Meta Financial Group, Inc.® (Nasdaq: CASH) (“Meta” or the
“Company”) reported net income of $13.2 million, or $0.38 per
diluted share, for the three months ended September 30, 2020,
compared to net income of $20.2 million, or $0.53 per diluted
share, for the three months ended September 30, 2019. The
Company reported record net income of $104.7 million, or $2.94 per
diluted share, for the fiscal year ended September 30, 2020,
compared to net income of $97.0 million, or $2.49 per diluted
share, for the fiscal year ended September 30, 2019.
“I am extremely proud of our team for executing
on our plan and our ability to deliver strong financial results and
value to shareholders despite numerous challenges we faced during
fiscal 2020,” said President and CEO Brad Hanson. “We will continue
to be diligent in monitoring credit, managing excess capital, and
focusing on our long-term strategic plan in order to better serve
our customers and shareholders."
Business Developments
- The Company resumed its share repurchase program ("Program"),
which it had suspended during March 2020 as a result of the
uncertainty related to the COVID-19 pandemic. During the quarter
ended September 30, 2020, the Company repurchased 260,816 shares,
at an average price of $19.13, under its Program, which is
authorized through December 31, 2022. Through October 23, 2020, the
Company has repurchased a total of 898,416 of its shares, at a
weighted average price of $21.80, since the Company resumed
repurchasing shares under the Program in September 2020.
- On August 5, 2020, MetaBank, N.A., a wholly-owned subsidiary of
the Company ("MetaBank" or the "Bank"), entered into a three-year
program management agreement with Emerald Financial Services, LLC,
a wholly owned indirect subsidiary of H&R Block, Inc., pursuant
to which MetaBank will serve as a facilitator for H&R Block’s
suite of financial services products, which include: Emerald
Prepaid MasterCard®, Refund Transfers, Refund Advances, Emerald
Advance® lines of credit, and other products through H&R
Block’s distribution channels.
- The Company continued its support of various COVID-19 relief
efforts including the Economic Impact Payment ("EIP") program and
the Paycheck Protection Program ("PPP"), which are further
described below.
Financial Highlights for the 2020 Fiscal Fourth Quarter
and Year Ended September 30, 2020
- Total gross loans and leases at September 30, 2020
decreased $337.3 million, or 9%, to $3.31 billion, compared to
September 30, 2019 and decreased $182.6 million, or 5% when
compared to June 30, 2020.
- Average deposits from the payments divisions for the fiscal
2020 fourth quarter increased nearly 121% to $5.82 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 fourth quarter were approximately $4.20
billion, representing an increase of 60% compared to the same
quarter in fiscal 2019.
- Total revenue for the fiscal 2020 fourth quarter was $105.3
million, compared to $101.6 million for the same quarter in fiscal
2019. Total revenue for the fiscal year ended September 30, 2020
was $498.8 million, an increase of 2% from the fiscal year ended
September 30, 2019.
- Net interest income for the fiscal 2020 fourth quarter was
$64.5 million, compared to $65.6 million in the comparable quarter
in fiscal 2019. Total fiscal year 2020 net interest income was
$259.0 million versus $264.2 million in the prior fiscal year.
- Net interest margin ("NIM") decreased to 3.77% for the fiscal
2020 fourth quarter from 4.95% over the same period of the prior
fiscal year, while the tax-equivalent net interest margin ("NIM,
TE") decreased to 3.79% from 5.00% for that same period in fiscal
2019. NIM for the 2020 fiscal year was 4.09% compared to 4.91%
during fiscal year 2019 while NIM, TE, decreased to 4.12% for
fiscal year 2020 from 5.02% for fiscal year 2019. The decrease in
NIM during the fiscal 2020 fourth quarter and 2020 fiscal year was
primarily driven by excess cash associated with the Company's
participation in the EIP program, as described further below.
COVID-19 Business Update
The Company is participating in the PPP which is
being administered by the Small Business Administration ("SBA"). As
of September 30, 2020, the Company had 689 loans outstanding with a
total of $219.0 million in loan balances that were originated as
part of the program.
From a credit perspective, the Company continues
to closely monitor each of its lending portfolios. The Company has
placed significant focus on its hospitality and movie theater loans
and its small ticket equipment finance relationships. The credit
management team has remained in regular contact with these
borrowers.
The Company's community bank hospitality loan
balances increased to $179.3 million as of September 30, 2020 from
$169.0 million as of June 30, 2020 and the average loan-to-value
ratio on those loans was 60% at both September 30, 2020 and June
30, 2020. 67% of these hospitality relationships received PPP loans
and, as of September 30, 2020, 44% of the hospitality loan balances
received some form of payment deferral modification and were still
in their active deferment period. Community Bank loans to borrowers
operating in the movie theater industry totaled $17.9 million as of
both September 30, 2020 and June 30, 2020. As of September 30,
2020, all movie theater loan balances were still in their active
deferment period.
As of September 30, 2020, the Company had $287.2
million in small ticket equipment finance balances, of which $255.1
million were categorized within term lending and $32.1 million were
categorized within lease financing. Borrowers with respect to 8% of
the balances on these small ticket equipment finance relationships
that received some form of payment deferral modification were still
in their active deferment period.
As of September 30, 2020, $170.0 million of the
loans and leases that were granted deferral payments by the Company
were still in their deferment period. As of June 30, 2020, loans
and leases totaling $292.2 million were within their deferment
period. In addition, the Company has made other COVID-19 related
modifications, of which $23.3 million were still active as of
September 30, 2020 compared to $34.6 million at June 30, 2020. The
majority of the other modifications were related to adjusting the
type or amount of the customer's payments.
When excluding its seasonal tax services lending
portfolio, the Company increased its allowance for loan and lease
losses by $1.9 million at September 30, 2020, as compared to June
30, 2020. This was primarily due to the effects of the on-going
COVID-19 pandemic and the continued economic uncertainty that it
has caused. 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 September 30, 2020, even while absorbing the temporary impact
from the EIP program, as described further below. As of September
30, 2020, the Bank's capital leverage ratio based on average assets
was 7.56%. The Bank's capital leverage ratio based on September 30,
2020 period-end assets was 9.66%, which better reflects the
Company's anticipated balance sheet going forward. See non-GAAP
reconciliation table below. In addition, the Company has options
available that can be used to effectively manage capital levels
through these turbulent times, including a strong and flexible
balance sheet.
EIP Program 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 a total load balance 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 the EIP 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 NIM along with a
corresponding impact on the Company's leverage capital ratios.
The total balances remaining on the EIP cards
were $942.2 million as of September 30, 2020 and $828.5 million as
of October 23, 2020. The funds on these cards increased the
Company's quarterly average noninterest deposit balances by $1.62
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 during the
current quarter was approximately 110 basis points.
Net Interest IncomeNet interest
income for the fiscal 2020 fourth quarter was $64.5 million, a
decrease of 2%, 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 fourth quarter of fiscal year 2020,
loan and lease interest income decreased $8.6 million and
investment securities interest income decreased $3.8 million, when
compared to the same quarter in fiscal 2019, while interest expense
decreased $11.3 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 September 30,
2020 decreased to 52%, from 71% for the quarter ended
September 30, 2019, while the quarterly average balance of
total investments as a percentage of interest-earning assets
decreased to 19% from 28% 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 fourth quarter
increased by $1.55 billion, to $6.81 billion from the comparable
quarter in fiscal 2019, primarily due to the effects of the EIP
program.
