Loading, Please Wait...

CST: 09/12/2019 06:55:06   

Meta Financial Group, Inc.® Announces Results for 2019 Fiscal Third Quarter

131 Days ago

- Revenue Rises 80% -

- Generates Net Income of $29.3 Million and Delivers Earnings Per Diluted Share of $0.75 -

SIOUX FALLS, S.D., July 30, 2019 (GLOBE NEWSWIRE) -- Meta Financial Group, Inc.® (Nasdaq: CASH) (“Meta” or the “Company”) reported net income of $29.3 million, or $0.75 per diluted share, for the three months ended June 30, 2019, compared to net income of $6.8 million, or $0.23 per diluted share, for the three months ended June 30, 2018. Total revenue for the fiscal 2019 third quarter was $110.8 million, compared to $61.6 million for the same quarter in fiscal 2018, representing an 80% increase.

“Our fiscal year 2019 third quarter results highlight our strong and consistent loan growth, as well as continued net interest income and margin expansion, primarily reflecting a more potent balance sheet,” said President and CEO Brad Hanson. “We continue to make progress on our key strategic initiatives, including a focus on leveraging our payments division to drive more favorable deposit growth, optimizing our interest-earning asset mix, and realizing operating efficiencies to generate sustained profit increases. Moreover, as we remain committed to maximizing shareholder value, we further enhanced our capital management activities by initiating share repurchases under our recent Board authorization.”

Highlights for the 2019 Fiscal Third Quarter Ended June 30, 2019

  • Total gross loans and leases at June 30, 2019 more than doubled to $3.63 billion, compared to June 30, 2018, and increased by $190.9 million, or 6%, when compared to March 31, 2019.
  • Average deposits from the payments division increased nearly 11% to $2.73 billion when compared to the same period in fiscal 2018.
  • Net interest income more than doubled to $67.0 million, compared to $28.4 million in the comparable quarter in fiscal 2018.
  • Net interest margin ("NIM") increased to 5.07% for the fiscal 2019 third quarter from 2.94% over the same period of the prior fiscal year, while the tax-equivalent net interest margin ("NIM, TE") increased to 5.15% from 3.23% over that same period in fiscal 2018.
  • Repurchased $43.0 million, or 1,574,734, shares at an average price of $27.31 during the fiscal 2019 third quarter.

Net Interest Income
Net interest income for the fiscal 2019 third quarter grew by $38.6 million, or 136%, to $67.0 million, compared to the same quarter in fiscal 2018.  This increase was primarily due to growth in loan and lease balances as well as an increase in loan and lease yields. The growth in loan and lease balances, along with the higher corresponding loan and lease yields, were largely attributable to the Company's acquisition of Crestmark in the fourth quarter of fiscal 2018 (the "Crestmark acquisition").

During the third quarter of fiscal year 2019, loan and lease interest income grew by $50.7 million, when compared to the same quarter in fiscal 2018, offset in part by an increase in interest expense of $9.0 million. The quarterly average outstanding balance of loans and leases as a percentage of interest-earning assets for the quarter ended June 30, 2019 increased to 68%, from 40% for the quarter ended June 30, 2018, while the quarterly average balance of total investments as a percentage of interest-earning assets decreased to 31% from 58% over that same period.  The Company’s average interest-earning assets for the fiscal 2019 third quarter grew by $1.4 billion, or 37%, to $5.30 billion from the comparable quarter in fiscal 2018.  This was primarily due to growth in our average loan and lease portfolio of $2.04 billion, of which $1.88 billion was attributable to an increase in national lending loans and leases along with an increase of $159.9 million in community banking loans, partially offset by a reduction in total investment securities of $633.3 million.

NIM increased to 5.07% for the fiscal 2019 third quarter from 2.94% for the comparable quarter in fiscal 2018, while NIM, TE was 5.15% for the fiscal 2019 third quarter. The net effect of purchase accounting accretion contributed 25 basis points to NIM for the fiscal 2019 third quarter, which represented an increase of seven basis points from the fiscal 2019 second quarter.

The overall reported tax-equivalent yield (“TEY”) on average earning asset yields increased by 244 basis points to 6.26% for the fiscal 2019 third quarter compared to the 2018 third fiscal quarter.  The growth was driven primarily by the Company's improved earning asset mix, which reflects higher balances for the national lending portfolio. The fiscal 2019 third quarter TEY on the securities portfolio was 3.09% compared to 3.11% for the same period of the prior fiscal year.

