % 3.80 % 4.70 % 4.39 % 4.31 % 1.64 %
Tax services 0.02 % 58.99 % 12.90 % 1.53 % 0.06 % 0.06 %
Warehouse finance 0.10 % 0.10 % 0.10 % 0.10 % 0.10 % 0.10 %
Community bank 6.16 % 4.36 % 4.03 % 4.01 % 3.37 % 4.59 %
Total loans and leases 1.89 % 2.61 % 2.71 % 2.10 % 2.08 % 1.70 %
(1) Represents the Company's ACL 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.

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The Company's ACL as a percentage of total loans and leases decreased to 1.89% at September 30, 2021 from 2.61% at June 30, 2021. The decrease in the total loans and leases coverage ratio reflected a seasonal reduction in the allowance for the tax services loan portfolios along with a reduction in specific reserves. When excluding the seasonal tax services loans, the ACL as a percentage of total loans and leases decreased to 1.90% at September 30, 2021 from 1.94% at June 30, 2021. The coverage ratio for the commercial finance loan category remained relatively similar to the June 30, 2021 quarter. The consumer finance coverage decreased primarily due to an improved overall macroeconomic outlook and the community bank coverage ratio increased as the majority of the remaining loans are in pandemic stressed industries, such as hospitality and movie theaters. 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 Year Ended
September 30, 2021 June 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020
(Dollars in thousands)
Beginning balance $ 91,208 $ 98,892 $ 65,747 $ 56,188 $ 29,149
Adoption of CECL accounting standard - - - 12,773 -
Provision - tax services loans 457 4,685 1,599 33,276 22,006
Provision - all other loans and leases 8,368 (36) 7,381 16,663 42,770
Charge-offs - tax services loans (24,849) (9,505) (13,037) (34,354) (22,834)
Charge-offs - all other loans and leases (7,635) (5,360) (6,015) (22,920) (18,927)
Recoveries - tax services loans 51 17 3 1,078 830
Recoveries - all other loans and leases 681 2,515 510 5,577 3,194
Ending balance $ 68,281 $ 91,208 $ 56,188 $ 68,281 $ 56,188

Provision for credit losses was $8.8 million for the quarter ended September 30, 2021, compared to $9.0 million for the comparable period in the prior fiscal year. Provision for credit losses was $49.8 million for fiscal year ended September 30, 2021, compared to $64.8 million for the comparable period in the prior fiscal year. The fiscal year-over-year decrease in provision was largely attributable to the ACL build in the prior year stemming from the COVID-19 pandemic. Net charge-offs were $31.8 millionfor the quarter ended September 30, 2021, compared to $18.5 million for the quarter ended September 30, 2020. The majority of the net charge-offs for the quarter were attributable to seasonal tax-related loan products.

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The Company's past due loans and leases were as follows for the periods presented.
As of September 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 $ 18,269 $ 7,388 $ 15,439 $ 41,096 $ 2,684,399 $ 2,725,495 $ 12,489 $ 19,330 $ 31,819
Consumer finance 1,676 812 1,236 3,724 249,133 252,857 1,160 - 1,160
Tax services - - 7,962 7,962 2,443 10,405 7,962 - 7,962
Warehouse finance - - - - 419,926 419,926 - - -
Community banking - - - - 199,132 199,132 - 14,915 14,915
Total loans and leases held for investment 19,945 8,200 24,637 52,782 3,555,033 3,607,815 21,611 34,245 55,856
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 - - -
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

