EX-99.1 2 exhibit991earningspressrel.htm EXHIBIT 99.1 Exhibit
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META FINANCIAL GROUP ANNOUNCES RESULTS FOR 2019 FISCAL FIRST QUARTER
- Revenue Rises 77% -
- Produces Net Income of $15.4 million as Earnings Per Diluted Share More Than Doubles to $0.39 -

Sioux Falls, S.D., January 28, 2019 (GLOBE NEWSWIRE) -- Meta Financial Group, Inc.® (Nasdaq: CASH) (“Meta” or the “Company”) recorded net income of $15.4 million, or $0.39 per diluted share, for the three months ended December 31, 2018, compared to net income of $4.7 million, or $0.16 per diluted share, for the three months ended December 31, 2017, representing a 230% increase in net income. Total revenue for the fiscal 2019 first quarter was $98.0 million, compared to $55.5 million for the same quarter in fiscal 2018, an increase of $42.5 million, or 77%.
“Due in large part to the success of our recent expansion in our national commercial finance portfolio, we drove a sizable increase in net interest income helping us deliver strong growth in earnings for the first quarter of fiscal 2019," said President and CEO Brad Hanson. "In addition to our plans to accelerate growth in our core deposits, primarily in our non-interest bearing deposit portfolio, we expect to further enhance our interest-earning asset mix by continuing to grow our commercial finance portfolios, and improve operating efficiencies to maximize long-term value for shareholders.”
Highlights for the 2019 Fiscal First Quarter Ended December 31, 2018
•
Total gross loans and leases grew over 100% to $3.33 billion, compared to the same period in fiscal 2018 and increased $383.3 million, or 13%, when compared to September 30, 2018.
•
Average non-interest-bearing deposits of $2.49 billion increased by $161.0 million, or 7%, when compared to the same period in fiscal 2018.
•
Net interest income grew over 100%, or $34.1 million, to $60.3 million, compared to $26.2 million in the comparable quarter in fiscal 2018.
•
Net interest margin ("NIM") increased to 4.60% from 2.76% over the same period of the prior fiscal year, while the tax-equivalent net interest margin ("NIM, TE") increased to 4.76% from 3.06% over that same period.
Net Interest Income
Net interest income for the fiscal 2019 first quarter was $60.3 million, an increase of $34.1 million, or 130%, compared to the same quarter in fiscal 2018, primarily due to growth in loan and lease balances and expansion in net interest margin.
During the first quarter of fiscal year 2019, loan and lease interest income grew $44.1 million, offset by an increase in interest expense of $10.0 million, when compared to the same quarter in fiscal 2018. The quarterly average outstanding balance of loans and leases as a percentage of interest-earning assets increased to 60% as of the end of the first fiscal quarter of 2019 from 37% as of the end of the first fiscal quarter of 2018. The Company’s average interest-earning assets for the fiscal 2019 first quarter grew by $1.43 billion, or 38%, to $5.19 billion from the comparable quarter in 2018. This was primarily due to growth in the loan and lease portfolio of $1.71 billion, of which $1.50 billion was attributable to an increase in national lending loans and leases along with an increase of $215.9 million in community banking loans, partially offset by a reduction in total investment securities of $226.4 million.
NIM, TE was 4.76% for the fiscal 2019 first quarter, with the net effect of purchase accounting accretion contributing 18 basis points.

