Meta Financial Group, Inc.® Announces Record Earnings for 2019 Fiscal Year

Oct 24 2019

- 2019 Fiscal Fourth Quarter Net Income of $20.2 million, or $0.53 Per Diluted Share -

- Fiscal 2019 Net Income of $97.0 million, or $2.49 Per Diluted Share -

- Fiscal 2019 Earnings Per Share up 49% Versus Fiscal 2018 -

SIOUX FALLS, S.D., Oct. 24, 2019 (GLOBE NEWSWIRE) -- Meta Financial Group, Inc.® (Nasdaq: CASH) (“Meta” or the “Company”) reported net income of $20.2 million, or $0.53 per diluted share, for the three months ended September 30, 2019, compared to net income of $8.7 million, or $0.24 per diluted share, for the three months ended September 30, 2018. The Company reported record net income of $97.0 million, or $2.49 per diluted share, for the fiscal year ended September 30, 2019, compared to net income of $51.6 million, or $1.67 per diluted share, for the fiscal year ended September 30, 2018.

“Earnings for the full fiscal year nearly doubled year-over-year, and more than doubled in the fiscal fourth quarter compared to the same period last year. This is reflective of the earnings power of the Company following our merger with Crestmark,” said President and CEO Brad Hanson. “Looking ahead, we remain focused on delivering against the key initiatives we have outlined with the goal of driving long-term value to shareholders. Finally, we continued to return excess capital to shareholders via quarterly dividends and ongoing share repurchases and plan to maintain flexibility as we continue to optimize our capital structure.”

Highlights for the 2019 Fiscal Fourth Quarter and Year Ended September 30, 2019

  • Total gross loans and leases at September 30, 2019 increased 24% to $3.65 billion compared to September 30, 2018, and increased by $25.5 million, or 1%, when compared to June 30, 2019.
  • Average deposits from the payments division increased $271.1 million, or 11%, to $2.63 billion for the 2019 fiscal fourth quarter when compared to the same quarter of fiscal 2018.
  • Total revenue for the fiscal 2019 fourth quarter was $101.6 million, an increase of 39% from the same period of the prior year. Total revenue for the fiscal year ended September 30, 2019 was $486.8 million, an increase of 54% from the fiscal year ended September 30, 2018.
  • Net interest income was $65.6 million for the 2019 fiscal fourth quarter, an increase of $17.1 million, or 35%, compared to $48.5 million for the fourth quarter of fiscal 2018. Total fiscal year 2019 net interest income was $264.2 million, representing a $133.7 million increase over the prior fiscal year.
  • Net interest margin ("NIM") was 4.95% for the fiscal fourth quarter of 2019, an increase from 4.05% over the same period of the prior year, while the tax-equivalent net interest margin ("NIM, TE") increased to 5.00% from 4.27% over that same period. NIM for the 2019 fiscal year was 4.91% compared to 3.14% during fiscal year 2018 while NIM, TE increased to 5.02% for fiscal year 2019 from 3.41% for fiscal year 2018.
  • The Company recognized $3.5 million pre-tax, or $0.07 per share on an after-tax basis, in compensation and benefits expense charges during the fiscal 2019 fourth quarter related to organizational changes, including severance, to further support its key strategic initiatives and drive enhanced operating leverage.
  • Repurchased $3.5 million, or 106,038 shares at an average price of $33.01 per share during the fiscal 2019 fourth quarter. For the 2019 fiscal year, the Company repurchased an aggregate of $46.5 million, or 1,680,772 shares at an average price of $27.67 per share. As of September 30, 2019, 319,228 shares remained available for repurchase under the common stock share repurchase program that was announced during the fiscal 2019 second quarter.

Net Interest Income
Net interest income for the fiscal 2019 fourth quarter was $65.6 million, an increase of 35% from the same quarter in 2018. The increase was driven primarily by growth in loans and leases, largely attributable to the Company's commercial, consumer and warehouse finance portfolios.

During the fourth quarter of fiscal 2019, loan and lease interest income grew by $25.5 million, when compared to the same quarter in fiscal 2018, offset in part by an increase in interest expense of $3.5 million. The quarterly average outstanding balance of loans and leases as a percentage of interest-earning assets for the quarter ended September 30, 2019 increased to 71%, from 52% for the quarter ended September 30, 2018, while the quarterly average balance of total investments as a percentage of interest-earning assets decreased to 28% from 46% over that same period. The Company’s average interest-earning assets for the fiscal 2019 fourth quarter grew by $515.9 million, or 11%, to $5.26 billion from the same quarter of the prior year, primarily as a result of growth in loans and leases in the Company's commercial finance portfolio.

