META FINANCIAL GROUP, INC.® ANNOUNCES RESULTS FOR 2021 FISCAL THIRD QUARTER
Sioux Falls, S.D., July 28, 2021 (GLOBE NEWSWIRE) -- Meta Financial Group, Inc.® (Nasdaq: CASH) (“Meta” or the “Company”) reported net income of $38.7 million, or $1.21 per share, for the three months ended June 30, 2021, compared to net income of $18.2 million, or $0.53 per share, for the three months ended June 30, 2020.
“MetaBank performed well during the third quarter, more than doubling earnings per share, as various timing items including tax season delays, additional card fee income from government stimulus programs, and reduced provision helped enhance performance year-over-year. Our results demonstrate how MetaBank’s mission of financial inclusion for all® is creating value for all our stakeholders, including our customers, employees and shareholders,” said President and CEO Brad Hanson.
Business Development Highlights for the 2021 Fiscal Third Quarter
•Published our inaugural 2020 Environmental, Social and Governance ("ESG") Report, building on the Company's vision, culture, and mission of financial inclusion for all®. The Company's 2020 ESG report can be downloaded at https://www.metafinancialgroup.com/environmental-social-governance.
•Launched the Company's Community Impact Program, focused on financial inclusion, personal and family financial empowerment, educational support, and disaster relief. Concentrating on these four areas positions MetaBank to encourage long-lasting positive impact in our communities.
•Expanded our renewable energy investment tax credit financing, originating $72.0 million for the first nine months of the fiscal year 2021, resulting in $18.9 million in total net ITC.
•Entered into a new Banking as a Service ("BaaS") partnership with Clair, a social impact embedded fintech startup. The Company will act as both the issuing bank and bank services provider, offering digital banking services for users of Clair.
Financial Highlights for the 2021 Fiscal Third Quarter
•Total revenue for the third quarter was $130.9 million, an increase of $27.7 million compared to $103.2 million for the same quarter in fiscal 2020 primarily driven by a timing shift of refund transfer product fees and additional payments card fee income from government stimulus programs.
•Operating efficiency ratio improved 185 basis points to 61.75% at June 30, 2021 compared to 63.60% at June 30, 2020. See non-GAAP reconciliation table below.
•Net interest income for the third quarter was $68.5 million, an increase of $6.4 million compared to $62.1 million in the third quarter last year, reflecting a decrease in deposit interest expense.
•Net interest margin ("NIM") improved to 3.75% for the third quarter from 3.28% during the same period of last year, chiefly due to the decrease of cash associated with the Company's participation in the EIP program and an increase in national lending loans and leases.
•Total gross loans and leases at June 30, 2021 decreased $1.5 million, to $3.50 billion, compared to June 30, 2020 and decreased $152.8 million, or 4%, when compared to March 31, 2021. The decrease was primarily driven due to the seasonal nature of the taxpayer advance loans.
•Average deposits from the Payments businesses for the fiscal 2021 third quarter increased nearly 8% to $6.79 billion when compared to the prior year quarter largely driven by excess cash on consumer cards related to government stimulus programs.
1
Tax Season Recap
During the third quarter of the fiscal 2021, total tax services product revenue was $13.6 million compared to $4.6 million in the prior year quarter. The significant increase for the quarter was mostly related to delayed timing of refund-transfers income due to the extension of the tax filing deadline by the IRS. Total tax services product income, net of losses and direct product expenses, increased 19% when comparing the first nine months of fiscal 2021 to the prior year period. The 2021 tax season benefited by the addition of the H&R Block relationship and has been successful despite the challenges caused by an increase in consumer liquidity due to stimulus payments throughout the 2021 tax season.
Economic Impact Program ("EIP") Update
Of the 16.5 million prepaid cards issued in conjunction with the three EIP stimulus programs, totaling approximately $24.15 billion, $2.81 billion were outstanding as of June 30, 2021, of which only $98.1 million was on Meta’s balance sheet with the remainder being held at other banks.
Net Interest Income
Net interest income for the third quarter of fiscal 2021 was $68.5 million, an increase of 10% from the same quarter in fiscal 2020. The increase was primarily driven by a reduction in total interest expense, partially offset by lower overall yields realized on investments and loan and leases.
Interest expense during the third quarter decreased $3.8 million, and loan and lease interest income increased $2.4 million. The third quarter average outstanding balance of loans and leases decreased by $4.2 million compared to the prior year quarter, primarily due to the decrease in community bank and healthcare receivable loan portfolios offset by growth of the remaining commercial loan portfolios. The Company’s average interest-earning assets for the third quarter decreased by $291.8 million to $7.32 billion compared with the prior year quarter, primarily due to the decrease in cash and fed funds sold, total investments, and community bank loans offset by growth of the national lending loans and leases.
Fiscal 2021 third quarter NIM increased to 3.75% from 3.28% for the third quarter last year. The overall reported tax-equivalent yield (“TEY”) on average earning asset yields increased 26 basis points to 3.85% compared to the prior year quarter, primarily driven by a reduction in low-yielding cash held at the Federal Reserve. The TEY on the securities portfolio was 1.62% compared to 2.22% for the comparable period last year.