The Company's cost of funds for all deposits and borrowings averaged 1.14% during the fiscal 2019 third quarter, compared to 0.62% for the 2018 third fiscal quarter. This increase was primarily due to a rise in short-term interest rates affecting overnight borrowing rates, other wholesale funding, and the interest-bearing time deposits acquired by the Company in connection with the Crestmark acquisition. The Company's overall cost of deposits was 0.90% in the fiscal third quarter of 2019, compared to 0.29% in the same quarter of fiscal 2018. Excluding wholesale deposits, the Company's cost of deposits for the third quarter of fiscal 2019 would have been 0.11%.

Non-Interest Income
Fiscal 2019 third quarter non-interest income was $43.8 million, an increase of 32% over the same quarter of fiscal 2018, which was due in large part to increases in rental income, gain on sale of loans and leases, other income, and deposit fees. Partially offsetting the increase were decreases in card fee income and in total tax product fee income over that same period of the prior fiscal year.  The increases in rental income and gain on sale of loans and leases were primarily attributable to the Crestmark acquisition. The card fee income decrease was related to the previously disclosed wind-down of two non-strategic partners and the transition of certain fees to deposit fees.

Non-Interest Expense
Non-interest expense increased to $72.5 million for the 2019 fiscal third quarter, compared to $49.1 million for the same quarter of fiscal 2018, primarily due to the addition of the Crestmark division, which was not present in the comparable quarter in the prior fiscal year. During the fiscal 2019 third quarter, compensation and benefits expense rose by $10.7 million from the same period of the prior fiscal year, primarily due to the addition of Crestmark division employees and new hires in the second half of fiscal 2018 in support of Meta's national lending and other business initiatives.

Income Tax Expense
The Company recorded an income tax benefit of $1.2 million, or an effective tax rate of (3.97%), for the fiscal 2019 third quarter, compared to an income tax expense of $0.5 million, or an effective tax rate of 6.55%, for the fiscal 2018 third quarter. The income tax benefit for the fiscal 2019 third quarter was primarily due to ratably recognized investment tax credits.

The Company originated $49.1 million in solar leases during the fiscal 2019 third quarter. Investment tax credits related to solar leases and future originations in fiscal 2019 will be recognized ratably based on income over the duration of the current 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,
2019
  March 31,
2019
  December 31,
2018
  September 30,
2018
  June 30,
2018
                   
Total investments $ 1,502,640     $ 1,649,754     $ 1,855,792     $ 2,019,968     $ 2,149,709  
                   
Loans held for sale                  
Consumer credit products 45,582     42,342     24,233          
SBA/USDA(1) 17,257     17,403     9,327     15,606      
Total loans held for sale 62,839     59,745     33,560     15,606      
                   
National Lending loans and leases                  
Asset based lending 615,309     572,210     554,072     477,917      
Factoring 320,344     287,955     284,912     284,221      
Lease financing 341,957     321,414     290,889     265,315      
Insurance premium finance 358,772     307,875     330,712     337,877     303,603  
SBA/USDA 99,791     77,481     67,893     59,374      
Other commercial finance 99,677     98,956     89,402     85,145     11,418  
Commercial finance(2) 1,835,850     1,665,891     1,617,880     1,509,849     315,021  
Consumer credit products 155,539     139,617     96,144     80,605     26,583  
Other consumer finance 164,727     170,824     182,510     189,756     194,344  
Consumer finance 320,266     310,441     278,654     270,361     220,927  
Tax services 24,410     84,824     76,575     1,073     14,281  
Warehouse finance 250,003     186,697     176,134     65,000      
Total National Lending loans and leases 2,430,529     2,247,853     2,149,243     1,846,283     550,229  
Community Banking loans                  
Commercial real estate and operating 877,412     869,917     863,753     790,890     751,146  
Consumer one-to-four family real estate and other 256,853     257,079     256,341     247,318     237,704  
Agricultural real estate and operating 61,169     60,167     58,971     60,498     60,096  
Total Community Banking loans 1,195,434     1,187,163     1,179,065     1,098,706     1,048,946  
Total gross loans and leases 3,625,963     3,435,016     3,328,308     2,944,989     1,599,175  
Allowance for loan and lease losses (43,505 )   (48,672 )   (21,290 )   (13,040 )   (21,950 )
Net deferred loan and lease origination fees (costs) 5,068     2,964     1,190     (250 )   (1,881 )
Total loans and leases, net of allowance $ 3,587,526     $ 3,389,308     $ 3,308,208     $ 2,931,699     $ 1,575,344  
 
(1) The June 30, 2019 balance included $0.7 million of an interest rate mark premium related to the acquired loans and leases from the Crestmark acquisition.
(2) The June 30, 2019 balance included $6.8 million and $3.2 million of credit and interest rate mark discounts, respectively, related to the acquired loans and leases from the Crestmark acquisition.
 

