Meta Financial Group, Inc.® Announces Results for 2022 Fiscal Second Quarter

Rhea-AI Summary

Meta Financial Group (Nasdaq: CASH) reported a net income of $49.3 million ($1.66 per diluted share) for Q2 2022, down from $59.1 million ($1.84 per share) in Q2 2021. Adjusted net income was $51.4 million ($1.73 per share) after $2.8 million in rebranding expenses. Total revenue increased 3% to $193.6 million. Notably, net interest income rose 13% to $83.8 million, and net interest margin increased to 4.80%. The company originated $1.83 billion in refund advance loans, a slight increase from last year.

Positive

• Net interest income increased 13% to $83.8 million.
• Net interest margin improved to 4.80% from 3.07% year-on-year.
• Total revenue grew 3% to $193.6 million.
• Adjusted net income was $51.4 million ($1.73 per share) after rebranding expenses.

Negative

• Net income decreased to $49.3 million from $59.1 million year-on-year.
• Noninterest income fell to $109.8 million, down from $113.5 million in the previous year.
• Significant increase in noninterest expenses, which rose 7% to $103.2 million.

Fiscal 2022 Second Quarter Net Income of $49.3 million, or $1.66 Per Diluted Share

Announces Name Change to Pathward Financial

SIOUX FALLS, S.D.--(BUSINESS WIRE)-- Meta Financial Group, Inc.^® (Nasdaq: CASH) (“Meta” or the “Company”) reported net income of $49.3 million, or $1.66 per share, for the three months ended March 31, 2022, compared to net income of $59.1 million, or $1.84 per share, for the three months ended March 31, 2021. During the quarter the Company recognized $2.8 million of pre-tax expenses related to rebranding efforts. Excluding the impact of the rebranding expenses, net of tax, the Company's adjusted net income for the quarter totaled $51.4 million, or $1.73 per share. See non-GAAP reconciliation table below.

CEO Brett Pharr said, "Although our tax services and renewable energy investment tax credit products produced results below our expectations, the balance of our businesses performed well. Our commercial finance portfolio saw continued healthy loan growth from satisfying small and medium sized businesses’ robust demand for credit, and our Banking as a Service pipeline of opportunities remains strong.”

“Last month, we announced our new corporate name, Pathward Financial. Pathward signifies our Company’s purpose to power financial inclusion for all by creating a path forward for individuals and businesses to meet their financial goals. The name reflects our dedication to removing the barriers that prevent millions of Americans from accessing the financial system and will serve as a constant reminder of our mission to meet the needs of the unbanked, underbanked, and underserved to help them achieve economic mobility,” Pharr added.

Tax Season

For the 2022 tax season, MetaBank originated $1.83 billion in refund advance loans compared to $1.79 billion during the 2021 tax season. The Company expects taxpayer advance volumes to return to more normalized levels in the 2023 tax season, absent further stimulus or additional changes to tax credit payments.

During the second quarter of fiscal 2022, total tax services product revenue was $68.3 million, an increase of 2% compared to the second quarter of fiscal 2021. Both total tax services product fee income and total tax services product expense were approximately flat compared to the prior year period. Net interest income on tax services loans increased $1.5 million during the second quarter of fiscal 2022 compared to the second quarter last year.

Total tax services product income, net of losses and direct product expenses, increased 6% to $34.4 million from $32.6 million, when comparing the first six months of fiscal 2022 to the same period of the prior fiscal year.

Business Development Highlights for the 2022 Fiscal Second Quarter

• On March 29, 2022, the Company announced it is changing its name to Pathward Financial, Inc.™, and its bank subsidiary, MetaBank®, N.A., will be changing its name to Pathward™, N.A. Certain changes will be made immediately, with a full transition to Pathward expected by the end of this calendar year, including the launch of a new brand identity and website. The Company will continue to serve its customers under existing brand names during the transition. The Company recognized $2.8 million of pre-tax expenses related to rebranding efforts during the second quarter of fiscal 2022. The Company continues to estimate total rebranding expenses will range between $15 million to $20 million.
• On April 27, 2022 Meta published its second annual ESG report. In addition to detailing the Company's community impact program and its diversity, equity, and inclusion initiatives, it contains enhanced quantitative reporting, which will be used to measure progress.

Financial Highlights for the 2022 Fiscal Second Quarter

• Total revenue for the second quarter was $193.6 million, an increase of $6.2 million, or 3%, compared to the same quarter in fiscal 2021, primarily driven by an increase in interest income, partially offset by a reduction in noninterest income.
• Net interest income for the second quarter was $83.8 million, an increase of $10.0 million compared to $73.9 million in the second quarter last year.
• Net interest margin ("NIM") increased to 4.80% for the second quarter from 3.07% during the same period of last year. The prior year period was impacted by excess cash associated with the Company's participation in the U.S. Treasury Department's Economic Impact Program.
• Total gross loans and leases at March 31, 2022 increased $78.1 million, to $3.73 billion, or 2%,compared to March 31, 2021 and increased $43.5 million, or 1%, when compared to December 31, 2021. The increase compared to the prior year quarter was driven by growth across our loan portfolios, partially offset by the sale of all remaining community banking loans during the fiscal 2022 first quarter.
• The Company originated$1.3 million in aggregate principal of renewable energy loan financing for the second quarter of fiscal 2022, resulting in $0.3 million in total net investment tax credits.
• The Company repurchased 736,198 shares of its common stock at an average price of $57.01, in the second fiscal quarter and has 4,868,177 shares available for repurchase under the common stock share repurchase program announced during the fourth quarter of fiscal year 2021.
• On March 24, 2022, the Company's Board of Directors approved the redemption at par of $75.0 million of the 5.75% fixed to floating rate note due August 15, 2026. The redemption date is set for May 15, 2022.

Net Interest Income

Net interest income for the second quarter of fiscal 2022 was $83.8 million, an increase of 13% from the same quarter in fiscal 2021. The increase was mainly attributable to an improved earning asset mix, together with increased loan balances.

