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.
1
•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.
2
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
3
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.
4
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 million for 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.
5
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.
6
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.
7
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.
8
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.
•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 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.
10
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
11
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.
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 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.
13
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
%
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.