The Company's cost of funds for all deposits and borrowings averaged 0.09% during the fiscal 2021 third quarter, compared to 0.28% during the prior year quarter, primarily driven by a reduction in wholesale deposit balances. The Company's overall cost of deposits was 0.01% in the fiscal third quarter of 2021, compared to 0.17% in the same quarter last year.
Noninterest Income
Fiscal 2021 third quarter noninterest income increased to $62.5 million, compared to $41.0 million for the same period of the prior year. This increase was primarily related to card fee income and refund transfer fee income. Card fees benefited from increased card balances related to stimulus programs. Refund transfer fee income was higher compared to last year due to refund transfer volume shift from the second fiscal quarter because of the delay in the 2021 tax season.
Noninterest Expense
Noninterest expense increased 14% to $81.5 million for the fiscal 2021 third quarter, from $71.2 million for the same quarter last year, primarily driven by increases in compensation due to a return to more normalized incentive accruals in fiscal year 2021 and additional employees to support growth. Refund transfer product expense was also higher than the same quarter last year, due largely to a shift in volume into the fiscal 2021 third quarter as a result of the delayed IRS filing date.
2
Income Tax Expense
The Company recorded income tax expense of $4.9 million, representing an effective tax rate of 11.0%, for the fiscal 2021 third quarter, compared to an income tax benefit of $2.4 million, representing an effective tax rate of (14.4)%, for the third quarter last year. The increase in the recorded income tax expense reflected an increase in fiscal 2021 third quarter earnings, whereas the prior year’s income tax benefit was chiefly the result of adjustments needed for the ratably recognized investment tax credits and lower earnings forecast at that time due to COVID-19.
The Company originated $13.5 million in solar leases during the fiscal 2021 third quarter, compared to $1.3 million in last year's third quarter. Investment tax credits related to solar leases are recognized ratably based on income throughout each fiscal year. The timing and impact of future solar tax credits are expected to vary from period to period, and Meta intends to undertake only those tax credit opportunities that meet the Company's underwriting and return criteria.
Investments, Loans and Leases
June 30, 2021
March 31, 2021
December 31, 2020
September 30, 2020
June 30, 2020
Total investments
$
1,981,852
$
1,552,892
$
1,309,452
$
1,360,712
$
1,268,416
Loans held for sale
Consumer credit products
12,582
6,233
234
962
391
SBA/USDA
57,208
61,402
32,983
52,542
31,438
Community Bank
18,115
—
100,442
130,073
48,076
Total loans held for sale
87,905
67,635
133,659
183,577
79,905
National Lending
Term lending
920,279
891,414
881,306
805,323
738,454
Asset based lending
263,237
248,735
242,298
182,419
181,130
Factoring
320,629
277,612
275,650
281,173
206,361
Lease financing
282,940
308,169
283,722
281,084
264,988
Insurance premium finance
417,652
344,841
338,227
337,940
359,147
SBA/USDA
263,709
331,917
300,707
318,387
308,611
Other commercial finance
118,081
103,234
101,209
101,658
100,214
Commercial Finance
2,586,527
2,505,922
2,423,119
2,307,984
2,158,905
Consumer credit products
105,440
104,842
88,595
89,809
102,808
Other consumer finance
122,316
130,822
162,423
134,342
138,777
Consumer Finance
227,756
235,664
251,018
224,151
241,585
Tax Services
41,268
225,921
92,548
3,066
19,168
Warehouse Finance
335,704
332,456
318,937
293,375
277,614
Total National Lending loans and leases
3,191,255
3,299,963
3,085,622
2,828,576
2,697,272
Community Banking
Commercial real estate and operating
294,810
335,587
339,141
457,371
608,303
Consumer one-to-four family real estate and other
1,349
4,567
5,077
16,486
166,479
Agricultural real estate and operating
7,825
7,911
9,724
11,707
24,655
Total Community Banking loans
303,984
348,065
353,942
485,564
799,437
Total gross loans and leases
3,495,239
3,648,028
3,439,564
3,314,140
3,496,709
Allowance for credit losses
(91,208)
(98,892)
(72,389)
(56,188)
(65,747)
Net deferred loan and lease origination fees
1,431
9,503
9,111
8,625
5,937
Total loans and leases, net of allowance
$
3,405,462
$
3,558,639
$
3,376,286
$
3,266,577
$
3,436,899
3
The Company's investment security balances at June 30, 2021 totaled $1.98 billion, as compared to $1.55 billion at March 31, 2021 and $1.27 billion at June 30, 2020.
Total gross loans and leases totaled $3.50 billion at June 30, 2021, as compared to $3.65 billion at March 31, 2021 and $3.50 billion and as compared to June 30, 2020. The primary driver for the decrease on a linked quarter basis was the pay down of seasonal tax service loans.
At June 30, 2021, commercial finance loans, which comprised 74% of the Company's gross loan and lease portfolio, totaled $2.59 billion, reflecting growth of $80.6 million, or 3%, from March 31, 2021. The increase in commercial finance loans was primarily due to increases in insurance premium finance by $72.8 million and factoring by $43.0 million, partially offset by decreases in lease financing by $25.2 million and SBA/USDA loans by $68.2 million, respectively, along with slight increases spread across several of the other commercial finance categories.