The Company continued to utilize sales of securities and cash flow from its amortizing securities portfolio to fund loan and lease growth. Investment securities totaled $1.50 billion at June 30, 2019, as compared to $2.15 billion at June 30, 2018.

Total gross loans and leases increased $2.03 billion, or 127%, to $3.63 billion at June 30, 2019, from $1.60 billion at June 30, 2018. This was primarily driven by loans and leases attributable to the acquired Crestmark commercial finance division, along with increases in warehouse finance and consumer credit product loans and growth of 18% in insurance premium finance loans and 14% in community banking loans.

At June 30, 2019, commercial finance loans, which comprised 51% of the Company's gross loan and lease portfolio, totaled $1.84 billion, reflecting growth of $170.0 million, or 10%, from March 31, 2019. Consumer credit product loans grew by $15.9 million, or 11%, and warehouse finance loans increased by $63.3 million, or 34%, at June 30, 2019 as compared to March 31, 2019.  The warehouse finance loan increase was driven by the addition of a highly-secured, consumer receivable warehouse line of credit during the fiscal 2019 third quarter.

Asset Quality
The Company’s allowance for loan and lease losses was $43.5 million at June 30, 2019, compared to $22.0 million at June 30, 2018, driven primarily by increases in the allowance of $11.4 million in commercial finance, $5.2 million in tax services, $3.8 million in consumer lending, and $0.9 million in the community banking portfolio.

       
(Unaudited) Three Months Ended   Nine Months Ended
Allowance for loan and lease loss activity June 30,
2019
  March 31,
2019
  June 30,
2018
  June 30,
2019
  June 30,
2018
(Dollars in thousands)                  
Beginning balance $ 48,672     $ 21,290     $ 27,078     $ 13,040     $ 7,534  
Provision - tax services loans 914     22,473     1,189     24,883     20,335  
Provision - all other loans and leases 8,198     10,845     4,126     26,646     4,391  
Charge-offs - tax services loans (9,627 )   (1 )   (10,507 )   (9,670 )   (10,507 )
Charge-offs - all other loans and leases (5,124 )   (6,522 )   (243 )   (14,407 )   (742 )
Recoveries - tax services loans 36     84     1     212     423  
Recoveries - all other loans and leases 436     503     306     2,801     516  
Ending balance $ 43,505     $ 48,672     $ 21,950     $ 43,505     $ 21,950  
                                       

Provision for loan and lease losses was $9.1 million for the quarter ended June 30, 2019, compared to $5.3 million for the comparable period in the prior fiscal year. The increase in provision was primarily driven by loan and lease growth in the commercial finance portfolio and provision expense to maintain allowance levels. Net charge-offs were $14.3 million for the quarter ended June 30, 2019 compared to $10.4 million for the quarter ended June 30, 2018. The total net charge-offs for the quarter ended June 30, 2019 primarily consisted of seasonal net charge-offs of $9.6 million in the tax services loan portfolio, which represented a decrease of $0.9 million, or 9%, from the comparable quarter of the prior fiscal year.  The overall increase in total net charge-offs from the comparable quarter of the prior fiscal year was primarily driven by activity in the commercial finance and other portfolios.

The Company's non-performing assets at June 30, 2019, were $51.0 million, representing 0.84% of total assets, compared to $40.9 million, or 0.68% of total assets at March 31, 2019 and $35.7 million, or 0.86% of total assets at June 30, 2018. The Company's non-performing loans and leases at June 30, 2019 were $20.8 million, representing 0.57% of total loans and leases, compared to $9.6 million, or 0.28% of total loans and leases, at March 31, 2019 and $5.7 million, or 0.36% of total loans and leases, at June 30, 2018.

Deposits, Borrowings and Other Liabilities
Total average deposits for the fiscal 2019 third quarter increased by $1.43 billion, or 45%, compared to the same period in fiscal 2018. Average wholesale deposits increased $1.07 billion, or 235%, primarily related to the Crestmark acquisition, and noninterest-bearing deposits grew by $244.5 million, or 10%, in each case, for the 2019 fiscal third quarter when compared to the same period in fiscal 2018.

The average balance of total deposits and interest-bearing liabilities was $5.14 billion for the three-month period ended June 30, 2019, compared to $3.70 billion for the same period in the prior fiscal year, representing an increase of 39%.

Total end-of-period deposits increased 36%, to $4.78 billion at June 30, 2019, compared to $3.52 billion at June 30, 2018. The increase in end-of-period deposits was primarily a result of increases in wholesale deposits, noninterest- bearing deposits, certificates of deposits and interest-bearing checking deposits.

