Meta Financial Group, Inc.® (Nasdaq: CASH) (“Meta” or the
“Company”) reported net income of $18.2 million, or $0.53 per
diluted share, for the three months ended June 30, 2020,
compared to net income of $29.3 million, or $0.75 per diluted
share, for the three months ended June 30, 2019.
“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, or 4%, to $3.50 billion, compared to June 30,
2019 and decreased $114.1 million, or 3% 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 of 46% 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 from 5.07% over the same period of the prior
fiscal year, while the tax-equivalent net interest margin ("NIM,
TE") decreased to 3.31% from 5.15% 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 $215.5 million in loan balances that were originated as
part of the program.
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 $169.0 million as of June 30, 2020 from
$160.1 million as of March 31, 2020 and the average loan-to-value
ratio on those loans improved to 60% at June 30, 2020 from 61% at
March 31, 2020. 67% of the loan balances for these hotel
relationships received PPP loans and 51% received some form of
payment deferral modifications.
As of June 30, 2020, the Company had $245.9
million in small ticket equipment finance balances, of which $217.3
million were categorized within term lending and $28.6 million were
categorized within lease financing. 27% of the balances on these
small ticket equipment finance relationships received some form of
payment deferral or other modifications.
The Company has granted deferral payments on a
total of $352.1 million of loan and lease balances through June 30,
2020 as a result of interagency guidance issued on March 22, 2020
encouraging companies to work with customers impacted by COVID-19.
As of June 30, 2020, loans and lease totaling $292.2 million were
still in their deferment period. In addition, the Company has made
other COVID-19 related modifications on a total of $52.9 million,
of which $34.6 million are still active as of June 30, 2020. The
majority of the other modifications were related to adjusting the
type or amount of the customer's payments.
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
6.89%. In addition, the Company has options available that can be
used to effectively manage capital levels through these turbulent
times, including a very strong and flexible balance sheet. The
Company's capital leverage ratio was impacted by approximately 278
basis points due to the increase in total asset balances as a
result of the EIP program.
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 $6.42 billion. As a result of the
program, the Company saw a quick influx of deposits to its balance
sheet in mid-May 2020 with limited visibility into the duration of
those deposits. While this program's impact to earnings was
negligible, it did have a significant impact on cash and deposit
balances, leading to a net drag on the net interest margin along
with pressuring the Company's leverage capital ratios.
The total balances remaining on the EIP cards as
of June 30, 2020 were $2.68 billion and $2.08 billion as of July
19, 2020. The funds on these cards increased the Company's
quarterly average noninterest deposit balances by $2.32 billion,
leading to an overall improvement in cost of deposits. This short
term influx of deposits also led to excess cash balances held at
the Federal Reserve during the current period, which yielded
approximately 10 basis points in interest income, and increased the
quarterly average of interest-earning assets compared to previous
periods. This increase of lower yielding cash balances resulted in
a drag to the overall yield on total interest-earning assets during
the current period. The net impact to NIM was approximately 140
basis points.
Net Interest IncomeNet interest
income for the fiscal 2020 third quarter was $62.1 million, a
decrease of 7%, from the same quarter in fiscal 2019. The decrease
was primarily driven by lower overall balances and yields realized
on the loan and lease portfolios along with a decrease in
investment securities balances, partially offset by a reduction in
total interest expense.
During the third quarter of fiscal year 2020,
loan and lease interest income decreased $9.8 million and
investment securities interest income decreased $4.4 million, when
compared to the same quarter in fiscal 2019, while interest expense
decreased $9.4 million over that same period. The quarterly average
outstanding balance of loans and leases as a percentage of
interest-earning assets for the quarter ended June 30, 2020
decreased to 48%, from 68% for the quarter ended June 30,
2019, while the quarterly average balance of total investments as a
percentage of interest-earning assets decreased to 17% from 31%
over that same period. These decreases were primarily due to the
increase in interest-earning cash balances related to the EIP
program. The Company’s average interest-earning assets for the
fiscal 2020 third quarter increased by $2.31 billion, to $7.61
billion from the comparable quarter in fiscal 2019, primarily due
to the effects of the EIP program.
NIM decreased to 3.28% for the fiscal 2020 third
quarter from 5.07% for the comparable quarter in fiscal 2019,
primarily due to the effects of the EIP program. The net effect of
purchase accounting accretion contributed two basis points to NIM
for the fiscal 2020 third quarter as compared to three basis points
and 25 basis points for the quarters ended March 31, 2020 and June
30, 2019, respectively.