As of June 30, 2021, the Company had 458 loans outstanding with total loan balances of $143.3 million originated as part of the Paycheck Protection Program ("PPP"), compared with 576 loans outstanding with total loan balances of $208.6 million for the quarter ended March 31, 2021. In total, 53% of the PPP loan balances were forgiven through June 30, 2021.
Consumer finance loans totaled $227.8 million as of June 30, 2021, a decrease compared to $235.7 million at March 31, 2021 and $241.6 million at June 30, 2020. This reduction was primarily driven by other consumer finance, which includes student loans and certain seasonal lending products for tax customers.
Tax services loans totaled $41.3 million as of June 30, 2021, a seasonal decrease as compared to $225.9 million for March 31, 2021 and an increase as compared to $19.2 million at June 30, 2020. Warehouse finance loans totaled $335.7 million at June 30, 2021, a 1% increase from March 31, 2021.
Community bank loans held for investment totaled $304.0 million as of June 30, 2021, decreasing as compared to $348.1 million at March 31, 2021 and $799.4 million at June 30, 2020. As of June 30, 2021, the Company had $18.1 million in community bank loans classified as held for sale.
Asset Quality
The Company’s allowance for credit losses totaled $91.2 million at June 30, 2021, a decrease compared to $98.9 million at March 31, 2021 and an increase compared to $65.7 million at June 30, 2020. The decrease in the allowance at June 30, 2021 when compared to March 31, 2021, was primarily due to the seasonal tax services loan portfolio, which decreased $4.8 million and consumer finance, which decreased $2.4 million during the fiscal 2021 third quarter.
The year-over-year increase in the allowance was primarily driven by a $16.0 million increase within the commercial finance portfolio, a $12.9 million increase in tax services, and a $4.4 million increase in the consumer finance portfolio. These increases were primarily driven by impacts from the pandemic, year-over-year loan growth and the adoption of the current expected credit losses ("CECL") accounting standard, which required a day one entry to increase the allowance for credit losses in the amount of $12.8 million effective October 1, 2020. The increases noted above were partially offset by a $7.2 million decrease within the retained community banking portfolio, which has decreased along with the reduction in year-over-year loan balances.
4
The following table presents the Company's allowance for credit losses as a percentage of its total loans and leases.
As of the Period Ended
(Unaudited)
June 30, 2021
March 31, 2021
December 31, 2020
October 1, 2020(1)
September 30, 2020
June 30, 2020
Commercial finance
1.73
%
1.77
%
1.88
%
1.85
%
1.30
%
1.36
%
Consumer finance
3.80
%
4.70
%
4.39
%
4.31
%
1.64
%
1.75
%
Tax services
58.99
%
12.90
%
1.53
%
0.06
%
0.06
%
59.67
%
Warehouse finance
0.10
%
0.10
%
0.10
%
0.10
%
0.10
%
0.10
%
National Lending
2.44
%
2.57
%
1.89
%
1.86
%
1.20
%
1.68
%
Community Bank
4.36
%
4.03
%
4.01
%
3.37
%
4.59
%
2.55
%
Total loans and leases
2.61
%
2.71
%
2.10
%
2.08
%
1.70
%
1.88
%
(1) Represents the Company's allowance coverage ratio upon the adoption of the Accounting Standards Update 2016-13 using September 30, 2020 loan and lease and allowance balances plus the CECL allowance adjustment.
The Company's allowance for credit losses as a percentage of total loans and leases decreased to 2.61% at June 30, 2021 from 2.71% at March 31, 2021. The decrease in the total loans and leases coverage ratio reflected a seasonal reduction in the allowance of the tax services loan portfolios. The coverage ratios for the other non-tax-related loan categories remained relatively similar to the March 31, 2021 quarter. The Company expects to continue to diligently monitor the allowance for credit losses and adjust as necessary in future periods to maintain an appropriate and supportable level.
Activity in the allowance for credit losses for the periods presented was as follows.
(Unaudited)
Three Months Ended
Nine Months Ended
June 30, 2021
March 31, 2021
June 30, 2020
June 30, 2021
June 30, 2020
(Dollars in thousands)
Beginning balance
$
98,892
$
72,389
$
65,355
$
56,188
$
29,149
Adoption of CECL accounting standard
—
—
—
12,773
—
Provision - tax services loans
4,685
27,680
(100)
32,819
20,407
Provision - all other loans and leases
(36)
2,519
15,193
8,294
35,390
Charge-offs - tax services loans
(9,505)
—
(9,797)
(9,505)
(9,797)
Charge-offs - all other loans and leases
(5,360)
(4,248)
(5,808)
(15,284)
(12,912)
Recoveries - tax services loans
17
54
15
1,027
827
Recoveries - all other loans and leases
2,515
498
889
4,896
2,684
Ending balance
$
91,208
$
98,892
$
65,747
$
91,208
$
65,747
Provision for credit losses was $4.6 million for the quarter ended June 30, 2021, compared to $15.1 million for the comparable period in the prior fiscal year. The decrease in the overall provision compared to the prior year was due in large part to the increase in the allowance as part of the Company's response to the emerging COVID-19 pandemic during the third quarter of fiscal 2020. Net charge-offs were $12.3 million for the quarter ended June 30, 2021, compared to $14.7 million for the quarter ended June 30, 2020. The majority of the net charge-offs for the quarter were attributable to seasonal tax-related loan products.