The Company's nonperforming assets at September 30, 2021 were $61.8 million, representing 0.92% of total assets, compared to $45.1 million, or 0.64% of total assets at June 30, 2021 and $48.0 million, or 0.79% of total assets at September 30, 2020. The changes in the nonperforming assets as a percentage of total assets at September 30, 2021 were driven in large part by a $10.2 million increase in nonperforming assets in the commercial finance portfolio which is primarily due to an administrative timing item that management believes is not a credit concern, and an increase related to the seasonal tax services portfolio that is also timing and not credit-related, partially offset by a decrease in nonperforming assets in the community bank portfolio when compared to both the linked-quarter and the prior year.
The Company's nonperforming loans and leases at September 30, 2021, were $55.9 million, representing 1.52% of total gross loans and leases, compared to $41.9 million, or 1.17% of total gross loans and leases at June 30, 2021 and $34.0 million, or 0.97% of total gross loans and leases at September 30, 2020. The increases are related to the aforementioned non-credit related increases in nonperforming assets in the commercial finance and tax services portfolios.
Loan and lease balances that were within their active deferment period decreased to $39.1 million at September 30, 2021 from $41.5 million at June 30, 2021.
Meta has revised its credit administration policies and reviewed its loan portfolio to better align with OCC guidance for national banks, a process that began during the quarter ending June 30, 2021 and was substantially completed as of September 30, 2021. These credit policy revisions had 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.
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The Company has various portfolios of consumer lending and tax services loans that present unique risks that are statistically managed. 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 held for investment by asset classification were as follows for the periods presented.
Asset Classification Pass Watch Special Mention Substandard Doubtful Total
As of September 30, 2021 (Dollars in Thousands)
Commercial finance $ 2,039,324 $ 364,713 $ 170,527 $ 144,414 $ 6,517 $ 2,725,495
Warehouse finance 419,926 - - - - 419,926
Community banking 10,314 27,121 35,916 120,238 5,543 199,132
Total Loans and Leases $ 2,469,564 $ 391,834 $ 206,443 $ 264,652 $ 12,060 $ 3,344,553
Asset Classification Pass Watch Special Mention Substandard Doubtful Total
As of June 30, 2021 (Dollars in Thousands)
Commercial finance $ 2,315,437 $ 133,124 $ 55,869 $ 74,930 $ 7,166 $ 2,586,526
Warehouse finance 335,704 - - - - 335,704
Community banking 195,721 33,494 14,574 60,196 - 303,985
Total Loans and Leases $ 2,846,862 $ 166,618 $ 70,443 $ 135,126 $ 7,166 $ 3,226,215