NIM decreased to 3.77% for the fiscal 2020
fourth quarter from 4.95% for the comparable quarter in fiscal
2019, primarily due to the effects of the EIP program.
The overall reported tax-equivalent yield
(“TEY”) on average earning asset yields decreased by 213 basis
points to 4.02% for the fiscal 2020 fourth quarter compared to the
fiscal 2019 fourth quarter, driven primarily by excess low-yielding
cash held at the Federal Reserve, along with a lower interest rate
environment. The fiscal 2020 fourth quarter TEY on the securities
portfolio was 1.78% compared to 2.83% for the same period of the
prior fiscal year.
The Company's cost of funds for all deposits and
borrowings averaged 0.23% during the fiscal 2020 fourth quarter,
compared to 1.17% for the fiscal 2019 fourth 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 0.12% in the
fiscal fourth quarter of 2020, compared to 0.95% in the same
quarter of fiscal 2019.
Noninterest IncomeFiscal 2020
fourth quarter noninterest income was $40.8 million, compared to
$36.0 million for the same period of the prior year. This
year-over-year increase was primarily due to higher total tax
product fee income, an increase in gains on loan sales, an increase
in other income, and an increase in payments cards and deposit
fees, partially offset by a decrease in rental income and other
bank and deposit fees.
Noninterest ExpenseNoninterest
expense increased 5% to $80.3 million for the fiscal 2020 fourth
quarter, from $76.1 million for the same quarter of fiscal 2019,
primarily driven by an increase in other expense, card processing
expense, and impairment expense, partially offset by a reduction in
compensation and benefits expense and amortization expense. The
increase in other expense included a pre-tax charge of $1.7
million, or $0.05 per diluted share, for the early extinguishment
of outstanding FHLB debt, which had a balance of $110.0 million at
a weighted average cost of 2.41%. While compensation and benefits
expense was reduced compared to the same quarter of fiscal 2019, it
includes pre-tax employee separation-related expenses of $1.5
million, or $0.04 per diluted share, for the fiscal 2020 fourth
quarter.
Income Tax ExpenseThe Company
recorded income tax expense of $1.8 million, representing an
effective tax rate of 11.2%, for the fiscal 2020 fourth quarter,
compared to an income tax benefit of $0.1 million, representing an
effective tax rate of (0.6)%, for the fiscal 2019 fourth quarter.
The recorded income tax expense during the current quarter was
primarily due to a reduction in investment tax credits from
originated solar leases in fiscal year 2020 as compared to the
fiscal year 2019. For the 2020 fiscal year, the Company's effective
tax rate was 4.9%, compared to (3.4)% for the 2019 fiscal year.
The Company originated $41.1 million in solar
leases during the fiscal 2020 fourth quarter, compared to $19.7
million during the fiscal 2019 fourth quarter. The Company
originated $77.8 million in solar leases for the 2020 fiscal year,
compared to $104.4 million during the 2019 fiscal year. Investment
tax credits related to solar leases are recognized ratably based on
income throughout each fiscal year. The timing and impact of future
solar tax credits are expected to vary from period to period, and
Meta intends to undertake only those tax credit opportunities that
meet the Company's underwriting and return criteria.
Investments, Loans and Leases
|
September 30, 2020 |
|
June 30, 2020 |
|
March 31, 2020 |
|
December 31, 2019 |
|
September 30, 2019 |
Total investments |
$ |
1,360,712 |
|
|
$ |
1,268,416 |
|
|
$ |
1,310,476 |
|
|
$ |
1,337,840 |
|
|
$ |
1,407,257 |
|
|
|
|
|
|
|
|
|
|
|
Loans held for sale |
|
|
|
|
|
|
|
|
|
Consumer credit products |
962 |
|
|
391 |
|
|
— |
|
|
— |
|
|
122,299 |
|
SBA/USDA |
52,542 |
|
|
31,438 |
|
|
13,610 |
|
|
13,883 |
|
|
26,478 |
|
Community Bank(1) |
130,073 |
|
|
48,076 |
|
|
— |
|
|
250,383 |
|
|
— |
|
Total loans held for sale |
183,577 |
|
|
79,905 |
|
|
13,610 |
|
|
264,266 |
|
|
148,777 |
|
|
|
|
|
|
|
|
|
|
|
National Lending |
|
|
|
|
|
|
|
|
|
Term lending(2) |
805,323 |
|
|
738,454 |
|
|
725,581 |
|
|
695,347 |
|
|
641,742 |
|
Asset based lending(2) |
182,419 |
|
|
181,130 |
|
|
250,211 |
|
|
250,633 |
|
|
250,465 |
|
Factoring |
281,173 |
|
|
206,361 |
|
|
285,495 |
|
|
285,776 |
|
|
296,507 |
|
Lease financing(2) |
281,084 |
|
|
264,988 |
|
|
238,788 |
|
|
223,715 |
|
|
177,915 |
|
Insurance premium finance |
337,940 |
|
|
359,147 |
|
|
332,800 |
|
|
349,299 |
|
|
361,105 |
|
SBA/USDA |
318,387 |
|
|
308,611 |
|
|
92,000 |
|
|
90,269 |
|
|
88,831 |
|
Other commercial finance |
101,658 |
|
|
100,214 |
|
|
101,472 |
|
|
99,617 |
|
|
99,665 |
|
Commercial Finance |
2,307,984 |
|
|
2,158,905 |
|
|
2,026,347 |
|
|
1,994,656 |
|
|
1,916,230 |
|
Consumer credit products |
89,809 |
|
|
102,808 |
|
|
113,544 |
|
|
115,843 |
|
|
106,794 |
|
Other consumer finance |
134,342 |
|
|
138,777 |
|
|
144,895 |
|
|
154,772 |
|
|
161,404 |
|
Consumer Finance |
224,151 |
|
|
241,585 |
|
|
258,439 |
|
|
270,615 |
|
|
268,198 |
|
Tax Services |
3,066 |
|
|
19,168 |
|
|
95,936 |
|
|
101,739 |
|
|
2,240 |
|
Warehouse Finance |
293,375 |
|
|
277,614 |
|
|
333,829 |
|
|
272,522 |
|
|
262,924 |
|
Total National Lending loans and leases |
2,828,576 |
|
|
2,697,272 |
|
|
2,714,551 |
|
|
2,639,532 |
|
|
2,449,592 |
|
Community Banking |
|
|
|
|
|
|
|
|
|
Commercial real estate and
operating |
457,371 |
|
|
608,303 |
|
|
654,429 |
|
|
682,399 |
|
|
883,932 |
|
Consumer one-to-four family
real estate and other |
16,486 |
|
|
166,479 |
|
|
205,046 |
|
|
220,588 |
|
|
259,425 |
|
Agricultural real estate and
operating |
11,707 |
|
|
24,655 |
|
|
36,759 |
|
|
40,778 |
|
|
58,464 |
|
Total Community Banking loans |
485,564 |
|
|
799,437 |
|
|
896,234 |
|
|
943,765 |
|
|
1,201,821 |
|
Total gross loans and
leases |
3,314,140 |
|
|
3,496,709 |
|
|
3,610,785 |
|
|
3,583,297 |
|
|
3,651,413 |
|
Allowance for loan and lease losses |
(56,188 |
) |
|
(65,747 |
) |
|
(65,355 |
) |
|
(30,176 |
) |
|
(29,149 |
) |
Net deferred loan and lease origination fees |
8,625 |
|
|
5,937 |
|
|
8,139 |
|
|
7,177 |
|
|
7,434 |
|
Total loans and leases, net of
allowance(3) |
$ |
3,266,577 |
|
|
$ |
3,436,899 |
|
|
$ |
3,553,569 |
|
|
$ |
3,560,298 |
|
|
$ |
3,629,698 |
|
(1) The September 30, 2020 balance included
approximately $77.5 million of commercial real estate and operating
loans, $50.1 million of consumer one-to-four family real estate and
other loans, and $2.5 million of agricultural real estate and
operating loans. 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 September 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 $149.1 million and
the remaining balances of the credit and interest rate mark
discounts related to the acquired loans and leases held for
investment were $2.8 million and $2.3 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 at
September 30, 2020 totaled $1.36 billion, as compared to $1.27
billion at June 30, 2020 and $1.41 billion at September 30,
2019. The increase in balances at September 30, 2020 compared to
June 30, 2020 was due to an increase in mortgage-backed securities
of $114.4 million as the Company utilized its growing deposit base
to fund investment securities.
