Meta Financial Group, Inc.® Announces Results for 2020 Fiscal Third Quarter
Meta Financial Group (Nasdaq: CASH) reported a net income of $18.2 million ($0.53 per diluted share) for Q3 2020, down from $29.3 million ($0.75 per diluted share) in Q3 2019. Total revenue decreased to $103.2 million, with net interest income declining to $62.1 million due to lower yields and participation in the Economic Impact Payment (EIP) program. Average deposits from payments divisions surged by nearly 131% to $6.32 billion, primarily driven by EIP programs. The company increased its allowance for loan losses amid ongoing economic uncertainty.
- Average deposits from payment divisions rose 131% to $6.32 billion year-over-year.
- Extended agreement with Blackhawk Network through 2040 to enhance product offerings.
- Capital leverage ratio remained strong at 6.89% despite challenges.
- Net income decreased 38% compared to Q3 2019.
- Total gross loans decreased by 4%, down $129.3 million year-over-year.
- Net interest margin fell from 5.07% to 3.28% due to excess cash from EIP program.
- 2020 Fiscal Third Quarter Net Income of
SIOUX FALLS, S.D., July 22, 2020 (GLOBE NEWSWIRE) -- Meta Financial Group, Inc.® (Nasdaq: CASH) (“Meta” or the “Company”) reported net income of
“I am proud of our performance to date during these unique and volatile times, both operationally and financially. While credit metrics remain sound, we have taken additional provision related to the uncertainty of the COVID-19 pandemic allowing us to build our allowance and strengthen our capital position,” said President and CEO Brad Hanson. “We are keeping the health and safety of our employees at the forefront as we continue serving customers, aligning for growth, and keeping our eyes on the long game, bringing sustainable value to shareholders.”
Business Developments
- On May 15, 2020, MetaBank, National Association (the “Bank”), a wholly owned subsidiary of the Company entered into a letter of intent ("LOI") with Emerald Financial Services, LLC (“EFS”), a wholly owned indirect subsidiary of H&R Block, Inc. (“H&R Block”). Under the LOI and subject to the negotiation and execution of a multi-year program management agreement (“PMA”), Meta will offer selected financial products to H&R Block clients, and negotiate the transition of certain financial products under an existing program manager agreement between H&R Block and a third party.
- On June 23, 2020, Brett Pharr was promoted to Co-President and Chief Operating Officer of MetaBank to better align business lines with Meta’s strategic initiatives. Brad Hanson remains Co-President and Chief Executive Officer of MetaBank and President and Chief Executive Officer of the Company.
- During the fiscal 2020 third quarter, the Company extended its agreement with Blackhawk Network, Inc. ("BlackHawk") through 2040. Blackhawk is a leading prepaid and payments company, which supports the program management and distribution of gift cards, prepaid telecom products and financial service products in a number of different retail, digital and incentive channels.
- The Company supported various COVID-19 relief efforts to include the Economic Impact Payment ("EIP") program and the Paycheck Protection Program ("PPP"), which are further described below.
Financial Highlights for the 2020 Fiscal Third Quarter Ended June 30, 2020
- Total gross loans and leases at June 30, 2020 decreased
$129.3 million , or4% , to$3.50 billion , compared to June 30, 2019 and decreased$114.1 million , or3% when compared to March 31, 2020. - Average deposits from the payments divisions for the fiscal 2020 third quarter increased nearly
131% to$6.32 billion when compared to the same quarter in fiscal 2019. A significant portion of the year-over-year increase reflected the Company's participation in the EIP program, as described further below. Excluding the balances on the EIP cards, average payments deposits for the fiscal 2020 third quarter were approximately$3.99 billion , representing an increase of46% compared to the same quarter in fiscal 2019. - Total revenue for the fiscal 2020 third quarter was
$103.2 million , compared to$110.8 million for the same quarter in fiscal 2019. - Net interest income for the fiscal 2020 third quarter was
$62.1 million , compared to$67.0 million in the comparable quarter in fiscal 2019.
- Net interest margin ("NIM") decreased to
3.28% for the fiscal 2020 third quarter from5.07% over the same period of the prior fiscal year, while the tax-equivalent net interest margin ("NIM, TE") decreased to3.31% from5.15% for that same period in fiscal 2019. The decrease in NIM during the fiscal 2020 third quarter was primarily driven by excess cash associated with the Company's participation in the Economic Impact Payment program, as described further below.
COVID-19 Business Update
The Company continues to focus on the well-being of its employees, partners and customers. Preventative health measures remain in place to protect employees and customers including mandating remote work options and social distancing measures where possible, restricting non-essential business travel and enhancing preventative cleaning services at all office locations. The Company's COVID-19 Crisis Command Center consisting of leadership and business continuity planning resources throughout the organization continues to effectively monitor possible interruptions related to the pandemic and to ensure business continuity.
The Company is participating in the PPP which is being administered by the Small Business Administration ("SBA"). As of June 30, 2020, the Company had 686 loans outstanding with a total of
From a credit perspective, the Company continues to monitor each of its lending portfolios through these unprecedented times. Significant focus has been placed on the Company's hospitality loans and its small ticket equipment finance relationships. The credit management team has increased the monitoring of these relationships and has been in regular contact with these borrowers.