The second quarter average outstanding balance of loans and leases increased $124.1 million compared to the same quarter of the prior year, primarily due to increases in our core loan and lease portfolios, partially offset by the sale of the remaining community bank portfolio. The Company’s average interest-earning assets for the second quarter decreased by $2.69 billion to $7.08 billion compared with the same quarter in fiscal 2021, primarily due to a reduction in cash balances as a result of high cash levels during the prior year period related to the Company's participation in government stimulus programs. The decrease in interest-earnings assets was partially offset by growth in total investments and total loans and leases.

Fiscal 2022 second quarter NIM increased to 4.80% from 3.07% in the second quarter of last year. The overall reported tax-equivalent yield (“TEY”) on average earning asset yields increased 174 basis points to 4.89% compared to the prior year quarter, primarily driven by a decrease in lower-yielding cash balances. Growth in loan and lease and investment securities balances also contributed to the year-over-year TEY increase. The yield on the loan and lease portfolio was 7.22% compared to 6.74% for the comparable period last year and the TEY on the securities portfolio was 1.83% compared to 1.78% over that same period.

The Company's cost of funds for all deposits and borrowings averaged 0.08% during the fiscal 2022 second quarter, the same as the prior year quarter. The Company's overall cost of deposits was 0.01% in the fiscal second quarter of 2022, compared to 0.02% in the same quarter last year.

Noninterest Income

Fiscal 2022 second quarter noninterest income decreased to $109.8 million, compared to $113.5 million for the same period of the prior year. The decrease was driven by a reduction in payments fee income of $3.6 million and a net loss on our MoneyLion investment of $1.3 million, partially offset by an increase in rental income of $1.5 million.

During the second quarter of fiscal year 2022, the Company sold the entirety of its equity investment in MoneyLion, recognizing a net loss of $1.3 million during the current period. Following the completion of MoneyLion's de-SPAC process and listing on the New York Stock Exchange on September 22, 2021, the Company recognized a cumulative loss of approximately $0.4 million on the investment dating back to the fourth quarter of fiscal year 2021. The Company continues to be a strategic BaaS provider to MoneyLion.

Noninterest Expense

Noninterest expense increased 7% to $103.2 million for the fiscal 2022 second quarter, from $96.0 million for the same quarter last year. The increase in expense was primarily driven by an increase in consulting expense, software expense, operating lease equipment depreciation and compensation expense. Compensation expense for the second quarter of fiscal 2022 includes $0.9 million of separation-related expenses. When comparing the fiscal 2022 second quarter to the first quarter of 2022, noninterest expense increased by $20.7 million.

Of the $2.8 million in rebranding expenses the Company incurred during the quarter, $2.0 million is recognized in other expense and $0.8 million is related to legal and consulting expense.

Income Tax Expense

The Company recorded income tax expense of $8.0 million, representing an effective tax rate of 13.8%, for the fiscal 2022 second quarter, compared to $1.1 million, representing an effective tax rate of 1.9%, for the second quarter last year. The current quarter increase in income tax expense was primarily due to a reduction in renewable energy investment tax credit lending volume compared to the prior year period.

The Company originated $1.3 million in solar leases during the fiscal 2022 second quarter, compared to $20.0 million in last year's second quarter. Investment tax credits related to solar leases are recognized ratably based on income throughout each fiscal year. For the six months ended March 31, 2022, the Company originated $22.5 million in solar leases, compared to $58.5 million for the comparable prior year period. 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)	March 31, 2022				December 31, 2021				September 30, 2021				June 30, 2021				March 31, 2021
Total investments	$	2,090,765			$	1,833,733			$	1,921,568			$	1,981,852			$	1,552,892
Loans held for sale
Consumer credit products		23,670				20,728				23,111				12,582				6,233
SBA/USDA		7,740				15,454				33,083				57,208				61,402
Community bank		—				—				—				18,115				—
Total loans held for sale		31,410				36,182				56,194				87,905				67,635
Term lending		1,111,076				1,038,378				961,019				920,279				891,414
Asset based lending		382,355				337,236				300,225				263,237				248,735
Factoring		394,865				402,972				363,670				320,629				277,612
Lease financing		235,397				245,315				266,050				282,940				308,169
Insurance premium finance		403,681				385,473				428,867				417,652				344,841
SBA/USDA		214,195				209,521				247,756				263,709				331,917
Other commercial finance		173,260				178,853				157,908				118,081				103,234
Commercial finance		2,914,829				2,797,748				2,725,495				2,586,527				2,505,922
Consumer credit products		171,847				173,343				129,251				105,440				104,842
Other consumer finance		111,922				144,412				123,606				122,316				130,822
Consumer finance		283,769				317,755				252,857				227,756				235,664
Tax services		85,999				100,272				10,405				41,268				225,921
Warehouse finance		441,496				466,831				419,926				335,704				332,456
Community banking		—				—				199,132				303,984				348,065
Total loans and leases		3,726,093				3,682,606				3,607,815				3,495,239				3,648,028
Net deferred loan origination costs		4,097				1,655				1,748				1,431				9,503
Total gross loans and leases		3,730,190				3,684,261				3,609,563				3,496,670				3,657,531
Allowance for credit losses		(88,552	)			(67,623	)			(68,281	)			(91,208	)			(98,892	)
Total loans and leases, net	$	3,641,638			$	3,616,638			$	3,541,282			$	3,405,462			$	3,558,639

The Company's investment security balances at March 31, 2022 totaled $2.09 billion, as compared to $1.83 billion at December 31, 2021 and $1.55 billion at March 31, 2021.

Total gross loans and leases totaled $3.73 billion at March 31, 2022, as compared to $3.68 billion at December 31, 2021 and $3.66 billion at March 31, 2021. The primary driver for the increase on a linked quarter basis was commercial finance loans. The year-over-year increase was primarily driven by increases within commercial finance, warehouse finance, and consumer finance, partially offset by a reduction in tax services loans and the sale of all remaining community bank loans.

