META FINANCIAL GROUP, INC.® ANNOUNCES RESULTS FOR 2022 FISCAL SECOND QUARTER
- Fiscal 2022 Second Quarter Net Income of $49.3 million, or $1.66 Per Diluted Share -
- Announces Name Change to Pathward Financial -
Sioux Falls, S.D., April 28, 2022 -- Meta Financial Group, Inc.® (Nasdaq: CASH) (“Meta” or the “Company”) reported net income of $49.3 million, or $1.66 per share, for the three months ended March 31, 2022, compared to net income of $59.1 million, or $1.84 per share, for the three months ended March 31, 2021. During the quarter the Company recognized $2.8 million of pre-tax expenses related to rebranding efforts. Excluding the impact of the rebranding expenses, net of tax, the Company's adjusted net income for the quarter totaled $51.4 million, or $1.73 per share. See non-GAAP reconciliation table below.
CEO Brett Pharr said, "Although our tax services and renewable energy investment tax credit products produced results below our expectations, the balance of our businesses performed well. Our commercial finance portfolio saw continued healthy loan growth from satisfying small and medium sized businesses’ robust demand for credit, and our Banking as a Service pipeline of opportunities remains strong.”
“Last month, we announced our new corporate name, Pathward Financial. Pathward signifies our Company’s purpose to power financial inclusion for all by creating a path forward for individuals and businesses to meet their financial goals. The name reflects our dedication to removing the barriers that prevent millions of Americans from accessing the financial system and will serve as a constant reminder of our mission to meet the needs of the unbanked, underbanked, and underserved to help them achieve economic mobility,” Pharr added.
Tax Season
For the 2022 tax season, MetaBank originated $1.83 billion in refund advance loans compared to $1.79 billion during the 2021 tax season. The Company expects taxpayer advance volumes to return to more normalized levels in the 2023 tax season, absent further stimulus or additional changes to tax credit payments.
During the second quarter of fiscal 2022, total tax services product revenue was $68.3 million, an increase of 2% compared to the second quarter of fiscal 2021. Both total tax services product fee income and total tax services product expense were approximately flat compared to the prior year period. Net interest income on tax services loans increased $1.5 million during the second quarter of fiscal 2022 compared to the second quarter last year.
Total tax services product income, net of losses and direct product expenses, increased 6% to $34.4 million from $32.6 million, when comparing the first six months of fiscal 2022 to the same period of the prior fiscal year.
Business Development Highlights for the 2022 Fiscal Second Quarter
•On March 29, 2022, the Company announced it is changing its name to Pathward Financial, Inc.™, and its bank subsidiary, MetaBank®, N.A., will be changing its name to Pathward™, N.A. Certain changes will be made immediately, with a full transition to Pathward expected by the end of this calendar year, including the launch of a new brand identity and website. The Company will continue to serve its customers under existing brand names during the transition. The Company recognized $2.8 million of pre-tax expenses related to rebranding efforts during the second quarter of fiscal 2022. The Company continues to estimate total rebranding expenses will range between $15 million to $20 million.
•On April 27, 2022 Meta published its second annual ESG report. In addition to detailing the Company's community impact program and its diversity, equity, and inclusion initiatives, it contains enhanced quantitative reporting, which will be used to measure progress.
1
Financial Highlights for the 2022 Fiscal Second Quarter
•Total revenue for the second quarter was $193.6 million, an increase of $6.2 million, or 3%, compared to the same quarter in fiscal 2021, primarily driven by an increase in interest income, partially offset by a reduction in noninterest income.
•Net interest income for the second quarter was $83.8 million, an increase of $10.0 million compared to $73.9 million in the second quarter last year.
•Net interest margin ("NIM") increased to 4.80% for the second quarter from 3.07% during the same period of last year. The prior year period was impacted by excess cash associated with the Company's participation in the U.S. Treasury Department's Economic Impact Program.
•Total gross loans and leases at March 31, 2022 increased $78.1 million, to $3.73 billion, or 2%, compared to March 31, 2021 and increased $43.5 million, or 1%, when compared to December 31, 2021. The increase compared to the prior year quarter was driven by growth across our loan portfolios, partially offset by the sale of all remaining community banking loans during the fiscal 2022 first quarter.
•The Company originated $1.3 million in aggregate principal of renewable energy loan financing for the second quarter of fiscal 2022, resulting in $0.3 million in total net investment tax credits.
•The Company repurchased 736,198 shares of its common stock at an average price of $57.01, in the second fiscal quarter and has 4,868,177 shares available for repurchase under the common stock share repurchase program announced during the fourth quarter of fiscal year 2021.
•On March 24, 2022, the Company's Board of Directors approved the redemption at par of $75.0 million of the 5.75% fixed to floating rate note due August 15, 2026. The redemption date is set for May 15, 2022.
Net Interest Income
Net interest income for the second quarter of fiscal 2022 was $83.8 million, an increase of 13% from the same quarter in fiscal 2021. The increase was mainly attributable to an improved earning asset mix, together with increased loan balances.