The Company's community bank hospitality loan balances increased to
As of June 30, 2020, the Company had
The Company has granted deferral payments on a total of
The Company increased its allowance for loan and lease losses during the fiscal third quarter primarily as a result of the ongoing economic uncertainty related to COVID-19 pandemic. The Company will continue to diligently monitor the allowance for loan and lease losses and adjust as necessary in future periods to maintain an appropriate and supportable level.
The Company's capital position remained strong as of June 30, 2020, even while absorbing the temporary impact from the EIP program, as described further below. As of June 30, 2020, the Bank's capital leverage ratio based on average assets was
Economic Impact Payment Program ("EIP") Update
On April 29, 2020, the Bank entered into an amendment of its existing agreement with the U.S. Department of the Treasury’s Bureau of the Fiscal Service (“Fiscal Service”) to provide debit card services to support the distribution of a segment of the Economic Impact Payments payable by the Internal Revenue Service under the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act").
Under the EIP program, 3.6 million cards were delivered with total loads of
The total balances remaining on the EIP cards as of June 30, 2020 were
Net Interest Income
Net interest income for the fiscal 2020 third quarter was
During the third quarter of fiscal year 2020, loan and lease interest income decreased
NIM decreased to
The overall reported tax-equivalent yield (“TEY”) on average earning asset yields decreased by 267 basis points to
The Company's cost of funds for all deposits and borrowings averaged
Noninterest Income
Fiscal 2020 third quarter noninterest income was
Noninterest Expense
Noninterest expense decreased
Income Tax Expense
The Company recorded an income tax benefit of
The Company originated
Investments, Loans and Leases
| June 30, 2020 | March 31, 2020 | December 31, 2019 | September 30, 2019 | June 30, 2019 | |||||||||||||||
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| Loans held for sale | |||||||||||||||||||
| Consumer credit products | 391 | — | — | 122,299 | 45,582 | ||||||||||||||
| SBA/USDA | 31,438 | 13,610 | 13,883 | 26,478 | 17,257 | ||||||||||||||
| Community Bank(1) | 48,076 | — | 250,383 | — | — | ||||||||||||||
| Total loans held for sale | 79,905 | 13,610 | 264,266 | 148,777 | 62,839 | ||||||||||||||
| National Lending | |||||||||||||||||||
| Term lending(2) | 738,454 | 725,581 | 695,347 | 641,742 | 562,557 | ||||||||||||||
| Asset based lending(2) | 181,130 | 250,211 | 250,633 | 250,465 | 229,573 | ||||||||||||||
| Factoring | 206,361 | 285,495 | 285,776 | 296,507 | 320,344 | ||||||||||||||
| Lease financing(2) | 264,988 | 238,788 | 223,715 | 177,915 | 165,136 | ||||||||||||||
| Insurance premium finance | 359,147 | 332,800 | 349,299 | 361,105 | 358,772 | ||||||||||||||
| SBA/USDA | 308,611 | 92,000 | 90,269 | 88,831 | 99,791 | ||||||||||||||
| Other commercial finance | 100,214 | 101,472 | 99,617 | 99,665 | 99,677 | ||||||||||||||
| Commercial Finance | 2,158,905 | 2,026,347 | 1,994,656 | 1,916,230 | 1,835,850 | ||||||||||||||
| Consumer credit products | 102,808 | 113,544 | 115,843 | 106,794 | 155,539 | ||||||||||||||
| Other consumer finance | 138,777 | 144,895 | 154,772 | 161,404 | 164,727 | ||||||||||||||
| Consumer Finance | 241,585 | 258,439 | 270,615 | 268,198 | 320,266 | ||||||||||||||
| Tax Services | 19,168 | 95,936 | 101,739 | 2,240 | 24,410 | ||||||||||||||
| Warehouse Finance | 277,614 | 333,829 | 272,522 | 262,924 | 250,003 | ||||||||||||||
| Total National Lending loans and leases | 2,697,272 | 2,714,551 | 2,639,532 | 2,449,592 | 2,430,529 | ||||||||||||||
| Community Banking | |||||||||||||||||||
| Commercial real estate and operating | 608,303 | 654,429 | 682,399 | 883,932 | 877,412 | ||||||||||||||
| Consumer one-to-four family real estate and other | 166,479 | 205,046 | 220,588 | 259,425 | 256,853 | ||||||||||||||
| Agricultural real estate and operating | 24,655 | 36,759 | 40,778 | 58,464 | 61,169 | ||||||||||||||
| Total Community Banking loans | 799,437 | 896,234 | 943,765 | 1,201,821 | 1,195,434 | ||||||||||||||
| Total gross loans and leases | 3,496,709 | 3,610,785 | 3,583,297 | 3,651,413 | 3,625,963 | ||||||||||||||
| Allowance for loan and lease losses | (65,747 | ) | (65,355 | ) | (30,176 | ) | (29,149 | ) | (43,505 | ) | |||||||||
| Net deferred loan and lease origination fees | 5,937 | 8,139 | 7,177 | 7,434 | 5,068 | ||||||||||||||
| Total loans and leases, net of allowance(3) | $ | 3,436,899 | $ | 3,553,569 | $ | 3,560,298 | $ | 3,629,698 | $ | 3,587,526 |
(1) The June 30, 2020 balance included approximately
(2) The Company updated the presentation of its loan and lease table beginning in the fiscal 2020 first quarter. The new presentation includes a new category called term lending. Certain balances previously included in the asset based lending and lease financing categories were reclassified into the new term lending category during the fiscal 2020 first quarter. Prior period balances have been conformed to the new presentation.