NIM was 4.95% in the fiscal 2019 fourth quarter, an increase of 90 basis points from 4.05% in the fourth quarter of fiscal 2018. The net effect of purchase accounting accretion contributed 14 basis points to NIM for the fourth quarter of fiscal 2019 and 12 basis points to NIM for the same period of the prior year.

The overall reported tax-equivalent yield (“TEY”) on average-earning asset yields increased by 90 basis points to 6.15% when comparing the fiscal 2019 fourth quarter to the fiscal 2018 fourth quarter, driven primarily by the Company's improved earning asset mix, which reflects higher balances for the national lending portfolio. The fiscal 2019 fourth quarter TEY on the securities portfolio was 2.83% compared to 3.09% for the same period of the prior fiscal year.

The Company's cost of funds for all deposits and borrowings averaged 1.17% during the fiscal 2019 fourth quarter, compared to 1.01% for the fiscal 2018 fourth quarter. This increase was primarily due to an increase in the cost of wholesale funding, including brokered deposits. The Company's overall cost of deposits was 0.95% in the fiscal fourth quarter of 2019, compared to 0.78% in the same quarter of fiscal 2018.

Noninterest Income
Fiscal 2019 fourth quarter noninterest income was $36.0 million, an increase of 46% over the same quarter of fiscal 2018, which was due in large part to increases in rental income and gain on sale of loans and leases, primarily as a result of the Crestmark merger. Also contributing to the increase were growth in deposit fees and an improvement in gain (loss) on sale of securities. Partially offsetting the increase were decreases in card fee income and other income over that same period of the prior fiscal year. The card fee income decrease was primarily related to the transition of certain fees to deposit fees.

Noninterest Expense
Noninterest expense increased to $76.1 million, or 14%, for the fiscal 2019 fourth quarter, compared to the same quarter in fiscal 2018, primarily due to increases in compensation and benefits, operating lease depreciation expense, and occupancy and equipment expense. These increases were primarily a result of the Crestmark merger. The increase in noninterest expense was partially offset by a decrease in legal and consulting expenses when comparing the fiscal 2019 fourth quarter to the same period of the prior year. The Company recognized $3.5 million pre-tax in compensation and benefits expense related to organizational changes, including severance, during the fiscal fourth quarter of 2019.

Income Tax Expense
The Company recorded an income tax benefit of $0.1 million for the fiscal 2019 fourth quarter, compared to an income tax benefit of $7.6 million for the fiscal 2018 fourth quarter. The fiscal 2018 fourth quarter results included a $4.6 million income tax benefit recognized by the Company as a result of amending a historical tax return of Crestmark, Bancorp, Inc. Also contributing to the reduced income tax benefit was an increase in net income before tax during the fourth quarter of fiscal 2019 compared to the same period of the prior year. For the 2019 fiscal year, our effective tax rate was (3.4)%, compared to 9.0% for the 2018 fiscal year.

The Company originated $19.7 million in solar leases during the fiscal 2019 fourth quarter, compared to $15.0 million in solar leases originated during the fiscal 2018 fourth quarter, and originated $104.4 million in solar leases for the 2019 fiscal year. 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

(Dollars in thousands) September 30, 2019   June 30, 2019   March 31, 2019   December 31, 2018   September 30, 2018
                   
Total investments $ 1,407,257     $ 1,502,640     $ 1,649,754     $ 1,855,791     $ 2,019,968  
                   
Loans held for sale                  
Consumer credit products 122,299     45,582     42,342     24,233      
SBA/USDA(1) 26,478     17,257     17,403     9,327     15,606  
Total loans held for sale 148,777     62,839     59,745     33,560     15,606  
                   
