META FINANCIAL GROUP, INC.® ANNOUNCES RESULTS FOR 2022 FISCAL FIRST QUARTER
- Fiscal 2022 First Quarter Net Income of $61.3 million, or $2.00 Per Diluted Share -
- Rebranding Process Underway Following Agreement to Sell Meta Names and Trademarks -
- Completes Sale of Remaining Community Bank Loans -
Sioux Falls, S.D., January 26, 2022 -- Meta Financial Group, Inc.® (Nasdaq: CASH) (“Meta” or the “Company”) reported net income of $61.3 million, or $2.00 per share, for the three months ended December 31, 2021, compared to net income of $28.0 million, or $0.84 per share, for the three months ended December 31, 2020. During the fiscal first quarter of 2022, the Company recognized a gain on sale of Meta names and trademarks of $50.0 million. Excluding the impact of the gain on sale of these assets, the Company's adjusted net income for the quarter totaled $23.9 million, or $0.78 per share. See non-GAAP reconciliation table below.
"We made continued progress towards our three strategic initiatives, as reflected in our strong fiscal first quarter results,” said CEO Brett Pharr. “We generated growth in earnings per share while positioning the Company for future growth through two significant strategic transactions during the first quarter.”
“Following the initiation of a comprehensive brand strategy review earlier in calendar 2021, we announced our agreement to sell the Meta name and trademarks to Beige Key LLC. This transaction provides significant funds, allowing us to advance a new corporate name and brand that represent our significant evolution and better enable us to fulfill our vision of “Financial Inclusion for All®,” Pharr noted.
Executive Vice President and CFO Glen Herrick added, “We are also pleased to have sold our remaining legacy community bank loans, completing the wind-down of that portfolio and marking another critical step in optimizing our interest-earning asset mix. Coupled with our strong financial results, our momentum continues to build, giving us confidence in our positive outlook and growth trajectory.”
Business Development Highlights for the 2022 Fiscal First Quarter
•Entered into an agreement with Beige Key LLC to sell the Meta names and trademarks for $60 million, of which $50 million was recognized as noninterest income in the first fiscal quarter. The Company plans to use a portion of the proceeds to implement its new corporate name and brand, which is expected to be completed by the end of 2022, and estimates its rebranding expenses will range between $15 million to $20 million. The remainder of the proceeds will be used for general corporate purposes including tax-efficient capital allocation.
•Sold all remaining $192.5 million of community banking loans, reducing this portfolio to zero and generating a favorable pre-tax impact of approximately $3.9 million after netting the recovery of provision expense from the portfolio's $12.3 million allowance and the loss on sale of loans of $8.4 million.
•Extended the agreement with Emerald Financial Services, LLC, a wholly-owned, indirect subsidiary of H&R Block, through June 30, 2025. The agreement adds valuable new financial product offerings and capabilities for customers, including Spruce Accounts, a mobile banking platform that features a spending account with an attached debit card. This innovative product, designed to help a consumer better manage their financial resources and meet spending goals, is powered by MetaBank.
•Originated $21.2 million in aggregate principal of renewable energy loan financing for the first quarter of fiscal 2022, resulting in $5.7 million in total net investment tax credits.
1
•Repurchased 1,711,501 shares, at an average price of $58.97, in the first fiscal quarter. The company purchased an additional 130,000 shares through January 20, 2022 at an average share price of $61.26 and has 5,474,375 shares available for repurchase under the common stock share repurchase program announced during the fourth quarter of fiscal year 2021.
Financial Highlights for the 2022 Fiscal First Quarter
•Total revenue for the first quarter was $158.2 million, an increase of $46.7 million, or 42%, compared to the same quarter in fiscal 2021, primarily driven by the gain on sale of the Meta names and trademarks.
•Net interest income for the first quarter was $71.6 million, an increase of $5.6 million compared to $66.0 million in the first quarter last year.
•Net interest margin ("NIM") was essentially unchanged, declining to 4.59% for the first quarter from 4.65% during the same period of last year. The increase in higher-yielding loans and leases was offset by an increase in lower-yielding investment securities balances and the continued low interest rate environment.