(3) As of June 30, 2020, the remaining balance of acquired loans and leases from the acquisition of Crestmark Bancorp, Inc. ("Crestmark") and its bank subsidiary, Crestmark Bank (the "Crestmark Acquisition") was
The Company's investment security balances continued to decline at June 30, 2020 to a total of
Total gross loans and leases decreased
At June 30, 2020, commercial finance loans, which comprised
Community bank loans totaled
Asset Quality
The Company’s allowance for loan and lease losses was
The following table presents the Company's allowance for loan and lease losses as a percentage of its total loans and leases.
| As of the Period Ended | |||||||
| (Unaudited) | June 30, 2020 | March 31, 2020 | June 30, 2019 | ||||
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| Consumer finance | 1.75 | % | 1.74 | % | 2.22 | % | |
| Tax services | 59.67 | % | 22.22 | % | 63.19 | % | |
| Warehouse finance | 0.10 | % | 0.10 | % | 0.10 | % | |
| National Lending | 1.68 | % | 1.92 | % | 1.44 | % | |
| Community Bank | 2.55 | % | 1.49 | % | 0.70 | % | |
| Total loans and leases | 1.88 | % | 1.81 | % | 1.20 | % |
The Company continued to assess each of its loan and lease portfolios during the fiscal third quarter and increased its allowance for loan and lease losses as a percentage of total loans and leases in the community bank and commercial finance portfolios primarily as a result of the on-going COVID-19 pandemic. Tax services coverage rates were driven by typical seasonal activity and have not been materially impacted by COVID-19 as the tax-lending season is now complete. Warehouse finance remained largely unchanged due to the structure of the credit protections in place. The Company expects to continue to diligently monitor the allowance for loan and lease losses and adjust as necessary in future periods to maintain an appropriate and supportable level. When adding the
Activity in the allowance for loan and lease losses for the periods presented were as follows.
| (Unaudited) | Three Months Ended | Nine Months Ended | |||||||||||||||||
| June 30, 2020 | March 31, 2020 | June 30, 2019 | June 30, 2020 | June 30, 2019 | |||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||
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| Provision - tax services loans | (100 | ) | 19,596 | 914 | 20,407 | 24,883 | |||||||||||||
| Provision - all other loans and leases | 15,193 | 17,700 | 8,198 | 35,390 | 26,646 | ||||||||||||||
| Charge-offs - tax services loans | (9,797 | ) | — | (9,627 | ) | (9,797 | ) | (9,670 | ) | ||||||||||
| Charge-offs - all other loans and leases | (5,808 | ) | (3,187 | ) | (5,124 | ) | (12,912 | ) | (14,407 | ) | |||||||||
| Recoveries - tax services loans | 15 | 74 | 36 | 827 | 212 | ||||||||||||||
| Recoveries - all other loans and leases | 889 | 996 | 436 | 2,684 | 2,801 | ||||||||||||||
| Ending balance | $ | 65,747 | $ | 65,355 | $ | 43,505 | $ | 65,747 | $ | 43,505 |
Provision for loan and lease losses was
The Company's past due loans and leases were as follows for the periods presented.
| As of June 30, 2020 | 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 | ||||||||||||||||||||||||||
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| Consumer finance | 650 | 623 | 909 | 2,182 | 239,403 | 241,585 | 909 | — | 909 | ||||||||||||||||||||||||||
| Tax services | — | 19,168 | — | 19,168 | — | 19,168 | — | — | — | ||||||||||||||||||||||||||
| Warehouse finance | — | — | — | — | 277,614 | 277,614 | — | — | — | ||||||||||||||||||||||||||
| Total National Lending | 14,515 | 35,796 | 28,059 | 78,370 | 2,618,902 | 2,697,272 | 9,544 | 22,285 | 31,829 | ||||||||||||||||||||||||||
| Total Community Banking | 4,910 | 625 | 6,885 | 12,420 | 787,017 | 799,437 | 4,995 | 2,470 | 7,465 | ||||||||||||||||||||||||||
| Total loans and leases held for investment | $ | 19,425 | $ | 36,421 | $ | 34,944 | $ | 90,790 | $ | 3,405,919 | $ | 3,496,709 | $ | 14,539 | $ | 24,755 | $ | 39,294 |
| As of March 31, 2020 | 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 | ||||||||||||||||||||||||||
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| Consumer finance | 1,781 | 1,078 | 1,345 | 4,204 | 254,235 | 258,439 | 1,345 | — | 1,345 | ||||||||||||||||||||||||||