The overall reported tax-equivalent yield
(“TEY”) on average earning asset yields decreased by 267 basis
points to 3.59% for the fiscal 2020 third quarter compared to the
fiscal 2019 third quarter, driven primarily by excess low-yielding
cash held at the Federal Reserve, along with a lower interest rate
environment. The fiscal 2020 third quarter TEY on the securities
portfolio was 2.22% compared to 3.09% for the same period of the
prior fiscal year.
The Company's cost of funds for all deposits and
borrowings averaged 0.28% during the fiscal 2020 third quarter,
compared to 1.14% for the fiscal 2019 third quarter. This decrease
was primarily due to a decrease in overnight borrowings rates as
well as an increase in the average balance of the Company's
noninterest-bearing deposits, mainly due to the EIP program noted
above. The Company's overall cost of deposits was 0.17% in the
fiscal third quarter of 2020, compared to 0.90% in the same quarter
of fiscal 2019.
Noninterest IncomeFiscal 2020
third quarter noninterest income was $41.0 million, compared to
$43.8 million for the same period of the prior year. This
year-over-year decrease was primarily due to lower total tax
product fee income and a reduction in gains on loan sales,
partially offset by an increase in rental income.
Noninterest ExpenseNoninterest
expense decreased 2% to $71.2 million for the fiscal 2020 third
quarter, from $72.5 million for the same quarter of fiscal 2019,
primarily driven by lower compensation and benefits, intangible
amortization, total tax product expense, and occupancy and
equipment expenses, partially offset by higher card processing
expenses and operating lease equipment depreciation.
Income Tax ExpenseThe Company
recorded an income tax benefit of $2.4 million, representing an
effective tax rate of (14.4%), for the fiscal 2020 third quarter,
compared to an income tax benefit of $1.2 million, representing an
effective tax rate of (4.0)%, for the fiscal 2019 third quarter.
The recorded income tax benefit during the current quarter was
primarily due to ratably recognized investment tax credits and
lower forecast earnings due to COVID-19.
The Company originated $1.3 million in solar
leases during the fiscal 2020 third quarter, compared to $49.1
million during the fiscal 2019 third quarter. Investment tax
credits related to solar leases are recognized ratably based on
income throughout each fiscal year. The timing and impact of future
solar tax credits are expected to vary from period to period, and
Meta intends to undertake only those tax credit opportunities that
meet the Company's underwriting and return criteria.
Investments, Loans and
Leases
|
June 30,
2020 |
|
March 31,
2020 |
|
December 31,
2019 |
|
September
30, 2019 |
|
June 30,
2019 |
Total investments |
$ |
1,268,416 |
|
|
$ |
1,310,476 |
|
|
$ |
1,337,840 |
|
|
$ |
1,407,257 |
|
|
$ |
1,502,640 |
|
|
|
|
|
|
|
|
|
|
|
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 $28.7 million of commercial real estate and operating
loans, $11.3 million of consumer one-to-four family real estate and
other loans, and $8.1 million of agricultural real estate and
operating loans. The December 31, 2019 balance included
approximately $197.5 million of commercial real estate and
operating loans, $40.4 million of consumer one-to-four family real
estate and other loans, and $12.7 million of agricultural real
estate and operating loans.
(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 $188.3 million and the remaining
balances of the credit and interest rate mark discounts related to
the acquired loans and leases held for investment were $3.4 million
and $2.9 million, respectively. On August 1, 2018, the Company
acquired loans and leases from the Crestmark Acquisition totaling
$1.06 billion and recorded related credit and interest rate mark
discounts of $12.3 million and $6.0 million, respectively.
The Company's investment security balances
continued to decline at June 30, 2020 to a total of $1.27
billion, as compared to $1.50 billion at June 30, 2019.
Total gross loans and leases decreased $129.3
million, or 4%, to $3.50 billion at June 30, 2020, from $3.63
billion at June 30, 2019, with most of the decline
attributable to the sale of community bank loan balances during the
second quarter of fiscal 2020 along with a decrease in the consumer
finance portfolio, partially offset by growth in the commercial
finance portfolio.
At June 30, 2020, commercial finance loans,
which comprised 62% of the Company's gross loan and lease
portfolio, totaled $2.16 billion, reflecting growth of $132.6
million, or 7%, from March 31, 2020. SBA/USDA loans at June 30,
2020 increased by $216.6 million compared to March 31, 2020, with
$215.5 million of the sequential increase related to PPP loans.
Warehouse finance loans totaled $277.6 million at June 30,
2020, a 17% decrease from March 31, 2020.