National Lending                  
Asset based lending 688,520     615,309     572,210     554,072     477,917  
Factoring 296,507     320,344     287,955     284,912     284,221  
Lease financing 381,602     341,957     321,414     290,889     265,315  
Insurance premium finance 361,105     358,772     307,875     330,712     337,877  
SBA/USDA 88,831     99,791     77,481     67,893     59,374  
Other commercial finance 99,665     99,677     98,956     89,402     85,145  
Commercial Finance(2) 1,916,230     1,835,850     1,665,891     1,617,880     1,509,849  
Consumer credit products 106,794     155,539     139,617     96,144     80,605  
Other consumer finance 161,404     164,727     170,824     182,510     189,756  
Consumer Finance 268,198     320,266     310,441     278,654     270,361  
Tax Services 2,240     24,410     84,824     76,575     1,073  
Warehouse Finance 262,924     250,003     186,697     176,134     65,000  
Total National Lending loans and leases 2,449,592     2,430,529     2,247,853     2,149,243     1,846,283  
Community Banking                  
Commercial real estate and operating 883,932     877,412     869,917     863,753     790,890  
Consumer one-to-four family real estate and other 259,425     256,853     257,079     256,341     247,318  
Agricultural real estate and operating 58,464     61,169     60,167     58,971     60,498  
Total Community Banking loans 1,201,821     1,195,434     1,187,163     1,179,065     1,098,706  
Total gross loan and leases 3,651,413     3,625,963     3,435,016     3,328,308     2,944,989  
Allowance for loan and lease losses (29,149 )   (43,505 )   (48,672 )   (21,290 )   (13,040 )
Net deferred loan and lease origination fees (costs) 7,434     5,068     2,964     1,190     (250 )
Total loan and leases, net of allowance $ 3,629,698     $ 3,587,526     $ 3,389,308     $ 3,308,208     $ 2,931,699  

(1) The September 30, 2019 balance included $0.7 million of an interest rate mark premium related to the acquired loans and leases from the Crestmark acquisition.
(2) The September 30, 2019 balance included $5.6 million and $2.6 million of credit and interest rate mark discounts, respectively, related to the acquired loans and leases from the Crestmark acquisition.

The Company continued to utilize sales of securities and cash flow from its amortizing securities portfolio to fund loan and lease growth. Investment securities totaled $1.41 billion at September 30, 2019, as compared to $2.02 billion at September 30, 2018.

Total gross loans and leases receivable increased $706.4 million, or 24%, to $3.65 billion at September 30, 2019 from $2.94 billion at September 30, 2018, which was primarily attributable to growth in the commercial finance and warehouse finance portfolios.

At September 30, 2019, commercial finance loans, which comprised 52% of the Company's gross loan and lease portfolio, totaled $1.92 billion, reflecting growth of $80.4 million, or 4%, from June 30, 2019.

Community banking loans grew $103.1 million, or 9%, at September 30, 2019 compared to September 30, 2018.

Asset Quality
The Company’s allowance for loan and lease losses was $29.1 million at September 30, 2019, compared to $13.0 million at September 30, 2018, which difference was driven primarily by increases in the allowance in the commercial and consumer finance portfolios of $13.3 million and $2.6 million, respectively. The Company's allowance at September 30, 2019 decreased $14.4 million compared to June 30, 2019, primarily from net charge-offs of $18.5 million during the 2019 fiscal fourth quarter, of which $15.4 million were related to charging-off a majority of the remaining balances of tax services loans. The timing and amount of these net charge-offs within the tax services portfolio are consistent with the same period of the prior year.

The following table presents, for the periods indicated, the allowance for loan and lease loss activity.

(Unaudited) Three Months Ended   Year Ended
Allowance for loan and lease loss activity September 30, 2019   June 30, 2019   September 30, 2018   September 30, 2019   September 30, 2018
(Dollars in thousands)                  
Beginning balance $ 43,505     $ 48,672     $ 21,950     $ 13,040     $ 7,534  
Provision - tax services loans (9 )   914     1,009     24,873     21,344  
Provision - all other loans and leases 4,130     8,198     3,697     30,776     8,089  
Charge-offs - tax services loans (15,426 )   (9,627 )   (11,295 )   (25,096 )   (21,802 )
Charge-offs - all other loans and leases (3,351 )   (5,124 )   (3,420 )   (17,758 )   (4,162 )
Recoveries - tax services loans 10     36     31     223     453  
Recoveries - all other loans and leases 290     436     1,068     3,091     1,584  
Ending balance $ 29,149     $ 43,505     $ 13,040     $ 29,149     $ 13,040  

Provision for loan and lease losses was $4.1 million for the quarter ended September 30, 2019, compared to $4.7 million for the comparable period in the prior fiscal year. The decrease in provision was primarily driven by a decrease in loan balances within the consumer finance portfolio, as well as a decrease in provision in the tax services and community bank portfolios to maintain allowance levels. As a partial offset, the provision in the commercial finance portfolio for the quarter ended September 30, 2019 increased year-over-year due to related loan and lease growth. Net charge-offs were $18.5 million for the quarter ended September 30, 2019, compared to $13.6 million for the quarter ended September 30, 2018.