| Tax services | 668 | — | — | 668 | 95,268 | 95,936 | — | — | — | ||||||||||||||||||||||||||
| Warehouse finance | — | — | — | — | 333,829 | 333,829 | — | — | — | ||||||||||||||||||||||||||
| Total National Lending | 38,259 | 8,565 | 20,066 | 66,890 | 2,647,661 | 2,714,551 | 10,717 | 16,024 | 26,741 | ||||||||||||||||||||||||||
| Total Community Banking | 1,012 | 2,735 | 4,723 | 8,470 | 887,764 | 896,234 | 2,905 | 1,818 | 4,723 | ||||||||||||||||||||||||||
| Total loans and leases held for investment | $ | 39,271 | $ | 11,300 | $ | 24,789 | $ | 75,360 | $ | 3,535,425 | $ | 3,610,785 | $ | 13,622 | $ | 17,842 | $ | 31,464 |
The Company's nonperforming assets at June 30, 2020, were
The Company's nonperforming loans and leases at June 30, 2020, were
Deposits, Borrowings and Other Liabilities
Total average deposits for the fiscal 2020 third quarter increased by
The average balance of total deposits and interest-bearing liabilities was
Total end-of-period deposits increased
Regulatory Capital
The Company and MetaBank, remained above the federal regulatory minimum capital requirements at June 30, 2020 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 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, 2020 | March 31, 2020 | December 31, 2019 | September 30, 2019 | June 30, 2019 | |||||||||
| Company | ||||||||||||||
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| Common equity Tier 1 capital ratio | 11.51 | % | 10.27 | % | 10.10 | % | 10.35 | % | 10.19 | % | ||||
| Tier 1 capital ratio | 11.90 | % | 10.63 | % | 10.46 | % | 10.71 | % | 10.55 | % | ||||
| Total capital ratio | 14.99 | % | 13.61 | % | 12.74 | % | 13.01 | % | 13.22 | % | ||||
| MetaBank | ||||||||||||||
| Tier 1 leverage capital ratio | 6.89 | % | 8.52 | % | 9.70 | % | 9.65 | % | 9.37 | % | ||||
| Common equity Tier 1 capital ratio | 13.82 | % | 12.39 | % | 12.18 | % | 12.31 | % | 12.22 | % | ||||
| Tier 1 capital ratio | 13.86 | % | 12.44 | % | 12.24 | % | 12.37 | % | 12.27 | % | ||||
| Total capital ratio | 15.12 | % | 13.69 | % | 12.90 | % | 13.02 | % | 13.26 | % |
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) | June 30, 2020 | March 31, 2020 | December 31, 2019 | September 30, 2019 | June 30, 2019 | ||||||||||||||
| (Dollars in Thousands) | |||||||||||||||||||
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| Adjustments: | |||||||||||||||||||
| LESS: Goodwill, net of associated deferred tax liabilities | 302,814 | 303,625 | 304,020 | 304,020 | 302,850 | ||||||||||||||
| LESS: Certain other intangible assets | 42,865 | 44,909 | 47,855 | 50,501 | 53,249 | ||||||||||||||
| LESS: Net deferred tax assets from operating loss and tax credit carry-forwards | 10,360 | 11,589 | 16,876 | 15,569 | 13,858 | ||||||||||||||
| LESS: Net unrealized gains (losses) on available-for-sale securities | 8,382 | 2,337 | 3,897 | 6,458 | 2,329 | ||||||||||||||
| LESS: Non-controlling interest | 3,787 | 3,762 | 4,305 | 4,047 | 3,508 | ||||||||||||||
| Common Equity Tier 1(1) | 461,701 | 438,852 | 460,115 | 463,363 | 447,107 | ||||||||||||||
| 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 | 1,894 | 2,036 | 2,372 | 2,350 | 2,119 | ||||||||||||||
| Total Tier 1 Capital | 477,256 | 454,549 | 476,148 | 479,374 | 462,887 | ||||||||||||||
| Allowance for loan and lease losses | 50,338 | 53,580 | 30,239 | 29,272 | 43,641 | ||||||||||||||
| Subordinated debentures (net of issuance costs) | 73,765 | 73,724 | 73,684 | 73,644 | 73,605 | ||||||||||||||
| Total qualifying capital | $ | 601,359 | $ | 581,853 | $ | 580,071 | $ | 582,290 | $ | 580,133 |
(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, 2020 | March 31, 2020 | December 31, 2019 | September 30, 2019 | June 30, 2019 | |||||||||||||||
| (Dollars in Thousands) | |||||||||||||||||||
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| Less: Goodwill | 309,505 | 309,505 | 309,505 | 309,505 | 307,941 | ||||||||||||||
| Less: Intangible assets | 43,974 | 46,766 | 50,151 | 52,810 | 56,153 | ||||||||||||||
| Tangible common equity | 476,430 | 448,803 | 477,412 | 481,643 | 458,807 | ||||||||||||||
| Less: Accumulated other comprehensive income (loss) ("AOCI") | 7,995 | 1,654 | 3,895 | 6,339 | 2,308 | ||||||||||||||
| Tangible common equity excluding AOCI | $ | 468,435 | $ | 447,149 | $ | 473,517 | $ | 475,304 | $ | 456,499 |