•Total gross loans and leases at December 31, 2021 increased $243.0 million, to $3.68 billion, or 7%, compared to December 31, 2020 and increased $74.8 million, or 2%, when compared to September 30, 2021. The increase was driven by growth across our loan portfolios, partially offset by the sale of all remaining community banking loans during the quarter.
Net Interest Income
Net interest income for the first quarter of fiscal 2022 was $71.6 million, an increase of 9% from the same quarter in fiscal 2021. The increase was mainly attributable to an improved earning asset and liability mix, along with increased loan balances.
The first quarter average outstanding balance of loans and leases increased $211.3 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 first quarter increased by $547.2 million to $6.18 billion compared with the same quarter in fiscal 2021, primarily due to growth in total investments and total loans and leases.
Fiscal 2022 first quarter NIM decreased to 4.59% from 4.65% in the first quarter of last year. The overall reported tax-equivalent yield (“TEY”) on average earning asset yields decreased 13 basis points to 4.69% compared to the prior year quarter, primarily driven by an increase in lower-yielding investment securities balances of $561.4 million. The TEY on the securities portfolio was 1.58% compared to 1.79% for the comparable period last year.
The Company's cost of funds for all deposits and borrowings averaged 0.08% during the fiscal 2022 first quarter, compared to 0.15% during the prior year quarter, primarily driven by a reduction in wholesale deposit balances along with an increase in noninterest bearing deposits. The Company's overall cost of deposits was 0.01% in the fiscal first quarter of 2022, compared to 0.06% in the same quarter last year.
Noninterest Income
Fiscal 2022 first quarter noninterest income increased to $86.6 million, compared to $45.5 million for the same period of the prior year. The significant increase was driven by the $50 million gain on sale of the Meta names and trademarks and to a lesser extent an increase in payments fee income and rental income.
The Company also recognized a loss on sale of other during the quarter of $3.5 million, a $6.3 million decrease from the prior year period, primarily consisting of a $8.4 million loss attributable to the sale of the remaining community bank loans partially offset by a $3.4 million gain on sale of SBA loans.
Also partially offsetting the increase during the quarter was a decrease in other income, which includes a net unrealized loss of $3.3 million on a prior investment in MoneyLion Inc. This loss partially offsets a net unrealized gain of $4.1 million recognized by the Company during the fourth quarter of fiscal 2021 following the completion of MoneyLion's de-SPAC process and listing on the New York Stock Exchange on September 22, 2021.
2
Noninterest Expense
Noninterest expense increased 14% to $82.4 million for the fiscal 2022 first quarter, from $72.6 million for the same quarter last year. The increase in expense was primarily driven by an increase in compensation expense, other expense, occupancy and equipment expense, and card processing expense. When comparing the fiscal 2022 first quarter to the fourth quarter of 2021, non-interest expense decreased by $11.2 million.
Income Tax Expense
The Company recorded income tax expense of $14.3 million, representing an effective tax rate of 18.9%, for the fiscal 2022 first quarter, compared to $3.5 million, representing an effective tax rate of 10.8%, for the first quarter last year. The increase in income tax expense was primarily due to increased earnings.