Total gross loans and leases decreased $337.3
million, or 9%, to $3.31 billion at September 30, 2020, from
$3.65 billion at September 30, 2019, with most of the decline
attributable to the sale of community bank loan balances during the
second and fourth quarters of fiscal 2020 along with a decrease in
the consumer finance portfolio, partially offset by growth in the
commercial finance and warehouse finance portfolios.
At September 30, 2020, commercial finance
loans, which comprised 70% of the Company's gross loan and lease
portfolio, totaled $2.31 billion, reflecting growth of $149.1
million, or 7%, from June 30, 2020. The increase in commercial
finance loans was primarily due to increases in factoring and term
lending loans of $74.8 million and $66.9 million, respectively,
partially offset by a $21.2 million decrease in insurance premium
finance loans. Warehouse finance loans totaled $293.4
million at September 30, 2020, a 6% increase from June 30,
2020.
Community bank loans held for investment totaled
$485.6 million as of September 30, 2020, as compared to $799.4
million at June 30, 2020 and $1.20 billion at September 30, 2019.
On August 4, 2020 and September 17, 2020, the Company sold an
additional $58.6 million and $76.4 million, respectively, of the
retained Community Bank portfolio to Central Bank. The sales did
not result in any material gain to the Company. As of September 30,
2020, the Company had $130.1 million of community bank loans
classified as held for sale and expects to sell those loans during
the first quarter of fiscal year 2021.
Asset QualityThe Company’s
allowance for loan and lease losses was $56.2 million at
September 30, 2020, compared to $65.7 million at June 30, 2020
and $29.1 million at September 30, 2019. The decrease in the
allowance at September 30, 2020 when compared to June 30, 2020, was
primarily due to reductions of $11.4 million within the tax
services portfolio and $0.6 million in the consumer finance
portfolio, partially offset by increases within the retained
community bank and commercial finance portfolios of $1.9 million
and $0.5 million, respectively.
The year over year increase in the allowance was
primarily driven by a $15.3 million increase within the commercial
finance portfolio and $14.2 million increase within the retained
community banking portfolio, partially offset by a reduction in the
consumer lending portfolio of $2.5 million.
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) |
September 30, 2020 |
|
June 30, 2020 |
September 30, 2019 |
|
|
|
|
|
Commercial finance |
1.30 |
% |
|
1.36 |
% |
0.76 |
% |
Consumer finance |
1.64 |
% |
|
1.75 |
% |
2.30 |
% |
Tax services |
0.06 |
% |
|
59.67 |
% |
— |
% |
Warehouse finance |
0.10 |
% |
|
0.10 |
% |
0.10 |
% |
National Lending |
1.20 |
% |
|
1.68 |
% |
0.86 |
% |
Community Bank |
4.59 |
% |
|
2.55 |
% |
0.68 |
% |
Total loans and leases |
1.70 |
% |
|
1.88 |
% |
0.80 |
% |
The Company's allowance for loan and lease
losses as a percentage of total loans and leases decreased to 1.70%
at September 30, 2020 from 1.88% at June 30, 2020. This reduction
was primarily due to seasonal charge-off activity within the tax
services portfolio, and to a lesser extent, a lower coverage ratio
within the commercial finance portfolio. The commercial finance
coverage ratio decreased as a result of the Company's continued
assessment of the risks associated with the ongoing COVID-19
pandemic. The decrease in the total Company coverage ratio was
partially offset by an increase to the coverage ratio within the
retained community bank portfolio due to identified risks impacting
its movie theater relationships stemming from the ongoing COVID-19
pandemic. Consumer finance and warehouse finance remained largely
unchanged due in part 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 $2.8 million balance of the
credit mark to the allowance for loan and lease losses, the
commercial finance coverage ratio increases to 1.41% and the total
loans and leases coverage ratio increases to 1.77%, as of September
30, 2020. Within commercial finance, the coverage ratio on
Crestmark division loans and leases was 1.42% at September 30,
2020, as compared to 1.52% at June 30, 2020 and 0.88% at September
30, 2019, and the coverage ratio on the insurance premium finance
portfolio over those same periods were 0.63%, 0.66%, and
0.28%, respectively.
Activity in the allowance for loan and lease
losses for the periods presented were as follows.
(Unaudited) |
Three Months Ended |
|
Year Ended |
|
September 30, 2020 |
|
June 30, 2020 |
|
September 30, 2019 |
|
September 30, 2020 |
|
September 30, 2019 |
(Dollars in thousands) |
|
|
|
|
|
|
|
|
|
Beginning balance |
$ |
65,747 |
|
|
$ |
65,355 |
|
|
$ |
43,505 |
|
|
$ |
29,149 |
|
|
$ |
13,040 |
|
Provision - tax services loans |
1,599 |
|
|
(100 |
) |
|
(9 |
) |
|
22,006 |
|
|
24,873 |
|
Provision - all other loans and leases |
7,381 |
|
|
15,193 |
|
|
4,130 |
|
|
42,770 |
|
|
30,776 |
|
Charge-offs - tax services loans |
(13,037 |
) |
|
(9,797 |
) |
|
(15,426 |
) |
|
(22,834 |
) |
|
(25,096 |
) |
Charge-offs - all other loans and leases |
(6,015 |
) |
|
(5,807 |
) |
|
(3,351 |
) |
|
(18,927 |
) |
|
(17,758 |
) |
Recoveries - tax services loans |
3 |
|
|
14 |
|
|
10 |
|
|
830 |
|
|
223 |
|
Recoveries - all other loans and leases |
510 |
|
|
889 |
|
|
290 |
|
|
3,194 |
|
|
3,091 |
|
Ending balance |
$ |
56,188 |
|
|
$ |
65,747 |
|
|
$ |
29,149 |
|
|
$ |
56,188 |
|
|
$ |
29,149 |
|
Provision for loan and lease losses was $9.0
million for the quarter ended September 30, 2020, compared to
$4.1 million for the comparable period in the prior fiscal year.
The increase in provision was primarily within the retained
community bank, tax services, and commercial finance portfolios,
partially offset by a decrease in the consumer finance portfolio.
Provision increases in the community bank and commercial finance
portfolios were primarily attributable to movie theater,
hospitality, and small ticket equipment finance relationships that
have experienced ongoing stress related to the COVID-19 pandemic.