Regulatory Capital
The Company and MetaBank remained above the federal regulatory minimum capital requirements at June 30, 2019 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,
 2019
  March 31,
 2019
  December 31,
2018
  September 30,
2018
  June 30,
2018
Company                  
Tier 1 leverage capital ratio 8.05 %   7.45 %   7.90 %   8.50 %   8.29 %
Common equity Tier 1 capital ratio 10.19 %   10.94 %   10.10 %   10.56 %   13.92 %
Tier 1 capital ratio 10.55 %   11.31 %   10.47 %   10.97 %   14.35 %
Total capital ratio 13.22 %   14.20 %   12.69 %   13.18 %   18.37 %
MetaBank                  
Tier 1 leverage capital ratio 9.37 %   8.42 %   9.01 %   9.75 %   10.16 %
Common equity Tier 1 capital ratio 12.22 %   12.72 %   11.87 %   12.50 %   17.57 %
Tier 1 capital ratio 12.27 %   12.76 %   11.91 %   12.56 %   17.57 %
Total capital ratio 13.26 %   13.92 %   12.41 %   12.89 %   18.50 %

The following table provides certain non-GAAP financial measures used to compute certain of the ratios included in the table above for the periods presented, 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,
 2019
  March 31,
 2019
  December 31,
2018
  September 30,
2018
  June 30,
2018
  (Dollars in Thousands)
Total stockholders' equity $ 822,901     $ 823,709     $ 770,728     $ 747,726     $ 443,913  
Adjustments:                  
LESS: Goodwill, net of associated deferred tax liabilities 302,850     302,768     299,037     299,456     94,781  
LESS: Certain other intangible assets 53,249     56,456     61,317     64,716     46,098  
LESS: Net deferred tax assets from operating loss and tax credit carry-forwards 13,858     7,381     4,720          
LESS: Net unrealized losses on available-for-sale securities 2,329     (10,022 )   (28,829 )   (33,114 )   (28,601 )
LESS: Noncontrolling interest 3,508     3,528     3,267     3,574      
LESS: Unrealized currency gains (losses)     (242 )   (357 )   3      
Common Equity Tier 1 Capital (1) 447,107     463,840     431,573     413,091     331,635  
Long-term borrowings and other instruments qualifying as Tier 1 13,661     13,661     13,661     13,661     10,310  
Tier 1 minority interest not included in common equity tier 1 capital 2,119     2,064     1,796     2,118      
Total Tier 1 Capital 462,887     479,565     447,030     428,870     341,945  
Allowance for loan and lease losses 43,641     48,812     21,422     13,185     22,151  
Subordinated debentures (net of issuance costs) 73,605     73,566     73,528     73,491     73,442  
Total Capital $ 580,133     $ 601,963     $ 541,980     $ 515,546     $ 437,538  
 
(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 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,
 2019
  March 31,
 2019
  December 31,
2018
  September 30,
2018
  June 30,
2018
  (Dollars in Thousands)
Total Stockholders' Equity $ 822,901     $ 823,709     $ 770,728     $ 747,726     $ 443,913  
Less: Goodwill 307,941     307,464     303,270     303,270     98,723  
Less: Intangible assets 56,153     60,506     66,366     70,719     46,098  
Tangible common equity 458,807     455,739     401,092     373,737     299,092  
Less: Accumulated Other Comprehensive Income (Loss) ("AOCI") 2,308     (10,264 )   (29,186 )   (33,111 )   (28,601 )
Tangible common equity excluding AOCI $ 456,499     $ 466,003     $ 430,278     $ 406,848     $ 327,693  

Future Outlook
The Company expects fiscal 2019 earnings per common share ("EPS") on an adjusted basis to range between $2.66 to $2.81. The Company's estimates on an adjusted basis exclude the non-recurring $0.12 EPS effect, or $6.1 million, of pre-tax executive transition agreement costs incurred in the quarter ended March 31, 2019. The adjusted EPS guidance also excludes the $0.17 EPS effect, or $6.6 million, after-tax net charge to earnings related to the previously disclosed DC Solar matters in the quarter ended March 31, 2019. As a result, GAAP earnings per share for fiscal 2019 is expected to be in the range of $2.37 to $2.52 per share. The Company reaffirms the earnings outlook for fiscal year 2020 GAAP EPS to be in the range of $3.10 to $3.80.