The second quarter average outstanding balance of loans and leases increased $124.1 million compared to the same quarter of the prior year, primarily due to increases in our core loan and lease portfolios, partially offset by the sale of the remaining community bank portfolio. The Company’s average interest-earning assets for the second quarter decreased by $2.69 billion to $7.08 billion compared with the same quarter in fiscal 2021, primarily due to a reduction in cash balances as a result of high cash levels during the prior year period related to the Company's participation in government stimulus programs. The decrease in interest-earnings assets was partially offset by growth in total investments and total loans and leases.
Fiscal 2022 second quarter NIM increased to 4.80% from 3.07% in the second quarter of last year. The overall reported tax-equivalent yield (“TEY”) on average earning asset yields increased 174 basis points to 4.89% compared to the prior year quarter, primarily driven by a decrease in lower-yielding cash balances. Growth in loan and lease and investment securities balances also contributed to the year-over-year TEY increase. The yield on the loan and lease portfolio was 7.22% compared to 6.74% for the comparable period last year and the TEY on the securities portfolio was 1.83% compared to 1.78% over that same period.
The Company's cost of funds for all deposits and borrowings averaged 0.08% during the fiscal 2022 second quarter, the same as the prior year quarter. The Company's overall cost of deposits was 0.01% in the fiscal second quarter of 2022, compared to 0.02% in the same quarter last year.
Noninterest Income
Fiscal 2022 second quarter noninterest income decreased to $109.8 million, compared to $113.5 million for the same period of the prior year. The decrease was driven by a reduction in payments fee income of $3.6 million and a net loss on our MoneyLion investment of $1.3 million, partially offset by an increase in rental income of $1.5 million.
2
During the second quarter of fiscal year 2022, the Company sold the entirety of its equity investment in MoneyLion, recognizing a net loss of $1.3 million during the current period. Following the completion of MoneyLion's de-SPAC process and listing on the New York Stock Exchange on September 22, 2021, the Company recognized a cumulative loss of approximately $0.4 million on the investment dating back to the fourth quarter of fiscal year 2021. The Company continues to be a strategic BaaS provider to MoneyLion.
Noninterest Expense
Noninterest expense increased 7% to $103.2 million for the fiscal 2022 second quarter, from $96.0 million for the same quarter last year. The increase in expense was primarily driven by an increase in consulting expense, software expense, operating lease equipment depreciation and compensation expense. Compensation expense for the second quarter of fiscal 2022 includes $0.9 million of separation-related expenses. When comparing the fiscal 2022 second quarter to the first quarter of 2022, noninterest expense increased by $20.7 million.
Of the $2.8 million in rebranding expenses the Company incurred during the quarter, $2.0 million is recognized in other expense and $0.8 million is related to legal and consulting expense.
Income Tax Expense
The Company recorded income tax expense of $8.0 million, representing an effective tax rate of 13.8%, for the fiscal 2022 second quarter, compared to $1.1 million, representing an effective tax rate of 1.9%, for the second quarter last year. The current quarter increase in income tax expense was primarily due to a reduction in renewable energy investment tax credit lending volume compared to the prior year period.
The Company originated $1.3 million in solar leases during the fiscal 2022 second quarter, compared to $20.0 million in last year's second quarter. Investment tax credits related to solar leases are recognized ratably based on income throughout each fiscal year. For the six months ended March 31, 2022, the Company originated $22.5 million in solar leases, compared to $58.5 million for the comparable prior year period. 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.
3
Investments, Loans and Leases
(dollars in thousands)
March 31, 2022
December 31, 2021
September 30, 2021
June 30, 2021
March 31, 2021
Total investments
$
2,090,765
$
1,833,733
$
1,921,568
$
1,981,852
$
1,552,892
Loans held for sale
Consumer credit products
23,670
20,728
23,111
12,582
6,233
SBA/USDA
7,740
15,454
33,083
57,208
61,402
Community bank
—
—
—
18,115
—
Total loans held for sale
31,410
36,182
56,194
87,905
67,635
Term lending
1,111,076
1,038,378
961,019
920,279
891,414
Asset based lending
382,355
337,236
300,225
263,237
248,735
Factoring
394,865
402,972
363,670
320,629
277,612
Lease financing
235,397
245,315
266,050
282,940
308,169
Insurance premium finance
403,681
385,473
428,867
417,652
344,841
SBA/USDA
214,195
209,521
247,756
263,709
331,917
Other commercial finance
173,260
178,853
157,908
118,081
103,234
Commercial finance
2,914,829
2,797,748
2,725,495
2,586,527
2,505,922
Consumer credit products
171,847
173,343
129,251
105,440
104,842
Other consumer finance
111,922
144,412
123,606
122,316
130,822
Consumer finance
283,769
317,755
252,857
227,756
235,664
Tax services
85,999
100,272
10,405
41,268
225,921
Warehouse finance
441,496
466,831
419,926
335,704
332,456
Community banking
—
—
199,132
303,984
348,065
Total loans and leases
3,726,093
3,682,606
3,607,815
3,495,239
3,648,028
Net deferred loan origination costs
4,097
1,655
1,748
1,431
9,503
Total gross loans and leases
3,730,190
3,684,261
3,609,563
3,496,670
3,657,531
Allowance for credit losses
(88,552)
(67,623)
(68,281)
(91,208)
(98,892)
Total loans and leases, net
$
3,641,638
$
3,616,638
$
3,541,282
$
3,405,462
$
3,558,639
The Company's investment security balances at March 31, 2022 totaled $2.09 billion, as compared to $1.83 billion at December 31, 2021 and $1.55 billion at March 31, 2021.