For fiscal year 2019, the Company recorded a provision for loan and lease losses of $55.7 million, compared to $29.4 million for the prior fiscal year, primarily driven by loan and lease growth and increased net charge-offs within the commercial finance portfolio.

The Company’s nonperforming assets at September 30, 2019 were $56.5 million, representing 0.91% of total assets, compared to $51.0 million, or 0.84% of total assets at June 30, 2019 and $41.8 million, or 0.72% of total assets, at September 30, 2018. At September 30, 2019, foreclosed and repossessed assets were $29.5 million, representing 0.48% of total assets, compared to $29.5 million, or 0.48% of total assets at June 30, 2019 and $31.6 million, or 0.54% of total assets, at September 30, 2018. For each of these periods, the outstanding foreclosed and repossessed asset balance was primarily related to a previously disclosed agricultural relationship.

Deposits, Borrowings and Other Liabilities
Total average deposits for the 2019 fiscal fourth quarter increased by $466.6 million, or 11%, compared to the same period in fiscal 2018. Average wholesale deposits increased $265.5 million, or 20%, and noninterest-bearing checking deposits increased $219.9 million, or 9%, for the 2019 fiscal fourth quarter when compared to the same period in fiscal 2018. Average deposits from the payments division increased $271.1 million, or 11%, to $2.63 billion for the 2019 fiscal fourth quarter when compared to the same quarter of fiscal 2018.

The average balance of total deposits and interest-bearing liabilities was $5.15 billion for the three-month period ended September 30, 2019, compared to $4.58 billion for the same period in fiscal 2018, representing an increase of 12%.

Total end-of-period deposits decreased 2% to $4.34 billion at September 30, 2019, compared to $4.43 billion at September 30, 2018. The decrease in end-of-period deposits was primarily a result of decreases in certificates of deposits and noninterest-bearing checking deposits. The decrease in noninterest-bearing checking deposits is related to the cyclicality of the Company's business, as a portion of its noninterest-bearing deposit base can fluctuate depending on the day of the week, primarily related to payroll processing timing. As noted above, average noninterest-bearing checking deposits increased 9% for the 2019 fiscal fourth quarter when compared to the same period in fiscal 2018.

Regulatory Capital
The Company and MetaBank remained above the federal regulatory minimum capital requirements at September 30, 2019 and continued to be classified as well-capitalized institutions. Regulatory capital ratios of the Company and the Bank are stated in the table below.

The tables below also 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 September 30,
 2019
June 30,
 2019
March 31,
 2019
December 31,
2018
September 30,
2018
Company          
Tier 1 leverage capital ratio 8.33% 8.05% 7.45% 7.90% 8.50%
Common equity Tier 1 capital ratio 10.35% 10.19% 10.94% 10.10% 10.56%
Tier 1 capital ratio 10.71% 10.55% 11.31% 10.47% 10.97%
Total capital ratio 13.01% 13.22% 14.20% 12.69% 13.18%
MetaBank          
Tier 1 leverage capital ratio 9.65% 9.37% 8.42% 9.01% 9.75%
Common equity Tier 1 capital ratio 12.31% 12.22% 12.72% 11.87% 12.50%
Tier 1 capital ratio 12.37% 12.27% 12.76% 11.91% 12.56%
Total capital ratio 13.02% 13.26% 13.92% 12.41% 12.89%

The following table provides 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,
 2019
June 30,
 2019
March 31,
 2019
December 31,
2018
September 30,
2018
  (Dollars in Thousands)
Total stockholders' equity $ 843,958   $ 822,901   $ 823,709   $ 770,728   $ 747,726  
Adjustments:          
  LESS: Goodwill, net of associated deferred tax liabilities 304,020   302,850   302,768   299,037   299,456  
  LESS: Certain other intangible assets 50,501   53,249   56,456   61,317   64,716  
LESS: Net deferred tax assets from operating loss and tax credit carry-forwards 15,569   13,858   7,381   4,720    
  LESS: Net unrealized gains (losses) on available-for-sale securities 6,458   2,329   (10,022 ) (28,829 ) (33,114 )
  LESS: Non-controlling interest 4,047   3,508   3,528   3,267   3,574  
  LESS: Unrealized currency gains (losses)     (242 ) (357 ) 3  
Common Equity Tier 1 (1) 463,363   447,107   463,840   431,573   413,091  
  Long-term debt 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 2,350   2,119   2,064   1,796   2,118  
Total Tier 1 capital 479,374   462,887   479,565   447,030   428,870  
  Allowance for loan and lease losses 29,272   43,641   48,812   21,422   13,185  
  Subordinated Debentures (net of issuance costs) 73,644   73,605   73,566   73,528   73,491  
Total qualifying capital $ 582,290   $ 580,133   $ 601,963   $ 541,980   $ 515,546  

(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 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.