Additional provisions were also applied to loans and leases that
received short-term payment deferrals. Net charge-offs were $18.5
million for the quarter ended September 30, 2020 compared to
$18.5 million for the quarter ended September 30, 2019. Total
net charge-offs for the quarter ended September 30, 2020 consisted
primarily of seasonal net charge-offs of $13.0 million in the tax
services loan portfolio.
The Company's past due loans and leases were as follows for the
periods presented.
As of September 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 |
$ |
13,338 |
|
$ |
14,345 |
|
$ |
16,663 |
|
$ |
44,346 |
|
$ |
2,263,638 |
|
$ |
2,307,984 |
|
$ |
7,400 |
|
$ |
21,553 |
|
$ |
28,953 |
Consumer finance |
977 |
|
894 |
|
872 |
|
2,743 |
|
221,408 |
|
224,151 |
|
872 |
|
— |
|
872 |
Tax services |
— |
|
— |
|
1,743 |
|
1,743 |
|
1,323 |
|
3,066 |
|
1,744 |
|
— |
|
1,744 |
Warehouse finance |
— |
|
— |
|
— |
|
— |
|
293,375 |
|
293,375 |
|
— |
|
— |
|
— |
Total National Lending |
14,315 |
|
15,239 |
|
19,278 |
|
48,832 |
|
2,779,744 |
|
2,828,576 |
|
10,016 |
|
21,553 |
|
31,569 |
Total Community Banking |
905 |
|
114 |
|
2,449 |
|
3,468 |
|
482,096 |
|
485,564 |
|
50 |
|
2,399 |
|
2,449 |
Total loans and leases held
for investment |
$ |
15,220 |
|
$ |
15,353 |
|
$ |
21,727 |
|
$ |
52,300 |
|
$ |
3,261,840 |
|
$ |
3,314,140 |
|
$ |
10,066 |
|
$ |
23,952 |
|
$ |
34,018 |
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 |
The Company's nonperforming assets at
September 30, 2020, were $48.0 million, representing 0.79% of
total assets, compared to $56.1 million, or 0.64% of total assets
at June 30, 2020 and $56.5 million, or 0.91% of total assets at
September 30, 2019. The decrease in nonperforming assets on a
linked quarter basis was primarily driven by a decrease in
nonperforming operating leases, a decrease in community bank
nonperforming loans, and a decrease in commercial finance
nonperforming loans and leases, partially offset by an increase in
foreclosed and repossessed assets and an increase in nonperforming
tax services loans. The year-over-year decrease in nonperforming
assets was primarily driven by a reduction in foreclosed and
repossessed assets, partially offset by an increase in
nonperforming loans and leases within the commercial finance and
community bank portfolios, as well as an increase in nonperforming
operating leases. The increase in nonperforming assets as a
percentage of total assets at September 30, 2020 was primarily due
to lower period-end assets, when compared to June 30, 2020.
The Company's nonperforming loans and leases at
September 30, 2020, were $34.0 million, representing 0.97% of
total gross loans and leases, compared to $39.3 million, or 1.10%
of total gross loans and leases at June 30, 2020 and $26.5 million,
or 0.70% of total gross loans and leases at September 30,
2019.
At September 30, 2020, the balance of the
Company's loans and leases past due 30 days or greater decreased
42% to $52.3 million when compared to June 30, 2020. When excluding
tax services loans, the balance of loans and leases past due 30
days or greater decreased to $50.6 million at September 30, 2020
from $71.6 million at June 30, 2020. Loan and lease balances that
were within their active deferment period decreased to $170.0
million at September 30, 2020 from $292.2 million at June 30,
2020.
Adoption of Current Expected Credit
Losses ("CECL") Accounting Standard
The Company adopted CECL effective October 1,
2020, and expects its day one entry to increase the allowance for
credit losses to be between $13 million and $14 million.
Aside from the loan and lease portfolio, management does not expect
any other meaningful impacts on the balance sheet or regulatory
capital ratios in the near term based on the election of the
two-year delay and the five-year total transition period as allowed
by the Office of the Comptroller of the Currency.
Deposits, Borrowings and Other
LiabilitiesTotal average deposits for the fiscal 2020
fourth quarter increased by $1.89 billion to $6.47 billion compared
to the same period in fiscal 2019, primarily due to the effects of
the EIP program. Average noninterest-bearing deposits increased
$3.01 billion, or 116%, for the fiscal 2020 fourth quarter when
compared to the same period in fiscal 2019, while average wholesale
deposits decreased $1.03 billion, or 65%. Average deposits from the
payments divisions increased 121% to $5.82 billion for the fiscal
2020 fourth quarter when compared to the same period in fiscal
2019. Excluding the balances on the EIP cards, average payments
deposits for the fiscal 2020 fourth quarter were $4.20 billion,
representing an increase of 60% compared to the same period of the
prior year, which was largely driven by stimulus payments loaded on
various partner cards along with lower levels of consumer
spending.
The average balance of total deposits and
interest-bearing liabilities was $6.66 billion for the three-month
period ended September 30, 2020, compared to $5.15 billion for
the same period in the prior fiscal year, representing an increase
of 29%.
Total end-of-period deposits increased 10% to
$4.98 billion at September 30, 2020, compared to $4.52 billion
at September 30, 2019. The increase in end-of-period deposits
was primarily driven by an increase in noninterest bearing deposits
of $2.00 billion, of which $942.2 million was attributable to the
balances on the EIP cards. The increase in total end-of-period
deposits was partially offset by a decrease of $1.09 billion in
wholesale deposits, as well as the sale of $290.5 million of
community bank deposits during the second quarter of fiscal
2020.