Conference Call
The Company will host a conference call and earnings webcast at 4:00 p.m. CDT (5:00 p.m. EDT) on Tuesday, July 30, 2019. 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 3047728 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 Securities and Exchange Commission (“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; customer retention; loan and other product demand; important components of the Company's statements of financial condition and operations; growth and expansion; new products and services, such as those offered by MetaBank or the Company's Payments divisions (which include Meta Payment Systems, Refund Advantage, EPS Financial and Specialty Consumer Services); 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; the expected growth opportunities, beneficial synergies and/or operating efficiencies from the Crestmark acquisition may not be fully realized or may take longer to realize than expected; customer losses and business disruption related to the Crestmark acquisition; unanticipated or unknown losses and liabilities may be incurred by the Company following the Crestmark acquisition; the costs, risks and effects on the Company of the ongoing federal investigation and bankruptcy proceedings involving DC Solar Solutions, Inc., DC Solar Distribution, Inc., and their affiliates, including the potential financial impact of those matters on the net book value of Company assets leased to DC Solar Distribution and the Company’s ability to recognize certain investment tax credits associated with such assets, and the results of the Company’s review of its due diligence processes with respect to the Company’s alternative energy assets; factors relating to the Company’s share repurchase program; 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; risks relating to the recent U.S. government shutdown, including any adverse impact on our ability to originate or sell SBA/USDA loans and any delay by the Internal Revenue Service in processing taxpayer refunds, thereby increasing the cost to us of our refund advance loans; the effects of, and 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”), as well as efforts of the United States Congress and the United States Treasury in conjunction with bank regulatory agencies to stimulate the economy and protect the financial system; 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 acceptance of usage of Meta’s strategic partners’ refund advance products; any actions which may be initiated by our regulators in the future; 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; our relationship with our primary regulators, the Office of the Comptroller of the Currency and the Federal Reserve, as well as the Federal Deposit Insurance Corporation, which insures MetaBank’s deposit accounts up to applicable limits; technological changes, including, but not limited to, the protection of electronic files or databases; acquisitions; litigation risk, in general, including, but not limited to, those risks involving MetaBank's divisions; 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 growing 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, 2018, 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 Operations (Unaudited)
(Dollars in Thousands, Except Share and Per Share Data(1))
 
ASSETS June 30,
2019
  March 31,
2019
  December 31,
2018
  September 30,
2018
  June 30,
2018
Cash and cash equivalents $ 100,732     $ 156,461     $ 164,169     99,977     $ 71,276  
Investment securities available for sale, at fair value 961,897     1,081,663     1,340,870     1,484,160     1,349,642  
Mortgage-backed securities available for sale, at fair value 395,201     413,493     354,186     364,065     575,999  
Investment securities held to maturity, at cost 138,128     146,992     153,075     163,893     215,850  
Mortgage-backed securities held to maturity, at cost 7,414     7,606     7,661     7,850     8,218  
Loans held for sale 62,839     59,745     33,560     15,606      
Loans and leases 3,631,031     3,437,980     3,329,498     2,944,739     1,597,294  
Allowance for loan and lease losses (43,505 )   (48,672 )   (21,290 )   (13,040 )   (21,950 )
Federal Home Loan Bank Stock, at cost 17,236     7,436     15,600     23,400     7,446  
Accrued interest receivable 19,722     20,281     22,076     22,016     17,825  
Premises, furniture, and equipment, net 46,360     45,457     44,299     40,458     20,374  
Rental equipment, net 184,732     140,087     146,815     107,290      
Bank-owned life insurance 89,193     88,565     87,934     87,293     86,655  
Foreclosed real estate and repossessed assets 29,514     29,548     31,548     31,638     29,922  
Goodwill 307,941     307,464     303,270     303,270     98,723  
Intangible assets 56,153     60,506     66,366     70,719     46,098  
Prepaid assets 22,023     26,597     31,483     27,906     23,211  
Deferred taxes 21,630     19,079     23,607     18,737     23,025  
Other assets 52,831     49,754     48,038     35,090     19,551  
                   
Total assets $ 6,101,072     $ 6,050,042     $ 6,182,765     5,835,067     $ 4,169,159  
                   
LIABILITIES AND STOCKHOLDERS’ EQUITY                  
                   
LIABILITIES                  
Noninterest-bearing checking $ 2,751,931     $ 3,034,428     $ 2,739,757     2,405,274     $ 2,637,987  
Interest-bearing checking 157,802     183,492     128,662     111,587     103,065  
Savings deposits 52,179     59,978     52,229     54,765     57,356  
Money market deposits 68,604     56,563     54,559     51,995     45,115  
Time certificates of deposit 116,698     154,401     170,629     276,180     57,151  
Wholesale deposits 1,628,000     1,481,445     1,790,611     1,531,186     620,959  
Total deposits 4,775,214     4,970,307     4,936,447     4,430,987     3,521,633  
Short-term borrowings 146,613     11,583     231,293     425,759     27,290  
Long-term borrowings 209,765     99,800     88,983     88,963     85,580  
Accrued interest payable 12,350     9,239     11,280     7,794     3,705  
Accrued expenses and other liabilities 134,229     135,404     144,034     133,838     87,038  
Total liabilities 5,278,171     5,226,333     5,412,037     5,087,341     3,725,246  
                   