  September 30,
 2019
June 30,
 2019
March 31,
 2019
December 31,
2018
September 30,
2018
  (Dollars in Thousands)
Total Stockholders' Equity $ 843,958   $ 822,901   $ 823,709   $ 770,728   $ 747,726  
Less: Goodwill 309,505   307,941   307,464   303,270   303,270  
Less: Intangible assets 52,810   56,153   60,506   66,366   70,719  
  Tangible common equity 481,643   458,807   455,739   401,092   373,737  
Less: Accumulated Other Comprehensive Income (Loss) ("AOCI") 6,339   2,308   (10,264 ) (29,186 ) (33,111 )
  Tangible common equity excluding AOCI (Loss) $ 475,304   $ 456,499   $ 466,003   $ 430,278   $ 406,848  

Future Outlook
The Company currently expects full-year fiscal 2020 GAAP earnings per common share to range between $3.30 to $3.50.

Conference Call
The Company will host a conference call and earnings webcast at 4:00 p.m. CDT (5:00 p.m. EDT) on October 24, 2019. 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 6288753 upon request. International callers should dial (636) 812-6634. A webcast replay will also be archived at www.metafinancialgroup.com for one year.

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 Securities and Exchange Commission (“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; customer retention; loan and other product demand; important components of the Company's statements of financial condition and operations; growth and expansion; new products and services; credit quality and adequacy of reserves; 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; the expected growth opportunities, beneficial synergies and/or operating efficiencies from the Crestmark acquisition may not be fully realized or may take longer to realize than expected; customer losses and business disruption related to the Crestmark acquisition; unanticipated or unknown losses and liabilities may be incurred by the Company following the Crestmark acquisition; the costs, risks and effects on the Company of the ongoing federal investigation and bankruptcy proceedings involving DC Solar Solutions, Inc., DC Solar Distribution, Inc., and their affiliates, including the potential financial impact of those matters on the net book value of Company assets leased to DC Solar Distribution and the Company’s ability to recognize certain investment tax credits associated with such assets; factors relating to the Company’s share repurchase program; 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 conducts operations; the effects of, and changes in, trade, monetary, and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System (the “Federal Reserve”), as well as efforts of the United States Congress and the United States Treasury in conjunction with bank regulatory agencies to stimulate the economy and protect the financial system; 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 acceptance of usage of Meta’s strategic partners’ refund advance products; any actions which may be initiated by our regulators in the future; 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; our relationship with our primary regulators, the Office of the Comptroller of the Currency and the Federal Reserve, as well as the Federal Deposit Insurance Corporation, which insures MetaBank’s deposit accounts up to applicable limits; technological changes, including, but not limited to, the protection of electronic files or databases; acquisitions; litigation risk, in general, including, but not limited to, those risks involving MetaBank's divisions; 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, particularly in light of our growing deposit base, a portion of which has been characterized as “brokered”; changes in consumer spending and saving habits; 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, 2018, 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.

Condensed Consolidated Statements of Operations (Unaudited)
(Dollars in Thousands, Except Share and per Share Data)

ASSETS September 30, 2019 June 30, 2019 March 31, 2019 December 31, 2018 September 30, 2018
Cash and cash equivalents $ 126,545   $ 100,732   $ 156,461   $ 164,169   $ 99,977  
Investment securities available for sale, at fair value 889,947   961,897   1,081,663   1,340,870   1,484,160  
Mortgage-backed securities available for sale, at fair value 382,546   395,201   413,493   354,186   364,065  
Investment securities held to maturity, at cost 127,582   138,128   146,992   153,075   163,893  
Mortgage-backed securities held to maturity, at cost 7,182   7,414   7,606   7,661   7,850  
Loans held for sale 148,777   62,839   59,745   33,560   15,606  
Loans and leases 3,658,847   3,631,031   3,437,980   3,329,498   2,944,739  
Allowance for loan and lease losses (29,149 ) (43,505 ) (48,672 ) (21,290 ) (13,040 )
Federal Home Loan Bank Stock, at cost 30,916   17,236   7,436   15,600   23,400  
Accrued interest receivable 20,400   19,722   20,281   22,076   22,016  
Premises, furniture, and equipment, net 45,932   46,360   45,457   44,299   40,458  
Rental equipment, net 208,537   184,732   140,087   146,815   107,290  
Bank-owned life insurance 89,827   89,193   88,565   87,934   87,293  
Foreclosed real estate and repossessed assets 29,494   29,514   29,548   31,548   31,638  
Goodwill 309,505   307,941   307,464   303,270   303,270  
Intangible assets 52,810   56,153   60,506   66,366   70,719  
Prepaid assets 9,476   22,023   26,597   31,483   27,906  
Deferred taxes 18,884   21,630   19,079   23,607   18,737  
Other assets 54,832   52,831   49,754   48,038   35,090  
  Total assets $ 6,182,890   $ 6,101,072   $ 6,050,042   $ 6,182,765   5,835,067  
           