Regulatory Capital
The Company and MetaBank remained above the
federal regulatory minimum capital requirements at
September 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 |
September 30, 2020 |
|
June 30, 2020 |
|
March 31, 2020 |
|
December 31, 2019 |
|
September 30, 2019 |
Company |
|
|
|
|
|
|
|
|
|
Tier 1 leverage capital ratio |
6.58 |
% |
|
5.91 |
% |
|
7.28 |
% |
|
8.28 |
% |
|
8.33 |
% |
Common equity Tier 1 capital ratio |
11.78 |
% |
|
11.51 |
% |
|
10.27 |
% |
|
10.10 |
% |
|
10.35 |
% |
Tier 1 capital ratio |
12.18 |
% |
|
11.90 |
% |
|
10.63 |
% |
|
10.46 |
% |
|
10.71 |
% |
Total capital ratio |
15.30 |
% |
|
14.99 |
% |
|
13.61 |
% |
|
12.74 |
% |
|
13.01 |
% |
MetaBank |
|
|
|
|
|
|
|
|
|
Tier 1 leverage capital ratio |
7.56 |
% |
|
6.89 |
% |
|
8.52 |
% |
|
9.70 |
% |
|
9.65 |
% |
Common equity Tier 1 capital ratio |
13.96 |
% |
|
13.82 |
% |
|
12.39 |
% |
|
12.18 |
% |
|
12.31 |
% |
Tier 1 capital ratio |
14.00 |
% |
|
13.86 |
% |
|
12.44 |
% |
|
12.24 |
% |
|
12.37 |
% |
Total capital ratio |
15.26 |
% |
|
15.12 |
% |
|
13.69 |
% |
|
12.90 |
% |
|
13.02 |
% |
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) |
September 30, 2020 |
|
June 30, 2020 |
|
March 31, 2020 |
|
December 31, 2019 |
|
September 30, 2019 |
(Dollars in Thousands) |
|
|
|
|
|
|
|
|
|
Total stockholders' equity |
$ |
847,308 |
|
|
$ |
829,909 |
|
|
$ |
805,074 |
|
|
$ |
837,068 |
|
|
$ |
843,958 |
|
Adjustments: |
|
|
|
|
|
|
|
|
|
LESS: Goodwill, net of associated deferred tax liabilities |
302,396 |
|
|
302,814 |
|
|
303,625 |
|
|
304,020 |
|
|
304,020 |
|
LESS: Certain other intangible assets |
40,964 |
|
|
42,865 |
|
|
44,909 |
|
|
47,855 |
|
|
50,501 |
|
LESS: Net deferred tax assets from operating loss and tax credit
carry-forwards |
18,361 |
|
|
10,360 |
|
|
11,589 |
|
|
16,876 |
|
|
15,569 |
|
LESS: Net unrealized gains (losses) on available-for-sale
securities |
17,762 |
|
|
8,382 |
|
|
2,337 |
|
|
3,897 |
|
|
6,458 |
|
LESS: Non-controlling interest |
3,603 |
|
|
3,787 |
|
|
3,762 |
|
|
4,305 |
|
|
4,047 |
|
Common Equity Tier 1(1) |
464,222 |
|
|
461,701 |
|
|
438,852 |
|
|
460,115 |
|
|
463,363 |
|
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 |
|
|
1,894 |
|
|
2,036 |
|
|
2,372 |
|
|
2,350 |
|
Total Tier 1 Capital |
479,777 |
|
|
477,256 |
|
|
454,549 |
|
|
476,148 |
|
|
479,374 |
|
Allowance for loan and lease losses |
49,343 |
|
|
50,338 |
|
|
53,580 |
|
|
30,239 |
|
|
29,272 |
|
Subordinated debentures (net of issuance costs) |
73,807 |
|
|
73,765 |
|
|
73,724 |
|
|
73,684 |
|
|
73,644 |
|
Total qualifying capital |
$ |
602,927 |
|
|
$ |
601,359 |
|
|
$ |
581,853 |
|
|
$ |
580,071 |
|
|
$ |
582,290 |
|
(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.
|
September 30, 2020 |
|
June 30, 2020 |
|
March 31, 2020 |
|
December 31, 2019 |
|
September 30, 2019 |
(Dollars in Thousands) |
|
|
|
|
|
|
|
|
|
Total Stockholders' Equity |
$ |
847,308 |
|
|
$ |
829,909 |
|
|
$ |
805,074 |
|
|
$ |
837,068 |
|
|
$ |
843,958 |
|
Less: Goodwill |
309,505 |
|
|
309,505 |
|
|
309,505 |
|
|
309,505 |
|
|
309,505 |
|
Less: Intangible assets |
41,692 |
|
|
43,974 |
|
|
46,766 |
|
|
50,151 |
|
|
52,810 |
|
Tangible common equity |
496,111 |
|
|
476,430 |
|
|
448,803 |
|
|
477,412 |
|
|
481,643 |
|
Less: Accumulated other
comprehensive income (loss) ("AOCI") |
17,542 |
|
|
7,995 |
|
|
1,654 |
|
|
3,895 |
|
|
6,339 |
|
Tangible common equity excluding AOCI |
$ |
478,569 |
|
|
$ |
468,435 |
|
|
$ |
447,149 |
|
|
$ |
473,517 |
|
|
$ |
475,304 |
|
Conference Call
The Company will host a conference call and
earnings webcast at 4:00 p.m. Central Time (5:00 p.m. Eastern Time)
on Wednesday, October 28, 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
3938037 upon request. International callers should dial (636)
812-6634. A webcast replay will also be archived at
www.metafinancialgroup.com for one year.
Forward-Looking Statements
The Company and MetaBank may from time to time
make written or oral “forward-looking statements,” including
statements contained in this press release, the Company’s filings
with the 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 loan and lease 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; actual
changes in interest rates and the Fed Funds rate; additional
changes in tax laws; the strength of the United States' economy, in
general, and the strength of the local economies in which the
Company operates; changes in, trade, monetary, and fiscal policies
and laws, including interest rate policies of the Federal Reserve;
inflation, market, and monetary fluctuations; the timely and
efficient development of, and acceptance of, new products and
services offered by the Company or its strategic partners, as well
as risks (including reputational and litigation) attendant thereto,
and the perceived overall value of these products and services by
users; the risks of dealing with or utilizing third parties,
including, in connection with the Company’s refund advance
business, the risk of reduced volume of refund advance loans as a
result of reduced customer demand for or usage of Meta’s strategic
partners’ refund advance products; our relationship with, and any
actions which may be initiated by, our regulators; the impact of
changes in financial services laws and regulations, including, but
not limited to, laws and regulations relating to the tax refund
industry and the insurance premium finance industry and recent and
potential changes in response to the COVID-19 pandemic such as the
