Meta Financial Group, Inc. Reports Expected Loss of Insurance on Student Loan Portfolios but Expects Only Slightly Lower Yiel...
June 20 2018 - 4:15PM
Meta Financial Group, Inc.® (NASDAQ:CASH) (“Meta” or the “Company”)
announced today that on June 18, 2018, the Company received written
notification from ReliaMax Surety Company (“ReliaMax”), which
informed policy holders that the South Dakota Division of Insurance
has filed a Petition to have ReliaMax declared insolvent and to
adopt a plan of liquidation. As previously disclosed, ReliaMax
provides insurance coverage for the Company’s $189.1 million
purchased, floating rate, seasoned student loan portfolios.
ReliaMax indicated in its notice that, following the conclusion of
a hearing to be scheduled for late June or early July 2018, and
entry of an Order by the court, the South Dakota Division of
Insurance will take control of ReliaMax, and a liquidator will be
appointed.
As indicated in its notice, until the hearing has concluded and
a court order has been entered, ReliaMax will continue its business
operations with regard to the Company’s purchased student loan
portfolios, including the areas of default prevention and
acceptance of claim filings. ReliaMax further noted that the impact
on outstanding insurance coverage will be clearer sometime after
the hearing and after the Division’s liquidation plan is
finalized.
"ReliaMax and its predecessor companies have been providing
private student loan insurance for over 25 years, and we are
disappointed to learn of their pending insolvency," said Chairman
and CEO J. Tyler Haahr. “While we expect to ultimately recover a
substantial portion of our unearned premiums, the timing and
amounts are unclear at this time.”
In light of the potential impact to the Company’s insurance
coverage, the Company is adjusting the allowance for loan losses
attributable to its student loan portfolios for the current
quarterly period ending June 30, 2018. The additional allowance is
estimated to result in a $2.8 million to $3.2 million pre-tax
charge to provision for loan losses and a reduction in consolidated
pre-tax net income for the third fiscal quarter of 2018.
Depending on the level of estate liquidation recoveries and
authorized distributions, recoveries from a state insurance
guarantee fund and other recovery sources, the Company anticipates
realized pre-tax yields, net of on-going provision for credit
losses and direct servicing costs, for the portfolios to range
between 7.50% and 5.50%. These yield estimates are derived from
historical default rates for these portfolios and are based on
current interest rates and will increase or decrease, however,
based on future Fed Funds rates over the life of the variable rate
portfolios. The Company expects to receive substantial recoveries
of unearned premiums from the estate of ReliaMax and also
anticipates additional recoveries from a state guarantee fund, to
which the Company believes it is entitled based upon the structure
of the purchases of the student loan portfolios.
About Meta Financial Group
Meta Financial Group, Inc. ("Meta") is the holding company for
MetaBank®, a federally chartered savings bank. Shares of Meta
common stock are traded on the NASDAQ Global Select Market® under
the symbol CASH. Headquartered in Sioux Falls, S.D., MetaBank
operates in both the Banking and Payments industries through:
MetaBank, its community banking operation; Meta Payment Systems,
its electronic payments division; AFS/IBEX, its commercial
insurance premium financing division; and Refund Advantage, EPS
Financial and Specialty Consumer Services, its tax-related
financial solutions divisions. More information is available at
metafinancialgroup.com.
Forward Looking Statements
This Press Release includes statements which may constitute
forward-looking statements made pursuant to the “safe harbor”
provisions of the Private Securities Litigation Reform Act of 1995,
including, but not limited to, statements regarding the Company’s
expected recoveries with respect to its purchased student loan
portfolios and the estimated impact on the Company’s provision for
loan losses and consolidated pre-tax net income for the Company’s
third fiscal quarter of 2018 and future periods, as well as
anticipated realized pre-tax yields, net of credit losses and
direct servicing costs, with respect to its purchased student loan
portfolios. The accuracy of these statements are necessarily
subject to risks, uncertainties, and assumptions as to future
events that may not prove to be accurate. Various factors could
cause actual results to differ materially from those expressed or
implied herein, including the risk that the amount of recoveries,
whether as a result of the ReliaMax liquidation plan, the state
insurance guarantee fund or otherwise, is less than expected
(including that the Company does not recover any such amounts at
all); the risk that the Company may recognize loan losses or direct
servicing costs in excess of the Company’s estimates with respect
to its third fiscal quarter of 2018 or in future periods, whether
as a result of the ReliaMax liquidation proceeding or otherwise;
actual changes in interest rates and the Fed Funds rate; and the
factors discussed in the Company’s most recent Annual Report on
Form 10-K and other filings with the Securities and Exchange
Commission. 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.
Media Contact: |
|
Investor Relations
Contact: |
|
Katie LeBrun |
|
Brittany Kelley
Elsasser |
|
Corporate
Communications Director |
|
Director of Investor
Relations |
|
605.362.5140 |
|
605.362.2423 |
|
klebrun@metabank.com |
|
bkelley@metabank.com |
|
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