Total gross loans and leases totaled $3.73 billion at March 31, 2022, as compared to $3.68 billion at December 31, 2021 and $3.66 billion at March 31, 2021. The primary driver for the increase on a linked quarter basis was commercial finance loans. The year-over-year increase was primarily driven by increases within commercial finance, warehouse finance, and consumer finance, partially offset by a reduction in tax services loans and the sale of all remaining community bank loans.
Commercial finance loans, which comprised 78% of the Company's gross loan and lease portfolio, totaled $2.91 billion at March 31, 2022, reflecting growth of $117.1 million, or 4%, from December 31, 2021 and $408.9 million, or 16%, from March 31, 2021.
As of March 31, 2022, the Company had 164 loans outstanding with total loan balances of $43.0 million originated as part of the Paycheck Protection Program ("PPP"), compared with 275 loans outstanding with total loan balances of $63.8 million for the quarter ended December 31, 2021. In total, approximately 85% of the PPP loan balances were forgiven through March 31, 2022.
Asset Quality
The Company’s allowance for credit losses ("ACL") totaled $88.6 million at March 31, 2022, an increase compared to $67.6 million at December 31, 2021 and a decrease from $98.9 million at March 31, 2021. The increase in the ACL at March 31, 2022, when compared to December 31, 2021, was primarily due to the seasonal tax services loan portfolio, which increased $29.2 million during the fiscal 2022 second quarter.
4
The $10.3 million year-over-year decrease in the ACL was primarily driven by a $14.0 million decrease attributable to the disposition of the community banking portfolio, along with a $2.1 million decrease in the consumer finance portfolio. These decreases were partially offset by a $4.0 million increase within the commercial finance portfolio and a $1.6 million increase within the tax services portfolio.
The following table presents the Company's ACL as a percentage of its total loans and leases.
As of the Period Ended
(Unaudited)
March 31, 2022
December 31, 2021
September 30, 2021
June 30, 2021
March 31, 2021
Commercial finance
1.66
%
2.04
%
1.77
%
1.73
%
1.77
%
Consumer finance
3.18
%
2.70
%
2.91
%
3.80
%
4.70
%
Tax services
35.76
%
1.60
%
0.02
%
58.99
%
12.90
%
Warehouse finance
0.10
%
0.10
%
0.10
%
0.10
%
0.10
%
Community banking
—
%
—
%
6.16
%
4.36
%
4.03
%
Total loans and leases
2.38
%
1.84
%
1.89
%
2.61
%
2.71
%
Total loans and leases excluding tax services
1.59
%
1.84
%
1.90
%
1.94
%
2.04
%
The Company's ACL as a percentage of total loans and leases increased to 2.38% at March 31, 2022 from 1.84% at December 31, 2021. The increase in the total loans and leases coverage ratio was primarily driven by the seasonal tax services loan portfolio. The coverage ratio for the commercial finance portfolio decreased compared to the December 31, 2021 quarter due to reduction of specific reserves on two individually evaluated loan relationships. The Company expects to continue to diligently monitor the ACL and adjust as necessary in future periods to maintain an appropriate and supportable level.
Activity in the allowance for credit losses for the periods presented was as follows.
(Unaudited)
Three Months Ended
Six Months Ended
(Dollars in thousands)
March 31, 2022
December 31, 2021
March 31, 2021
March 31, 2022
March 31, 2021
Beginning balance
$
67,623
$
68,281
$
72,389
$
68,281
$
56,188
Adoption of CECL accounting standard
—
—
—
—
12,773
Provision (reversal of) - tax services loans
28,972
(714)
27,680
28,259
28,134
Provision - all other loans and leases
3,183
1,184
2,519
4,368
8,329
Charge-offs - tax services loans
—
(254)
—
(254)
—
Charge-offs - all other loans and leases
(12,415)
(4,605)
(4,248)
(17,021)
(9,923)
Recoveries - tax services loans
184
2,567
54
2,750
1,010
Recoveries - all other loans and leases
1,005
1,164
498
2,169
2,381
Ending balance
$
88,552
$
67,623
$
98,892
$
88,552
$
98,892
The Company recognized a provision for credit losses of $32.3 million for the quarter ended March 31, 2022, compared to $30.3 million for the comparable period in the prior fiscal year. Net charge-offs were $11.2 million for the quarter ended March 31, 2022, compared to $3.7 million for the quarter ended March 31, 2021. Net charge-offs attributable to the commercial finance portfolio for the quarter were $10.7 million and net charge-offs attributable to the consumer finance portfolio were $0.7 million.
5
The Company's past due loans and leases were as follows for the periods presented.