LIABILITIES AND STOCKHOLDERS’ EQUITY          
           
LIABILITIES          
Noninterest-bearing checking $ 2,358,010   $ 2,751,931   $ 3,034,428   $ 2,739,757   2,405,274  
Interest-bearing checking 185,768   157,802   183,492   128,662   111,587  
Savings deposits 49,773   52,179   59,978   52,229   54,765  
Money market deposits 76,911   68,604   56,563   54,559   51,995  
Time certificates of deposit 109,275   116,698   154,401   170,629   276,180  
Wholesale deposits 1,557,268   1,628,000   1,481,445   1,790,611   1,531,186  
  Total deposits 4,337,005   4,775,214   4,970,307   4,936,447   4,430,987  
Short-term borrowings 646,019   146,613   11,583   231,293   425,759  
Long-term borrowings 215,838   209,765   99,800   88,983   88,963  
Accrued interest payable 9,414   12,350   9,239   11,280   7,794  
Accrued expenses and other liabilities 130,656   134,229   135,404   144,034   133,838  
  Total liabilities 5,338,932   5,278,171   5,226,333   5,412,037   5,087,341  
           
STOCKHOLDERS’ EQUITY          
Preferred stock          
Common stock, $.01 par value 378   379   395   394   393  
Common stock, Nonvoting, $.01 par value          
Additional paid-in capital 580,826   578,715   576,406   572,156   565,811  
Retained earnings 252,813   238,004   258,600   228,453   213,048  
Accumulated other comprehensive income (loss) 6,339   2,308   (10,264 ) (29,186 ) (33,111 )
Treasury stock, at cost (445 ) (13 ) (4,956 ) (4,356 ) (1,989 )
Total equity attributable to parent 839,911   819,393   820,181   767,461   744,152  
Non-controlling interest 4,047   3,508   3,528   3,267   3,574  
Total stockholders' equity 843,958   822,901   823,709   770,728   747,726  
  Total liabilities and stockholders’ equity $ 6,182,890   $ 6,101,072   $ 6,050,042   $ 6,182,765   $ 5,835,067  


Condensed Consolidated Statements of Operations (Unaudited)

  Three Months Ended   Year Ended
(Dollars in Thousands, Except Share and Per Share Data) September 30, 2019 June 30, 2019 September 30, 2018   September 30, 2019 September 30, 2018
Interest and dividend income:            
Loans and leases, including fees $ 70,628   $ 69,732   $ 45,131     $ 274,528   $ 98,475  
Mortgage-backed securities 2,768   3,063   3,724     11,390   15,479  
Other investments 7,432   8,837   11,346     39,811   44,580  
  80,828   81,632   60,201     325,729   158,534  
Interest expense:            
Deposits 10,917   10,395   8,057     46,648   15,163  
FHLB advances and other borrowings 4,294   4,269   3,607     14,874   12,822  
  15,211   14,664   11,664     61,522   27,985  
             
Net interest income 65,617   66,968   48,537     264,207   130,549  
             
Provision for loan and lease losses 4,121   9,112   4,706     55,650   29,432  
             
Net interest income after provision for loan and lease losses 61,496   57,856   43,831     208,557   101,117  
             
Noninterest income:            
Refund transfer product fees 639   6,697   526     39,198   41,879  
Tax advance product fees (70 ) 34   (36 )   34,687   35,703  
Card fees 18,043   19,537   19,536     79,982   94,446  
Rental income 10,886   9,386   7,333     41,053   7,333  
Loan and lease fees 1,107   1,012   1,025     4,292   4,470  
Bank-owned life insurance 634   628   638     2,535   2,590  
Deposit fees 2,725   2,335   1,487     9,090   4,451  
Gain (loss) on sale of securities available-for-sale, net 80   440   (6,979 )   729   (8,177 )
Gain on sale of loans and leases 1,380   1,913   355     5,244   355  
Loss on foreclosed real estate (93 )       (278 ) (19 )
Other income 649   1,808   728     6,013   1,494  
Total noninterest income 35,980   43,790   24,613     222,545   184,525  
             