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; 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, 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 |
September 30, 2020 |
|
June 30, 2020 |
|
March 31, 2020 |
|
December 31, 2019 |
|
September 30, 2019 |
Cash and cash
equivalents |
$ |
427,367 |
|
|
$ |
3,108,141 |
|
|
$ |
108,733 |
|
|
$ |
152,189 |
|
|
$ |
126,545 |
|
Investment securities available for sale, at fair value |
814,495 |
|
|
825,579 |
|
|
840,525 |
|
|
852,603 |
|
|
889,947 |
|
Mortgage-backed securities available for sale, at fair
value |
453,607 |
|
|
338,250 |
|
|
355,094 |
|
|
362,120 |
|
|
382,546 |
|
Investment securities held to maturity, at cost |
87,183 |
|
|
98,205 |
|
|
108,105 |
|
|
116,313 |
|
|
127,582 |
|
Mortgage-backed securities held to maturity, at cost |
5,427 |
|
|
6,382 |
|
|
6,752 |
|
|
6,804 |
|
|
7,182 |
|
Loans held for sale |
183,577 |
|
|
79,905 |
|
|
13,610 |
|
|
264,266 |
|
|
148,777 |
|
Loans and leases |
3,322,765 |
|
|
3,502,646 |
|
|
3,618,924 |
|
|
3,590,474 |
|
|
3,658,847 |
|
Allowance for loan and lease losses |
(56,188 |
) |
|
(65,747 |
) |
|
(65,355 |
) |
|
(30,176 |
) |
|
(29,149 |
) |
Federal Reserve Bank and Federal Home Loan Bank stocks, at
cost |
27,138 |
|
|
31,836 |
|
|
29,944 |
|
|
13,796 |
|
|
30,916 |
|
Accrued interest receivable |
16,628 |
|
|
17,545 |
|
|
16,958 |
|
|
18,687 |
|
|
20,400 |
|
Premises, furniture, and equipment, net |
41,608 |
|
|
40,361 |
|
|
38,871 |
|
|
38,671 |
|
|
45,932 |
|
Rental equipment, net |
205,964 |
|
|
216,336 |
|
|
200,837 |
|
|
211,673 |
|
|
208,537 |
|
Bank-owned life insurance |
92,315 |
|
|
91,697 |
|
|
91,081 |
|
|
90,458 |
|
|
89,827 |
|
Foreclosed real estate and repossessed assets |
9,957 |
|
|
6,784 |
|
|
7,249 |
|
|
1,328 |
|
|
29,494 |
|
Goodwill |
309,505 |
|
|
309,505 |
|
|
309,505 |
|
|
309,505 |
|
|
309,505 |
|
Intangible assets |
41,692 |
|
|
43,974 |
|
|
46,766 |
|
|
50,151 |
|
|
52,810 |
|
Prepaid assets |
8,328 |
|
|
6,806 |
|
|
9,727 |
|
|
14,813 |
|
|
9,476 |
|
Deferred taxes |
17,723 |
|
|
15,944 |
|
|
20,887 |
|
|
19,752 |
|
|
18,884 |
|
Other assets |
82,983 |
|
|
104,877 |
|
|
85,652 |
|
|
97,499 |
|
|
54,832 |
|
|
|
|
|
|
|
|
|
|
|
Total assets |
$ |
6,092,074 |
|
|
$ |
8,779,026 |
|
|
$ |
5,843,865 |
|
|
$ |
6,180,926 |
|
|
$ |
6,182,890 |
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES |
|
|
|
|
|
|
|
|
|
Deposits held for sale |
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
288,975 |
|
|
$ |
— |
|
Deposits: |
|
|
|
|
|
|
|
|
|
Noninterest-bearing checking |
4,356,630 |
|
|
6,537,809 |
|
|
2,900,484 |
|
|
2,927,967 |
|
|
2,358,010 |
|
Interest-bearing checking |
157,571 |
|
|
187,003 |
|
|
152,504 |
|
|
67,642 |
|
|
185,768 |
|
Savings deposits |
47,866 |
|
|
55,896 |
|
|
37,615 |
|
|
17,436 |
|
|
49,773 |
|
Money market deposits |
48,494 |
|
|
40,811 |
|
|
37,266 |
|
|
42,286 |
|
|
76,911 |
|
Time certificates of deposit |
20,223 |
|
|
25,000 |
|
|
25,492 |
|
|
23,454 |
|
|
109,275 |
|
Wholesale deposits |
348,416 |
|
|
743,806 |
|
|
809,043 |
|
|
1,438,820 |
|
|
1,557,268 |
|
Total deposits |
4,979,200 |
|
|
7,590,325 |
|
|
3,962,404 |
|
|
4,517,605 |
|
|
4,337,005 |
|
Short-term borrowings |
— |
|
|
— |
|
|
717,000 |
|
|
194,000 |
|
|
646,019 |
|
Long-term borrowings |
98,224 |
|
|
209,781 |
|
|
211,353 |
|
|
213,070 |
|
|
215,838 |
|
Accrued interest payable |
1,923 |
|
|
4,332 |
|
|
3,607 |
|
|
6,620 |
|
|
9,414 |
|
Accrued expenses and other liabilities |
165,419 |
|
|
144,679 |
|
|
144,427 |
|
|
123,588 |
|
|
130,656 |
|
Total liabilities |
5,244,766 |
|
|
7,949,117 |
|
|
5,038,791 |
|
|
5,343,858 |
|
|
5,338,932 |
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
|
Preferred stock |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Common stock, $.01 par value |
344 |
|
|
346 |
|
|
346 |
|
|
372 |
|
|
378 |
|
Common stock, Nonvoting, $.01 par value |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Additional paid-in capital |
594,569 |
|
|
592,693 |
|
|
590,682 |
|
|
587,678 |
|
|
580,826 |
|
Retained earnings |
234,927 |
|
|
228,500 |
|
|
212,027 |
|
|
244,005 |
|
|
252,813 |
|
Accumulated other comprehensive income |
17,542 |
|
|
7,995 |
|
|
1,654 |
|
|
3,895 |
|
|
6,339 |
|
Treasury stock, at cost |
(3,677 |
) |
|
(3,412 |
) |
|
(3,397 |
) |
|
(3,187 |
) |
|
(445 |
) |
Total equity attributable to parent |
843,705 |
|
|
826,122 |
|
|
801,312 |
|
|
832,763 |
|
|
839,911 |
|
Noncontrolling interest |
3,603 |
|
|
3,787 |
|
|
3,762 |
|
|
4,305 |
|
|
4,047 |
|
Total stockholders’ equity |
847,308 |
|
|
829,909 |
|
|
805,074 |
|
|
837,068 |
|
|
843,958 |
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders’ equity |
$ |
6,092,074 |
|
|
$ |
8,779,026 |
|
|
$ |
5,843,865 |
|
|
$ |
6,180,926 |
|
|
$ |
6,182,890 |
|
Consolidated Statements of Operations
(Unaudited)(Dollars in Thousands, Except Share and Per
Share Data)
|
Three Months Ended |
|
Year Ended |
|
September 30, 2020 |
|
June 30, 2020 |
|
September 30, 2019 |
|
September 30, 2020 |
|
September 30, 2019 |
Interest and dividend income: |
|
|
|
|
|
|
|
|
|
Loans and leases, including fees |
$ |
62,022 |
|
|
$ |
59,911 |
|
|
$ |
70,628 |
|
|
$ |
261,128 |
|
|
$ |
274,528 |
|
Mortgage-backed securities |
1,877 |
|
|
2,269 |
|
|
2,768 |
|
|
9,028 |
|
|
11,390 |
|
Other investments |
4,508 |
|
|
5,226 |
|
|
7,432 |
|
|
22,685 |
|
|
39,811 |
|
|
68,407 |
|
|
67,406 |
|
|
80,828 |
|
|
292,841 |
|
|
325,729 |
|
Interest expense: |