As of March 31, 2022
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
Nonaccrual Balance
Total
Loans held for sale
$
—
$
—
$
—
$
—
$
31,410
$
31,410
$
—
$
—
$
—
Commercial finance
24,631
2,574
11,994
39,199
2,875,630
2,914,829
5,701
25,327
31,028
Consumer finance
5,829
5,475
4,814
16,118
267,651
283,769
4,814
—
4,814
Tax services
830
—
—
830
85,169
85,999
—
—
—
Warehouse finance
—
—
—
—
441,496
441,496
—
—
—
Total loans and leases held for investment
31,290
8,049
16,808
56,147
3,669,946
3,726,093
10,515
25,327
35,842
Total loans and leases
$
31,290
$
8,049
$
16,808
$
56,147
$
3,701,356
$
3,757,503
$
10,515
$
25,327
$
35,842
As of December 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
Nonaccrual Balance
Total
Loans held for sale
$
9
$
2
$
—
$
11
$
36,171
$
36,182
$
—
$
—
$
—
Commercial finance
41,473
8,539
7,568
57,580
2,740,168
2,797,748
3,896
37,760
41,656
Consumer finance
4,880
2,277
1,534
8,691
309,064
317,755
1,534
—
1,534
Tax services
—
—
—
—
100,272
100,272
—
—
—
Warehouse finance
—
—
—
—
466,831
466,831
—
—
—
Total loans and leases held for investment
46,353
10,816
9,102
66,271
3,616,335
3,682,606
5,430
37,760
43,190
Total loans and leases
$
46,362
$
10,818
$
9,102
$
66,282
$
3,652,506
$
3,718,788
$
5,430
$
37,760
$
43,190
The Company's nonperforming assets at March 31, 2022 were $38.3 million, representing 0.56% of total assets, compared to $44.3 million, or 0.58% of total assets at December 31, 2021 and $46.7 million, or 0.48% of total assets at March 31, 2021. The decrease in the nonperforming assets as a percentage of total assets at March 31, 2022 compared to December 31, 2021, was primarily driven by a decrease in nonperforming assets in the commercial finance portfolio, partially offset by an increase within the consumer finance portfolio. When comparing the current period to the same period of the prior year, the decrease in nonperforming assets was due to a decrease in nonperforming assets in the community bank portfolio, partially offset by an increase in nonperforming assets in the commercial and consumer finance portfolios.
The Company's nonperforming loans and leases at March 31, 2022, were $35.8 million, representing 0.95% of total gross loans and leases, compared to $43.2 million, or 1.16% of total gross loans and leases at December 31, 2021 and $43.5 million, or 1.17% of total gross loans and leases at March 31, 2021. The decreases are related to the aforementioned decrease in nonperforming assets in the community bank portfolio, partially offset by an increase in nonperforming assets in the commercial and consumer finance portfolios.
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.
6
Asset Classification
(Dollars in thousands)
Pass
Watch
Special Mention
Substandard
Doubtful
Total
As of March 31, 2022
Commercial finance
$
2,171,206
$
430,240
$
141,497
$
167,882
$
4,004
$
2,914,829
Warehouse finance
441,496
—
—
—
—
441,496
Total loans and leases
$
2,612,702
$
430,240
$
141,497
$
167,882
$
4,004
$
3,356,325
Asset Classification
(Dollars in thousands)
Pass
Watch
Special Mention
Substandard
Doubtful
Total
As of December 31, 2021
Commercial finance
$
2,084,835
$
355,431
$
161,301
$
176,258
$
19,923
$
2,797,748
Warehouse finance
466,831
—
—
—
—
466,831
Total loans and leases
$
2,551,666
$
355,431
$
161,301
$
176,258
$
19,923
$
3,264,579
Deposits, Borrowings and Other Liabilities
Total average deposits for the fiscal 2022 second quarter decreased by $2.89 billion to $6.68 billion compared to the same period in fiscal 2021. The decrease in average deposits was primarily due to a decrease in noninterest-bearing deposits of $2.66 billion, and to a lesser extent decreases within time and wholesale deposits, partially offset by increases in money market and savings deposits.
The average balance of total deposits and interest-bearing liabilities was $6.87 billion for the three-month period ended March 31, 2022, compared to $9.66 billion for the same period in the prior fiscal year, representing a decrease of 29%.
Total end-of-period deposits decreased 33% to $5.83 billion at March 31, 2022, compared to $8.64 billion at March 31, 2021. The decrease in end-of-period deposits was primarily driven by a decrease in noninterest-bearing deposits of $2.32 billion and a decrease in wholesale deposits of $94.1 million. The decrease in noninterest-bearing deposits was driven by government stimulus-related dollars loaded on various partner cards during the prior year period.
As of March 31, 2022, the Company managed $1.85 billion of customer deposits at other banks in its capacity as custodian.
Regulatory Capital
The Company and MetaBank remained above the federal regulatory minimum capital requirements at March 31, 2022, continued to be classified as well-capitalized, and in good standing with the regulatory agencies. Regulatory capital ratios of the Company and the Bank are stated in the table below. The decrease in Tier 1 leverage capital ratio for the period is the result of higher quarterly average assets related to its seasonal tax business. The MetaBank Tier 1 leverage capital ratio using end of period assets of 8.94% better reflects the expected capital position post tax season. See non-GAAP reconciliation table below. Regulatory Capital is not affected by the unrealized loss on accumulated other comprehensive income (“AOCI”). The securities portfolio is made up of nearly all amortizing securities that should provide consistent cash flow and is not expected to require sales to realize the losses to fund future loan growth.
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.