Deposits, Borrowings and Other Liabilities
Total average deposits for the fiscal 2021 fourth quarter decreased by $389.7 million to $6.08 billion compared to the same period in fiscal 2020, primarily due to a reduction in wholesale deposits. Average wholesale deposits decreased $485.3 million, while noninterest-bearing deposits decreased $11.1 million, for the fiscal 2021 fourth quarter when compared to the same period in fiscal 2020.
The average balance of total deposits and interest-bearing liabilities was $6.17 billion for the three-month period ended September 30, 2021, compared to $6.66 billion for the same period in the prior fiscal year, representing a decrease of 7%.
Total end-of-period deposits increased 11% to $5.51 billion at September 30, 2021, compared to $4.98 billion at September 30, 2020. The increase in end-of-period deposits was primarily driven by an increase in noninterest-bearing deposits of $661.6 million, partially offset by a decrease in wholesale deposits of $269.1 million. The increase in noninterest-bearing deposits was driven by government stimulus-related dollars loaded on various partner cards.
Of the 16.5 million prepaid cards issued in conjunction with the three EIP stimulus programs, totaling approximately $24.15 billion, $1.64 billion were outstanding as of September 30, 2021, of which only $69.8 million was on Meta's balance sheet with the remainder being held by other banks.
Regulatory Capital
The Company and MetaBank remained above the federal regulatory minimum capital requirements at September 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.
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As of the dates indicated
September 30, 2021 (1)
June 30,
2021
March 31,
2021
December 31,
2020
September 30,
2020
Company
Tier 1 leverage capital ratio 7.67 % 6.85 % 4.75 % 7.39 % 6.58 %
Common equity Tier 1 capital ratio 12.12 % 12.76 % 11.29 % 10.72 % 11.78 %
Tier 1 capital ratio 12.46 % 13.11 % 11.63 % 11.07 % 12.18 %
Total capital ratio 15.45 % 16.18 % 14.65 % 14.14 % 15.30 %
MetaBank
Tier 1 leverage capital ratio 8.69 % 7.83 % 5.47 % 8.60 % 7.56 %
Common equity Tier 1 capital ratio 14.11 % 14.94 % 13.39 % 12.87 % 13.96 %
Tier 1 capital ratio 14.13 % 14.96 % 13.40 % 12.89 % 14.00 %
Total capital ratio 15.38 % 16.22 % 14.66 % 14.14 % 15.26 %
(1) September 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)
September 30,
2021
June 30,
2021
March 31,
2021
December 31,
2020
September 30,
2020
(Dollars in Thousands)
Total stockholders' equity $ 871,884 $ 876,633 $ 835,258 $ 813,210 $ 847,308
Adjustments:
LESS: Goodwill, net of associated deferred tax liabilities 300,780 301,179 301,602 301,999 302,396
LESS: Certain other intangible assets 33,572 35,100 36,779 39,403 40,964
LESS: Net deferred tax assets from operating loss and tax credit carry-forwards 22,801 17,753 19,306 24,105 18,361
LESS: Net unrealized gains (losses) on available-for-sale securities 7,344 14,750 12,458 19,894 17,762
LESS: Non-controlling interest 1,155 1,490 1,092 1,536 3,603
ADD: Adoption of Accounting Standards Update 2016-13 8,202 13,913 10,439 10,439 -
Common Equity Tier 1(1)
514,434 520,274 474,460 436,712 464,222
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 747 932 690 749 1,894
Total Tier 1 Capital 528,842 534,867 488,811 451,122 479,777
Allowance for credit losses 53,159 51,317 53,232 51,070 49,343
Subordinated debentures (net of issuance costs) 73,980 73,936 73,892 73,850 73,807
Total qualifying capital $ 655,981 $ 660,119 $ 615,935 $ 576,042 $ 602,927
(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.
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September 30,
2021
June 30,
2021
March 31,
2021
December 31,
2020
September 30,
2020
(Dollars in Thousands)
Total Stockholders' Equity $ 871,884 $ 876,633 $ 835,258 $ 813,210 $ 847,308
Less: Goodwill 309,505 309,505 309,505 309,505 309,505
Less: Intangible assets 33,148 34,898 36,903 39,660 41,692
Tangible common equity 529,231 532,230 488,850 464,045 496,111
Less: Accumulated other comprehensive income (loss) ("AOCI") 7,599 15,222 12,809 20,119 17,542
Tangible common equity excluding AOCI $ 521,632 $ 517,008 $ 476,041 $ 443,926 $ 478,569

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, October 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 conference call by dialing (844) 200-6205 approximately 10 minutes prior to start time and reference access code 483958. A webcast replay will also be archived at www.metafinancialgroup.com for one year.
Upcoming Investor Events
•KBW Financial Services Symposium, February 17, 2022 | Boca Raton, FL
•Raymond James Institutional Investors Conference, March 8, 2022 | Orlando, FL