Commercial finance loans, which comprised 78% of the Company's gross loan and lease portfolio, totaled $2.91 billion at March 31, 2022, reflecting growth of $117.1 million, or 4%, from December 31, 2021 and $408.9 million, or 16%, from March 31, 2021.

As of March 31, 2022, the Company had 164 loans outstanding with total loan balances of $43.0 million originated as part of the Paycheck Protection Program ("PPP"), compared with 275 loans outstanding with total loan balances of $63.8 million for the quarter ended December 31, 2021. In total, approximately 85% of the PPP loan balances were forgiven through March 31, 2022.

Asset Quality

The Company’s allowance for credit losses ("ACL") totaled $88.6 million at March 31, 2022, an increase compared to $67.6 million at December 31, 2021 and a decrease from $98.9 million at March 31, 2021. The increase in the ACL at March 31, 2022, when compared to December 31, 2021, was primarily due to the seasonal tax services loan portfolio, which increased $29.2 million during the fiscal 2022 second quarter.

The $10.3 million year-over-year decrease in the ACL was primarily driven by a $14.0 million decrease attributable to the disposition of the community banking portfolio, along with a $2.1 million decrease in the consumer finance portfolio. These decreases were partially offset by a $4.0 million increase within the commercial finance portfolio and a $1.6 million increase within the tax services portfolio.

The following table presents the Company's ACL as a percentage of its total loans and leases.

	As of the Period Ended
(Unaudited)	March 31, 2022			December 31, 2021			September 30, 2021			June 30, 2021			March 31, 2021
Commercial finance	1.66	%		2.04	%		1.77	%		1.73	%		1.77	%
Consumer finance	3.18	%		2.70	%		2.91	%		3.80	%		4.70	%
Tax services	35.76	%		1.60	%		0.02	%		58.99	%		12.90	%
Warehouse finance	0.10	%		0.10	%		0.10	%		0.10	%		0.10	%
Community banking	—	%		—	%		6.16	%		4.36	%		4.03	%
Total loans and leases	2.38	%		1.84	%		1.89	%		2.61	%		2.71	%
Total loans and leases excluding tax services	1.59	%		1.84	%		1.90	%		1.94	%		2.04	%

The Company's ACL as a percentage of total loans and leases increased to 2.38% at March 31, 2022 from 1.84% at December 31, 2021. The increase in the total loans and leases coverage ratio was primarily driven by the seasonal tax services loan portfolio. The coverage ratio for the commercial finance portfolio decreased compared to the December 31, 2021 quarter due to reduction of specific reserves on two individually evaluated loan relationships. The Company expects to continue to diligently monitor the ACL 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												Six Months Ended
(Dollars in thousands)	March 31, 2022				December 31, 2021				March 31, 2021				March 31, 2022				March 31, 2021
Beginning balance	$	67,623			$	68,281			$	72,389			$	68,281			$	56,188
Adoption of CECL accounting standard		—				—				—				—				12,773
Provision (reversal of) - tax services loans		28,972				(714	)			27,680				28,259				28,134
Provision - all other loans and leases		3,183				1,184				2,519				4,368				8,329
Charge-offs - tax services loans		—				(254	)			—				(254	)			—
Charge-offs - all other loans and leases		(12,415	)			(4,605	)			(4,248	)			(17,021	)			(9,923	)
Recoveries - tax services loans		184				2,567				54				2,750				1,010
Recoveries - all other loans and leases		1,005				1,164				498				2,169				2,381
Ending balance	$	88,552			$	67,623			$	98,892			$	88,552			$	98,892

The Company recognized a provision for credit losses of $32.3 million for the quarter ended March 31, 2022, compared to $30.3 million for the comparable period in the prior fiscal year. Net charge-offs were $11.2 million for the quarter ended March 31, 2022, compared to $3.7 million for the quarter ended March 31, 2021. Net charge-offs attributable to the commercial finance portfolio for the quarter were $10.7 million and net charge-offs attributable to the consumer finance portfolio were $0.7 million.

The Company's past due loans and leases were as follows for the periods presented.

As of March 31, 2022	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			Nonaccrual Balance			Total
Loans held for sale	$	—		$	—		$	—		$	—		$	31,410		$	31,410		$	—		$	—		$	—
Commercial finance		24,631			2,574			11,994			39,199			2,875,630			2,914,829			5,701			25,327			31,028
Consumer finance		5,829			5,475			4,814			16,118			267,651			283,769			4,814			—			4,814
Tax services		830			—			—			830			85,169			85,999			—			—			—
Warehouse finance		—			—			—			—			441,496			441,496			—			—			—
Total loans and leases held for investment		31,290			8,049			16,808			56,147			3,669,946			3,726,093			10,515			25,327			35,842
Total loans and leases	$	31,290		$	8,049		$	16,808		$	56,147		$	3,701,356		$	3,757,503		$	10,515		$	25,327		$	35,842

As of December 31, 2021	Accruing and Nonaccruing Loans and Leases																		Nonperforming Loans and Leases
(Dollars in thousands)	30-59 Days Past Due			60-89 Days Past Due			> 89 Days Past Due			Total Past Due			Current			Total Loans and Leases Receivable			> 89 Days Past Due and Accruing			Nonaccrual Balance			Total
Loans held for sale	$	9		$	2		$	—		$	11		$	36,171		$	36,182		$	—		$	—		$	—
Commercial finance		41,473			8,539			7,568			57,580			2,740,168			2,797,748			3,896			37,760			41,656
Consumer finance		4,880			2,277			1,534			8,691			309,064			317,755			1,534			—			1,534
Tax services		—			—			—			—			100,272			100,272			—			—			—
Warehouse finance		—			—			—			—			466,831			466,831			—			—			—
Total loans and leases held for investment		46,353			10,816			9,102			66,271			3,616,335			3,682,606			5,430			37,760			43,190
Total loans and leases	$	46,362		$	10,818		$	9,102		$	66,282		$	3,652,506		$	3,718,788		$	5,430		$	37,760		$	43,190

The Company's nonperforming assets at March 31, 2022 were $38.3 million, representing 0.56% of total assets, compared to $44.3 million, or 0.58% of total assets at December 31, 2021 and $46.7 million, or 0.48% of total assets at March 31, 2021. The decrease in the nonperforming assets as a percentage of total assets at March 31, 2022 compared to December 31, 2021, was primarily driven by a decrease in nonperforming assets in the commercial finance portfolio, partially offset by an increase within the consumer finance portfolio. When comparing the current period to the same period of the prior year, the decrease in nonperforming assets was due to a decrease in nonperforming assets in the community bank portfolio, partially offset by an increase in nonperforming assets in the commercial and consumer finance portfolios.