1


The overall reported tax-equivalent yield (“TEY”) on average earning asset yields increased by 234 basis points to 5.89% for the fiscal 2019 first quarter compared to the 2018 first fiscal quarter. The improvement was driven primarily by the Company's improved earning asset mix, which reflects increased balances in the national lending portfolio. The fiscal 2019 first quarter TEY on the securities portfolio increased by 20 basis points to 3.13% compared to TEY for the same period of the prior year of 2.93%.
Overall, the Company's cost of funds for all deposits and borrowings averaged 1.14% during the fiscal 2019 first quarter, compared to 0.51% for the 2018 first 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 Company's acquisition of Crestmark in the fourth quarter of fiscal 2018. The Company's overall cost of deposits was 0.91% in the fiscal first quarter of 2019, compared to 0.24% in the same quarter of fiscal 2018. Excluding wholesale deposits, the Company's cost of deposits for the first quarter of fiscal 2019 would have been 0.14%.
Non-Interest Income
Fiscal 2019 first quarter non-interest income was $37.8 million, an increase of 29% over the same quarter of fiscal 2018, largely due to increases in rental income, deposit fees, other income, and gain on sale of loans and leases. Lower losses on sale of securities also contributed to the overall increase in non-interest income. Partially offsetting the increase in non-interest income was a decrease in card fee income to $19.4 million, compared to $25.2 million in same quarter of the prior fiscal year.
Together, card and deposit fee income totaled $21.3 million for the fiscal 2019 first quarter, compared to $26.1 million in the same quarter in fiscal 2018. This expected reduction in residual fee income was related to the wind-down of the Company's relationships with two non-strategic payments partners.
Non-Interest Expense
Non-interest expense increased to $74.3 million for the 2019 fiscal first quarter, compared to $44.0 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.
Income Tax Expense
The Company recorded an income tax benefit of $1.7 million, or an effective tax rate of (11.56%), for the fiscal 2019 first quarter, compared to an income tax expense of $5.7 million, or an effective tax rate of 54.90%, for the fiscal 2018 first quarter.
The Company originated $35.6 million in solar leasing initiatives and recorded a related income tax benefit in the fiscal first quarter of 2019. Investment tax credits related to these solar leasing initiatives 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 criteria.


2


Investments, Loans and Leases
 
December 31, 2018
 
September 30, 2018
 
June 30, 2018
 
March 31, 2018
 
December 31, 2017
 
 
 
 
 
 
 
 
 
 
Total investments
$
1,855,792


$
2,019,968


$
2,149,709


$
2,306,603


$
2,233,705

 
 
 
 
 
 
 
 
 
 
Loans held for sale
 
 
 
 
 
 
 
 
 
Consumer credit products
24,233

 
—

 
—

 
—

 
—

SBA/USDA(1)
9,327

 
15,606

 
—

 
—

 
—

Total loans held for sale
33,560

 
15,606

 
—

 
—

 
—

 
 
 
 
 
 
 
 
 
 
National Lending loans and leases
 
 
 
 
 
 
 
 
 
Asset based lending
554,072

 
477,917

 
—

 
—

 
—

Factoring
284,912

 
284,221

 
—

 
—

 
—

Lease financing
290,889

 
265,315

 
—

 
—

 
—

Insurance premium finance
330,712

 
337,877

 
303,603

 
240,640

 
235,671

SBA/USDA
67,893

 
59,374

 
—

 
—

 
—

Other commercial finance
89,402

 
85,145

 
11,418

 
8,041

 
6,306

Commercial finance(2)
1,617,880

 
1,509,849

 
315,021

 
248,681

 
241,977

Consumer credit products
96,144

 
80,605

 
26,583

 
—

 
—

Other consumer finance
182,510

 
189,756

 
194,344

 
201,942

 
209,137

Consumer finance
278,654

 
270,361

 
220,927

 
201,942

 
209,137

Tax services
76,575

 
1,073

 
14,281

 
58,794

 
67,424

Warehouse finance
176,134

 
65,000

 
—

 
—

 
—

Total National Lending loans and leases
2,149,243

 
1,846,283

 
550,229

 
509,417

 
518,538

Community Banking loans
 
 
 
 
 
 
 
 
 