5
The Company's past due loans and leases were as follows for the periods presented.
As of June 30, 2021
Accruing and Nonaccruing Loans and Leases
Nonperforming Loans and Leases
(Dollars in Thousands)
30-59 Days Past Due
60-89 Days Past Due
> 89 Days Past Due
Total Past Due
Current
Total Loans and Leases Receivable
> 89 Days Past Due and Accruing
Non-accrual balance
Total
Commercial finance
$
22,117
$
10,650
$
8,844
$
41,611
$
2,544,916
$
2,586,527
$
4,350
$
17,315
$
21,665
Consumer finance
843
1,009
525
2,377
225,379
227,756
469
—
469
Tax services
—
40,958
—
40,958
310
41,268
—
—
—
Warehouse finance
—
—
—
—
335,704
335,704
—
—
—
Total National Lending
22,960
52,617
9,369
84,946
3,106,309
3,191,255
4,819
17,315
22,134
Total Community Banking
62
—
1,769
1,831
302,153
303,984
—
19,773
19,773
Total loans and leases held for investment
$
23,022
$
52,617
$
11,138
$
86,777
$
3,408,462
$
3,495,239
$
4,819
$
37,088
$
41,907
As of March 31, 2021
Accruing and Nonaccruing Loans and Leases
Nonperforming Loans and Leases
(Dollars in Thousands)
30-59 Days Past Due
60-89 Days Past Due
> 89 Days Past Due
Total Past Due
Current
Total Loans and Leases Receivable
> 89 Days Past Due and Accruing
Non-accrual balance
Total
Commercial finance
$
34,675
$
8,730
$
9,488
$
52,893
$
2,453,029
$
2,505,922
$
4,810
$
18,305
$
23,115
Consumer finance
2,033
4,162
2,294
8,489
227,175
235,664
517
—
517
Tax services
507
—
—
507
225,414
225,921
—
—
—
Warehouse finance
—
—
—
—
332,456
332,456
—
—
—
Total National Lending
37,215
12,892
11,782
61,889
3,238,074
3,299,963
5,327
18,305
23,632
Total Community Banking
12
—
1,818
1,830
346,235
348,065
—
19,824
19,824
Total loans and leases held for investment
$
37,227
$
12,892
$
13,600
$
63,719
$
3,584,309
$
3,648,028
$
5,327
$
38,129
$
43,456
The Company's nonperforming assets at June 30, 2021 were $45.1 million, representing 0.64% of total assets, compared to $46.7 million, or 0.48% of total assets at March 31, 2021 and $56.1 million, or 0.64% of total assets at June 30, 2020. The changes in the nonperforming assets as a percentage of total assets at June 30, 2021 were driven in large part by a significant reduction in period-end total assets as the total nonperforming assets for June 30, 2021 decreased when compared to both the linked-quarter and the prior year.
The Company's nonperforming loans and leases at June 30, 2021, were $41.9 million, representing 1.17% of total gross loans and leases, compared to $43.5 million, or 1.17% of total gross loans and leases at March 31, 2021 and $39.3 million, or 1.10% of total gross loans and leases at June 30, 2020.
Loan and lease balances that were within their active deferment period decreased to $41.5 million at June 30, 2021 from $66.5 million at March 31, 2021.
Meta is now revising its credit administration policies and reviewing its loan portfolio to better align with OCC guidance for national banks, a process that began during the quarter ending June 30, 2021 and is expected to be completed by September 30, 2021. We expect these credit policy revisions will have an impact on our loan and lease risk ratings, resulting in downgrades of certain credits in several categories. Our loan and collateral management practices have proven effective in managing losses during previous economic cycles; and while we expect this process will result in setting a new baseline for portfolio metrics going forward, it does not indicate a deterioration in our portfolio's expected performance. Further, these changes do not reflect an increase in credit risk for past or future periods and thus we do not anticipate any increase in losses as a result of these one-time administrative adjustments to these credits' risk ratings.
6
The Company has various portfolios of consumer finance and tax services loans that present unique risks. Due to the unique risks associated with these portfolios, the Company monitors other credit quality indicators in their evaluation of the appropriateness of the allowance for credit losses on these portfolios, and as such, these loans are not included in the asset classification table below. The Company's loans and leases by asset classification were as follows for the periods presented.