7
As of the Periods Indicated
March 31, 2022(1)
December 31, 2021
September 30, 2021
June 30, 2021
March 31, 2021
Company
Tier 1 leverage capital ratio
6.80
%
7.39
%
7.67
%
6.85
%
4.75
%
Common equity Tier 1 capital ratio
11.26
%
10.88
%
12.12
%
12.76
%
11.29
%
Tier 1 capital ratio
11.58
%
11.20
%
12.46
%
13.11
%
11.63
%
Total capital ratio
14.16
%
13.80
%
15.45
%
16.18
%
14.65
%
MetaBank
Tier 1 leverage ratio
7.79
%
8.52
%
8.69
%
7.83
%
5.47
%
Common equity Tier 1 capital ratio
13.26
%
12.90
%
14.11
%
14.94
%
13.39
%
Tier 1 capital ratio
13.26
%
12.91
%
14.13
%
14.96
%
13.40
%
Total capital ratio
14.52
%
14.16
%
15.38
%
16.22
%
14.66
%
(1) March 31, 2022 percentages are preliminary pending completion and filing of the Company's regulatory reports. Regulatory capital ratios for periods presented 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)
(Dollars in thousands)
March 31, 2022
December 31, 2021
September 30, 2021
June 30, 2021
March 31, 2021
Total stockholders' equity
$
763,406
$
826,157
$
871,884
$
876,633
$
835,258
Adjustments:
LESS: Goodwill, net of associated deferred tax liabilities
299,983
300,382
300,780
301,179
301,602
LESS: Certain other intangible assets
30,007
32,294
33,572
35,100
36,779
LESS: Net deferred tax assets from operating loss and tax credit carry-forwards
13,404
19,805
22,801
17,753
19,306
LESS: Net unrealized gains (losses) on available for sale securities
(69,838)
403
7,344
14,750
12,458
LESS: Noncontrolling interest
322
642
1,155
1,490
1,092
ADD: Adoption of Accounting Standards Update 2016-13
13,387
6,527
8,202
13,913
10,439
Common Equity Tier 1(1)
502,915
479,158
514,434
520,274
474,460
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
208
444
747
932
690
Total Tier 1 capital
516,784
493,263
528,842
534,867
488,811
Allowance for credit losses
56,051
55,125
53,159
51,317
53,232
Subordinated debentures (net of issuance costs)
59,256
59,220
73,980
73,936
73,892
Total capital
$
632,091
$
607,608
$
655,981
$
660,119
$
615,935
(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 were fully phased in through the end of calendar year 2021.
8
The following table provides a reconciliation of tangible common equity and tangible common equity excluding AOCI, each of which is used in calculating tangible book value data, to Total Stockholders' Equity. Each of tangible common equity and tangible common equity excluding AOCI is a non-GAAP financial measure that is commonly used within the banking industry.
March 31, 2022
December 31, 2021
September 30, 2021
June 30, 2021
March 31, 2021
Total stockholders' equity
$
763,406
$
826,157
$
871,884
$
876,633
$
835,258
Less: Goodwill
309,505
309,505
309,505
309,505
309,505
Less: Intangible assets
29,290
31,661
33,148
34,898
36,903
Tangible common equity
424,611
484,991
529,231
532,230
488,850
Less: AOCI
(69,374)
724
7,599
15,222
12,809
Tangible common equity excluding AOCI
$
493,985
$
484,267
$
521,632
$
517,008
$
476,041
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 Thursday, April 28, 2022. 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 1-844-200-6205 (International: +1-929-526-1599) approximately 10 minutes prior to start time and reference access code 247026. A webcast replay will also be archived at www.metafinancialgroup.com for one year.
Upcoming Investor Events
•B. Riley Institutional Investors Conference, May 25, 2022 | Los Angeles, CA
9
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, or other unusual and infrequently occurring events, including the impact on financial markets from geopolitical conflicts such as the military conflict between Russia and Ukraine; successfully completing our announced rebranding and our ability to achieve brand recognition for Pathward equal to or greater than we currently enjoy for MetaBank; changes in trade, monetary, and fiscal policies and laws, including actual changes in interest rates and the Fed Funds rate; changes in tax laws; the strength of the United States' economy, and the local economies in which the Company operates; inflation, market, and monetary fluctuations; the timely and efficient development 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; MetaBank's ability to maintain its Durbin Amendment exemption; the risks of dealing with or utilizing third parties, including, in connection with the Company’s prepaid card and tax refund advance businesses, 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; changes in financial services laws and regulations, including 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; 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, 2021, and in other filings made with the SEC. The Company expressly disclaims any intent or obligation to update any forward-looking statements, whether written or oral, that may be made from time to time by or on behalf of the Company or its subsidiaries, whether as a result of new information, changed circumstances, or future events or for any other reason.