The Company's nonperforming loans and leases at March 31, 2022, were $35.8 million, representing 0.95% of total gross loans and leases, compared to $43.2 million, or 1.16% of total gross loans and leases at December 31, 2021 and $43.5 million, or 1.17% of total gross loans and leases at March 31, 2021. The decreases are related to the aforementioned decrease in nonperforming assets in the community bank portfolio, partially offset by an increase in nonperforming assets in the commercial and consumer finance portfolios.

The Company has various portfolios of consumer lending and tax services loans that present unique risks that are statistically managed. Due to the unique risks associated with these portfolios, the Company monitors other credit quality indicators in their evaluation of the appropriateness of the allowance for credit losses on these portfolios, and as such, these loans are not included in the asset classification table below. The Company's loans and leases held for investment by asset classification were as follows for the periods presented.

	Asset Classification
(Dollars in thousands)	Pass			Watch			Special Mention			Substandard			Doubtful			Total
As of March 31, 2022
Commercial finance	$	2,171,206		$	430,240		$	141,497		$	167,882		$	4,004		$	2,914,829
Warehouse finance		441,496			—			—			—			—			441,496
Total loans and leases	$	2,612,702		$	430,240		$	141,497		$	167,882		$	4,004		$	3,356,325

	Asset Classification
(Dollars in thousands)	Pass			Watch			Special Mention			Substandard			Doubtful			Total
As of December 31, 2021
Commercial finance	$	2,084,835		$	355,431		$	161,301		$	176,258		$	19,923		$	2,797,748
Warehouse finance		466,831			—			—			—			—			466,831
Total loans and leases	$	2,551,666		$	355,431		$	161,301		$	176,258		$	19,923		$	3,264,579

Deposits, Borrowings and Other Liabilities

Total average deposits for the fiscal 2022 second quarter decreased by $2.89 billion to $6.68 billion compared to the same period in fiscal 2021. The decrease in average deposits was primarily due to a decrease in noninterest-bearing deposits of $2.66 billion, and to a lesser extent decreases within time and wholesale deposits, partially offset by increases in money market and savings deposits.

The average balance of total deposits and interest-bearing liabilities was $6.87 billion for the three-month period ended March 31, 2022, compared to $9.66 billion for the same period in the prior fiscal year, representing a decrease of 29%.

Total end-of-period deposits decreased 33% to $5.83 billion at March 31, 2022, compared to $8.64 billion at March 31, 2021. The decrease in end-of-period deposits was primarily driven by a decrease in noninterest-bearing deposits of $2.32 billion and a decrease in wholesale deposits of $94.1 million. The decrease in noninterest-bearing deposits was driven by government stimulus-related dollars loaded on various partner cards during the prior year period.

As of March 31, 2022, the Company managed $1.85 billion of customer deposits at other banks in its capacity as custodian.

Regulatory Capital

The Company and MetaBank remained above the federal regulatory minimum capital requirements at March 31, 2022, continued to be classified as well-capitalized, and in good standing with the regulatory agencies. Regulatory capital ratios of the Company and the Bank are stated in the table below. The decrease in Tier 1 leverage capital ratio for the period is the result of higher quarterly average assets related to its seasonal tax business. The MetaBank Tier 1 leverage capital ratio using end of period assets of 8.94% better reflects the expected capital position post tax season. See non-GAAP reconciliation table below. Regulatory Capital is not affected by the unrealized loss on accumulated other comprehensive income (“AOCI”). The securities portfolio is made up of nearly all amortizing securities that should provide consistent cash flow and is not expected to require sales to realize the losses to fund future loan growth.

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 Periods Indicated	March 31, 2022(1)			December 31, 2021			September 30, 2021			June 30, 2021			March 31, 2021
Company
Tier 1 leverage capital ratio	6.80	%		7.39	%		7.67	%		6.85	%		4.75	%
Common equity Tier 1 capital ratio	11.26	%		10.88	%		12.12	%		12.76	%		11.29	%
Tier 1 capital ratio	11.58	%		11.20	%		12.46	%		13.11	%		11.63	%
Total capital ratio	14.16	%		13.80	%		15.45	%		16.18	%		14.65	%
MetaBank
Tier 1 leverage ratio	7.79	%		8.52	%		8.69	%		7.83	%		5.47	%
Common equity Tier 1 capital ratio	13.26	%		12.90	%		14.11	%		14.94	%		13.39	%
Tier 1 capital ratio	13.26	%		12.91	%		14.13	%		14.96	%		13.40	%
Total capital ratio	14.52	%		14.16	%		15.38	%		16.22	%		14.66	%

(1)

March 31, 2022 percentages are preliminary pending completion and filing of the Company's regulatory reports. Regulatory capital ratios for periods presented reflect the Company's election of the five-year CECL transition for regulatory capital purposes.