Asset Classification
Pass
Watch
Special Mention
Substandard
Doubtful
Total
As of June 30, 2021
(Dollars in Thousands)
Commercial finance
$
2,370,132
$
135,691
$
55,805
$
74,941
$
7,166
$
2,643,735
Warehouse finance
335,704
—
—
—
—
335,704
Total National Lending
2,705,836
135,691
55,805
74,941
7,166
2,979,439
Total Community Banking
212,283
33,494
16,126
60,196
—
322,099
Total Loans and Leases
$
2,918,119
$
169,185
$
71,931
$
135,137
$
7,166
$
3,301,538
Asset Classification
Pass
Watch
Special Mention
Substandard
Doubtful
Total
As of March 31, 2021
(Dollars in Thousands)
Commercial finance
$
2,310,043
$
142,506
$
59,904
$
52,492
$
2,378
$
2,567,323
Warehouse finance
332,456
—
—
—
—
332,456
Total National Lending
2,642,499
142,506
59,904
52,492
2,378
2,899,779
Total Community Banking
239,650
84,107
684
23,625
—
348,066
Total Loans and Leases
$
2,882,149
$
226,613
$
60,588
$
76,117
$
2,378
$
3,247,845
Deposits, Borrowings and Other Liabilities
Total average deposits for the fiscal 2021 third quarter decreased by $240.7 million to $6.98 billion compared to the same period in fiscal 2020, due to a reduction in wholesale deposits partially offset by increases in all other non-maturity deposit categories. Average wholesale deposits decreased $731.1 million, or 89%, while noninterest-bearing deposits increased $323.1 million, or 5%, for the fiscal 2021 third quarter when compared to the same period in fiscal 2020. Average deposits from the Payments division increased nearly 8% to $6.79 billion for the fiscal 2021 third quarter when compared to the same period in fiscal 2020. Excluding the balances on the EIP cards, average payments deposits for the fiscal 2021 second quarter were $6.67 billion, representing an increase of 42% compared to the same period of the prior year, which continues to be largely driven by other stimulus-related dollars loaded on various partner cards.
The average balance of total deposits and interest-bearing liabilities was $7.08 billion for the three-month period ended June 30, 2021, compared to $7.49 billion for the same period in the prior fiscal year, representing a decrease of 6%.
Total end-of-period deposits decreased 22% to $5.89 billion at June 30, 2021, compared to $7.59 billion at June 30, 2020. The reduction in end-of-period deposits was primarily driven by decreases in noninterest-bearing deposits of $1.15 billion and wholesale deposits of $665.0 million. The decrease in noninterest-bearing deposits was driven by a $2.58 billion reduction in EIP program card balances from June 30, 2020 to June 30, 2021 as Meta was able to shift most of the remaining EIP program card balances from its balance sheet to other banks. That decrease in EIP balances was partially offset by growth in payments deposits that has been largely driven by excess cash on consumer cards related to government stimulus programs.
7
Regulatory Capital
The Company and MetaBank remained above the federal regulatory minimum capital requirements at June 30, 2021, continued to be classified as well-capitalized, and in good standing with the regulatory agencies. A temporary exemption was granted by the Office of the Comptroller of the Currency related to the financial impacts of distributing prepaid debit cards as part of the EIP program. Regulatory capital ratios of the Company and the Bank are stated in the table below.
The tables below include certain non-GAAP financial measures that are used by investors, analysts and bank regulatory agencies to assess the capital position of financial services companies. Management reviews these measures along with other measures of capital as part of its financial analysis.
As of the dates indicated
June 30, 2021(1)
March 31, 2021
December 31, 2020
September 30, 2020
June 30, 2020
Company
Tier 1 leverage capital ratio
6.85
%
4.75
%
7.39
%
6.58
%
5.91
%
Common equity Tier 1 capital ratio
12.76
%
11.29
%
10.72
%
11.78
%
11.51
%
Tier 1 capital ratio
13.11
%
11.63
%
11.07
%
12.18
%
11.90
%
Total capital ratio
16.18
%
14.65
%
14.14
%
15.30
%
14.99
%
MetaBank
Tier 1 leverage capital ratio
7.83
%
5.47
%
8.60
%
7.56
%
6.89
%
Common equity Tier 1 capital ratio
14.94
%
13.39
%
12.87
%
13.96
%
13.82
%
Tier 1 capital ratio
14.96
%
13.40
%
12.89
%
14.00
%
13.86
%
Total capital ratio
16.22
%
14.66
%
14.14
%
15.26
%
15.12
%
(1) June 30, 2021 amounts are preliminary pending completion and filing of the Company's regulatory reports. Regulatory capital presented for periods in fiscal year 2021 reflect the Company's election of the five-year CECL transition for regulatory capital purposes.
The following table provides the non-GAAP financial measures used to compute certain of the ratios included in the table above, as well as a reconciliation of such non-GAAP financial measures to the most directly comparable financial measure in accordance with GAAP:
8
Standardized Approach(1)
June 30, 2021
March 31, 2021
December 31, 2020
September 30, 2020
June 30, 2020
(Dollars in Thousands)
Total stockholders' equity
$
876,633
$
835,258
$
813,210
$
847,308
$
829,909
Adjustments:
LESS: Goodwill, net of associated deferred tax liabilities
301,179
301,602
301,999
302,396
302,814
LESS: Certain other intangible assets
35,100
36,779
39,403
40,964
42,865
LESS: Net deferred tax assets from operating loss and tax credit carry-forwards
17,753
19,306
24,105
18,361
10,360
LESS: Net unrealized gains (losses) on available-for-sale securities
14,750
12,458
19,894
17,762
8,382
LESS: Non-controlling interest
1,490
1,092
1,536
3,603
3,787
ADD: Adoption of Accounting Standards Update 2016-13
13,913
10,439
10,439
—
—
Common Equity Tier 1(1)
520,274
474,460
436,712
464,222
461,701
Long-term borrowings and other instruments qualifying as Tier 1
13,661
13,661
13,661
13,661
13,661
Tier 1 minority interest not included in common equity tier 1 capital
932
690
749
1,894
1,894
Total Tier 1 Capital
534,867
488,811
451,122
479,777
477,256
Allowance for credit losses
51,317
53,232
51,070
49,343
50,338
Subordinated debentures (net of issuance costs)
73,936
73,892
73,850
73,807
73,765
Total qualifying capital
$
660,119
$
615,935
$
576,042
$
602,927
$
601,359
(1) Capital ratios were determined using the Basel III capital rules that became effective on January 1, 2015. Basel III revised the definition of capital, increased minimum capital ratios, and introduced a minimum CET1 ratio; those changes are being fully phased in through the end of 2021.