10
Condensed Consolidated Statements of Financial Condition (Unaudited)
(Dollars in Thousands, Except Share Data)
March 31, 2022
December 31, 2021
September 30, 2021
June 30, 2021
March 31, 2021
ASSETS
Cash and cash equivalents
$
237,680
$
1,230,100
$
314,019
$
720,243
$
3,724,242
Securities available for sale, at fair value
2,043,478
1,782,739
1,864,899
1,917,605
1,480,780
Securities held to maturity, at amortized cost
47,287
50,994
56,669
64,247
72,112
Federal Reserve Bank and Federal Home Loan Bank Stock, at cost
28,812
28,400
28,400
28,433
28,433
Loans held for sale
31,410
36,182
56,194
87,905
67,635
Loans and leases
3,730,190
3,684,261
3,609,563
3,496,670
3,657,531
Allowance for credit losses
(88,552)
(67,623)
(68,281)
(91,208)
(98,892)
Accrued interest receivable
19,115
17,240
16,254
16,230
17,429
Premises, furniture, and equipment, net
43,167
44,130
44,888
44,107
41,510
Rental equipment, net
213,033
234,693
213,116
211,368
211,397
Foreclosed real estate and repossessed assets, net
112
298
2,077
1,204
1,483
Goodwill and intangible assets
338,795
341,166
342,653
344,403
346,408
Prepaid assets
15,264
17,007
10,513
7,482
10,201
Other assets
227,448
210,071
199,686
203,123
229,854
Total assets
$
6,887,239
$
7,609,658
$
6,690,650
$
7,051,812
$
9,790,123
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES
Deposits
5,829,886
6,525,569
5,514,971
5,888,871
8,642,413
Long-term borrowings
91,386
92,274
92,834
93,634
95,336
Accrued expenses and other liabilities
202,561
165,658
210,961
192,674
217,116
Total liabilities
6,123,833
6,783,501
5,818,766
6,175,179
8,954,865
STOCKHOLDERS’ EQUITY
Preferred stock
—
—
—
—
—
Common stock, $.01 par value
294
301
317
319
319
Common stock, Nonvoting, $.01 par value
—
—
—
—
—
Additional paid-in capital
612,917
610,816
604,484
602,720
601,222
Retained earnings
223,760
217,992
259,189
262,578
225,471
Accumulated other comprehensive income (loss)
(69,374)
724
7,599
15,222
12,809
Treasury stock, at cost
(4,513)
(4,318)
(860)
(5,696)
(5,655)
Total equity attributable to parent
763,084
825,515
870,729
875,143
834,166
Noncontrolling interest
322
642
1,155
1,490
1,092
Total stockholders’ equity
763,406
826,157
871,884
876,633
835,258
Total liabilities and stockholders’ equity
$
6,887,239
$
7,609,658
$
6,690,650
$
7,051,812
$
9,790,123
11
Condensed Consolidated Statements of Operations (Unaudited)
(Dollars in Thousands, Except Share and Per Share Data)
Three Months Ended
Six Months Ended
March 31, 2022
December 31, 2021
March 31, 2021
March 31, 2022
March 31, 2021
Interest and dividend income:
Loans and leases, including fees
$
75,540
$
65,035
$
68,472
$
140,575
$
130,128
Mortgage-backed securities
5,446
3,864
2,608
9,310
4,730
Other investments
4,191
3,992
4,589
8,183
8,956
85,177
72,891
75,669
158,068
143,814
Interest expense:
Deposits
165
141
445
306
1,241
FHLB advances and other borrowings
1,212
1,137
1,374
2,349
2,724
1,377
1,278
1,819
2,655
3,965
Net interest income
83,800
71,613
73,850
155,413
139,849
Provision for credit losses
32,302
186
30,290
32,488
36,379
Net interest income after provision for credit losses
51,498
71,427
43,560
122,925
103,470
Noninterest income:
Refund transfer product fees
27,805
579
22,680
28,384
23,327
Tax advance product fees
39,299
1,233
44,562
40,532
46,522
Payments card and deposit fees
26,270
25,132
29,875
51,402
52,439
Other bank and deposit fees
250
237
133
487
370
Rental income
11,375
11,077
9,846
22,452
19,731
Gain on sale of securities
260
137
6
397
6
Gain on sale of trademarks
—
50,000
—
50,000
—
Gain (loss) on sale of other
626
(3,465)
2,133
(2,839)
4,981
Other income
3,881
1,661
4,218
5,542
11,532
Total noninterest income
109,766
86,591
113,453
196,357
158,908
Noninterest expense:
Compensation and benefits
45,047
38,225
43,932
83,272
76,263
Refund transfer product expense
6,260
138
6,146
6,398
6,207
Tax advance product expense
2,002
183
2,189
2,185
2,559
Card processing
7,457
7,172
7,212
14,629
13,329
Occupancy and equipment expense
8,500
8,349
6,748
16,849
13,636
Operating lease equipment depreciation
8,737
8,449
7,419
17,185
15,000
Legal and consulting
9,347
6,208
6,045
15,555
11,292
Intangible amortization
2,169
1,488
2,757
3,657
4,770
Impairment expense
—
—
554
—
1,713
Other expense
13,641
12,224
12,969
25,866
23,777
Total noninterest expense
103,160
82,436
95,971
185,596
168,546
Income before income tax expense
58,104
75,582
61,042
133,686
93,832
Income tax expense
8,002
14,276
1,133
22,278
4,665
Net income before noncontrolling interest
50,102
61,306
59,909
111,408
89,167
Net income attributable to noncontrolling interest
851
(18)
843
833
2,064
Net income attributable to parent
$
49,251
$
61,324
$
59,066
$
110,575
$
87,103
Less: Allocation of Earnings to participating securities(1)
815
953
1,113
1,773
1,683
Net income attributable to common shareholders(1)
48,436
60,371
57,953
108,802
85,420
Earnings per common share:
Basic
$
1.66
$
2.00
$
1.84
$
3.66
$
2.66
Diluted
$
1.66
$
2.00
$
1.84
$
3.66
$
2.65
Shares used in computing earnings per common share:
Basic
29,212,301
30,238,621
31,520,505
29,731,797
32,158,994
Diluted
29,224,362
30,260,655
31,535,022
29,748,832
32,175,484
(1) Amounts presented are used in the two-class earnings per common share calculation.