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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.
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Condensed Consolidated Statements of Financial Condition (Unaudited)
(Dollars in Thousands, Except Share Data)
ASSETS September 30, 2021 June 30, 2021 March 31, 2021 December 30, 2020 September 30, 2020
Cash and cash equivalents $ 314,019 $ 720,243 $ 3,724,242 $ 1,586,451 $ 427,367
Investment securities available for sale, at fair value 847,870 854,023 921,947 797,363 814,495
Mortgage-backed securities available for sale, at fair value 1,017,029 1,063,582 558,833 430,761 453,607
Investment securities held to maturity, at cost 52,944 60,228 67,709 76,176 87,183
Mortgage-backed securities held to maturity, at cost 3,725 4,019 4,403 5,152 5,427
Loans held for sale 56,194 87,905 67,635 133,659 183,577
Loans and leases 3,609,563 3,496,670 3,657,531 3,448,675 3,322,765
Allowance for credit losses (68,281) (91,208) (98,892) (72,389) (56,188)
Federal Reserve Bank and Federal Home Loan Bank stocks, at cost 28,400 28,433 28,433 27,138 27,138
Accrued interest receivable 16,254 16,230 17,429 17,133 16,628
Premises, furniture, and equipment, net 44,888 44,107 41,510 39,932 41,608
Rental equipment, net 213,116 211,368 211,397 206,732 205,964
Bank-owned life insurance 94,749 94,142 93,542 92,937 92,315
Foreclosed real estate and repossessed assets, net 2,077 1,204 1,483 7,186 9,957
Goodwill 309,505 309,505 309,505 309,505 309,505
Intangible assets 33,148 34,898 36,903 39,660 41,692
Prepaid assets 10,513 7,482 10,201 11,270 8,328
Deferred taxes 25,173 20,072 25,435 24,411 17,723
Other assets 79,764 88,909 110,877 82,763 82,983
Total assets $ 6,690,650 $ 7,051,812 $ 9,790,123 $ 7,264,515 $ 6,092,074
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits:
Noninterest-bearing checking 5,018,233 5,385,569 7,928,235 5,581,597 4,356,630
Interest-bearing checking 254,721 255,509 416,164 274,504 157,571
Savings deposits 86,356 93,608 126,834 54,080 47,866
Money market deposits 67,204 63,920 55,045 56,440 48,494
Time certificates of deposit 9,091 11,425 12,614 13,522 20,223
Wholesale deposits 79,366 78,840 103,521 227,648 348,416
Total deposits 5,514,971 5,888,871 8,642,413 6,207,791 4,979,200
Long-term borrowings 92,834 93,634 95,336 96,760 98,224
Accrued interest payable 579 1,853 679 2,068 1,923
Accrued expenses and other liabilities 210,382 190,821 216,437 144,686 165,419
Total liabilities 5,818,766 6,175,179 8,954,865 6,451,305 5,244,766
STOCKHOLDERS' EQUITY
Preferred stock - - - - -
Common stock, $.01 par value 317 319 319 326 344
Common stock, Nonvoting, $.01 par value - - - - -
Additional paid-in capital 604,484 602,720 601,222 598,669 594,569
Retained earnings 259,189 262,578 225,471 198,000 234,927
Accumulated other comprehensive income 7,599 15,222 12,809 20,119 17,542
Treasury stock, at cost (860) (5,696) (5,655) (5,440) (3,677)
Total equity attributable to parent 870,729 875,143 834,166 811,674 843,705
Noncontrolling interest 1,155 1,490 1,092 1,536 3,603
Total stockholders' equity 871,884 876,633 835,258 813,210 847,308
Total liabilities and stockholders' equity $ 6,690,650 $ 7,051,812 $ 9,790,123 $ 7,264,515 $ 6,092,074