The following table provides a reconciliation of tangible common equity and tangible common equity excluding accumulated other comprehensive income ("AOCI"), each of which is used in calculating tangible book value data, to Total Stockholders' Equity. Each of tangible common equity and tangible common equity excluding AOCI is a non-GAAP financial measure that is commonly used within the banking industry.
June 30, 2021
March 31, 2021
December 31, 2020
September 30, 2020
June 30, 2020
(Dollars in Thousands)
Total Stockholders' Equity
$
876,633
$
835,258
$
813,210
$
847,308
$
829,909
Less: Goodwill
309,505
309,505
309,505
309,505
309,505
Less: Intangible assets
34,898
36,903
39,660
41,692
43,974
Tangible common equity
532,230
488,850
464,045
496,111
476,430
Less: Accumulated other comprehensive income (loss) ("AOCI")
15,222
12,809
20,119
17,542
7,995
Tangible common equity excluding AOCI
$
517,008
$
476,041
$
443,926
$
478,569
$
468,435
Conference Call
The Company will host a conference call and earnings webcast at 4:00 p.m. Central Time (5:00 p.m. Eastern Time) on Wednesday, July 28, 2021. The live webcast of the call can be accessed from Meta’s Investor Relations website at www.metafinancialgroup.com. Telephone participants may access the live conference call by dialing (844) 461-9934 beginning approximately 10 minutes prior to start time. Please ask to join the Meta Financial conference call, and provide conference ID 5084665 upon request. International callers should dial (636) 812-6634. A webcast replay will also be archived at www.metafinancialgroup.com for one year.
Upcoming Investor Events
•Raymond James U.S. Bank Conference, September 8, 2021 | Chicago, IL
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
June 30, 2021
March 31, 2021
December 31, 2020
September 30, 2020
June 30, 2020
Cash and cash equivalents
$
720,243
$
3,724,242
$
1,586,451
$
427,367
$
3,108,141
Investment securities available for sale, at fair value
854,023
921,947
797,363
814,495
825,579
Mortgage-backed securities available for sale, at fair value
1,063,582
558,833
430,761
453,607
338,250
Investment securities held to maturity, at cost
60,228
67,709
76,176
87,183
98,205
Mortgage-backed securities held to maturity, at cost
4,019
4,403
5,152
5,427
6,382
Loans held for sale
87,905
67,635
133,659
183,577
79,905
Loans and leases
3,496,670
3,657,531
3,448,675
3,322,765
3,502,646
Allowance for credit losses
(91,208)
(98,892)
(72,389)
(56,188)
(65,747)
Federal Reserve Bank and Federal Home Loan Bank stocks, at cost
28,433
28,433
27,138
27,138
31,836
Accrued interest receivable
16,230
17,429
17,133
16,628
17,545
Premises, furniture, and equipment, net
44,107
41,510
39,932
41,608
40,361
Rental equipment, net
211,368
211,397
206,732
205,964
216,336
Bank-owned life insurance
94,142
93,542
92,937
92,315
91,697
Foreclosed real estate and repossessed assets, net
1,204
1,483
7,186
9,957
6,784
Goodwill
309,505
309,505
309,505
309,505
309,505
Intangible assets
34,898
36,903
39,660
41,692
43,974
Prepaid assets
7,482
10,201
11,270
8,328
6,806
Deferred taxes
20,072
25,435
24,411
17,723
15,944
Other assets
88,909
110,877
82,763
82,983
104,877
Total assets
$
7,051,812
$
9,790,123
$
7,264,515
$
6,092,074
$
8,779,026
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES
Deposits:
Noninterest-bearing checking
5,385,569
7,928,235
5,581,597
4,356,630
6,537,809
Interest-bearing checking
255,509
416,164
274,504
157,571
187,003
Savings deposits
93,608
126,834
54,080
47,866
55,896
Money market deposits
63,920
55,045
56,440
48,494
40,811
Time certificates of deposit
11,425
12,614
13,522
20,223
25,000
Wholesale deposits
78,840
103,521
227,648
348,416
743,806
Total deposits
5,888,871
8,642,413
6,207,791
4,979,200
7,590,325
Short-term borrowings
—
—
—
—
—
Long-term borrowings
93,634
95,336
96,760
98,224
209,781