Noninterest expense:            
Compensation and benefits 38,461   35,176   30,093     155,811   109,044  
Refund transfer product expense 48   287   85     7,526   11,750  
Tax advance product expense 1   425   81     3,102   1,817  
Card processing 5,008   4,613   5,485     23,677   26,283  
Occupancy and equipment 7,265   7,136   5,653     28,071   19,740  
Operating lease equipment depreciation 7,901   6,029   5,386     26,181   5,386  
Legal and consulting 4,968   4,065   6,628     17,310   15,064  
Marketing 1,195   368   1,037     2,688   2,674  
Data processing 453   260   268     1,471   1,226  
Intangible amortization 3,358   4,374   3,564     17,711   9,641  
Impairment expense     18     9,660   18  
Other expense 7,485   9,735   8,342     39,952   25,589  
Total noninterest expense 76,143   72,468   66,640     333,160   228,232  
             
Income before income tax expense 21,333   29,178   1,804     97,942   57,410  
             
Income tax (benefit) expense (130 ) (1,158 ) (7,591 )   (3,374 ) 5,117  
             
Net income before noncontrolling interest 21,463   30,336   9,395     101,316   52,293  
Net income attributable to noncontrolling interest 1,268   1,045   673     4,312   673  
Net income attributable to parent $ 20,195   $ 29,291   $ 8,722     $ 97,004   $ 51,620  
             
Earnings per common share(1)            
Basic $ 0.53   $ 0.75   $ 0.24     $ 2.49   $ 1.68  
Diluted $ 0.53   $ 0.75   $ 0.24     $ 2.49   $ 1.67  
Shares used in computing earnings per share(1)            
Basic 37,868,788   38,903,266   35,711,400     38,880,919   30,737,499  
Diluted 37,912,616   38,977,690   35,823,162     38,921,637   30,853,050  


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 rates. Only the yield/rate reflects tax-equivalent adjustments. Non-accruing loans and leases have been included in the table as loans carrying a zero yield.

Three Months Ended September 30, 2019   2018
(Dollars in Thousands) Average
Outstanding
Balance
  Interest
Earned /
Paid
  Yield /
Rate(1)
  Average
Outstanding
Balance
  Interest
Earned /
Paid
  Yield /
Rate(2)
Interest-earning assets:                      
Cash and fed funds sold $ 68,435     $ 505     2.93 %   $ 60,946     $ 532     3.47 %
Mortgage-backed securities 396,075     2,768     2.77 %   543,042     3,724     2.72 %
Tax exempt investment securities 555,285     2,743     2.48 %   1,314,380     8,069     3.23 %
Asset-backed securities 307,080     2,615     3.38 %   273,625     2,251     3.26 %
Other investment securities 204,695     1,569     3.04 %   70,380     494     2.79 %
Total investments 1,463,135     9,695     2.83 %   2,201,427     14,538     3.09 %
Commercial finance loans and leases 1,882,699     44,375     9.35 %   1,091,459     27,035     9.83 %
Consumer finance loans 381,165     8,268     8.61 %   245,405     5,043     8.15 %
Tax services loans 21,445     (13 )   (0.25 )%   13,210     (14 )   (0.41 )%
Warehouse finance loans 249,022     3,913     6.24 %   57,228     879     6.09 %
National lending loans and leases 2,534,331     56,543     8.85 %   1,407,302     32,943     9.29 %
Community banking loans 1,195,214     14,085     4.68 %   1,075,586     12,188     4.50 %
Total loans and leases 3,729,545     70,628     7.51 %   2,482,888     45,131     7.21 %
Total interest-earning assets 5,261,115     $ 80,828     6.15 %   4,745,261     $ 60,201     5.25 %
Non-interest-earning assets 869,171             635,317          
Total assets $ 6,130,286             $ 5,380,578          
                       