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Consolidated Statements of Operations (Unaudited)
(Dollars in Thousands, Except Share and Per Share Data)
Three Months Ended Year Ended
September 30, 2021 June 30, 2021 September 30, 2020 September 30,
2021
September 30,
2020
Interest and dividend income:
Loans and leases, including fees $ 63,665 $ 62,287 $ 62,022 $ 256,080 $ 261,128
Mortgage-backed securities 3,979 3,446 1,877 12,155 9,028
Other investments 4,412 4,250 4,508 17,619 22,685
72,056 69,983 68,407 285,854 292,841
Interest expense:
Deposits 164 188 1,904 1,593 22,616
FHLB advances and other borrowings 1,225 1,320 1,990 5,270 11,187
1,389 1,508 3,894 6,863 33,803
Net interest income 70,667 68,475 64,513 278,991 259,038
Provision for credit losses 8,775 4,612 8,980 49,766 64,776
Net interest income after provision for credit losses 61,892 63,863 55,533 229,225 194,262
Noninterest income:
Refund transfer product fees 2,567 12,073 2,335 37,967 36,061
Tax advance product fees 226 891 (14) 47,639 31,826
Payments card and deposit fees 25,541 29,203 21,422 107,182 87,379
Other bank and deposit fees 230 338 228 939 1,310
Rental income 9,709 9,976 10,144 39,416 44,826
Net gain realized on investment securities - - 51 6 51
Gain on divestitures - - - - 19,275
Gain (loss) on sale of other 580 5,955 3,455 11,515 4,425
Other income 10,689 4,017 3,129 26,240 14,641
Total noninterest income 49,542 62,453 40,750 270,904 239,794
Noninterest expense:
Compensation and benefits 36,222 38,604 35,616 151,090 136,247
Refund transfer product expense 3,219 2,435 162 11,861 7,644
Tax advance product expense 30 (25) (97) 2,564 2,723
Card processing 7,063 6,809 6,524 27,201 25,956
Occupancy and equipment expense 8,252 7,381 6,826 29,269 26,995
Operating lease equipment depreciation 7,865 8,122 7,594 30,987 32,831
Legal and consulting 14,369 5,680 5,615 31,341 20,858
Intangible amortization 1,761 2,013 2,283 8,545 10,997
Impairment expense 601 505 1,232 2,818 1,982
Other expense 14,232 9,999 14,528 48,007 52,818
Total noninterest expense 93,614 81,523 80,283 343,683 319,051
Income before income tax expense 17,820 44,793 16,000 156,446 115,005
Income tax expense (benefit) 1,101 4,934 1,791 10,701 5,661
Net income before noncontrolling interest 16,719 39,859 14,209 145,745 109,344
Net income attributable to noncontrolling interest 816 1,158 1,051 4,037 4,624
Net income attributable to parent $ 15,903 $ 38,701 $ 13,158 $ 141,708 $ 104,720
Less: Allocation of Earnings to participating securities(1)
297 729 309 2,698 2,414
Net income attributable to common shareholders(1)
15,606 37,972 12,849 139,010 102,306
Earnings per common share
Basic $ 0.50 $ 1.21 $ 0.38 $ 4.38 $ 2.94
Diluted $ 0.50 $ 1.21 $ 0.38 $ 4.38 $ 2.94
Shares used in computing earnings per common share
Basic 31,280,162 31,320,893 33,783,659 31,729,596 34,829,971
Diluted 31,299,555 31,338,947 33,783,659 31,751,522 34,829,971
(1) Amounts presented are used in the two-class earnings per common share calculation.
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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 September 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 $ 852,122 $ 1,248 0.58 % $ 1,960,020 $ 891 0.18 %
Mortgage-backed securities 1,049,258 3,979 1.50 % 394,456 1,877 1.89 %
Tax exempt investment securities 232,006 772 1.67 % 374,876 1,347 1.81 %
Asset-backed securities 400,507 1,199 1.19 % 331,939 1,241 1.49 %
Other investment securities 258,367 1,193 1.83 % 208,078 1,029 1.97 %
Total investments 1,940,138 7,143 1.50 % 1,309,349 5,494 1.78 %
Commercial finance 2,690,064 48,285 7.12 % 2,240,591 42,390 7.53 %
Consumer finance 258,043 4,308 6.62 % 234,468 3,998 6.78 %
Tax services 37,174 165 1.76 % 16,651 5 0.13 %
Warehouse finance 388,477 6,332 6.47 % 287,294 4,378 6.06 %
Community banking 272,554 4,575 6.66 % 757,993 11,251 5.91 %
Total loans and leases 3,646,312 63,665 6.93 % 3,536,997 62,022 6.98 %
Total interest-earning assets $ 6,438,572 $ 72,056 4.45 % $ 6,806,366 $ 68,407 4.02 %
Noninterest-earning assets 822,592 866,407
Total assets $ 7,261,164 $ 7,672,773
Interest-bearing liabilities:
Interest-bearing checking(2)
$ 243,005 $ - - % $ 186,952 $ - - %
Savings 89,110 5 0.02 % 52,616 1 0.01 %
Money markets 67,083 58 0.34 % 41,179 32 0.31 %
Time deposits 10,218 21 0.81 % 21,947 92 1.66 %
Wholesale deposits 77,506 80 0.41 % 562,828 1,779 1.26 %
Total interest-bearing deposits 486,922 164 0.13 % 865,522 1,904 0.88 %
FHLB advances - - - % 94,457 619 2.61 %
Subordinated debentures 73,951 1,065 5.71 % 73,779 1,147 6.19 %
Other borrowings 19,299 160 3.29 % 25,431 224 3.50 %
Total borrowings 93,250 1,225 5.21 % 193,667 1,990 4.09 %
Total interest-bearing liabilities 580,172 1,390 0.95 % 1,059,189 3,894 1.46 %
Noninterest-bearing deposits 5,589,946 - - % 5,601,052 - - %
Total deposits and interest-bearing liabilities $ 6,170,118 $ 1,390 0.09 % $ 6,660,241 $ 3,894 0.23 %
Other noninterest-bearing liabilities 204,726 164,766
Total liabilities 6,374,844 6,825,007
Shareholders' equity 886,320 847,766
Total liabilities and shareholders' equity $ 7,261,164 $ 7,672,773
Net interest income and net interest rate spread including noninterest-bearing deposits $ 70,667 4.36 % $ 64,513 3.79 %
Net interest margin 4.35 % 3.77 %
Tax-equivalent effect 0.01 % 0.02 %
Net interest margin, tax-equivalent(3)
4.37 % 3.79 %
(1) Tax rate used to arrive at the TEY for the three months ended September 30, 2021 and 2020 was 21%.
(2) Of the total balance,$242.7 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.