Commercial real estate and operating
863,753

 
790,890

 
751,146

 
723,091

 
680,785

Consumer one-to-four family real estate and other
256,341

 
247,318

 
237,704

 
228,415

 
225,841

Agricultural real estate and operating
58,971

 
60,498

 
60,096

 
58,773

 
85,999

Total Community Banking loans
1,179,065

 
1,098,706

 
1,048,946

 
1,010,279

 
992,625

Total gross loans and leases
3,328,308

 
2,944,989

 
1,599,175

 
1,519,696

 
1,511,163

Allowance for loan and lease losses
(21,290
)
 
(13,040
)
 
(21,950
)
 
(27,078
)
 
(8,862
)
Net deferred loan origination fees
1,190

 
(250
)
 
(1,881
)
 
(2,080
)
 
(2,023
)
Total loans and leases, net of allowance
$
3,308,208

 
$
2,931,699

 
$
1,575,344

 
$
1,490,538

 
$
1,500,278

(1) The December 31, 2018 balance included $0.8 million of an interest rate mark premium related to the acquired loans and leases from the Crestmark acquisition.
(2) The December 31, 2018 balance included $10.1 million and $5.6 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 growth, which contributed to a 17% decrease in investment securities at December 31, 2018, from $2.23 billion at December 31, 2017.
Total gross loans and leases increased $1.82 billion, or 120%, to $3.33 billion at December 31, 2018, from $1.51 billion at December 31, 2017, primarily driven by loans and leases attributable to the recently acquired Crestmark commercial finance division, along with increases in warehouse finance and consumer credit product loans, a 40% increase in insurance premium finance loans, and a 19% increase in community banking loans.
At December 31, 2018, commercial finance loans, which comprised 49% of the Company's gross loan and lease portfolio, totaled $1.62 billion, reflecting growth of $108.0 million, or 7%, from September 30, 2018. Warehouse finance loans increased by $111.1 million from the prior quarter, due to the Company's participation in two highly-secured, asset-based warehouse lines of credit. Community banking loans grew by $80.4 million, or 7%, during the first quarter of fiscal 2019, due primarily to growth in commercial real estate loans.



3


Asset Quality
The Company’s allowance for loan and lease losses was $21.3 million at December 31, 2018, compared to $8.9 million at December 31, 2017, driven primarily by increases in the allowance of $5.4 million in consumer lending, $5.0 million in commercial finance, and $1.8 million in the community banking portfolio.
(Unaudited)
Three Months Ended
Allowance for loan and lease loss activity
December 31, 2018
 
September 30, 2018
 
December 31, 2017
(Dollars in thousands)
 
 
 
 
 
Beginning balance
$
13,040

 
$
21,950

 
$
7,534

Provision - tax services loans
1,496

 
1,009

 
1,017

Provision - all other loans and leases
7,603

 
3,697

 
51

Charge-offs - tax services loans
(42
)
 
(11,295
)
 
—

Charge-offs - all other loans and leases
(2,762
)
 
(3,420
)
 