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 22, 2020. 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 8468707 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, N.A. ("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 the 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 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; expected growth opportunities may not be realized or may take longer to realize than expected; the potential adverse effects of the ongoing COVID-19 pandemic and any governmental or societal responses thereto, or other unusual and infrequently occurring events; actual changes in interest rates and the Fed Funds rate; additional changes in tax laws; the strength of the United States' economy, in general, and the strength of the local economies in which the Company conducts operations; 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”); 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 Company's ability to finalize a definitive program management agreement with H&R Block and the terms thereof; 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 and recent and potential changes in response to the COVID-19 pandemic such as the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") and the rules and regulations that may be promulgated thereunder; 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, particularly in light of our 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, 2019, 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 Financial Condition (Unaudited)
(Dollars in Thousands, Except Share Data)
| ASSETS | June 30, 2020 | March 31, 2020 | December 31, 2019 | September 30, 2019 | June 30, 2019 | ||||||||||||||
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| Investment securities available for sale, at fair value | 825,579 | 840,525 | 852,603 | 889,947 | 961,897 | ||||||||||||||
| Mortgage-backed securities available for sale, at fair value | 338,250 | 355,094 | 362,120 | 382,546 | 395,201 | ||||||||||||||
| Investment securities held to maturity, at cost | 98,205 | 108,105 | 116,313 | 127,582 | 138,128 | ||||||||||||||
| Mortgage-backed securities held to maturity, at cost | 6,382 | 6,752 | 6,804 | 7,182 | 7,414 | ||||||||||||||
| Loans held for sale | 79,905 | 13,610 | 264,266 | 148,777 | 62,839 | ||||||||||||||
| Loans and leases | 3,502,646 | 3,618,924 | 3,590,474 | 3,658,847 | 3,631,031 | ||||||||||||||
| Allowance for loan and lease losses | (65,747 | ) | (65,355 | ) | (30,176 | ) | (29,149 | ) | (43,505 | ) | |||||||||
| Federal Reserve Bank and Federal Home Loan Bank stocks, at cost | 31,836 | 29,944 | 13,796 | 30,916 | 17,236 | ||||||||||||||
| Accrued interest receivable | 17,545 | 16,958 | 18,687 | 20,400 | 19,722 | ||||||||||||||
| Premises, furniture, and equipment, net | 40,361 | 38,871 | 38,671 | 45,932 | 46,360 | ||||||||||||||
| Rental equipment, net | 216,336 | 200,837 | 211,673 | 208,537 | 184,732 | ||||||||||||||
| Bank-owned life insurance | 91,697 | 91,081 | 90,458 | 89,827 | 89,193 | ||||||||||||||
| Foreclosed real estate and repossessed assets | 6,784 | 7,249 | 1,328 | 29,494 | 29,514 | ||||||||||||||
| Goodwill | 309,505 | 309,505 | 309,505 | 309,505 | 307,941 | ||||||||||||||
| Intangible assets | 43,974 | 46,766 | 50,151 | 52,810 | 56,153 | ||||||||||||||
| Prepaid assets | 6,806 | 9,727 | 14,813 | 9,476 | 22,023 | ||||||||||||||
| Deferred taxes | 15,944 | 20,887 | 19,752 | 18,884 | 21,630 | ||||||||||||||
| Other assets | 104,877 | 85,652 | 97,499 | 54,832 | 52,831 | ||||||||||||||
| Total assets | $ | 8,779,026 | $ | 5,843,865 | $ | 6,180,926 | 6,182,890 | $ | 6,101,072 | ||||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||||||||||
| LIABILITIES | |||||||||||||||||||
| Deposits held for sale | $ | — | $ | — | $ | 288,975 | $ | — | $ | — | |||||||||
| Deposits: | |||||||||||||||||||
| Noninterest-bearing checking | 6,537,809 | 2,900,484 | 2,927,967 | 2,358,010 | 2,751,931 | ||||||||||||||
| Interest-bearing checking | 187,003 | 152,504 | 67,642 | 185,768 | 157,802 | ||||||||||||||
| Savings deposits | 55,896 | 37,615 | 17,436 | 49,773 | 52,179 | ||||||||||||||
| Money market deposits | 40,811 | 37,266 | 42,286 | 76,911 | 68,604 | ||||||||||||||
| Time certificates of deposit | 25,000 | 25,492 | 23,454 | 109,275 | 116,698 | ||||||||||||||