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Selected Financial Information
As of and For the Three Months Ended September 30,
2021
June 30,
2021
March 31,
2021
December 31,
2020
September 30,
2020
Equity to total assets 13.03 % 12.43 % 8.53 % 11.19 % 13.91 %
Book value per common share outstanding $ 27.53 $ 27.46 $ 26.16 $ 24.93 $ 24.66
Tangible book value per common share outstanding $ 16.71 $ 16.67 $ 15.31 $ 14.23 $ 14.44
Tangible book value per common share outstanding excluding AOCI $ 16.47 $ 16.20 $ 14.91 $ 13.61 $ 13.93
Common shares outstanding 31,669,952 31,919,780 31,926,008 32,620,251 34,360,890
Nonperforming assets to total assets 0.92 % 0.64 % 0.48 % 0.73 % 0.79 %
Nonperforming loans and leases to total loans and leases 1.52 % 1.17 % 1.17 % 1.18 % 0.97 %
Net interest margin 4.35 % 3.75 % 3.07 % 4.65 % 3.77 %
Net interest margin, tax-equivalent 4.37 % 3.77 % 3.08 % 4.67 % 3.79 %
Return on average assets 0.88 % 1.90 % 2.22 % 1.73 % 0.69 %
Return on average equity 7.18 % 18.07 % 28.93 % 13.91 % 6.21 %
Full-time equivalent employees 1,124 1,109 1,075 1,038 1,015

Non-GAAP Reconciliation
Efficiency Ratio For the last twelve months ended
(Dollars in Thousands) September 30,
2021
June 30,
2021
March 31,
2021
December 31,
2020
September 30,
2020
Noninterest Expense - GAAP $ 343,683 $ 330,352 $ 320,070 $ 315,828 $ 319,051
Net Interest Income 278,991 272,837 266,499 260,386 259,038
Noninterest Income 270,903 262,111 240,706 247,766 239,794
Total Revenue: GAAP $ 549,894 $ 534,948 $ 507,205 $ 508,152 $ 498,832
Efficiency Ratio, last twelve months 62.50 % 61.75 % 63.10 % 62.15 % 63.96 %

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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]

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