(160
)
Recoveries - tax services loans
92

 
31

 
413

Recoveries - all other loans and leases
1,863

 
1,068

 
7

Ending balance
$
21,290

 
$
13,040

 
$
8,862

Provision for loan and lease losses was $9.1 million for the quarter ended December 31, 2018, compared to $1.1 million for the comparable period in the prior fiscal year. The increase in provision was primarily driven by growth in the commercial finance and tax advance portfolios, as well as provision expense to maintain allowance levels. Net charge-offs were $0.8 million for the quarter ended December 31, 2018 compared to a net recovery of $0.3 million for the quarter ended December 31, 2017.
The Company's non-performing assets at December 31, 2018, were $45.4 million, representing 0.73% of total assets, compared to $41.8 million, or 0.72% of total assets at September 30, 2018 and $33.3 million, or 0.61% of total assets at December 31, 2017. The Company's non-performing loans and leases at December 31, 2018 were $13.9 million, representing 0.42% of total loans and leases, compared to $10.2 million, or 0.35% of total loans and leases at September 30, 2018 and $33.2 million, or 2.19% of total loans and leases at December 31, 2017.
Deposits, Borrowings and Other Liabilities
Total average deposits for the fiscal 2019 first quarter increased by $1.49 billion, or 48%, compared to the same period in fiscal 2018. Average wholesale deposits increased $1.21 billion, or 251%, and average non-interest-bearing deposits increased $161.0 million, or 7%, for the 2019 fiscal first quarter when compared to the same period in fiscal 2018.
The average balance of total deposits and interest-bearing liabilities was $5.10 billion for the three-month period ended December 31, 2018, compared to $3.62 billion for the same period in the prior fiscal year, representing an increase of 41%.
Total end-of-period deposits increased 40%, to $4.94 billion at December 31, 2018, compared to $3.51 billion at December 31, 2017. The increase in end-of-period deposits was primarily a result of increases in wholesale deposits by 326%, interest-bearing checking deposits by 52%, and certificates of deposits by 33%.
Regulatory Capital
The Company and MetaBank remained above the federal regulatory minimum capital requirements at December 31, 2018 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.

4


As of the periods indicated
December 31,
2018
 
September 30,
2018
 
June 30,
2018
 
March 31,
2018
 
December 31,
2017
Company
 
 
 
 
 
 
 
 
 
Tier 1 leverage ratio
7.90
%
 
8.50
%
 
8.29
%
 
7.26
%
 
7.68
%
Common equity Tier 1 capital ratio
10.11
%
 
10.56
%
 
13.92
%
 
13.74
%
 
12.88
%
Tier 1 capital ratio
10.47
%
 
10.97
%
 
14.35
%
 
14.18
%
 
13.32
%
Total qualifying capital ratio
12.69
%
 
13.18
%
 
18.37
%
 
18.48
%
 
16.91
%
MetaBank
 
 
 
 
 
 
 
 
 
Tier 1 leverage ratio
9.01
%
 
9.75
%
 
10.16
%
 
8.93
%
 
9.61
%
Common equity Tier 1 capital ratio
11.87
%
 
12.50
%
 
17.57
%
 
17.43
%
 
16.64
%
Tier 1 capital ratio
11.91
%
 
12.56
%
 
17.57
%
 
17.43
%
 
16.64
%
Total qualifying capital ratio
12.41
%
 
12.89
%
 
18.50
%
 
18.59
%
 
17.03
%
Due to the predictable, quarterly cyclicality of non-interest bearing deposits in connection with tax season business activity, management believes that a six-month capital calculation is a useful metric to monitor the Company’s overall capital management process. As such, MetaBank’s six-month average Tier 1 leverage ratio, Common equity Tier 1 capital ratio, Tier 1 capital ratio, and Total qualifying capital ratio as of December 31, 2018, were 9.46%, 13.42%, 13.47%, and 14.03%, respectively. 
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)
December 31,
2018
 
September 30,
2018
 
June 30,
2018
 
March 31,
2018
 
December 31,
2017
 
(Dollars in Thousands)
Total stockholders' equity
$
770,728

 
$
747,726

 
$
443,913

 
$
443,703

 
$
437,705

Adjustments:
 
 
 
 
 
 
 
 
 
LESS: Goodwill, net of associated deferred tax liabilities
299,037

 
299,456

 
94,781

 
95,262

 
95,705

LESS: Certain other intangible assets
61,317

 
64,716

 
46,098

 
47,724

 
40,417

LESS: Net deferred tax assets from operating loss and tax credit carry-forwards
4,720

 
—

 
—

 
—

 
—

LESS: Net unrealized gains (losses) on available-for-sale securities
(28,829
)
 
(33,114
)
 
(28,601
)
 
(21,166
)
 
5,782

LESS: Non-controlling interest
3,267

 
3,574

 
—

 
—

 
—

LESS: Unrealized currency gains (losses)
(357
)
 