The following table provides the non-GAAP financial measures used to compute certain of the ratios included in the table above, as well as a reconciliation of such non-GAAP financial measures to the most directly comparable financial measure in accordance with GAAP:

	Standardized Approach(1)
(Dollars in thousands)	March 31, 2022				December 31, 2021			September 30, 2021			June 30, 2021			March 31, 2021
Total stockholders' equity	$	763,406			$	826,157		$	871,884		$	876,633		$	835,258
Adjustments:
LESS: Goodwill, net of associated deferred tax liabilities		299,983				300,382			300,780			301,179			301,602
LESS: Certain other intangible assets		30,007				32,294			33,572			35,100			36,779
LESS: Net deferred tax assets from operating loss and tax credit carry-forwards		13,404				19,805			22,801			17,753			19,306
LESS: Net unrealized gains (losses) on available for sale securities		(69,838	)			403			7,344			14,750			12,458
LESS: Noncontrolling interest		322				642			1,155			1,490			1,092
ADD: Adoption of Accounting Standards Update 2016-13		13,387				6,527			8,202			13,913			10,439
Common Equity Tier 1(1)		502,915				479,158			514,434			520,274			474,460
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		208				444			747			932			690
Total Tier 1 capital		516,784				493,263			528,842			534,867			488,811
Allowance for credit losses		56,051				55,125			53,159			51,317			53,232
Subordinated debentures (net of issuance costs)		59,256				59,220			73,980			73,936			73,892
Total capital	$	632,091			$	607,608		$	655,981		$	660,119		$	615,935

(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 were fully phased in through the end of calendar year 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.

	March 31, 2022				December 31, 2021			September 30, 2021			June 30, 2021			March 31, 2021
Total stockholders' equity	$	763,406			$	826,157		$	871,884		$	876,633		$	835,258
Less: Goodwill		309,505				309,505			309,505			309,505			309,505
Less: Intangible assets		29,290				31,661			33,148			34,898			36,903
Tangible common equity		424,611				484,991			529,231			532,230			488,850
Less: AOCI		(69,374	)			724			7,599			15,222			12,809
Tangible common equity excluding AOCI	$	493,985			$	484,267		$	521,632		$	517,008		$	476,041

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 Thursday, April 28, 2022. The live webcast of the call can be accessed from Meta’s Investor Relations website at www.metafinancialgroup.com. Telephone participants may access the conference call by dialing 1-844-200-6205 (International: +1-929-526-1599) approximately 10 minutes prior to start time and reference access code 247026. A webcast replay will also be archived at www.metafinancialgroup.com for one year.

Upcoming Investor Events

• B. Riley Institutional Investors Conference, May 25, 2022 | Los Angeles, CA

Forward-Looking Statements

The Company and MetaBank may from time to time make written or oral “forward-looking statements,” including statements contained in this press release, the Company’s filings with the SEC, the Company’s reports to stockholders, and in other communications by the Company and MetaBank, which are made in good faith by the Company pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995.

You can identify forward-looking statements by words such as “may,” “hope,” “will,” “should,” “expect,” “plan,” “anticipate,” “intend,” “believe,” “estimate,” “predict,” “potential,” “continue,” “could,” “future,” or the negative of those terms, or other words of similar meaning or similar expressions. You should carefully read statements that contain these words because they discuss our future expectations or state other “forward-looking” information. These forward-looking statements are based on information currently available to us and assumptions about future events, and include statements with respect to the Company’s beliefs, expectations, estimates, and intentions, which are subject to significant risks and uncertainties, and are subject to change based on various factors, some of which are beyond the Company’s control. Such risks, uncertainties and other factors may cause our actual growth, results of operations, financial condition, cash flows, performance and business prospects and opportunities to differ materially from those expressed in, or implied by, these forward-looking statements. Such statements address, among others, the following subjects: future operating results; expectations in connection with the impact of the ongoing COVID-19 pandemic and related government actions on our business, our industry and the capital markets; customer retention; loan and other product demand; expectations concerning acquisitions and divestitures; new products and services, including those offered by Meta Payment Systems, Refund Advantage, EPS Financial and Specialty Consumer Services divisions; credit quality; the level of net charge-offs and the adequacy of the allowance for credit losses; technology; and the Company's employees. The following factors, among others, could cause the Company's financial performance and results of operations to differ materially from the expectations, estimates, and intentions expressed in such forward-looking statements: maintaining our executive management team; expected growth opportunities may not be realized or may take longer to realize than expected; the potential adverse effects of the ongoing COVID-19 pandemic and any governmental or societal responses thereto, or other unusual and infrequently occurring events, including the impact on financial markets from geopolitical conflicts such as the military conflict between Russia and Ukraine; successfully completing our announced rebranding and our ability to achieve brand recognition for Pathward equal to or greater than we currently enjoy for MetaBank; changes in trade, monetary, and fiscal policies and laws, including actual changes in interest rates and the Fed Funds rate; changes in tax laws; the strength of the United States' economy, and the local economies in which the Company operates; inflation, market, and monetary fluctuations; the timely and efficient development 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; MetaBank's ability to maintain its Durbin Amendment exemption; the risks of dealing with or utilizing third parties, including, in connection with the Company’s prepaid card and tax refund advance businesses, the risk of reduced volume of refund advance loans as a result of reduced customer demand for or usage of Meta’s strategic partners’ refund advance products; our relationship with, and any actions which may be initiated by, our regulators; changes in financial services laws and regulations, including laws and regulations relating to the tax refund industry and the insurance premium finance industry; technological changes, including, but not limited to, the protection of our electronic systems and information; the impact of acquisitions and divestitures; litigation risk; the growth of the Company’s business, as well as expenses related thereto; continued maintenance by MetaBank of its status as a well-capitalized institution; changes in consumer spending and saving habits; losses from fraudulent or illegal activity; technological risks and developments and cyber threats, attacks, or events; and the success of the Company at maintaining its high quality asset level and managing and collecting assets of borrowers in default should problem assets increase.

The foregoing list of factors is not exclusive. We caution you not to place undue reliance on these forward-looking statements. The forward-looking statements included in this press release speak only as of the date hereof. Additional discussions of factors affecting the Company’s business and prospects are reflected under the caption “Risk Factors” and in other sections of the Company’s Annual Report on Form 10-K for the Company’s fiscal year ended September 30, 2021, and in other filings made with the SEC. The Company expressly disclaims any intent or obligation to update any forward-looking statements, whether written or oral, that may be made from time to time by or on behalf of the Company or its subsidiaries, whether as a result of new information, changed circumstances, or future events or for any other reason.