|
|
|
|
|
|
|
|
|
Deposits |
1,904 |
|
|
3,130 |
|
|
10,917 |
|
|
22,616 |
|
|
46,648 |
|
FHLB advances and other borrowings |
1,990 |
|
|
2,139 |
|
|
4,294 |
|
|
11,187 |
|
|
14,874 |
|
|
3,894 |
|
|
5,269 |
|
|
15,211 |
|
|
33,803 |
|
|
61,522 |
|
|
|
|
|
|
|
|
|
|
|
Net interest income |
64,513 |
|
|
62,137 |
|
|
65,617 |
|
|
259,038 |
|
|
264,207 |
|
|
|
|
|
|
|
|
|
|
|
Provision for loan for lease losses |
8,980 |
|
|
15,093 |
|
|
4,121 |
|
|
64,776 |
|
|
55,650 |
|
|
|
|
|
|
|
|
|
|
|
Net interest income after provision for loan and lease losses |
55,533 |
|
|
47,044 |
|
|
61,496 |
|
|
194,262 |
|
|
208,557 |
|
|
|
|
|
|
|
|
|
|
|
Noninterest income: |
|
|
|
|
|
|
|
|
|
Refund transfer product fees |
2,335 |
|
|
4,595 |
|
|
639 |
|
|
36,061 |
|
|
39,198 |
|
Tax advance product fees |
(14 |
) |
|
28 |
|
|
(70 |
) |
|
31,826 |
|
|
34,687 |
|
Payments card and deposit fees |
21,422 |
|
|
21,302 |
|
|
20,276 |
|
|
87,379 |
|
|
87,130 |
|
Other bank and deposit fees |
228 |
|
|
214 |
|
|
492 |
|
|
1,310 |
|
|
1,942 |
|
Rental income |
10,144 |
|
|
11,231 |
|
|
10,886 |
|
|
44,826 |
|
|
41,053 |
|
Gain on sale of securities available-for-sale, net |
51 |
|
|
— |
|
|
80 |
|
|
51 |
|
|
729 |
|
Gain on divestitures |
— |
|
|
— |
|
|
— |
|
|
19,275 |
|
|
— |
|
Gain (loss) on sale of other |
3,455 |
|
|
1,214 |
|
|
1,715 |
|
|
4,425 |
|
|
7,831 |
|
Other income |
3,129 |
|
|
2,464 |
|
|
1,962 |
|
|
14,641 |
|
|
9,975 |
|
Total noninterest income |
40,750 |
|
|
41,048 |
|
|
35,980 |
|
|
239,794 |
|
|
222,545 |
|
|
|
|
|
|
|
|
|
|
|
Noninterest expense: |
|
|
|
|
|
|
|
|
|
Compensation and benefits |
35,616 |
|
|
32,102 |
|
|
38,461 |
|
|
136,247 |
|
|
155,811 |
|
Refund transfer product expense |
162 |
|
|
(139 |
) |
|
48 |
|
|
7,644 |
|
|
7,526 |
|
Tax advance product expense |
(97 |
) |
|
(11 |
) |
|
1 |
|
|
2,723 |
|
|
3,102 |
|
Card processing |
6,524 |
|
|
7,128 |
|
|
5,008 |
|
|
25,956 |
|
|
23,677 |
|
Occupancy and equipment expense |
6,826 |
|
|
6,502 |
|
|
7,265 |
|
|
26,995 |
|
|
28,071 |
|
Operating lease equipment depreciation |
7,594 |
|
|
8,536 |
|
|
7,901 |
|
|
32,831 |
|
|
26,181 |
|
Legal and consulting |
5,615 |
|
|
4,660 |
|
|
4,968 |
|
|
20,858 |
|
|
17,310 |
|
Intangible amortization |
2,283 |
|
|
2,636 |
|
|
3,358 |
|
|
10,997 |
|
|
17,711 |
|
Impairment expense |
1,232 |
|
|
— |
|
|
— |
|
|
1,982 |
|
|
9,660 |
|
Other expense |
14,528 |
|
|
9,827 |
|
|
9,133 |
|
|
52,818 |
|
|
44,111 |
|
Total noninterest expense |
80,283 |
|
|
71,241 |
|
|
76,143 |
|
|
319,051 |
|
|
333,160 |
|
|
|
|
|
|
|
|
|
|
|
Income before income tax expense |
16,000 |
|
|
16,851 |
|
|
21,333 |
|
|
115,005 |
|
|
97,942 |
|
|
|
|
|
|
|
|
|
|
|
Income tax expense (benefit) |
1,791 |
|
|
(2,426 |
) |
|
(130 |
) |
|
5,661 |
|
|
(3,374 |
) |
|
|
|
|
|
|
|
|
|
|
Net income before noncontrolling interest |
14,209 |
|
|
19,277 |
|
|
21,463 |
|
|
109,344 |
|
|
101,316 |
|
Net income attributable to noncontrolling interest |
1,051 |
|
|
1,087 |
|
|
1,268 |
|
|
4,624 |
|
|
4,312 |
|
Net income attributable to parent |
$ |
13,158 |
|
|
$ |
18,190 |
|
|
$ |
20,195 |
|
|
$ |
104,720 |
|
|
$ |
97,004 |
|
|
|
|
|
|
|
|
|
|
|
Earnings per common share |
|
|
|
|
|
|
|
|
|
Basic |
$ |
0.38 |
|
|
$ |
0.53 |
|
|
$ |
0.53 |
|
|
$ |
2.94 |
|
|
$ |
2.49 |
|
Diluted |
$ |
0.38 |
|
|
$ |
0.53 |
|
|
$ |
0.53 |
|
|
$ |
2.94 |
|
|
$ |
2.49 |
|
Shares used in computing earnings per share |
|
|
|
|
|
|
|
|
|
Basic |
34,596,422 |
|
|
34,616,038 |
|
|
37,868,788 |
|
|
35,651,709 |
|
|
38,880,919 |
|
Diluted |
34,596,422 |
|
|
34,623,114 |
|
|
37,912,616 |
|
|
35,651,709 |
|
|
38,921,637 |
|
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 September
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 |
$ |
1,960,020 |
|
|
$ |
891 |
|
|
0.18 |
% |
|
$ |
68,435 |
|
|
$ |
505 |
|
|
2.93 |
% |
Mortgage-backed securities |
394,456 |
|
|
1,877 |
|
|
1.89 |
% |
|
396,075 |
|
|
2,768 |
|
|
2.77 |
% |
Tax exempt investment securities |
374,876 |
|
|
1,347 |
|
|
1.81 |
% |
|
555,285 |
|
|
2,743 |
|
|
2.48 |
% |
Asset-backed securities |
331,939 |
|
|
1,241 |
|
|
1.49 |
% |
|
307,080 |
|
|
2,615 |
|
|
3.38 |
% |
Other investment securities |
208,078 |
|
|
1,029 |
|
|
1.97 |
% |
|
204,695 |
|
|
1,569 |
|
|
3.04 |
% |
Total investments |
1,309,349 |
|
|
5,494 |
|
|
1.78 |
% |
|
1,463,135 |
|
|
9,695 |
|
|
2.83 |
% |
Commercial finance loans and leases |
2,240,591 |
|
|
42,390 |
|
|
7.53 |
% |
|
1,882,699 |
|
|
44,375 |
|
|
9.35 |
% |
Consumer finance loans |
234,468 |
|
|
3,998 |
|
|
6.78 |
% |
|
381,165 |
|
|
8,268 |
|
|
8.61 |
% |
Tax services loans |
16,651 |
|
|
5 |
|
|
0.13 |
% |
|
21,445 |
|
|
(13 |
) |
|
(0.25 |
)% |
Warehouse finance loans |
287,294 |
|
|
4,378 |
|
|
6.06 |
% |
|
249,022 |
|
|
3,913 |
|
|
6.24 |
% |
National lending loans and leases |
2,779,004 |
|
|
50,771 |
|
|
7.27 |
% |
|
2,534,331 |
|
|
56,543 |
|
|
8.85 |
% |
Community banking loans |
757,993 |
|
|
11,251 |
|
|
5.91 |
% |
|
1,195,214 |
|
|
14,085 |
|
|
4.68 |
% |
Total loans and leases |
3,536,997 |
|
|
62,022 |
|
|
6.98 |
% |
|
3,729,545 |
|
|
70,628 |
|
|
7.51 |
% |
Total interest-earning
assets |
$ |
6,806,366 |
|
|
$ |
68,407 |
|
|
4.02 |
% |
|
$ |
5,261,115 |
|
|
$ |
80,828 |
|
|
6.15 |
% |
Non-interest-earning assets |
866,407 |
|
|
|
|
|
|
869,171 |
|
|
|
|
|
Total assets |
$ |
7,672,773 |
|
|
|
|
|
|
$ |
6,130,286 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing
liabilities: |
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing checking(2) |