Community bank loans totaled $799.4 million as
of June 30, 2020, as compared to $896.2 million at March 31,
2020 and $1.20 billion at June 30, 2019. As of June 30, 2020, the
Company had $48.1 million of community bank loans classified as
held for sale and expects to sell those loans during the fourth
quarter of fiscal 2020.
Asset QualityThe Company’s
allowance for loan and lease losses was $65.7 million at
June 30, 2020, compared to $43.5 million at June 30,
2019, driven primarily by increases in the allowance of $17.1
million in commercial finance and $12.0 million in the community
banking portfolio, partially offset by decreases in the tax
services and consumer lending portfolios of $4.0 million and $2.9
million, respectively.
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 |
|
|
|
|
|
Commercial finance |
1.36 |
% |
|
1.28 |
% |
0.67 |
% |
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 $3.4 million balance of the credit mark to the
allowance for loan and lease losses, the commercial finance
coverage ratio increases to 1.52% and the total loans and leases
coverage ratio increases to 1.98%, as of June 30, 2020. Within
commercial finance, the coverage ratio on Crestmark division loans
and leases was 1.52% at June 30, 2020, as compared to 1.41% at
March 31, 2020 and 0.77% at June 30, 2019, and the coverage ratio
on the insurance premium finance portfolio over those same periods
were 0.66%, 0.64%, and 0.28%, respectively.
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) |
|
|
|
|
|
|
|
|
|
Beginning balance |
$ |
65,355 |
|
|
$ |
30,176 |
|
|
$ |
48,672 |
|
|
$ |
29,149 |
|
|
$ |
13,040 |
|
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 $15.1
million for the quarter ended June 30, 2020, compared to $9.1
million for the comparable period in the prior fiscal year. The
increase in provision was primarily within the remaining community
banking and commercial finance portfolios, partially offset by
decreases in the consumer finance and tax services portfolios.
Provision increases in the community banking and commercial finance
portfolios was primarily attributable to the increased stress that
the hospitality loans and its small ticket equipment finance
relationships have experienced stemming from the ongoing economic
uncertainty related to the COVID-19 pandemic. Loans and leases that
received short-term payment deferrals were also analyzed and
additional provision was applied as appropriate. Management
believes that given the structure of the credit protections put in
place for the consumer and warehouse finance lending lines, the
coverage ratio for those loan portfolios was adequate as of June
30, 2020. Net charge-offs were $14.7 million for the quarter ended
June 30, 2020 compared to $14.3 million for the quarter ended
June 30, 2019. Total net charge-offs for the quarter ended
June 30, 2020 consisted primarily of seasonal net charge-offs of
$9.8 million in the tax services loan portfolio. The overall
increase in total net charge-offs from the comparable quarter of
the prior fiscal year was primarily within the commercial finance
portfolio, offset partially by a decrease in the consumer finance
portfolio.
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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial finance |
$ |
13,865 |
|
|
$ |
16,005 |
|
|
$ |
27,150 |
|
|
$ |
57,020 |
|
|
$ |
2,101,885 |
|
|
$ |
2,158,905 |
|
|
$ |
8,635 |
|
|
$ |
22,285 |
|
|
$ |
30,920 |
|
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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial finance |
$ |
35,810 |
|
|
$ |
7,487 |
|
|
$ |
18,721 |
|
|
$ |
62,018 |
|
|
$ |
1,964,329 |
|
|
$ |
2,026,347 |
|
|
$ |
9,372 |
|
|
$ |
16,024 |
|
|
$ |
25,396 |
|
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 $56.1 million, representing 0.64% of total
assets, compared to $39.4 million, or 0.67% of total assets at
March 31, 2020 and $51.0 million, or 0.84% of total assets at
June 30, 2019. The increase in nonperforming assets on a
linked quarter basis was primarily driven by an increase in
commercial finance and community banking nonperforming loans and
leases, as well as an increase in nonperforming operating leases.
The year-over-year increase in nonperforming assets was primarily
driven by an increase in commercial finance nonperforming loans and
leases and an increase in nonperforming operating leases, mostly
offset by a reduction in foreclosed and repossessed assets. The
decrease in nonperforming assets as a percentage of total assets
was primarily due to higher period-end assets at June 30, 2020
related to excess cash held at the Federal Reserve stemming from
the additional EIP deposit balances.
The Company's nonperforming loans and leases at
June 30, 2020, were $39.3 million, representing 1.10% of total
gross loans and leases, compared to $31.5 million, or 0.87% of
total gross loans and leases at March 31, 2020 and $20.8 million,
or 0.57% of total gross loans and leases at June 30, 2019.