3

 
—

 
—

 
—

Common Equity Tier 1 (1)
431,573

 
413,091

 
331,635

 
321,882

 
295,801

Long-term debt and other instruments qualifying as Tier 1
13,661

 
13,661

 
10,310

 
10,310

 
10,310

Tier 1 minority interest not included in common equity tier 1 capital
1,796

 
2,118

 
—

 
—

 
—

Total Tier 1 capital
447,030

 
428,870

 
341,945

 
332,192

 
306,111

Allowance for loan and lease losses
21,422

 
13,185

 
22,151

 
27,285

 
9,058

Subordinated debentures (net of issuance costs)
73,528

 
73,491

 
73,442

 
73,418

 
73,382

Total qualifying capital
$
541,980

 
$
515,546

 
$
437,538

 
$
432,896

 
$
388,551

(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.


5


The following table provides a reconciliation of tangible common equity used in calculating tangible book value data.
 
December 31, 2018
 
(Dollars in Thousands)
Total Stockholders' Equity
$
770,728

Less: Goodwill
303,270

Less: Intangible assets
66,366

     Tangible common equity
401,092

Less: Accumulated Other Comprehensive Income (Loss) ("AOCI")
(29,186
)
     Tangible common equity excluding AOCI (Loss)
430,278

Future Outlook
The Company continues to expect fiscal 2019 earnings per common share to be in the range of $2.30 to $2.70, excluding the effects related to Company executive transition costs. The Company estimates $6.1 million of pre-tax executive transition agreement costs will reduce fiscal 2019 earnings per common share by up to $0.12, all of which costs the Company expects will be incurred in the quarter ending March 31, 2019. The Company also affirms the earnings outlook for fiscal year 2020 GAAP earnings per common share 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. CST (5:00 p.m. EST) on Monday, January 28, 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 7878366 upon request. International callers should dial (636) 812-6634. A webcast replay will also be archived at www.metafinancialgroup.com for one year.


6


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: risks relating to the recently-announced management transition; 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; 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, interest rate, 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.


7


Condensed Consolidated Statements of Operations (Unaudited)
(Dollars in Thousands, Except Share and Per Share Data)
ASSETS
December 31, 2018
 
September 30, 2018
 
June 30, 2018
 
March 31, 2018
 
December 31, 2017
Cash and cash equivalents
$
164,169

 
$
99,977

 
$
71,276

 
$
107,563

 
$
1,300,409

Investment securities available for sale, at fair value
1,340,870

 
1,484,160

 
1,349,642

 
1,417,012

 
1,390,411

Mortgage-backed securities available for sale, at fair value
354,186

 
364,065

 
575,999

 
654,890

 
600,112

Investment securities held to maturity, at cost
153,075

 
163,893

 
215,850

 
226,308

 
234,714

Mortgage-backed securities held to maturity, at cost
7,661

 
7,850

 
8,218

 
8,393

 
8,468

Loans held for sale
33,560

 
15,606

 
—

 
—

 
—

Loans and leases
3,329,498

 
2,944,739

 
1,597,294

 
1,517,616

 
1,509,140

Allowance for loan and lease loss
(21,290
)
 
(13,040
)
 
(21,950
)
 
(27,078
)
 
(8,862
)
Federal Home Loan Bank Stock, at cost
15,600

 
23,400

 
7,446

 
17,846

 
57,443

Accrued interest receivable
22,076

 
22,016

 
17,825

 
17,604

 
21,089

Premises, furniture, and equipment, net
44,299

 
40,458

 
20,374

 
20,278

 
20,571

Rental equipment, net
146,815

 
107,290

 
—

 
—

 
—

Bank-owned life insurance
87,934

 
87,293

 
86,655

 
86,021

 
85,371

Foreclosed real estate and repossessed assets
31,548

 
31,638

 
29,922

 
30,050

 
128

Goodwill
303,270

 
303,270

 
98,723

 
98,723

 
98,723

Intangible assets
66,366

 
70,719

 
46,098

 
47,724

 
50,521

Prepaid assets
31,483

 
27,906

 
23,211

 
26,342

 
29,758

Deferred taxes
23,607

 
18,737

 
23,025

 
20,939

 
5,379

Other assets
48,038

 
35,090

 
19,551

 
31,462

 
14,588

 
 