Accrued interest payable
1,853
679
2,068
1,923
4,332
Accrued expenses and other liabilities
190,821
216,437
144,686
165,419
144,679
Total liabilities
6,175,179
8,954,865
6,451,305
5,244,766
7,949,117
STOCKHOLDERS’ EQUITY
Preferred stock
—
—
—
—
—
Common stock, $.01 par value
319
319
326
344
346
Common stock, Nonvoting, $.01 par value
—
—
—
—
—
Additional paid-in capital
602,720
601,222
598,669
594,569
592,693
Retained earnings
262,578
225,471
198,000
234,927
228,500
Accumulated other comprehensive income
15,222
12,809
20,119
17,542
7,995
Treasury stock, at cost
(5,696)
(5,655)
(5,440)
(3,677)
(3,412)
Total equity attributable to parent
875,143
834,166
811,674
843,705
826,122
Noncontrolling interest
1,490
1,092
1,536
3,603
3,787
Total stockholders’ equity
876,633
835,258
813,210
847,308
829,909
Total liabilities and stockholders’ equity
$
7,051,812
$
9,790,123
$
7,264,515
$
6,092,074
$
8,779,026
11
Consolidated Statements of Operations (Unaudited)
(Dollars in Thousands, Except Share and Per Share Data)
Three Months Ended
Year Ended
June 30, 2021
March 31, 2021
June 30, 2020
June 30, 2021
June 30, 2020
Interest and dividend income:
Loans and leases, including fees
$
62,287
$
68,472
$
59,911
$
192,415
$
199,107
Mortgage-backed securities
3,446
2,608
2,269
8,176
7,151
Other investments
4,250
4,589
5,226
13,207
18,176
69,983
75,669
67,406
213,798
224,434
Interest expense:
Deposits
188
445
3,130
1,429
20,712
FHLB advances and other borrowings
1,320
1,374
2,139
4,045
9,197
1,508
1,819
5,269
5,474
29,909
Net interest income
68,475
73,850
62,137
208,324
194,525
Provision for credit losses
4,612
30,290
15,093
40,991
55,796
Net interest income after provision for credit losses
63,863
43,560
47,044
167,333
138,729
Noninterest income:
Refund transfer product fees
12,073
22,680
4,595
35,400
33,726
Tax advance product fees
891
44,562
28
47,413
31,840
Payments card and deposit fees
29,203
29,875
21,302
81,641
65,957
Other bank and deposit fees
338
133
214
709
1,083
Rental income
9,976
9,846
11,231
29,707
34,682
Net gain realized on investment securities
—
6
—
6
—
Gain on divestitures
—
—
—
—
19,275
Gain (loss) on sale of other
5,955
2,133
1,214
10,935
969
Other income
4,017
4,218
2,464
15,550
11,512
Total noninterest income
62,453
113,453
41,048
221,361
199,044
Noninterest expense:
Compensation and benefits
38,604
43,932
32,102
114,867
100,631
Refund transfer product expense
2,435
6,146
(139)
8,642
7,482
Tax advance product expense
(25)
2,189
(11)
2,534
2,820
Card processing
6,809
7,212
7,128
20,138
19,432
Occupancy and equipment expense
7,381
6,748
6,502
21,017
20,169
Operating lease equipment depreciation
8,122
7,419
8,536
23,122
25,237
Legal and consulting
5,680
6,045
4,660
16,972
15,242
Intangible amortization
2,013
2,757
2,636
6,784
8,714
Impairment expense
505
554
—
2,217
750
Other expense
9,999
12,969
9,827
33,775
38,291
Total noninterest expense
81,523
95,971
71,241
250,068
238,768
Income before income tax expense
44,793
61,042
16,851
138,626
99,005
Income tax expense (benefit)
4,934
1,133
(2,426)
9,600
3,870
Net income before noncontrolling interest
39,859
59,909
19,277
129,026
95,135
Net income attributable to noncontrolling interest
1,158
843
1,087
3,221
3,573
Net income attributable to parent
$
38,701
$
59,066
$
18,190
$
125,805
$
91,562
Less: Allocation of Earnings to participating securities(1)
729
1,113
432
2,411
2,097
Net income attributable to common shareholders(1)
37,972
57,953
17,758
123,394
89,465
Earnings per common share
Basic
$
1.21
$
1.84
$
0.53
$
3.87
$
2.54
Diluted
$
1.21
$
1.84
$
0.53
$
3.87
$
2.54
Shares used in computing earnings per common share
Basic
31,320,893
31,520,505
33,794,154
31,880,653
35,180,068
Diluted
31,338,947
31,535,022
33,815,651
31,900,597
35,201,702
(1) Amounts presented are used in the two-class earnings per common share calculation.