The Company originated $21.2 million in solar leases during the fiscal 2022 first quarter, compared to $38.5 million in last year's first 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
December 31, 2021
September 30, 2021
June 30, 2021
March 31, 2021
December 31, 2020
Total investments
$
1,833,733
$
1,921,568
$
1,981,852
$
1,552,892
$
1,309,452
Loans held for sale
Consumer credit products
20,728
23,111
12,582
6,233
234
SBA/USDA
15,454
33,083
57,208
61,402
32,983
Community Bank
—
—
18,115
—
100,442
Total loans held for sale
36,182
56,194
87,905
67,635
133,659
Term lending
1,038,378
961,019
920,279
891,414
881,306
Asset based lending
337,236
300,225
263,237
248,735
242,298
Factoring
402,972
363,670
320,629
277,612
275,650
Lease financing
245,315
266,050
282,940
308,169
283,722
Insurance premium finance
385,473
428,867
417,652
344,841
338,227
SBA/USDA
209,521
247,756
263,709
331,917
300,707
Other commercial finance
178,853
157,908
118,081
103,234
101,209
Commercial Finance
2,797,748
2,725,495
2,586,527
2,505,922
2,423,119
Consumer credit products
173,343
129,251
105,440
104,842
88,595
Other consumer finance
144,412
123,606
122,316
130,822
162,423
Consumer Finance
317,755
252,857
227,756
235,664
251,018
Tax Services
100,272
10,405
41,268
225,921
92,548
Warehouse Finance
466,831
419,926
335,704
332,456
318,937
Community Banking
—
199,132
303,984
348,065
353,942
Total gross loans and leases
3,682,606
3,607,815
3,495,239
3,648,028
3,439,564
Allowance for credit losses
(67,623)
(68,281)
(91,208)
(98,892)
(72,389)
Net deferred loan and lease origination fees
1,655
1,748
1,431
9,503
9,111
Total loans and leases, net of allowance
$
3,616,638
$
3,541,282
$
3,405,462
$
3,558,639
$
3,376,286
The Company's investment security balances at December 31, 2021 totaled $1.83 billion, as compared to $1.92 billion at September 30, 2021 and $1.31 billion at December 31, 2020.
Total gross loans and leases totaled $3.68 billion at December 31, 2021, as compared to $3.61 billion at September 30, 2021 and $3.44 billion and as compared to December 31, 2020. The primary drivers for the increase on a linked quarter basis were tax services, commercial finance, consumer credit, and warehouse finance loans, partially offset by the sale of all remaining community bank loans.
3
Commercial finance loans, which comprised 76% of the Company's gross loan and lease portfolio, totaled $2.80 billion at December 31, 2021, reflecting growth of $72.3 million, or 3%, from September 30, 2021 and $374.6 million, or 15%, from December 31, 2020.
As of December 31, 2021, the Company had 275 loans outstanding with total loan balances of $63.8 million originated as part of the Paycheck Protection Program ("PPP"), compared with 370 loans outstanding with total loan balances of $96.0 million for the quarter ended September 30, 2021. In total, approximately 80% of the PPP loan balances were forgiven through December 31, 2021.
During the first fiscal quarter of 2022, the Company sold all remaining community banking loans. The outstanding balance of community banking loans at September 30, 2021 and December 31, 2020 was $199.1 million and $353.9 million, respectively. The amount of community banking loans sold during the quarter totaled $192.5 million.
Asset Quality
The Company’s allowance for credit losses ("ACL") totaled $67.6 million at December 31, 2021, a decrease compared to $68.3 million at September 30, 2021 and $72.4 million at December 31, 2020. The reduction in the ACL at December 31, 2021, when compared to September 30, 2021, was primarily due to a $12.3 million decrease attributable to the community banking portfolio, as all loans have now been sold. This decrease was partially offset by increases within commercial finance of $8.7 million, tax services of $1.6 million, and consumer finance of $1.2 million.
The $4.8 million year-over-year decrease in the ACL was primarily driven by a $14.2 million decrease attributable to the community banking portfolio, due to pay downs and the aforementioned loan sales, along with a $2.4 million decrease in the consumer finance portfolio. These decreases were partially offset by a $11.5 million increase within the commercial finance portfolio, and to a lesser extent, increases within the tax services and warehouse finance portfolios.
The following table presents the Company's ACL as a percentage of its total loans and leases.