STOCKHOLDERS’ EQUITY                  
Preferred stock, 3,000,000 shares authorized, no shares issued or outstanding at June 30, 2019, March 31, 2019, December 31, 2018, September 30, 2018, and June 30, 2018                  
Common stock, $.01 par value; 90,000,000 shares authorized, 37,878,694, 39,565,496, 39,494,919, 39,192,063, and 29,122,596 shares issued and 37,878,205, 39,450,938, 39,405,508, 39,167,280, and 29,101,605 shares outstanding at June 30, 2019, March 31, 2019, December 31, 2018, September 30, 2018, and June 30, 2018 379     395     394     393     291  
Common stock, Nonvoting, $.01 par value; 3,000,000 shares authorized, no shares issued or outstanding at June 30, 2019, March 31, 2019, December 31, 2018, September 30, 2018, and June 30, 2018                  
Additional paid-in capital 578,715     576,406     572,156     565,811     267,610  
Retained earnings 238,004     258,600     228,453     213,048     206,284  
Accumulated other comprehensive (loss) income 2,308     (10,264 )   (29,186 )   (33,111 )   (28,601 )
Treasury stock, at cost, 489, 114,558, 89,411, 24,783, and 20,991 common shares at June 30, 2019, March 31, 2019, December 31, 2018, September 30, 2018, and June 30, 2018 (13 )   (4,956 )   (4,356 )   (1,989 )   (1,671 )
Total equity attributable to parent 819,393     820,181     767,461     744,152     443,913  
Non-controlling interest 3,508     3,528     3,267     3,574      
Total stockholders’ equity 822,901     823,709     770,728     747,726     443,913  
                   
Total liabilities and stockholders’ equity $ 6,101,072     $ 6,050,042     $ 6,182,765     5,835,067     $ 4,169,159  
 
(1) All share and per share data reported in this release for all periods presented has been adjusted to reflect the 3-for-1 forward stock split effected by the Company on October 4, 2018.
 


       
 Consolidated Statements of Operations (Unaudited)
(Dollars in Thousands, Except Share and Per Share Data(1))
       
  Three Months Ended   Nine Months Ended
  June 30,
2019
  March 31,
2019
  June 30,
2018
  June 30,
2019
  June 30,
2018
Interest and dividend income:                  
Loans and leases, including fees $ 69,732     $ 73,670     $ 19,056     $ 203,900     $ 53,344  
Mortgage-backed securities 3,063     2,861     3,950     8,622     11,755  
Other investments 8,837     11,763     11,098     32,380     33,234  
  81,632     88,294     34,104     244,902     98,333  
Interest expense:                  
Deposits 10,395     14,740     2,264     35,731     7,106  
FHLB advances and other borrowings 4,269     2,204     3,429     10,581     9,215  
  14,664     16,944     5,693     46,312     16,321  
                   
Net interest income 66,968     71,350     28,411     198,590     82,012  
                   
Provision for loan for lease losses 9,112     33,318     5,315     51,529     24,726  
                   
Net interest income after provision for loan and lease losses 57,856     38,032     23,096     147,061     57,286  
                   
Noninterest income:                  
Refund transfer product fees 6,697     31,601     7,358     38,559     41,353  
Tax advance product fees 34     33,038     (46 )   34,757     35,739  
Card fees 19,537     23,052     22,807     61,939     74,910  
Rental income 9,386     9,890         30,167      
Loan and lease fees 1,012     925     1,111     3,185     3,445  
Bank-owned life insurance 628     631     633     1,901     1,952  
Deposit fees 2,335     2,093     1,134     6,365     2,964  
Gain (loss) on sale of securities available-for-sale, net 440     231     (22 )   649     (1,198 )
Gain on sale of loans and leases 1,913     1,085         3,865      
Gain (loss) on foreclosed real estate     (200 )       (185 )   (19 )
Other income 1,808     2,679     250     5,363     766  
Total noninterest income 43,790     105,025     33,225     186,565     159,912  
                   