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 June 30,
2021
2020
(Dollars in Thousands)
Average Outstanding Balance
Interest Earned / Paid
Yield /
Rate(1)
Average Outstanding Balance
Interest Earned / Paid
Yield /
Rate(1)
Interest-earning assets:
Cash and fed funds sold
$
1,867,988
$
528
0.11
%
$
2,692,270
$
783
0.12
%
Mortgage-backed securities
882,042
3,446
1.57
%
342,174
2,269
2.67
%
Tax exempt investment securities
263,401
884
1.70
%
417,042
1,658
2.02
%
Asset-backed securities
438,163
1,651
1.51
%
336,562
1,770
2.11
%
Other investment securities
246,493
1,187
1.93
%
197,643
1,014
2.06
%
Total investments
1,830,099
7,168
1.62
%
1,293,420
6,711
2.22
%
Total commercial finance
2,616,942
48,641
7.46
%
2,160,175
40,375
7.52
%
Total consumer finance
241,813
3,916
6.50
%
247,824
4,635
7.52
%
Total tax services
91,804
604
2.64
%
39,845
—
—
%
Total warehouse finance
332,759
5,151
6.21
%
304,839
4,582
6.05
%
National lending loans and leases
3,283,318
58,312
7.12
%
2,752,683
49,592
7.25
%
Community Banking loans
335,415
3,975
4.75
%
870,245
10,319
4.77
%
Total loans and leases
3,618,733
62,287
6.90
%
3,622,928
59,911
6.65
%
Total interest-earning assets
$
7,316,820
$
69,983
3.85
%
$
7,608,618
$
67,406
3.59
%
Noninterest-earning assets
841,738
830,589
Total assets
$
8,158,558
$
8,439,206
Interest-bearing liabilities:
Interest-bearing checking(2)
$
336,576
$
—
—
%
$
226,382
$
—
—
%
Savings
107,803
5
0.02
%
55,572
1
0.01
%
Money markets
58,517
66
0.45
%
40,091
33
0.33
%
Time deposits
11,877
27
0.91
%
25,392
113
1.78
%
Wholesale deposits
86,295
90
0.42
%
817,414
2,983
1.47
%
Total interest-bearing deposits
601,068
188
0.13
%
1,164,852
3,130
1.08
%
Overnight fed funds purchased
11
—
0.25
%
59,055
48
0.33
%
FHLB advances
—
—
—
%
110,000
670
2.45
%
Subordinated debentures
73,907
1,148
6.23
%
73,738
1,153
6.29
%
Other borrowings
20,657
172
3.35
%
27,032
268
3.98
%
Total borrowings
94,575
1,320
5.60
%
269,825
2,139
3.19
%
Total interest-bearing liabilities
695,643
1,508
0.87
%
1,434,677
5,269
1.48
%
Noninterest-bearing deposits
6,380,371
—
—
%
6,057,314
—
—
%
Total deposits and interest-bearing liabilities
$
7,076,014
$
1,508
0.09
%
$
7,491,991
$
5,269
0.28
%
Other noninterest-bearing liabilities
225,862
122,940
Total liabilities
7,301,876
7,614,931
Shareholders' equity
856,682
824,276
Total liabilities and shareholders' equity
$
8,158,558
$
8,439,206
Net interest income and net interest rate spread including noninterest-bearing deposits
$
68,475
3.76
%
$
62,137
3.30
%
Net interest margin
3.75
%
3.28
%
Tax-equivalent effect
0.02
%
0.02
%
Net interest margin, tax-equivalent(3)
3.77
%
3.31
%
(1) Tax rate used to arrive at the TEY for the three months ended June 30, 2021 and 2020 was 21%.
(2) Of the total balance, $336.2 million are interest-bearing deposits where interest expense is paid by a third party and not by the Company.
(3) Net interest margin expressed on a fully-taxable-equivalent basis ("net interest margin, tax-equivalent") is a non-GAAP financial measure. The tax-equivalent adjustment to net interest income recognizes the estimated income tax savings when comparing taxable and tax-exempt assets and adjusting for federal and state exemption of interest income. The Company believes that it is a standard practice in the banking industry to present net interest margin expressed on a fully taxable equivalent basis and, accordingly, believes the presentation of this non-GAAP financial measure may be useful for peer comparison purposes.
13
Selected Financial Information
As of and For the Three Months Ended
June 30, 2021
March 31, 2021
December 31, 2020
September 30, 2020
June 30, 2020
Equity to total assets
12.43
%
8.53
%
11.19
%
13.91
%
9.45
%
Book value per common share outstanding
$
27.46
$
26.16
$
24.93
$
24.66
$
23.96
Tangible book value per common share outstanding
$
16.67
$
15.31
$
14.23
$
14.44
$
13.76
Tangible book value per common share outstanding excluding AOCI
$
16.20
$
14.91
$
13.61
$
13.93
$
13.53
Common shares outstanding
31,919,780
31,926,008
32,620,251
34,360,890
34,631,160
Nonperforming assets to total assets
0.64
%
0.48
%
0.73
%
0.79
%
0.64
%
Nonperforming loans and leases to total loans and leases
1.17
%
1.17
%
1.18
%
0.97
%
1.10
%
Net interest margin
3.75
%
3.07
%
4.65
%
3.77
%
3.28
%
Net interest margin, tax-equivalent
3.77
%
3.08
%
4.67
%
3.79
%
3.31
%
Return on average assets
1.90
%
2.22
%
1.73
%
0.69
%
0.86
%
Return on average equity
18.07
%
28.93
%
13.91
%
6.21
%
8.83
%
Full-time equivalent employees
1,109
1,075
1,038
1,015
999
Non-GAAP Reconciliation
Efficiency Ratio
For the last twelve months ended
(Dollars in Thousands)
June 30, 2021
March 31, 2021
December 31, 2020
September 30, 2020
June 30, 2020
Noninterest Expense - GAAP
$
330,352
$
320,070
$
315,828
$
319,051
$
314,911
Net Interest Income
272,837
266,499
260,386
259,038
260,142
Noninterest Income
262,111
240,706
247,766
239,794
235,024
Total Revenue: GAAP
$
534,948
$
507,205
$
508,152
$
498,832
$
495,166
Efficiency Ratio, last twelve months
61.75
%
63.10
%
62.15
%
63.96
%
63.60
%
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.