 
 
 
 
 
 
 
 
        Total assets
$
6,182,765

 
$
5,835,067

 
$
4,169,159

 
$
4,301,693

 
$
5,417,963

 
 
 
 
 
 
 
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
LIABILITIES
 
 
 
 
 
 
 
 
 
Non-interest-bearing checking
$
2,739,757

 
$
2,405,274

 
$
2,637,987

 
$
2,850,886

 
$
2,779,645

Interest-bearing checking
128,662

 
111,578

 
103,065

 
123,398

 
84,390

Savings deposits
52,229

 
54,765

 
57,356

 
65,345

 
53,535

Money market deposits
54,559

 
51,995

 
45,115

 
48,070

 
47,451

Time certificates of deposit
170,629

 
276,180

 
57,151

 
71,712

 
128,220

Wholesale deposits
1,790,611

 
1,531,186

 
620,959

 
181,087

 
420,404

        Total deposits
4,936,447

 
4,430,987

 
3,521,633

 
3,340,497

 
3,513,645

Short-term debt
231,293

 
425,759

 
27,290

 
315,777

 
1,313,401

Long-term debt
88,983

 
88,963

 
85,580

 
85,572

 
85,552

Accrued interest payable
11,280

 
7,794

 
3,705

 
1,315

 
4,065

Accrued expenses and other liabilities
144,034

 
133,838

 
87,038

 
114,829

 
63,595

          Total liabilities
5,412,037

 
5,087,341

 
3,725,246

 
3,857,990

 
4,980,258

 
 
 
 
 
 
 
 
 
 
STOCKHOLDERS’ EQUITY
 

 
 
 
 
 
 
 
 
Preferred stock, 3,000,000 shares authorized, no shares issued or outstanding at December 31, 2018, September 30, 2018, June 30, 2018, March 31, 2018, and December 31, 2017
—

 
—

 
—

 
—

 
—

Common stock, $.01 par value; 90,000,000, 90,000,000, 90,000,000, 90,000,000, and 45,000,000 shares authorized, 39,494,919, 39,192,063, 29,122,596, 29,119,718, and 29,015,090 shares issued and 39,405,508, 39,167,280, 29,101,605, 29,098,773, and 28,994,538 shares outstanding at December 31, 2018, September 30, 2018, June 30, 2018, March 31, 2018, and December 31, 2017.
394

 
393

 
291

 
291

 
290

Common stock, Nonvoting, $.01 par value; 3,000,000 shares authorized, no shares issued or outstanding at December 31, 2018, September 30, 2018, June 30, 2018, March 31, 2018, and December 31, 2017.
—

 
—

 
—

 
—

 
—

Additional paid-in capital
572,156

 
565,811

 
267,610

 
265,491

 
262,678

Retained earnings
228,453

 
213,048

 
206,284

 
200,753

 
170,578

Accumulated other comprehensive (loss) income
(29,186
)
 
(33,111
)
 
(28,601
)
 
(21,166
)
 
5,782

Treasury stock, at cost, 89,411, 24,783, 20,991, 20,945, and 20,552 common shares at December 31, 2018, September 30, 2018, June 30, 2018, March 31, 2018, and December 31, 2017.
(4,356
)
 
(1,989
)
 
(1,671
)
 
(1,666
)
 
(1,623
)
Total equity attributable to parent
767,461

 
744,152

 
443,913

 
443,703

 
437,705

Non-controlling interest
3,267

 
3,574

 
—

 
—

 
—

Total stockholders’ equity
770,728

 
747,726

 
443,913

 
443,703

 
437,705

 
 
 
 
 
 
 
 
 
 
         Total liabilities and stockholders’ equity
$
6,182,765

 
$
5,835,067

 
$
4,169,159

 
$
4,301,693

 
$
5,417,963

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.