Noninterest expense:                  
Compensation and benefits 35,176     49,164     24,439     117,350     78,951  
Refund transfer product expense 287     7,181     1,694     7,478     11,665  
Tax advance product expense 425     2,225     (19 )   3,101     1,736  
Card processing 4,613     6,971     7,068     18,670     20,798  
Occupancy and equipment 7,136     7,212     4,720     20,806     14,087  
Operating lease equipment depreciation 6,029     4,485         18,280      
Legal and consulting 4,065     4,308     2,781     12,341     8,436  
Marketing 368     585     416     1,493     1,637  
Data processing 260     321     301     1,018     958  
Intangible amortization 4,374     5,596     1,664     14,352     6,077  
Impairment expense     9,660         9,660      
Other expense 9,735     12,546     5,988     32,467     17,247  
Total noninterest expense 72,468     110,254     49,053     257,016     161,592  
                   
Income before income tax expense 29,178     32,803     7,268     76,610     55,606  
                   
Income tax (benefit) expense (1,158 )   (395 )   476     (3,244 )   12,708  
                   
Net income before noncontrolling interest 30,336     33,198     6,792     79,854     42,898  
Net income attributable to noncontrolling interest 1,045     1,078         3,045      
Net income attributable to parent $ 29,291     $ 32,120     $ 6,792     $ 76,809     $ 42,898  
                   
Earnings per common share                  
Basic $ 0.75     $ 0.81     $ 0.23     $ 1.96     $ 1.48  
Diluted $ 0.75     $ 0.81     $ 0.23     $ 1.95     $ 1.47  
Shares used in computing earnings per share                  
Basic 38,903,266     39,429,595     29,099,472     39,220,793     29,043,309  
Diluted 38,977,690     39,496,832     29,218,980     39,289,011     29,159,985  
                             
(1) All share and per share data reported in this release for all periods presented has been adjusted to reflect the 3-for-1 forward stock split effected by the Company on October 4, 2018.
                             

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 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, 2019   2018
(Dollars in Thousands) Average
Outstanding
Balance
  Interest
Earned /
Paid
  Yield /
Rate(1)
  Average
Outstanding
Balance
  Interest
Earned /
Paid
  Yield /
Rate(2)
Interest-earning assets:                      
Cash & fed funds sold $ 80,100     $ 521     2.61 %   $ 57,164     $ 388     2.72 %
Mortgage-backed securities 421,725     3,063     2.91 %   617,815     3,950     2.56 %
Tax exempt investment securities 690,732     4,058     2.98 %   1,373,444     8,635     3.34 %
Asset-backed securities 307,581     2,701     3.52 %   189,389     1,537     3.25 %
Other investment securities 199,681     1,557     3.13 %   72,381     538     2.98 %
Total investments 1,619,719     11,379     3.09 %   2,253,029     14,660     3.11 %
Commercial finance loans and leases 1,775,905     44,332     10.01 %   299,676     3,813     5.10 %
Consumer finance loans 364,633     8,178     9.00 %   208,937     3,717     7.13 %
Tax services loans 45,142         %   22,268         %
Warehouse finance loans 223,546     3,491     6.26 %           %
National lending loans and leases 2,409,226     56,001     9.32 %   530,881     7,530     5.69 %
Community banking loans 1,189,912     13,731     4.63 %   1,030,016     11,526     4.49 %
Total loans and leases 3,599,138     69,732     7.77 %   1,560,897     19,056     4.90 %
Total interest-earning assets $ 5,298,957     $ 81,632     6.26 %   $ 3,871,090     $ 34,104     3.82 %
Non-interest-earning assets 820,474             369,200          
Total assets $ 6,119,431             $ 4,240,290          
                       
Interest-bearing liabilities:                      
Interest-bearing checking $ 137,950     $ 85     0.25 %   $ 98,235     $ 54     0.22 %
Savings 54,247     9     0.07 %   59,546     10     0.07 %
Money markets 58,782     107     0.73 %   46,742     28     0.24 %
Time deposits 128,165     633     1.98 %   60,373     167     1.11 %
Wholesale deposits 1,521,594     9,561     2.52 %   453,885     2,005     1.77 %
Total interest-bearing deposits 1,900,738     10,395     2.19 %   718,781     2,264     1.26 %
Overnight fed funds purchased 363,857     2,368     2.61 %   402,088     2,041     2.04 %
FHLB advances 54,341     324     2.39 %           %
Subordinated debentures 73,583     1,163     6.34 %   73,430     1,102     6.02 %
Other borrowings 40,653     414     4.08 %   36,408     286     3.15 %
Total borrowings 532,434     4,269     3.22 %   511,926     3,429     2.69 %
Total interest-bearing liabilities 2,433,172     14,664     2.42 %   1,230,707     5,693     1.86 %
Non-interest bearing deposits 2,710,288         %   2,465,750         %
Total deposits and interest-bearing liabilities $ 5,143,460     $ 14,664     1.14 %   $ 3,696,457     $ 5,693     0.62 %
Other non-interest-bearing liabilities 149,207             98,973          
Total liabilities 5,292,667             3,795,430          
Shareholders' equity 826,764             444,860          
Total liabilities and shareholders' equity $ 6,119,431             $ 4,240,290          
Net interest income and net interest rate spread including non-interest-bearing deposits     $ 66,968     5.12 %       $ 28,411     3.21 %
                       