12
Average Balances, Interest Rates and Yields
The following table presents, for the periods indicated, the total dollar amount of interest income from average interest-earning assets and the resulting yields, as well as the interest expense on average interest-bearing liabilities, expressed both in dollars and in rates. Only the yield/rate reflects tax-equivalent adjustments. Nonaccruing loans and leases have been included in the table as loans carrying a zero yield.
Three Months Ended March 31,
2022
2021
(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
$
810,857
$
721
0.36
%
$
4,187,558
$
1,090
0.11
%
Mortgage-backed securities
1,184,377
5,446
1.86
%
543,256
2,607
1.95
%
Tax exempt investment securities
189,213
903
2.45
%
297,299
1,132
1.96
%
Asset-backed securities
370,671
1,142
1.25
%
389,406
1,290
1.34
%
Other investment securities
282,655
1,425
2.05
%
230,168
1,077
1.90
%
Total investments
2,026,916
8,916
1.83
%
1,460,129
6,106
1.78
%
Commercial finance
2,852,147
48,872
6.95
%
2,471,694
46,299
7.60
%
Consumer finance
331,033
7,892
9.67
%
255,625
6,968
11.06
%
Tax services
594,166
11,599
7.92
%
714,789
6,544
3.71
%
Warehouse finance
467,298
7,177
6.23
%
315,162
4,845
6.23
%
Community banking
—
—
—
%
363,285
3,817
4.26
%
Total loans and leases
4,244,644
75,540
7.22
%
4,120,555
68,473
6.74
%
Total interest-earning assets
$
7,082,417
$
85,177
4.89
%
$
9,768,242
$
75,669
3.15
%
Noninterest-earning assets
814,151
887,610
Total assets
$
7,896,568
$
10,655,852
Interest-bearing liabilities:
Interest-bearing checking(2)
$
289
$
—
0.32
%
$
275,982
$
—
—
%
Savings
82,902
6
0.03
%
77,562
4
0.02
%
Money markets
102,473
53
0.21
%
56,352
42
0.30
%
Time deposits
8,682
10
0.49
%
12,820
34
1.07
%
Wholesale deposits
173,493
96
0.22
%
175,777
365
0.84
%
Total interest-bearing deposits
367,839
165
0.18
%
598,493
445
0.30
%
Overnight fed funds purchased
95,700
62
0.26
%
—
—
—
%
Subordinated debentures
74,040
1,002
5.49
%
73,864
1,147
6.30
%
Other borrowings
17,874
148
3.35
%
22,377
227
4.12
%
Total borrowings
187,614
1,212
2.62
%
96,241
1,374
5.79
%
Total interest-bearing liabilities
555,453
1,377
1.01
%
694,734
1,819
1.06
%
Noninterest-bearing deposits
6,311,583
—
—
%
8,967,067
—
—
%
Total deposits and interest-bearing liabilities
$
6,867,036
$
1,377
0.08
%
$
9,661,801
$
1,819
0.08
%
Other noninterest-bearing liabilities
213,982
177,372
Total liabilities
7,081,018
9,839,173
Shareholders' equity
815,550
816,679
Total liabilities and shareholders' equity
$
7,896,568
$
10,655,852
Net interest income and net interest rate spread including noninterest-bearing deposits
$
83,800
4.81
%
$
73,850
3.08
%
Net interest margin
4.80
%
3.07
%
Tax-equivalent effect
0.01
%
0.01
%
Net interest margin, tax-equivalent(3)
4.81
%
3.08
%
(1) Tax rate used to arrive at the TEY for the three months ended March 31, 2022 and 2021 was 21%.
(2) At March 31, 2021, $275.7 million of the total balance were interest-bearing deposits where interest expense was paid by a third party and not by the Company. On October 1, 2021, the Company reclassified the balances related to that program to noninterest bearing checking due to the product moving to noninterest bearing.
(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.