Interest-bearing liabilities:                      
Interest-bearing checking 155,099     136     0.35 %   90,627     56     0.24 %
Savings 49,846     9     0.07 %   55,163     10     0.07 %
Money markets 71,793     157     0.86 %   49,822     41     0.33 %
Time deposits 115,036     601     2.07 %   214,946     926     1.71 %
Wholesale deposits 1,593,616     10,014     2.49 %   1,328,128     7,024     2.10 %
Total interest-bearing deposits 1,985,390     10,917     2.18 %   1,738,686     8,057     1.84 %
Overnight fed funds purchased 336,457     1,999     2.36 %   362,076     2,051     2.25 %
FHLB advances 115,707     713     2.44 %           %
Subordinated debentures 73,618     1,162     6.26 %   73,466     1,158     6.25 %
Other borrowings 45,302     420     3.68 %   31,593     398     5.00 %
Total borrowings 571,084     4,294     2.98 %   467,135     3,607     3.06 %
Total interest-bearing liabilities 2,556,474     15,211     2.36 %   2,205,821     11,664     2.10 %
Non-interest-bearing deposits 2,595,386         %   2,375,499         %
Total deposits and interest-bearing liabilities 5,151,860     $ 15,211     1.17 %   4,581,320     $ 11,664     1.01 %
Other non-interest-bearing liabilities 144,703             146,148          
Total liabilities 5,296,563             4,727,468          
Shareholders' equity 833,723             653,110          
Total liabilities and shareholders' equity $ 6,130,286             $ 5,380,578          
Net interest income and net interest rate spread including non-interest-bearing deposits     $ 65,617     4.98 %       $ 48,537     4.24 %
                       
Net interest margin         4.95 %           4.05 %
Tax equivalent effect         0.05 %           0.22 %
Net interest margin, tax-equivalent(3)         5.00 %           4.27 %

(1) Tax rate used to arrive at the TEY for the three months ended September 30, 2019 was 21%.
(2) Tax rate used to arrive at the TEY for the three months ended September 30, 2018 was 24.53%.
(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.


Selected Financial Information
As of and for the three months ended: September 30,
 2019
  June 30,
2019
  March 31,
2019
  December 31,
2018
  September 30,
2018
Equity to total assets 13.65 %   13.49 %   13.61 %   12.47 %   12.81 %
Book value per common share outstanding $ 22.32     $ 21.72     $ 20.88     $ 19.56     $ 19.09  
Tangible book value per common share outstanding $ 12.74     $ 12.11     $ 11.55     $ 10.18     $ 9.54  
Tangible book value per common share outstanding excluding AOCI $ 12.57     $ 12.05     $ 11.81     $ 10.92     $ 10.39  
Common shares outstanding 37,807,064     37,878,205     39,450,938     39,405,508     39,167,280  
Non-performing assets to total assets 0.91 %   0.84 %   0.68 %   0.73 %   0.72 %
Non-performing loans and leases to total loans and leases 0.70 %   0.57 %   0.28 %   0.42 %   0.35 %
Net interest margin 4.95 %   5.07 %   5.06 %   4.60 %   4.05 %
Net interest margin, tax-equivalent 5.00 %   5.15 %   5.18 %   4.76 %   4.27 %
Return on average assets 1.32 %   1.91 %   1.89 %   1.03 %   0.65 %
Return on average equity 9.69 %   14.17 %   16.18 %   8.19 %   5.34 %
Full-time equivalent employees 1,186     1,218     1,231     1,229     1,219  


Quarterly Amortization of Intangibles Expense
(Dollars in Thousands) Actual Anticipated
For the Three Months Ended Sep 30,
 2019
Dec 31,
 2019
Mar 31,
 2020
Jun 30,
 2020
Sep 30,
 2020
Dec 31,
 2020
Mar 31,
 2021
Jun 30,
 2021
Sep 30,
 2021
                   
Amortization of Intangibles(1) $ 3,358   $ 2,675   $ 3,400   $ 2,632   $ 2,277   $ 2,008   $ 2,752   $ 2,008   $ 1,756  

(1) These amounts are based upon the current reporting period’s intangible assets only. This table makes no assumption for expenses related to future acquired intangible assets.

About Meta Financial Group®
Meta Financial Group, Inc. ® (Nasdaq: CASH) is the holding company for the financial services company MetaBank® (“Meta”). Founded in 1954, Meta has grown to operate in several different financial sectors: payments, commercial finance, tax services, community banking and consumer lending. Meta works with high-value niche industries, strategic-growth companies and technology adopters to grow their businesses and build more profitable customer relationships. Meta tailors solutions for bank and non-bank businesses, and provides a focused collaborative approach. The organization is helping to shape the evolving financial services landscape by directly investing in innovation and complementary businesses that strategically expand its suite of services. Meta has a national presence and over 1,200 employees, with corporate headquarters in Sioux Falls, S.D. For more information, visit the Meta Financial Groupwebsite or LinkedIn.

Investor Relations and Media Contact:
Brittany Kelley Elsasser
Director of Investor Relations
605.362.2423
bkelley@metabank.com

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Source: MetaBank