$ |
186,952 |
|
|
$ |
— |
|
|
— |
% |
|
$ |
155,099 |
|
|
$ |
136 |
|
|
0.35 |
% |
Savings |
52,616 |
|
|
1 |
|
|
0.01 |
% |
|
49,846 |
|
|
9 |
|
|
0.07 |
% |
Money markets |
41,179 |
|
|
32 |
|
|
0.31 |
% |
|
71,793 |
|
|
157 |
|
|
0.86 |
% |
Time deposits |
21,947 |
|
|
92 |
|
|
1.66 |
% |
|
115,036 |
|
|
601 |
|
|
2.07 |
% |
Wholesale deposits |
562,828 |
|
|
1,779 |
|
|
1.26 |
% |
|
1,593,616 |
|
|
10,014 |
|
|
2.49 |
% |
Total interest-bearing deposits |
865,522 |
|
|
1,904 |
|
|
0.88 |
% |
|
1,985,390 |
|
|
10,917 |
|
|
2.18 |
% |
Overnight fed funds purchased |
— |
|
|
— |
|
|
— |
% |
|
336,457 |
|
|
1,999 |
|
|
2.36 |
% |
FHLB advances |
94,457 |
|
|
619 |
|
|
2.61 |
% |
|
115,707 |
|
|
713 |
|
|
2.44 |
% |
Subordinated debentures |
73,779 |
|
|
1,147 |
|
|
6.19 |
% |
|
73,618 |
|
|
1,162 |
|
|
6.26 |
% |
Other borrowings |
25,431 |
|
|
224 |
|
|
3.50 |
% |
|
45,302 |
|
|
420 |
|
|
3.68 |
% |
Total borrowings |
193,667 |
|
|
1,990 |
|
|
4.09 |
% |
|
571,084 |
|
|
4,294 |
|
|
2.98 |
% |
Total interest-bearing
liabilities |
1,059,189 |
|
|
3,894 |
|
|
1.46 |
% |
|
2,556,474 |
|
|
15,211 |
|
|
2.36 |
% |
Noninterest-bearing deposits |
5,601,052 |
|
|
— |
|
|
— |
% |
|
2,595,386 |
|
|
— |
|
|
— |
% |
Total deposits and
interest-bearing liabilities |
$ |
6,660,241 |
|
|
$ |
3,894 |
|
|
0.23 |
% |
|
$ |
5,151,860 |
|
|
$ |
15,211 |
|
|
1.17 |
% |
Other noninterest-bearing liabilities |
164,766 |
|
|
|
|
|
|
144,703 |
|
|
|
|
|
Total liabilities |
6,825,007 |
|
|
|
|
|
|
5,296,563 |
|
|
|
|
|
Shareholders' equity |
847,766 |
|
|
|
|
|
|
833,723 |
|
|
|
|
|
Total liabilities and
shareholders' equity |
$ |
7,672,773 |
|
|
|
|
|
|
$ |
6,130,286 |
|
|
|
|
|
Net interest income and net
interest rate spread including noninterest-bearing deposits |
|
|
$ |
64,513 |
|
|
3.79 |
% |
|
|
|
$ |
65,617 |
|
|
4.98 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Net interest margin |
|
|
|
|
3.77 |
% |
|
|
|
|
|
4.95 |
% |
Tax-equivalent effect |
|
|
|
|
0.02 |
% |
|
|
|
|
|
0.05 |
% |
Net interest margin,
tax-equivalent(3) |
|
|
|
|
3.79 |
% |
|
|
|
|
|
5.00 |
% |
(1) Tax rate used to arrive at the TEY for the three months
ended September 30, 2020 and 2019 was 21%.(2) Of the total balance,
$186.7 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 |
September 30, 2020 |
|
June 30, 2020 |
|
March 31, 2020 |
|
December 31, 2019 |
|
September 30, 2019 |
Equity to total assets |
13.91 |
% |
|
9.45 |
% |
|
13.78 |
% |
|
13.54 |
% |
|
13.65 |
% |
Book value per common share outstanding |
$ |
24.66 |
|
|
$ |
23.96 |
|
|
$ |
23.26 |
|
|
$ |
22.52 |
|
|
$ |
22.32 |
|
Tangible book value per common
share outstanding |
$ |
14.44 |
|
|
$ |
13.76 |
|
|
$ |
12.97 |
|
|
$ |
12.84 |
|
|
$ |
12.74 |
|
Tangible book value per common
share outstanding excluding AOCI |
$ |
13.93 |
|
|
$ |
13.53 |
|
|
$ |
12.92 |
|
|
$ |
12.74 |
|
|
$ |
12.57 |
|
Common shares outstanding |
34,360,890 |
|
|
34,631,160 |
|
|
34,607,962 |
|
|
37,172,081 |
|
|
37,807,064 |
|
Non-performing assets to total
assets |
0.79 |
% |
|
0.64 |
% |
|
0.67 |
% |
|
0.48 |
% |
|
0.91 |
% |
Non-performing loans and
leases to total loans and leases |
0.97 |
% |
|
1.10 |
% |
|
0.87 |
% |
|
0.62 |
% |
|
0.70 |
% |
Net interest margin |
3.77 |
% |
|
3.28 |
% |
|
4.78 |
% |
|
4.94 |
% |
|
4.95 |
% |
Net interest margin,
tax-equivalent |
3.79 |
% |
|
3.31 |
% |
|
4.82 |
% |
|
4.99 |
% |
|
5.00 |
% |
Return on average assets |
0.69 |
% |
|
0.86 |
% |
|
3.16 |
% |
|
1.38 |
% |
|
1.32 |
% |
Return on average equity |
6.21 |
% |
|
8.83 |
% |
|
25.15 |
% |
|
10.04 |
% |
|
9.69 |
% |
Full-time equivalent
employees |
1,015 |
|
|
999 |
|
|
992 |
|
|
1,088 |
|
|
1,186 |
|
Quarterly Amortization of Intangibles
Expense
(Dollars in Thousands) |
Actual |
Anticipated |
For the Three Months
Ended |
Sep 30, 2020 |
Dec 31, 2020 |
Mar 31, 2021 |
Jun 30, 2021 |
Sep 30, 2021 |
Dec 31, 2021 |
Mar 31, 2022 |
Jun 30, 2022 |
Sep 30, 2022 |
|
|
|
|
|
|
|
|
|
|
Amortization of intangibles(1) |
$ |
2,283 |
|
$ |
2,014 |
|
$ |
2,758 |
|
$ |
2,014 |
|
$ |
1,762 |
|
$ |
1,489 |
|
$ |
2,171 |
|
$ |
1,177 |
|
$ |
1,092 |
|
(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.
Non-GAAP Reconciliation
MetaBank Period-End Tier 1
Leverage |
September 30, 2020 |
Total stockholders' equity |
$ |
933,430 |
|
Adjustments: |
|
LESS: Goodwill, net of
associated deferred tax liabilities |
302,396 |
|
LESS: Certain other intangible
assets |
40,964 |
|
LESS: Net deferred tax assets
from operating loss and tax credit carry-forwards |
18,361 |
|
LESS: Net unrealized gains
(losses) on available-for-sale securities |
17,762 |
|
LESS: Non-controlling
interest |
3,603 |
|
Common Equity Tier 1 |
550,344 |
|
Tier 1 minority interest not
included in common equity tier 1 capital |
1,894 |
|
Total Tier 1 Capital |
$ |
552,238 |
|
|
|
Total Assets (Quarter
Average) |
$ |
7,679,897 |
|
ADD: Available for sale
securities amortized cost |
(22,844 |
) |
ADD: Deferred tax |
5,724 |
|
LESS: Deductions from
CET1 |
361,721 |
|
Adjusted total assets |
$ |
7,301,056 |
|
MetaBank Regulatory Tier 1
Leverage |
7.56 |
% |
|
|
Total Assets (Period End) |
$ |
6,095,030 |
|
ADD: Available for sale
securities amortized cost |
(23,718 |
) |
ADD: Deferred tax |
5,956 |
|
LESS: Deductions from
CET1 |
361,721 |
|
Adjusted total assets |
$ |
5,715,547 |
|
MetaBank Period-end Tier 1
Leverage |
9.66 |
% |
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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