| Wholesale deposits | 743,806 | 809,043 | 1,438,820 | 1,557,268 | 1,628,000 | ||||||||||||||
| Total deposits | 7,590,325 | 3,962,404 | 4,517,605 | 4,337,005 | 4,775,214 | ||||||||||||||
| Short-term borrowings | — | 717,000 | 194,000 | 646,019 | 146,613 | ||||||||||||||
| Long-term borrowings | 209,781 | 211,353 | 213,070 | 215,838 | 209,765 | ||||||||||||||
| Accrued interest payable | 4,332 | 3,607 | 6,620 | 9,414 | 12,350 | ||||||||||||||
| Accrued expenses and other liabilities | 144,679 | 144,427 | 123,588 | 130,656 | 134,229 | ||||||||||||||
| Total liabilities | 7,949,117 | 5,038,791 | 5,343,858 | 5,338,932 | 5,278,171 | ||||||||||||||
| STOCKHOLDERS’ EQUITY | |||||||||||||||||||
| Preferred stock | — | — | — | — | — | ||||||||||||||
| Common stock, $.01 par value | 346 | 346 | 372 | 378 | 379 | ||||||||||||||
| Common stock, Nonvoting, $.01 par value | — | — | — | — | — | ||||||||||||||
| Additional paid-in capital | 592,693 | 590,682 | 587,678 | 580,826 | 578,715 | ||||||||||||||
| Retained earnings | 228,500 | 212,027 | 244,005 | 252,813 | 238,004 | ||||||||||||||
| Accumulated other comprehensive income | 7,995 | 1,654 | 3,895 | 6,339 | 2,308 | ||||||||||||||
| Treasury stock, at cost | (3,412 | ) | (3,397 | ) | (3,187 | ) | (445 | ) | (13 | ) | |||||||||
| Total equity attributable to parent | 826,122 | 801,312 | 832,763 | 839,911 | 819,393 | ||||||||||||||
| Noncontrolling interest | 3,787 | 3,762 | 4,305 | 4,047 | 3,508 | ||||||||||||||
| Total stockholders’ equity | 829,909 | 805,074 | 837,068 | 843,958 | 822,901 | ||||||||||||||
| Total liabilities and stockholders’ equity | $ | 8,779,026 | $ | 5,843,865 | $ | 6,180,926 | $ | 6,182,890 | $ | 6,101,072 |
Consolidated Statements of Operations (Unaudited)
(Dollars in Thousands, Except Share and Per Share Data)
| Three Months Ended | Nine Months Ended | ||||||||||||||||||
| June 30, 2020 | March 31, 2020 | June 30, 2019 | June 30, 2020 | June 30, 2019 | |||||||||||||||
| Interest and dividend income: | |||||||||||||||||||
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| Mortgage-backed securities | 2,269 | 2,493 | 3,063 | 7,151 | 8,622 | ||||||||||||||
| Other investments | 5,226 | 6,417 | 8,837 | 18,176 | 32,380 | ||||||||||||||
| 67,406 | 79,403 | 81,632 | 224,434 | 244,902 | |||||||||||||||
| Interest expense: | |||||||||||||||||||
| Deposits | 3,130 | 8,242 | 10,395 | 20,712 | 35,731 | ||||||||||||||
| FHLB advances and other borrowings | 2,139 | 3,424 | 4,269 | 9,197 | 10,581 | ||||||||||||||
| 5,269 | 11,666 | 14,664 | 29,909 | 46,312 | |||||||||||||||
| Net interest income | 62,137 | 67,737 | 66,968 | 194,525 | 198,590 | ||||||||||||||
| Provision for loan for lease losses | 15,093 | 37,296 | 9,112 | 55,796 | 51,529 | ||||||||||||||
| Net interest income after provision for loan and lease losses | 47,044 | 30,441 | 57,856 | 138,729 | 147,061 | ||||||||||||||
| Noninterest income: | |||||||||||||||||||
| Refund transfer product fees | 4,595 | 28,939 | 6,697 | 33,726 | 38,559 | ||||||||||||||
| Tax advance product fees | 28 | 29,536 | 34 | 31,840 | 34,757 | ||||||||||||||
| Payments card and deposit fees | 21,302 | 23,156 | 21,377 | 65,957 | 66,855 | ||||||||||||||
| Other bank and deposit fees | 214 | 381 | 495 | 1,083 | 1,449 | ||||||||||||||
| Rental income | 11,231 | 11,100 | 9,386 | 34,682 | 30,167 | ||||||||||||||
| Gain on sale of securities available-for-sale, net | — | — | 440 | — | 649 | ||||||||||||||
| Gain on divestitures | — | 19,275 | — | 19,275 | — | ||||||||||||||
| Gain (loss) on sale of other | 1,214 | 2,325 | 2,620 | 969 | 6,117 | ||||||||||||||
| Other income | 2,464 | 5,801 | 2,741 | 11,512 | 8,012 | ||||||||||||||
| Total noninterest income | 41,048 | 120,513 | 43,790 | 199,044 | 186,565 | ||||||||||||||
| Noninterest expense: | |||||||||||||||||||
| Compensation and benefits | 32,102 | 34,260 | 35,176 | 100,631 | 117,350 | ||||||||||||||
| Refund transfer product expense | (139 | ) | 7,449 | 287 | 7,482 | 7,478 | |||||||||||||
| Tax advance product expense | (11 | ) | 1,698 | 425 | 2,820 | 3,101 | |||||||||||||
| Card processing | 7,128 | 6,696 | 4,613 | 19,432 | 18,670 | ||||||||||||||
| Occupancy and equipment expense | 6,502 | 7,013 | 7,136 | 20,169 | 20,806 | ||||||||||||||