As of the Period Ended
(Unaudited)
December 31, 2021
September 30, 2021
June 30, 2021
March 31, 2021
December 31, 2020
Commercial finance
2.04
%
1.77
%
1.73
%
1.77
%
1.88
%
Consumer finance
2.70
%
2.91
%
3.80
%
4.70
%
4.39
%
Tax services
1.60
%
0.02
%
58.99
%
12.90
%
1.53
%
Warehouse finance
0.10
%
0.10
%
0.10
%
0.10
%
0.10
%
Community bank
—
%
6.16
%
4.36
%
4.03
%
4.01
%
Total loans and leases
1.84
%
1.89
%
2.61
%
2.71
%
2.10
%
The Company's ACL as a percentage of total loans and leases decreased to 1.84% at December 31, 2021 from 1.89% at September 30, 2021. The decrease in the total loans and leases coverage ratio reflected the release of the community banking portfolio allowance. The coverage ratio for the commercial finance portfolio increased compared to the September 30, 2021 quarter due to specific reserves on two individually evaluated loan relationships. The consumer finance coverage ratio decreased primarily due to an improved overall macroeconomic outlook while the tax services coverage increased due to the seasonal start of tax season, similar to the same period of the prior year. The Company expects to continue to diligently monitor the ACL and adjust as necessary in future periods to maintain an appropriate and supportable level.
4
Activity in the allowance for credit losses for the periods presented was as follows.
(Unaudited)
Three Months Ended
December 31, 2021
September 30, 2021
December 31, 2020
(Dollars in thousands)
Beginning balance
$
68,281
$
91,208
$
56,188
Adoption of CECL accounting standard
—
—
12,773
(Reversal of) provision - tax services loans
(714)
457
454
Provision - all other loans and leases
1,184
8,368
5,810
Charge-offs - tax services loans
(254)
(24,849)
—
Charge-offs - all other loans and leases
(4,605)
(7,635)
(5,675)
Recoveries - tax services loans
2,567
51
956
Recoveries - all other loans and leases
1,164
681
1,883
Ending balance
$
67,623
$
68,281
$
72,389
The Company recognized a provision for credit losses of $0.2 million for the quarter ended December 31, 2021, compared to $6.1 million for the comparable period in the prior fiscal year. Net charge-offs were $1.1 million for the quarter ended December 31, 2021, compared to $2.8 million for the quarter ended December 31, 2020. Net charge-offs attributable to the commercial finance portfolio for the quarter were $3.2 million, partially offset by net recoveries from the tax services portfolio of $2.3 million.
The Company's past due loans and leases were as follows for the periods presented.
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
Non-accrual 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
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
1,236
—
1,236
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
21,687
34,245
55,932
5
The Company's nonperforming assets at December 31, 2021 were $44.3 million, representing 0.58% of total assets, compared to $61.8 million, or 0.92% of total assets at September 30, 2021 and $53.2 million, or 0.73% of total assets at December 31, 2020. The changes in the nonperforming assets as a percentage of total assets at December 31, 2021 were driven in large part by a decrease in nonperforming assets in the community bank and tax services portfolios, partially offset by an increase in nonperforming assets in the commercial finance portfolio, when compared to the linked-quarter. 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 finance portfolio.
The Company's nonperforming loans and leases at December 31, 2021, were $43.2 million, representing 1.16% of total gross loans and leases, compared to $55.9 million, or 1.52% of total gross loans and leases at September 30, 2021 and $43.5 million, or 1.17% of total gross loans and leases at December 31, 2020. The decreases are related to the aforementioned decreases in nonperforming assets in the community bank and tax services portfolios, partially offset by an increase in nonperforming assets in the commercial finance portfolio.
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 December 31, 2021
(Dollars in Thousands)
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
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
Deposits, Borrowings and Other Liabilities
Total average deposits for the fiscal 2022 first quarter increased by $494.9 million to $5.92 billion compared to the same period in fiscal 2021, primarily due to an increase in noninterest-bearing deposits of $808.2 million. Average wholesale deposits decreased $193.8 million for the fiscal 2022 first quarter when compared to the same period in fiscal 2021.
The average balance of total deposits and interest-bearing liabilities was $6.01 billion for the three-month period ended December 31, 2021, compared to $5.52 billion for the same period in the prior fiscal year, representing an increase of 9%.
Total end-of-period deposits increased 5% to $6.53 billion at December 31, 2021, compared to $6.21 billion at December 31, 2020. The increase in end-of-period deposits was primarily driven by an increase in noninterest-bearing deposits of $688.0 million, partially offset by a decrease in wholesale deposits of $161.2 million. The increase in noninterest-bearing deposits was driven by government stimulus-related dollars loaded on various partner cards.