Condensed Consolidated Statements of Financial Condition (Unaudited) (Dollars in Thousands, Except Share Data)
	March 31, 2022				December 31, 2021				September 30, 2021				June 30, 2021				March 31, 2021
ASSETS
Cash and cash equivalents	$	237,680			$	1,230,100			$	314,019			$	720,243			$	3,724,242
Securities available for sale, at fair value		2,043,478				1,782,739				1,864,899				1,917,605				1,480,780
Securities held to maturity, at amortized cost		47,287				50,994				56,669				64,247				72,112
Federal Reserve Bank and Federal Home Loan Bank Stock, at cost		28,812				28,400				28,400				28,433				28,433
Loans held for sale		31,410				36,182				56,194				87,905				67,635
Loans and leases		3,730,190				3,684,261				3,609,563				3,496,670				3,657,531
Allowance for credit losses		(88,552	)			(67,623	)			(68,281	)			(91,208	)			(98,892	)
Accrued interest receivable		19,115				17,240				16,254				16,230				17,429
Premises, furniture, and equipment, net		43,167				44,130				44,888				44,107				41,510
Rental equipment, net		213,033				234,693				213,116				211,368				211,397
Foreclosed real estate and repossessed assets, net		112				298				2,077				1,204				1,483
Goodwill and intangible assets		338,795				341,166				342,653				344,403				346,408
Prepaid assets		15,264				17,007				10,513				7,482				10,201
Other assets		227,448				210,071				199,686				203,123				229,854
Total assets	$	6,887,239			$	7,609,658			$	6,690,650			$	7,051,812			$	9,790,123
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES
Deposits		5,829,886				6,525,569				5,514,971				5,888,871				8,642,413
Long-term borrowings		91,386				92,274				92,834				93,634				95,336
Accrued expenses and other liabilities		202,561				165,658				210,961				192,674				217,116
Total liabilities		6,123,833				6,783,501				5,818,766				6,175,179				8,954,865
STOCKHOLDERS’ EQUITY
Preferred stock		—				—				—				—				—
Common stock, $.01 par value		294				301				317				319				319
Common stock, Nonvoting, $.01 par value		—				—				—				—				—
Additional paid-in capital		612,917				610,816				604,484				602,720				601,222
Retained earnings		223,760				217,992				259,189				262,578				225,471
Accumulated other comprehensive income (loss)		(69,374	)			724				7,599				15,222				12,809
Treasury stock, at cost		(4,513	)			(4,318	)			(860	)			(5,696	)			(5,655	)
Total equity attributable to parent		763,084				825,515				870,729				875,143				834,166
Noncontrolling interest		322				642				1,155				1,490				1,092
Total stockholders’ equity		763,406				826,157				871,884				876,633				835,258
Total liabilities and stockholders’ equity	$	6,887,239			$	7,609,658			$	6,690,650			$	7,051,812			$	9,790,123

Condensed Consolidated Statements of Operations (Unaudited) (Dollars in Thousands, Except Share and Per Share Data)
	Three Months Ended										Six Months Ended
	March 31, 2022			December 31, 2021				March 31, 2021			March 31, 2022				March 31, 2021
Interest and dividend income:
Loans and leases, including fees	$	75,540		$	65,035			$	68,472		$	140,575			$	130,128
Mortgage-backed securities		5,446			3,864				2,608			9,310				4,730
Other investments		4,191			3,992				4,589			8,183				8,956
		85,177			72,891				75,669			158,068				143,814
Interest expense:
Deposits		165			141				445			306				1,241
FHLB advances and other borrowings		1,212			1,137				1,374			2,349				2,724
		1,377			1,278				1,819			2,655				3,965
Net interest income		83,800			71,613				73,850			155,413				139,849
Provision for credit losses		32,302			186				30,290			32,488				36,379
Net interest income after provision for credit losses		51,498			71,427				43,560			122,925				103,470
Noninterest income:
Refund transfer product fees		27,805			579				22,680			28,384				23,327
Tax advance product fees		39,299			1,233				44,562			40,532				46,522
Payments card and deposit fees		26,270			25,132				29,875			51,402				52,439
Other bank and deposit fees		250			237				133			487				370
Rental income		11,375			11,077				9,846			22,452				19,731
Gain on sale of securities		260			137				6			397				6
Gain on sale of trademarks		—			50,000				—			50,000				—
Gain (loss) on sale of other		626			(3,465	)			2,133			(2,839	)			4,981
Other income		3,881			1,661				4,218			5,542				11,532
Total noninterest income		109,766			86,591				113,453			196,357				158,908
Noninterest expense:
Compensation and benefits		45,047			38,225				43,932			83,272				76,263
Refund transfer product expense		6,260			138				6,146			6,398				6,207
Tax advance product expense		2,002			183				2,189			2,185				2,559
Card processing		7,457			7,172				7,212			14,629				13,329
Occupancy and equipment expense		8,500			8,349				6,748			16,849				13,636
Operating lease equipment depreciation		8,737			8,449				7,419			17,185				15,000
Legal and consulting		9,347			6,208				6,045			15,555				11,292
Intangible amortization		2,169			1,488				2,757			3,657				4,770
Impairment expense		—			—				554			—				1,713
Other expense		13,641			12,224				12,969			25,866				23,777
Total noninterest expense		103,160			82,436				95,971			185,596				168,546
Income before income tax expense		58,104			75,582				61,042			133,686				93,832
Income tax expense		8,002			14,276				1,133			22,278				4,665
Net income before noncontrolling interest		50,102			61,306				59,909			111,408				89,167
Net income attributable to noncontrolling interest		851			(18	)			843			833				2,064
Net income attributable to parent	$	49,251		$	61,324			$	59,066		$	110,575			$	87,103
Less: Allocation of Earnings to participating securities(1)		815			953				1,113			1,773				1,683
Net income attributable to common shareholders(1)		48,436			60,371				57,953			108,802				85,420
Earnings per common share:
Basic	$	1.66		$	2.00			$	1.84		$	3.66			$	2.66
Diluted	$	1.66		$	2.00			$	1.84		$	3.66			$	2.65
Shares used in computing earnings per common share:
Basic		29,212,301			30,238,621				31,520,505			29,731,797				32,158,994
Diluted		29,224,362			30,260,655				31,535,022			29,748,832				32,175,484
(1) Amounts presented are used in the two-class earnings per common share calculation.