Deposits, Borrowings and Other
LiabilitiesTotal average deposits for the fiscal 2020
third quarter increased by $2.61 billion to $7.22 billion compared
to the same period in fiscal 2019, primarily due to the effects of
the EIP program. Average noninterest-bearing deposits increased
$3.35 billion, or 123%, for the fiscal 2020 third quarter when
compared to the same period in fiscal 2019, while average wholesale
deposits decreased $704.2 million, or 46%. Average deposits from
the payments divisions increased 131% to $6.32 billion for the
fiscal 2020 third quarter when compared to the same period in
fiscal 2019. Excluding the balances on the EIP cards, average
payments deposits for the fiscal 2020 third quarter were $3.99
billion, representing an increase of 46% compared to the same
period of the prior year, which was largely driven by various
stimulus payments loaded on partner cards along with lower levels
of consumer spending.
The average balance of total deposits and
interest-bearing liabilities was $7.49 billion for the three-month
period ended June 30, 2020, compared to $5.14 billion for the
same period in the prior fiscal year, representing an increase of
46%.
Total end-of-period deposits increased 59% to
$7.59 billion at June 30, 2020, compared to $4.78 billion at
June 30, 2019. The increase in end-of-period deposits was
primarily driven by an increase in noninterest bearing deposits
of $4.18 billion, of which $2.68 billion was attributable to
the balances on the EIP cards. The increase in total end-of-period
deposits was partially offset by a decrease of $884.2 million in
wholesale deposits, as well as the sale of $290.5 million of
community bank deposits during the second quarter of fiscal
2020.
Regulatory CapitalThe 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 |
|
|
|
|
|
|
|
|
|
Tier 1 leverage capital ratio |
5.91 |
% |
|
7.28 |
% |
|
8.28 |
% |
|
8.33 |
% |
|
8.05 |
% |
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) |
|
|
|
|
|
|
|
|
|
Total stockholders' equity |
$ |
829,909 |
|
|
$ |
805,074 |
|
|
$ |
837,068 |
|
|
$ |
843,958 |
|
|
$ |
822,901 |
|
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) |
|
|
|
|
|
|
|
|
|
Total Stockholders' Equity |
$ |
829,909 |
|
|
$ |
805,074 |
|
|
$ |
837,068 |
|
|
$ |
843,958 |
|
|
$ |
822,901 |
|
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 CallThe 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 StatementsThe
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 |
Cash and cash
equivalents |
$ |
3,108,141 |
|
|
$ |
108,733 |
|
|
$ |
152,189 |
|
|
$ |
126,545 |
|
|
$ |
100,732 |
|
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: |
|
|
|
|
|
|
|
|
|
Loans and leases, including fees |
$ |
59,911 |
|
|
$ |
70,493 |
|
|
$ |
69,732 |
|
|
$ |
199,107 |
|
|
$ |
203,900 |
|
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: |
|
|
|
|
|
|
|
|
|
|
|
Cash and fed funds sold |
$ |
2,692,270 |
|
|
$ |
783 |
|
|
0.12 |
% |
|
$ |
80,100 |
|
|
$ |
521 |
|
|
2.61 |
% |
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 21%.(2) Of the total balance,
$226.1 million are interest-bearing deposits where interest expense
is paid by a third party and not by the Company.(3) Net interest
margin expressed on a fully-taxable-equivalent basis ("net interest
margin, tax-equivalent") is a non-GAAP financial measure. The
tax-equivalent adjustment to net interest income recognizes the
estimated income tax savings when comparing taxable and tax-exempt
assets and adjusting for federal and state exemption of interest
income. The Company believes that it is a standard practice in the
banking industry to present net interest margin expressed on a
fully taxable equivalent basis and, accordingly, believes the
presentation of this non-GAAP financial measure may be useful for
peer comparison purposes.
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 |
% |
Book value per common share outstanding |
$ |
23.96 |
|
|
$ |
23.26 |
|
|
$ |
22.52 |
|
|
$ |
22.32 |
|
|
$ |
21.72 |
|
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 |
|
|
|
|
|
|
|
|
|
|
Amortization of intangibles(1) |
$ |
2,636 |
|
$ |
2,265 |
|
$ |
2,013 |
|
$ |
2,757 |
|
$ |
2,013 |
|
$ |
1,761 |
|
$ |
1,488 |
|
$ |
2,170 |
|
$ |
1,176 |
|
(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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