6
Of the 16.5 million prepaid cards issued in conjunction with the three EIP stimulus programs, totaling approximately $24.15 billion, $1.38 billion were outstanding as of December 31, 2021, of which only $28.1 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 December 31, 2021, 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 tables below include certain non-GAAP financial measures that are used by investors, analysts and bank regulatory agencies to assess the capital position of financial services companies. Management reviews these measures along with other measures of capital as part of its financial analysis.
As of the dates indicated
December 31, 2021 (1)
September 30, 2021
June 30, 2021
March 31, 2021
December 31, 2020
Company
Tier 1 leverage capital ratio
7.39
%
7.67
%
6.85
%
4.75
%
7.39
%
Common equity Tier 1 capital ratio
10.88
%
12.12
%
12.76
%
11.29
%
10.72
%
Tier 1 capital ratio
11.20
%
12.46
%
13.11
%
11.63
%
11.07
%
Total capital ratio
13.80
%
15.45
%
16.18
%
14.65
%
14.14
%
MetaBank
Tier 1 leverage capital ratio
8.52
%
8.69
%
7.83
%
5.47
%
8.60
%
Common equity Tier 1 capital ratio
12.90
%
14.11
%
14.94
%
13.39
%
12.87
%
Tier 1 capital ratio
12.91
%
14.13
%
14.96
%
13.40
%
12.89
%
Total capital ratio
14.16
%
15.38
%
16.22
%
14.66
%
14.14
%
(1) December 31, 2021 amounts are preliminary pending completion and filing of the Company's regulatory reports. Regulatory capital presented for periods presented reflect the Company's election of the five-year CECL transition for regulatory capital purposes.
7
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)
December 31, 2021
September 30, 2021
June 30, 2021
March 31, 2021
December 31, 2020
(Dollars in Thousands)
Total stockholders' equity
$
826,157
$
871,884
$
876,633
$
835,258
$
813,210
Adjustments:
LESS: Goodwill, net of associated deferred tax liabilities
300,382
300,780
301,179
301,602
301,999
LESS: Certain other intangible assets
32,294
33,572
35,100
36,779
39,403
LESS: Net deferred tax assets from operating loss and tax credit carry-forwards
19,805
22,801
17,753
19,306
24,105
LESS: Net unrealized gains (losses) on available-for-sale securities
403
7,344
14,750
12,458
19,894
LESS: Non-controlling interest
642
1,155
1,490
1,092
1,536
ADD: Adoption of Accounting Standards Update 2016-13
6,527
8,202
13,913
10,439
10,439
Common Equity Tier 1(1)
479,158
514,434
520,274
474,460
436,712
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
444
747
932
690
749
Total Tier 1 Capital
493,263
528,842
534,867
488,811
451,122
Allowance for credit losses
55,125
53,159
51,317
53,232
51,070
Subordinated debentures (net of issuance costs)
59,220
73,980
73,936
73,892
73,850
Total qualifying capital
$
607,608
$
655,981
$
660,119
$
615,935
$
576,042
(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.
December 31, 2021
September 30, 2021
June 30, 2021
March 31, 2021
December 31, 2020
(Dollars in Thousands)
Total Stockholders' Equity
$
826,157
$
871,884
$
876,633
$
835,258
$
813,210
Less: Goodwill
309,505
309,505
309,505
309,505
309,505
Less: Intangible assets
31,661
33,148
34,898
36,903
39,660
Tangible common equity
484,991
529,231
532,230
488,850
464,045
Less: Accumulated other comprehensive income (loss) ("AOCI")
724
7,599
15,222
12,809
20,119
Tangible common equity excluding AOCI
$
484,267
$
521,632
$
517,008
$
476,041
$
443,926
8
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, January 26, 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 (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.