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 March 31,	2022									2021
(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	$	810,857		$	721		0.36	%		$	4,187,558		$	1,090		0.11	%
Mortgage-backed securities		1,184,377			5,446		1.86	%			543,256			2,607		1.95	%
Tax exempt investment securities		189,213			903		2.45	%			297,299			1,132		1.96	%
Asset-backed securities		370,671			1,142		1.25	%			389,406			1,290		1.34	%
Other investment securities		282,655			1,425		2.05	%			230,168			1,077		1.90	%
Total investments		2,026,916			8,916		1.83	%			1,460,129			6,106		1.78	%
Commercial finance		2,852,147			48,872		6.95	%			2,471,694			46,299		7.60	%
Consumer finance		331,033			7,892		9.67	%			255,625			6,968		11.06	%
Tax services		594,166			11,599		7.92	%			714,789			6,544		3.71	%
Warehouse finance		467,298			7,177		6.23	%			315,162			4,845		6.23	%
Community banking		—			—		—	%			363,285			3,817		4.26	%
Total loans and leases		4,244,644			75,540		7.22	%			4,120,555			68,473		6.74	%
Total interest-earning assets	$	7,082,417		$	85,177		4.89	%		$	9,768,242		$	75,669		3.15	%
Noninterest-earning assets		814,151									887,610
Total assets	$	7,896,568								$	10,655,852
Interest-bearing liabilities:
Interest-bearing checking(2)	$	289		$	—		0.32	%		$	275,982		$	—		—	%
Savings		82,902			6		0.03	%			77,562			4		0.02	%
Money markets		102,473			53		0.21	%			56,352			42		0.30	%
Time deposits		8,682			10		0.49	%			12,820			34		1.07	%
Wholesale deposits		173,493			96		0.22	%			175,777			365		0.84	%
Total interest-bearing deposits		367,839			165		0.18	%			598,493			445		0.30	%
Overnight fed funds purchased		95,700			62		0.26	%			—			—		—	%
Subordinated debentures		74,040			1,002		5.49	%			73,864			1,147		6.30	%
Other borrowings		17,874			148		3.35	%			22,377			227		4.12	%
Total borrowings		187,614			1,212		2.62	%			96,241			1,374		5.79	%
Total interest-bearing liabilities		555,453			1,377		1.01	%			694,734			1,819		1.06	%
Noninterest-bearing deposits		6,311,583			—		—	%			8,967,067			—		—	%
Total deposits and interest-bearing liabilities	$	6,867,036		$	1,377		0.08	%		$	9,661,801		$	1,819		0.08	%
Other noninterest-bearing liabilities		213,982									177,372
Total liabilities		7,081,018									9,839,173
Shareholders' equity		815,550									816,679
Total liabilities and shareholders' equity	$	7,896,568								$	10,655,852
Net interest income and net interest rate spread including noninterest-bearing deposits				$	83,800		4.81	%					$	73,850		3.08	%
Net interest margin							4.80	%								3.07	%
Tax-equivalent effect							0.01	%								0.01	%
Net interest margin, tax-equivalent(3)							4.81	%								3.08	%

(1)		Tax rate used to arrive at the TEY for the three months ended March 31, 2022 and 2021 was 21%.
(2)		At March 31, 2021, $275.7 million of the total balance were interest-bearing deposits where interest expense was paid by a third party and not by the Company. On October 1, 2021, the Company reclassified the balances related to that program to noninterest bearing checking due to the product moving to noninterest bearing.
(3)		Net interest margin expressed on a fully-taxable-equivalent basis ("net interest margin, tax-equivalent") is a non-GAAP financial measure. The tax-equivalent adjustment to net interest income recognizes the estimated income tax savings when comparing taxable and tax-exempt assets and adjusting for federal and state exemption of interest income. The Company believes that it is a standard practice in the banking industry to present net interest margin expressed on a fully taxable equivalent basis and, accordingly, believes the presentation of this non-GAAP financial measure may be useful for peer comparison purposes.

Selected Financial Information
As of and For the Three Months Ended	March 31, 2022				December 31, 2021				September 30, 2021				June 30, 2021				March 31, 2021
Equity to total assets		11.08	%			10.86	%			13.03	%			12.43	%			8.53	%
Book value per common share outstanding	$	26.00			$	27.46			$	27.53			$	27.46			$	26.16
Tangible book value per common share outstanding	$	14.46			$	16.12			$	16.71			$	16.67			$	15.31
Tangible book value per common share outstanding excluding AOCI	$	16.82			$	16.10			$	16.47			$	16.20			$	14.91
Common shares outstanding		29,362,844				30,080,717				31,669,952				31,919,780				31,926,008
Nonperforming assets to total assets		0.56	%			0.58	%			0.92	%			0.64	%			0.48	%
Nonperforming loans and leases to total loans and leases		0.95	%			1.16	%			1.52	%			1.17	%			1.17	%
Net interest margin		4.80	%			4.59	%			4.35	%			3.75	%			3.07	%
Net interest margin, tax-equivalent		4.81	%			4.61	%			4.37	%			3.77	%			3.08	%
Return on average assets		2.49	%			3.49	%			0.88	%			1.90	%			2.22	%
Return on average equity		24.16	%			29.69	%			7.18	%			18.07	%			28.93	%
Full-time equivalent employees		1,167				1,140				1,124				1,109				1,075