13
Selected Financial Information
As of and For the Three Months Ended
March 31, 2022
December 31, 2021
September 30, 2021
June 30, 2021
March 31, 2021
Equity to total assets
11.08
%
10.86
%
13.03
%
12.43
%
8.53
%
Book value per common share outstanding
$
26.00
$
27.46
$
27.53
$
27.46
$
26.16
Tangible book value per common share outstanding
$
14.46
$
16.12
$
16.71
$
16.67
$
15.31
Tangible book value per common share outstanding excluding AOCI
$
16.82
$
16.10
$
16.47
$
16.20
$
14.91
Common shares outstanding
29,362,844
30,080,717
31,669,952
31,919,780
31,926,008
Nonperforming assets to total assets
0.56
%
0.58
%
0.92
%
0.64
%
0.48
%
Nonperforming loans and leases to total loans and leases
0.95
%
1.16
%
1.52
%
1.17
%
1.17
%
Net interest margin
4.80
%
4.59
%
4.35
%
3.75
%
3.07
%
Net interest margin, tax-equivalent
4.81
%
4.61
%
4.37
%
3.77
%
3.08
%
Return on average assets
2.49
%
3.49
%
0.88
%
1.90
%
2.22
%
Return on average equity
24.16
%
29.69
%
7.18
%
18.07
%
28.93
%
Full-time equivalent employees
1,167
1,140
1,124
1,109
1,075
Non-GAAP Reconciliation
Adjusted Net Income and Adjusted Earnings Per Share
At and For the Three Months Ended
At and For the Six Months Ended
(Dollars in thousands)
March 31, 2022
December 31, 2021
March 31, 2021
March 31, 2022
March 31, 2021
Net Income - GAAP
$
49,251
$
61,324
$
59,066
$
110,575
$
87,103
Less: Gain on sale of trademarks
—
50,000
—
50,000
—
Add: Rebranding expenses
2,819
3
—
2,822
—
Add: Income tax effect resulting from gain on sale of trademarks and rebranding expenses
(711)
12,593
—
11,882
—
Adjusted net income
$
51,359
$
23,920
$
59,066
$
75,279
$
87,103
Less: Adjusted allocation of earnings to participating securities
850
372
1,113
1,207
1,683
Adjusted Net income attributable to common shareholders
50,509
23,548
57,953
74,072
85,420
Weighted average diluted common shares outstanding
29,224,362
30,260,655
31,535,022
29,748,832
32,175,484
Adjusted earnings per common share - diluted
$
1.73
$
0.78
$
1.84
$
2.49
$
2.65
14
Efficiency Ratio
For the Last Twelve Months Ended
(Dollars in thousands)
March 31, 2022
December 31, 2021
September 30, 2021
June 30, 2021
March 31, 2021
Noninterest expense: GAAP
$
360,733
$
353,544
$
343,683
$
330,352
$
320,070
Net interest income
294,555
284,605
278,991
272,837
266,499
Noninterest income
308,352
312,039
270,903
262,111
240,706
Total revenue: GAAP
$
602,907
$
596,644
$
549,894
$
534,948
$
507,205
Efficiency ratio
59.83
%
59.26
%
62.50
%
61.75
%
63.10
%
Adjusted Efficiency Ratio
Noninterest expense: GAAP
$
360,733
$
353,544
$
343,683
$
330,352
$
320,070
Less: Rebranding expenses
2,822
3
—
—
—
Adjusted noninterest expense
357,911
353,541
343,683
330,352
320,070
Net interest income
294,555
284,605
278,991
272,837
266,499
Noninterest income
308,352
312,039
270,903
262,111
240,706
Less: Gain on sale of trademarks
50,000
50,000
—
—
—
Total adjusted revenue
$
552,907
$
546,644
$
549,984
$
534,948
$
507,205
Adjusted efficiency ratio
64.73
%
64.67
%
62.50
%
61.75
%
63.10
%
MetaBank Period-end Tier 1 Leverage
(Dollars in thousands)
March 31, 2022
Total stockholders' equity
$
853,001
Adjustments:
LESS: Goodwill, net of associated deferred tax liabilities
299,983
LESS: Certain other intangible assets
30,007
LESS: Net deferred tax assets from operating loss and tax credit carry-forwards
13,404
LESS: Net unrealized gains (losses) on available for sale securities
(69,838)
LESS: Noncontrolling interest
322
ADD: Adoption of Accounting Standards Update 2016-13
13,386
Common Equity Tier 1(1)
592,509
Tier 1 minority interest not included in common equity Tier 1 capital
208
Total Tier 1 capital
$
592,717
Total Assets (Quarter Average)
$
7,901,915
ADD: Available for sale securities amortized cost
51,403
ADD: Deferred tax
(12,948)
ADD: Adoption of Accounting Standards Updated 2016-13
13,386
LESS: Deductions from CET1
343,394
Adjusted total assets
$
7,610,362
MetaBank Regulatory Tier 1 Leverage
7.79
%
Total Assets (Period End)
$
6,891,342
ADD: Available for sale securities amortized cost
93,354
ADD: Deferred tax
(23,516)
ADD: Adoption of Accounting Standards Updated 2016-13
13,386
LESS: Deductions from CET1
343,394
Adjusted total assets
$
6,631,172
MetaBank Period-end Tier 1 Leverage
8.94
%
15
About Meta Financial Group, Inc.®
Meta Financial Group, Inc.® (Nasdaq: CASH) is a U.S.-based financial holding company driven by its purpose to power financial inclusion for all™. Through our subsidiary, MetaBank®, N.A., we strive to increase financial availability, choice, and opportunity across strategic service lines including Payments, Commercial Finance, and Consumer Solutions, which is comprised of tax services and consumer lending. These solutions are seamlessly integrated to provide end-to-end support to the individuals and businesses who are powering the everyone economy. On March 29, 2022, MetaBank announced it is changing its name to Pathward™, N.A., and Meta Financial Group, Inc. is changing its name to Pathward Financial, Inc.™. Meta Financial Group, Inc. will make certain changes immediately and fully transition to Pathward Financial, Inc.™ by the end of this calendar year. Learn more at MetaFinancialGroup.com.