•Raymond James Institutional Investors Conference, March 8, 2022 | Orlando, FL
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; 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 prepaid card and 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; 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; 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)
ASSETS
December 31, 2021
September 30, 2021
June 30, 2021
March 31, 2021
December 30, 2020
Cash and cash equivalents
$
1,230,100
$
314,019
$
720,243
$
3,724,242
$
1,586,451
Securities available for sale, at fair value
1,782,739
1,864,899
1,917,605
1,480,780
1,228,124
Securities held to maturity, at amortized cost
50,994
56,669
64,247
72,112
81,328
Federal Reserve Bank and Federal Home Loan Bank stocks, at cost
28,400
28,400
28,433
28,433
27,138
Loans held for sale
36,182
56,194
87,905
67,635
133,659
Loans and leases
3,684,261
3,609,563
3,496,670
3,657,531
3,448,675
Allowance for credit losses
(67,623)
(68,281)
(91,208)
(98,892)
(72,389)
Accrued interest receivable
17,240
16,254
16,230
17,429
17,133
Premises, furniture, and equipment, net
44,130
44,888
44,107
41,510
39,932
Rental equipment, net
234,693
213,116
211,368
211,397
206,732
Foreclosed real estate and repossessed assets, net
298
2,077
1,204
1,483
7,186
Goodwill and intangible assets, net
341,166
342,653
344,403
346,408
349,165
Prepaid assets
17,007
10,513
7,482
10,201
11,270
Other assets
210,071
199,686
203,123
229,854
200,111
Total assets
$
7,609,658
$
6,690,650
$
7,051,812
$
9,790,123
$
7,264,515
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES
Deposits
6,525,569
5,514,971
5,888,871
8,642,413
6,207,791
Long-term borrowings
92,274
92,834
93,634
95,336
96,760
Accrued expenses and other liabilities
165,658
210,961
192,674
217,116
146,754
Total liabilities
6,783,501
5,818,766
6,175,179
8,954,865
6,451,305
STOCKHOLDERS’ EQUITY
Preferred stock
—
—
—
—
—
Common stock, $.01 par value
301
317
319
319
326
Common stock, Nonvoting, $.01 par value
—
—
—
—
—
Additional paid-in capital
610,816
604,484
602,720
601,222
598,669
Retained earnings
217,992
259,189
262,578
225,471
198,000
Accumulated other comprehensive income
724
7,599
15,222
12,809
20,119
Treasury stock, at cost
(4,318)
(860)
(5,696)
(5,655)
(5,440)
Total equity attributable to parent
825,515
870,729
875,143
834,166
811,674
Noncontrolling interest
642
1,155
1,490
1,092
1,536
Total stockholders’ equity
826,157
871,884
876,633
835,258
813,210
Total liabilities and stockholders’ equity
$
7,609,658
$
6,690,650
$
7,051,812
$
9,790,123
$
7,264,515
11
Condensed Consolidated Statements of Operations (Unaudited)
(Dollars in Thousands, Except Share and Per Share Data)
Three Months Ended
December 31, 2021
September 30, 2021
December 31, 2020
Interest and dividend income:
Loans and leases, including fees
$
65,035
$
63,665
$
61,655
Mortgage-backed securities
3,864
3,979
2,123
Other investments
3,992
4,412
4,368
72,891
72,056
68,146
Interest expense:
Deposits
141
164
797
FHLB advances and other borrowings
1,137
1,225
1,350
1,278
1,389
2,147
Net interest income
71,613
70,667
65,999
Provision for credit losses
186
8,775
6,089
Net interest income after provision for credit losses
71,427
61,892
59,910
Noninterest income:
Refund transfer product fees
579
2,567
647
Tax advance product fees
1,233
226
1,960
Payments card and deposit fees
25,132
25,541
22,564
Other bank and deposit fees
237
230
237
Rental income
11,077
9,709
9,885
Gain on sale of securities
137
—
—
Gain on sale of trademarks
50,000
—
—
Gain (loss) on sale of other
(3,465)
580
2,847
Other income
1,661
10,689
7,315
Total noninterest income
86,591
49,542
45,455
Noninterest expense:
Compensation and benefits
38,225
36,222
32,331
Refund transfer product expense
138
3,219
61
Tax advance product expense
183
30
370
Card processing
7,172
7,063
6,117
Occupancy and equipment expense
8,349
8,252
6,888
Operating lease equipment depreciation
8,449
7,865
7,581
Legal and consulting
6,208
14,369
5,247
Intangible amortization
1,488
1,761
2,013
Impairment expense
—
601
1,159
Other expense
12,224
14,232
10,808
Total noninterest expense
82,436
93,614
72,575
Income before income tax expense
75,582
17,820
32,790
Income tax expense
14,276
1,101
3,533
Net income before noncontrolling interest
61,306
16,719
29,257
Net income (loss) attributable to noncontrolling interest
(18)
816
1,220
Net income attributable to parent
$
61,324
$
15,903
$
28,037
Less: Allocation of Earnings to participating securities(1)
953
297
554
Net income attributable to common shareholders(1)
60,371
15,606
27,483
Earnings per common share
Basic
$
2.00
$
0.50
$
0.84
Diluted
$
2.00
$
0.50
$
0.84
Shares used in computing earnings per common share
Basic
30,238,621
31,280,162
32,782,285
Diluted
30,260,655
31,299,555
32,790,895
(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 December 31,
2021
2020
(Dollars in Thousands)
Average Outstanding Balance
Interest Earned / Paid
Yield /
Rate(1)
Average Outstanding Balance
Interest Earned / Paid
Yield /
Rate(1)
Interest-earning assets:
Cash and fed funds sold
$
594,614
$
560
0.37
%
$
820,108
$
842
0.41
%
Mortgage-backed securities
1,007,030
3,864
1.52
%
438,610
2,123
1.92
%
Tax exempt investment securities
207,621
820
1.98
%
333,729
1,215
1.83
%
Asset-backed securities
387,567
1,152
1.18
%
326,315
1,200
1.46
%
Other investment securities
279,839
1,460
2.07
%
221,986
1,111
1.98
%
Total investments
1,882,057
7,296
1.58
%
1,320,640
5,649
1.79
%
Commercial finance
2,775,394
49,021
7.01
%
2,417,691
45,630
7.49
%
Consumer finance
316,573
6,114
7.66
%
239,618
4,748
7.86
%
Tax services
33,604
1,474
17.40
%
25,104
8
0.13
%
Warehouse finance
443,506
6,901
6.17
%
284,199
4,933
6.89
%
Community banking
137,898
1,525
4.39
%
529,085
6,336
4.75
%
Total loans and leases
3,706,975
65,035
6.96
%
3,495,697
61,655
7.00
%
Total interest-earning assets
$
6,183,646
$
72,891
4.69
%
$
5,636,445
$
68,146
4.82
%
Noninterest-earning assets
839,854
845,378
Total assets
$
7,023,500
$
6,481,823
Interest-bearing liabilities:
Interest-bearing checking(2)
$
389
$
—
0.32
%
$
162,748
$
—
—
%
Savings
80,765
5
0.03
%
52,198
2
0.01
%
Money markets
75,664
52
0.27
%
52,620
39
0.30
%
Time deposits
8,619
15
0.67
%
17,390
57
1.30
%
Wholesale deposits
67,384
69
0.41
%
261,136
699
1.06
%
Total interest-bearing deposits
232,821
141
0.24
%
546,092
797
0.58
%
Overnight fed funds purchased
327
—
0.31
%
11
—
0.25
%
Subordinated debentures
73,995
986
5.28
%
73,822
1,147
6.16
%
Other borrowings
18,636
151
3.22
%
23,870
203
3.37
%
Total borrowings
92,958
1,137
4.85
%
97,703
1,350
5.48
%
Total interest-bearing liabilities
325,779
1,278
1.56
%
643,795
2,147
1.32
%
Noninterest-bearing deposits
5,688,563
—
—
%
4,880,352
—
—
%
Total deposits and interest-bearing liabilities
$
6,014,342
$
1,278
0.08
%
$
5,524,147
$
2,147
0.15
%
Other noninterest-bearing liabilities
182,916
151,528
Total liabilities
6,197,258
5,675,675
Shareholders' equity
826,242
806,148
Total liabilities and shareholders' equity
$
7,023,500
$
6,481,823
Net interest income and net interest rate spread including noninterest-bearing deposits
$
71,613
4.61
%
$
65,999
4.67
%
Net interest margin
4.59
%
4.65
%
Tax-equivalent effect
0.02
%
0.02
%
Net interest margin, tax-equivalent(3)
4.61
%
4.67
%
(1) Tax rate used to arrive at the TEY for the three months ended December 31, 2021 and 2020 was 21%.