8


Consolidated Statements of Operations (Unaudited)
(Dollars in Thousands, Except Share and Per Share Data)
 
Three Months Ended
 
December 31, 2018
 
September 30, 2018
 
December 31, 2017
Interest and dividend income:
 
 
 
 
 
Loans and leases, including fees
$
60,498

 
$
45,131

 
$
16,443

Mortgage-backed securities
2,698

 
3,724

 
3,758

Other investments
11,780

 
11,346

 
10,656

 
74,976

 
60,201

 
30,857

Interest expense:
 

 
 
 
 
Deposits
10,596

 
8,057

 
1,885

FHLB advances and other borrowings
4,108

 
3,607

 
2,776

 
14,704

 
11,664

 
4,661

 
 
 
 
 
 
Net interest income
60,272

 
48,537

 
26,196

 
 
 
 
 
 
Provision for loan for lease losses
9,099

 
4,706

 
1,068

 
 
 
 
 
 
Net interest income after provision for loan and lease losses
51,173

 
43,831

 
25,128

 
 
 
 
 
 
Non-interest income:
 

 
 
 
 

Refund transfer product fees
261

 
526

 
192

Tax advance product fees
1,685

 
(36
)
 
1,947

Card fees
19,351

 
19,536

 
25,247

Rental income
10,890

 
7,333

 
—

Loan and lease fees
1,247

 
1,025

 
1,292

Bank-owned life insurance
642

 
638

 
669

Deposit fees
1,938

 
1,487

 
848

Loss on sale of securities
(22
)
 
(6,979
)
 
(1,010
)
Gain on sale of loans and leases
867

 
355

 
—

Gain (loss) on foreclosed real estate
15

 
—

 
(19
)
Other income
877

 
728

 
102

Total non-interest income
37,751

 
24,613

 
29,268

 
 
 
 
 
 
Non-interest expense:
 

 
 
 
 

Compensation and benefits
33,010

 
30,093

 
22,340

Refund transfer product expense
10

 
85

 
101

Tax advance product expense
452

 
81

 
280

Card processing
7,085

 
5,485

 
6,540

Occupancy and equipment
6,458

 
5,653

 
4,890

Operating lease equipment depreciation expense
7,765

 
5,386

 
—

Legal and consulting
3,969

 
6,628

 
2,416

Marketing
539

 
1,037

 
553

Data processing
437

 
268

 
414

Intangible amortization expense
4,383

 
3,564

 
1,681

Intangible impairment expense
—

 
18

 
—

Other expense
10,187

 
8,342

 
4,827

Total non-interest expense
74,295

 
66,640

 
44,042

 
 
 
 
 
 
Income before income tax expense
14,629

 
1,804

 
10,354

 
 
 
 
 
 
Income tax expense (benefit)
(1,691
)
 
(7,591
)
 
5,684

 
 
 
 
 
 
Net income before non-controlling interest
16,320

 
9,395

 
4,670

Net income attributable to non-controlling interest
922

 
673

 
—

Net income attributable to parent
$
15,398

 
$
8,722

 
$
4,670

 
 
 
 
 
 
Earnings per common share
 

 
 
 
 
Basic
$
0.39

 
$
0.24

 
$
0.16

Diluted
$
0.39

 
$
0.24

 
$
0.16

Shares used in computing earnings per share
 
 
 
 
 
Basic
39,335,054

 
35,711,400

 
28,970,334

Diluted
39,406,507

 
35,823,162

 
29,138,523

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.