Net interest margin         5.07 %           2.94 %
Tax-equivalent effect         0.08 %           0.29 %
Net interest margin, tax-equivalent(3)         5.15 %           3.23 %
 
(1) Tax rate used to arrive at the TEY for the three months ended June 30, 2019 was 21%.
(2) Tax rate used to arrive at the TEY for the three months ended June 30, 2018 was 24.53%.
(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,
2019
  March 31,
2019
  December 31,
2018
  September 30,
2018
  June 30,
2018
                   
Equity to total assets 13.49 %   13.61 %   12.47 %   12.81 %   10.65 %
Book value per common share outstanding $ 21.72     $ 20.88     $ 19.56     $ 19.09     $ 15.25  
Tangible book value per common share outstanding $ 12.11     $ 11.55     $ 10.18     $ 9.54     $ 10.28  
Tangible book value per common share outstanding excluding AOCI $ 12.05     $ 11.81     $ 10.92     $ 10.39     $ 11.26  
Common shares outstanding 37,878,205     39,450,938     39,405,508     39,167,280     29,101,605  
Non-performing assets to total assets 0.84 %   0.68 %   0.73 %   0.72 %   0.86 %
Non-performing loans and leases to total loans and leases 0.57 %   0.28 %   0.42 %   0.35 %   0.36 %
Net interest margin 5.07 %   5.06 %   4.60 %   4.05 %   2.94 %
Net interest margin, tax-equivalent 5.15 %   5.18 %   4.76 %   4.27 %   3.23 %
Return on average assets 1.91 %   1.89 %   1.03 %   0.65 %   0.64 %
Return on average equity 14.17 %   16.18 %   8.19 %   5.34 %   6.11 %
Full-time equivalent employees 1,218     1,231     1,229     1,219     932  


Select Quarterly Expenses
(Dollars in Thousands) Actual Anticipated
For the Three Months Ended Jun 30,
 2019
Sep 30,
 2019
Dec 31,
 2019
Mar 31,
 2020
Jun 30,
 2020
Sep 30,
 2020
Dec 31,
 2020
Mar 31,
 2021
Jun 30,
 2021
                   
Amortization of Intangibles (1) $ 4,374   $ 3,358   $ 2,675   $ 3,400   $ 2,632   $ 2,277   $ 2,008   $ 2,752   $ 2,008  
Executive Officer Stock Compensation (2) $ 927   $ 937   $ 679   $ 669   $ 669   $ 676   $ 485   $ 473   $ 478  
 
(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.
 
(2) These amounts are based upon the long-term employment agreements signed in the first and second quarters of fiscal 2017 by the Company’s three highest paid executives at that time. This table makes no assumption for expenses related to any additional future agreements entered into, or to be entered into, after such quarters. The amounts in this table were not impacted by the Executive Separation Agreement entered into by the Company as of January 16, 2019 and filed with the Securities and Exchange Commission on January 17, 2019.
 

About Meta Financial Group®
Meta Financial Group, Inc. ® (Nasdaq: CASH) is the holding company for the financial services company MetaBank® (“Meta”). Founded in 1954, Meta has grown to operate in several different financial sectors: payments, commercial finance, tax services, community banking and consumer lending. Meta works with high-value niche industries, strategic-growth companies and technology adopters to grow their businesses and build more profitable customer relationships. Meta tailors solutions for bank and non-bank businesses, and provides a focused collaborative approach. The organization is helping to shape the evolving financial services landscape by directly investing in innovation and complementary businesses that strategically expand its suite of services. Meta has a national presence and over 1,200 employees, with corporate headquarters in Sioux Falls, S.D. For more information, visit the Meta Financial Group website or LinkedIn.

Investor Relations and Media Contact:
Brittany Kelley Elsasser
Director of Investor Relations
605-362-2423
bkelley@metabank.com

 

Is your business listed correctly on America’s largest city directory network of 1,000 portals?