(2) At December 31, 2020, $162.5 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
December 31, 2021
September 30, 2021
June 30, 2021
March 31, 2021
December 31, 2020
Equity to total assets
10.86
%
13.03
%
12.43
%
8.53
%
11.19
%
Book value per common share outstanding
$
27.46
$
27.53
$
27.46
$
26.16
$
24.93
Tangible book value per common share outstanding
$
16.12
$
16.71
$
16.67
$
15.31
$
14.23
Tangible book value per common share outstanding excluding AOCI
$
16.10
$
16.47
$
16.20
$
14.91
$
13.61
Common shares outstanding
30,080,717
31,669,952
31,919,780
31,926,008
32,620,251
Nonperforming assets to total assets
0.58
%
0.92
%
0.64
%
0.48
%
0.73
%
Nonperforming loans and leases to total loans and leases
1.16
%
1.52
%
1.17
%
1.17
%
1.18
%
Net interest margin
4.59
%
4.35
%
3.75
%
3.07
%
4.65
%
Net interest margin, tax-equivalent
4.61
%
4.37
%
3.77
%
3.08
%
4.67
%
Return on average assets
3.49
%
0.88
%
1.90
%
2.22
%
1.73
%
Return on average equity
29.69
%
7.18
%
18.07
%
28.93
%
13.91
%
Full-time equivalent employees
1,140
1,124
1,109
1,075
1,038
Non-GAAP Reconciliation
Adjusted Net Income and Adjusted Earnings Per Share
At and for the three months ended
(Dollars in Thousands)
December 31, 2021
September 30, 2020
December 31, 2020
Net Income - GAAP
$
61,324
$
15,903
$
28,037
Less: Gain on sale of trademarks
50,000
—
—
Add: Income tax effect resulting from gain on sale of trademarks
12,593
—
—
Adjusted net income
$
23,917
$
15,903
$
28,037
Less: Adjusted allocation of earnings to participating securities
372
297
554
Adjusted Net income attributable to common shareholders
23,545
15,606
27,483
Weighted average diluted common shares outstanding
30,260,655
31,299,555
32,790,895
Adjusted earnings per common share - diluted
$
0.78
$
0.50
$
0.84
Efficiency Ratio
For the last twelve months ended
(Dollars in Thousands)
December 31, 2021
September 30, 2021
June 30, 2021
March 31, 2021
December 31, 2020
Noninterest Expense - GAAP
$
353,544
$
343,683
$
330,352
$
320,070
$
315,828
Net Interest Income
284,605
278,991
272,837
266,499
260,386
Noninterest Income
312,039
270,903
262,111
240,706
247,766
Total Revenue: GAAP
$
596,644
$
549,894
$
534,948
$
507,205
$
508,152
Efficiency Ratio, last twelve months
59.26
%
62.50
%
61.75
%
63.10
%
62.15
%
Adjusted Efficiency Ratio
Noninterest Expense - GAAP
$
353,544
$
343,683
$
330,352
$
320,070
$
315,828
Net Interest Income
284,605
278,991
272,837
266,499
260,386
Noninterest Income
312,039
270,903
262,111
240,706
247,766
Less: Gain on sale of trademarks
50,000
—
—
—
—
Total Adjusted Revenue:
$
546,644
$
549,894
$
534,948
$
507,205
$
508,152
Adjusted Efficiency Ratio, last twelve months
64.68
%
62.50
%
61.75
%
63.10
%
62.15
%
14
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.