| Operating lease equipment depreciation | 8,536 | 8,421 | 6,029 | 25,237 | 18,280 | ||||||||||||||
| Legal and consulting | 4,660 | 5,909 | 4,065 | 15,242 | 12,341 | ||||||||||||||
| Intangible amortization | 2,636 | 3,402 | 4,374 | 8,714 | 14,352 | ||||||||||||||
| Impairment expense | — | 507 | — | 750 | 9,660 | ||||||||||||||
| Other expense | 9,827 | 16,374 | 10,363 | 38,291 | 34,978 | ||||||||||||||
| Total noninterest expense | 71,241 | 91,729 | 72,468 | 238,768 | 257,016 | ||||||||||||||
| Income before income tax expense | 16,851 | 59,225 | 29,178 | 99,005 | 76,610 | ||||||||||||||
| Income tax expense (benefit) | (2,426 | ) | 5,617 | (1,158 | ) | 3,870 | (3,244 | ) | |||||||||||
| Net income before noncontrolling interest | 19,277 | 53,608 | 30,336 | 95,135 | 79,854 | ||||||||||||||
| Net income attributable to noncontrolling interest | 1,087 | 1,304 | 1,045 | 3,573 | 3,045 | ||||||||||||||
| Net income attributable to parent | $ | 18,190 | $ | 52,304 | $ | 29,291 | $ | 91,562 | $ | 76,809 | |||||||||
| Earnings per common share | |||||||||||||||||||
| Basic | $ | 0.53 | $ | 1.45 | $ | 0.75 | $ | 2.54 | $ | 1.96 | |||||||||
| Diluted | $ | 0.53 | $ | 1.45 | $ | 0.75 | $ | 2.54 | $ | 1.95 | |||||||||
| Shares used in computing earnings per share | |||||||||||||||||||
| Basic | 34,616,038 | 35,948,799 | 38,903,266 | 36,004,877 | 39,220,793 | ||||||||||||||
| Diluted | 34,623,114 | 35,970,296 | 38,977,690 | 36,016,037 | 39,289,011 |
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. Non-accruing loans and leases have been included in the table as loans carrying a zero yield.
| Three Months Ended June 30, | 2020 | 2019 | |||||||||||||||||||
| (Dollars in Thousands) | Average Outstanding Balance | Interest Earned / Paid | Yield / Rate(1) | Average Outstanding Balance | Interest Earned / Paid | Yield / Rate(1) | |||||||||||||||
| Interest-earning assets: | |||||||||||||||||||||
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| Mortgage-backed securities | 342,174 | 2,269 | 2.67 | % | 421,725 | 3,063 | 2.91 | % | |||||||||||||
| Tax exempt investment securities | 417,042 | 1,658 | 2.02 | % | 690,732 | 4,058 | 2.98 | % | |||||||||||||
| Asset-backed securities | 336,562 | 1,770 | 2.11 | % | 307,581 | 2,701 | 3.52 | % | |||||||||||||
| Other investment securities | 197,643 | 1,014 | 2.06 | % | 199,681 | 1,557 | 3.13 | % | |||||||||||||
| Total investments | 1,293,420 | 6,711 | 2.22 | % | 1,619,719 | 11,379 | 3.09 | % | |||||||||||||
| Commercial finance loans and leases | 2,160,175 | 40,375 | 7.52 | % | 1,775,905 | 44,332 | 10.01 | % | |||||||||||||
| Consumer finance loans | 247,824 | 4,635 | 7.52 | % | 364,633 | 8,178 | 9.00 | % | |||||||||||||
| Tax services loans | 39,845 | — | — | % | 45,142 | — | — | % | |||||||||||||
| Warehouse finance loans | 304,839 | 4,582 | 6.05 | % | 223,546 | 3,491 | 6.26 | % | |||||||||||||
| National lending loans and leases | 2,752,683 | 49,592 | 7.25 | % | 2,409,226 | 56,001 | 9.32 | % | |||||||||||||
| Community banking loans | 870,245 | 10,319 | 4.77 | % | 1,189,912 | 13,731 | 4.63 | % | |||||||||||||
| Total loans and leases | 3,622,928 | 59,911 | 6.65 | % | 3,599,138 | 69,732 | 7.77 | % | |||||||||||||
| Total interest-earning assets | $ | 7,608,618 | $ | 67,406 | 3.59 | % | $ | 5,298,957 | $ | 81,632 | 6.26 | % | |||||||||
| Non-interest-earning assets | 830,589 | 820,474 | |||||||||||||||||||
| Total assets | $ | 8,439,206 | $ | 6,119,431 | |||||||||||||||||
| Interest-bearing liabilities: | |||||||||||||||||||||
| Interest-bearing checking(2) | $ | 226,382 | $ | — | — | % | $ | 137,950 | $ | 85 | 0.25 | % | |||||||||
| Savings | 55,572 | 1 | 0.01 | % | 54,247 | 9 | 0.07 | % | |||||||||||||
| Money markets | 40,091 | 33 | 0.33 | % | 58,782 | 107 | 0.73 | % | |||||||||||||
| Time deposits | 25,392 | 113 | 1.78 | % | 128,165 | 633 | 1.98 | % | |||||||||||||
| Wholesale deposits | 817,414 | 2,983 | 1.47 | % | 1,521,594 | 9,561 | 2.52 | % | |||||||||||||
| Total interest-bearing deposits | 1,164,852 | 3,130 | 1.08 | % | 1,900,738 | 10,395 | 2.19 | % | |||||||||||||
| Overnight fed funds purchased | 59,055 | 48 | 0.33 | % | 363,857 | 2,368 | 2.61 | % | |||||||||||||
| FHLB advances | 110,000 | 670 | 2.45 | % | 54,341 | 324 | 2.39 | % | |||||||||||||