Non-GAAP Reconciliation
Adjusted Net Income and Adjusted Earnings Per Share	At and For the Three Months Ended										At and For the Six Months Ended
(Dollars in thousands)	March 31, 2022				December 31, 2021			March 31, 2021			March 31, 2022			March 31, 2021
Net Income - GAAP	$	49,251			$	61,324		$	59,066		$	110,575		$	87,103
Less: Gain on sale of trademarks		—				50,000			—			50,000			—
Add: Rebranding expenses		2,819				3			—			2,822			—
Add: Income tax effect resulting from gain on sale of trademarks and rebranding expenses		(711	)			12,593			—			11,882			—
Adjusted net income	$	51,359			$	23,920		$	59,066		$	75,279		$	87,103
Less: Adjusted allocation of earnings to participating securities		850				372			1,113			1,207			1,683
Adjusted Net income attributable to common shareholders		50,509				23,548			57,953			74,072			85,420
Weighted average diluted common shares outstanding		29,224,362				30,260,655			31,535,022			29,748,832			32,175,484
Adjusted earnings per common share - diluted	$	1.73			$	0.78		$	1.84		$	2.49		$	2.65

Efficiency Ratio	For the Last Twelve Months Ended
(Dollars in thousands)	March 31, 2022				December 31, 2021				September 30, 2021				June 30, 2021				March 31, 2021
Noninterest expense: GAAP	$	360,733			$	353,544			$	343,683			$	330,352			$	320,070
Net interest income		294,555				284,605				278,991				272,837				266,499
Noninterest income		308,352				312,039				270,903				262,111				240,706
Total revenue: GAAP	$	602,907			$	596,644			$	549,894			$	534,948			$	507,205
Efficiency ratio		59.83	%			59.26	%			62.50	%			61.75	%			63.10	%
Adjusted Efficiency Ratio
Noninterest expense: GAAP	$	360,733			$	353,544			$	343,683			$	330,352			$	320,070
Less: Rebranding expenses		2,822				3				—				—				—
Adjusted noninterest expense		357,911				353,541				343,683				330,352				320,070
Net interest income		294,555				284,605				278,991				272,837				266,499
Noninterest income		308,352				312,039				270,903				262,111				240,706
Less: Gain on sale of trademarks		50,000				50,000				—				—				—
Total adjusted revenue	$	552,907			$	546,644			$	549,984			$	534,948			$	507,205
Adjusted efficiency ratio		64.73	%			64.67	%			62.50	%			61.75	%			63.10	%

MetaBank Period-end Tier 1 Leverage
(Dollars in thousands)	March 31, 2022
Total stockholders' equity	$	853,001
Adjustments:
LESS: Goodwill, net of associated deferred tax liabilities		299,983
LESS: Certain other intangible assets		30,007
LESS: Net deferred tax assets from operating loss and tax credit carry-forwards		13,404
LESS: Net unrealized gains (losses) on available for sale securities		(69,838	)
LESS: Noncontrolling interest		322
ADD: Adoption of Accounting Standards Update 2016-13		13,386
Common Equity Tier 1(1)		592,509
Tier 1 minority interest not included in common equity Tier 1 capital		208
Total Tier 1 capital	$	592,717
Total Assets (Quarter Average)	$	7,901,915
ADD: Available for sale securities amortized cost		51,403
ADD: Deferred tax		(12,948	)
ADD: Adoption of Accounting Standards Updated 2016-13		13,386
LESS: Deductions from CET1		343,394
Adjusted total assets	$	7,610,362
MetaBank Regulatory Tier 1 Leverage		7.79	%
Total Assets (Period End)	$	6,891,342
ADD: Available for sale securities amortized cost		93,354
ADD: Deferred tax		(23,516	)
ADD: Adoption of Accounting Standards Updated 2016-13		13,386
LESS: Deductions from CET1		343,394
Adjusted total assets	$	6,631,172
MetaBank Period-end Tier 1 Leverage		8.94	%

About Meta Financial Group, Inc.®

Meta Financial Group, Inc.® (Nasdaq: CASH) is a U.S.-based financial holding company driven by its purpose to power financial inclusion for all™. Through our subsidiary, MetaBank®, N.A., we strive to increase financial availability, choice, and opportunity across strategic service lines including Payments, Commercial Finance, and Consumer Solutions, which is comprised of tax services and consumer lending. These solutions are seamlessly integrated to provide end-to-end support to the individuals and businesses who are powering the everyone economy. On March 29, 2022, MetaBank announced it is changing its name to Pathward™, N.A., and Meta Financial Group, Inc. is changing its name to Pathward Financial, Inc.™. Meta Financial Group, Inc. will make certain changes immediately and fully transition to Pathward Financial, Inc.™ by the end of this calendar year. Learn more at MetaFinancialGroup.com.

View source version on businesswire.com: https://www.businesswire.com/news/home/20220428006016/en/

Investor Relations Contact

Justin Schempp

877-497-7497

jschempp@metabank.com

Media Relations Contact

mediarelations@metabank.com

Source: Meta Financial Group, Inc.

FAQ

What were Meta Financial Group's earnings for Q2 2022?

Meta Financial Group reported a net income of $49.3 million, or $1.66 per diluted share, for Q2 2022.

What is the adjusted net income for Meta Financial Group?

The adjusted net income for Q2 2022 was $51.4 million, or $1.73 per share, after accounting for rebranding expenses.

How did total revenue perform in Q2 2022 for Meta Financial Group?

Total revenue increased by 3% to $193.6 million in Q2 2022 compared to the same quarter in 2021.

What impact did rebranding expenses have on Meta Financial Group's earnings?

Meta Financial Group incurred $2.8 million in pre-tax expenses related to rebranding during Q2 2022.

What was the net interest margin for Meta Financial Group in Q2 2022?

The net interest margin for Q2 2022 increased to 4.80%, up from 3.07% in Q2 2021.