| Subordinated debentures | 73,738 | 1,153 | 6.29 | % | 73,583 | 1,163 | 6.34 | % | |||||||||||||
| Other borrowings | 27,032 | 268 | 3.98 | % | 40,653 | 414 | 4.08 | % | |||||||||||||
| Total borrowings | 269,825 | 2,139 | 3.19 | % | 532,434 | 4,269 | 3.22 | % | |||||||||||||
| Total interest-bearing liabilities | 1,434,677 | 5,269 | 1.48 | % | 2,443,172 | 14,664 | 2.42 | % | |||||||||||||
| Noninterest-bearing deposits | 6,057,314 | — | — | % | 2,710,288 | — | — | % | |||||||||||||
| Total deposits and interest-bearing liabilities | $ | 7,491,991 | $ | 5,269 | 0.28 | % | $ | 5,143,460 | $ | 14,664 | 1.14 | % | |||||||||
| Other noninterest-bearing liabilities | 122,940 | 149,207 | |||||||||||||||||||
| Total liabilities | 7,614,931 | 5,292,667 | |||||||||||||||||||
| Shareholders' equity | 824,276 | 826,764 | |||||||||||||||||||
| Total liabilities and shareholders' equity | $ | 8,439,206 | $ | 6,119,431 | |||||||||||||||||
| Net interest income and net interest rate spread including noninterest-bearing deposits | $ | 62,137 | 3.30 | % | $ | 66,968 | 5.12 | % | |||||||||||||
| Net interest margin | 3.28 | % | 5.07 | % | |||||||||||||||||
| Tax-equivalent effect | 0.02 | % | 0.08 | % | |||||||||||||||||
| Net interest margin, tax-equivalent(3) | 3.31 | % | 5.15 | % |
(1) Tax rate used to arrive at the TEY for the three months ended June 30, 2020 and 2019 was
(2) Of the total balance,
(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 | June 30, 2020 | March 31, 2020 | December 31, 2019 | September 30, 2019 | June 30, 2019 | ||||||||||||||
| Equity to total assets | 9.45 | % | 13.78 | % | 13.54 | % | 13.65 | % | 13.49 | % | |||||||||
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| Tangible book value per common share outstanding | $ | 13.76 | $ | 12.97 | $ | 12.84 | $ | 12.74 | $ | 12.11 | |||||||||
| Tangible book value per common share outstanding excluding AOCI | $ | 13.53 | $ | 12.92 | $ | 12.74 | $ | 12.57 | $ | 12.05 | |||||||||
| Common shares outstanding | 34,631,160 | 34,607,962 | 37,172,081 | 37,807,064 | 37,878,205 | ||||||||||||||
| Non-performing assets to total assets | 0.64 | % | 0.67 | % | 0.48 | % | 0.91 | % | 0.84 | % | |||||||||
| Non-performing loans and leases to total loans and leases | 1.10 | % | 0.87 | % | 0.62 | % | 0.70 | % | 0.57 | % | |||||||||
| Net interest margin | 3.28 | % | 4.78 | % | 4.94 | % | 4.95 | % | 5.07 | % | |||||||||
| Net interest margin, tax-equivalent | 3.31 | % | 4.82 | % | 4.99 | % | 5.00 | % | 5.15 | % | |||||||||
| Return on average assets | 0.86 | % | 3.16 | % | 1.38 | % | 1.32 | % | 1.91 | % | |||||||||
| Return on average equity | 8.83 | % | 25.15 | % | 10.04 | % | 9.69 | % | 14.17 | % | |||||||||
| Full-time equivalent employees | 999 | 992 | 1,088 | 1,186 | 1,218 |
Quarterly Amortization of Intangibles Expense
| (Dollars in Thousands) | Actual | Anticipated | |||||||||||||||||||||||||
| For the Three Months Ended | Jun 30, 2020 | Sep 30, 2020 | Dec 31, 2020 | Mar 31, 2021 | Jun 30, 2021 | Sep 30, 2021 | Dec 31, 2021 | Mar 31, 2022 | Jun 30, 2022 | ||||||||||||||||||
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(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 a South Dakota-based financial holding company. Meta Financial Group’s banking subsidiary, MetaBank®, N.A., (“Meta”), is a leader in providing innovative financial solutions to consumers and businesses in under-served niche markets and believes in financial inclusion for all. Meta’s commercial lending division works with high-value niche industries, rapid-growth companies and technology adopters to grow their businesses and build more profitable customer relationships nationwide. Meta is one of the largest issuers of prepaid cards in the U.S., having issued more than a billion cards in partnership with banks, program managers, payments providers and other businesses, and offers a total payments services solution that includes ACH origination, wire transfers, and more. For more information, visit the Meta Financial Group website.
| Investor Relations Contact: | |
| Brittany Kelley Elsasser | |
| Director of Investor Relations | |
| 605-362-2423 | |
| bkelley@metabank.com | |
| Media Relations: | |
| mediarelations@metabank.com |
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