9


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 December 31,
2018
 
2017
(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
$
45,383

 
$
555

 
4.85
%
 
$
100,321

 
$
607

 
2.40
%
Mortgage-backed securities
381,285

 
2,698

 
2.81
%
 
673,411

 
3,758

 
2.21
%
Tax exempt investment securities
1,237,198

 
7,803

 
3.17
%
 
1,408,552

 
8,698

 
3.25
%
Asset-backed securities
298,445

 
2,712

 
3.61
%
 
93,631

 
765

 
3.24
%
Other investment securities
110,879

 
710

 
2.54
%
 
78,584

 
586

 
2.96
%
Total investments
2,027,807

 
13,923

 
3.13
%
 
2,254,178

 
13,807

 
2.93
%
Commercial finance loans and leases
1,562,054

 
39,281

 
9.98
%
 
249,927

 
2,868

 
4.55
%
Consumer finance loans
291,421

 
6,230

 
8.48
%
 
204,024

 
3,109

 
6.04
%
Tax services loans
11,009

 
2

 
0.07
%
 
12,378

 
—

 
—
%
Warehouse finance loans
99,818

 
1,632

 
6.49
%
 
—

 
—

 
—
%
National lending loans and leases
1,964,302

 
47,145

 
9.52
%
 
466,329

 
5,977

 
5.09
%
Community banking loans
1,156,072

 
13,353

 
4.58
%
 
940,161

 
10,466

 
4.42
%
Total loans and leases
3,120,374

 
60,498

 
7.69
%
 
1,406,490

 
16,443

 
4.64
%
Total interest-earning assets
$
5,193,564

 
$
74,976

 
5.89
%
 
$
3,760,989

 
$
30,857

 
3.55
%
Non-interest-earning assets
787,973

 
 
 
 
 
361,960

 
 
 
 
Total assets
$
5,981,537

 
 
 
 
 
$
4,122,949

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest-bearing liabilities:
 
 
 
 
 
 
 
 
 
 
 
Interest-bearing checking
$
102,880

 
$
58

 
0.23
%
 
$
71,448

 
$
50

 
0.28
%
Savings
53,661

 
10

 
0.07
%
 
53,084

 
8

 
0.06
%
Money markets
54,288

 
64

 
0.47
%
 
47,899

 
27

 
0.22
%
Time deposits
205,049

 
881

 
1.71
%
 
128,496

 
366

 
1.13
%
Wholesale deposits
1,698,492

 
9,583

 
2.24
%
 
483,878

 
1,434

 
1.18
%
Total interest-bearing deposits
2,114,370

 
10,596

 
1.99
%
 
784,805

 
1,885

 
0.95
%
Overnight fed funds purchased
393,315

 
2,481

 
2.50
%
 
139,152

 
525

 
1.50
%
FHLB advances
—

 
—

 
—
%
 
268,913

 
937

 
1.38
%
Subordinated debentures
73,504

 
1,161

 
6.27
%
 
73,359

 
1,113

 
6.02
%
Other borrowings
30,058

 
466

 
6.15
%
 
22,982

 
201

 
3.47
%
Total borrowings
496,877

 
4,108

 
3.28
%
 
504,406

 
2,776

 
2.18
%
Total interest-bearing liabilities
2,611,247

 
14,704

 
2.23
%

1,289,211

 
4,661

 
1.43
%
Non-interest bearing deposits
2,489,148

 
—

 
—
%
 
2,328,159

 
—

 
—
%
Total deposits and interest-bearing liabilities
$
5,100,395

 
$
14,704

 
1.14
%
 
$
3,617,370

 
$
4,661

 
0.51
%
Other non-interest-bearing liabilities
128,900

 
 
 
 
 
71,398

 
 
 
 
Total liabilities
5,229,295

 
 
 
 
 
3,688,768

 
 
 
 
Shareholders' equity
752,242

 
 
 
 
 
434,181

 
 
 
 
Total liabilities and shareholders' equity
$
5,981,537

 
 
 
 
 
$
4,122,949

 
 
 
 
Net interest income and net interest rate spread including non-interest-bearing deposits
 
 
$
60,272

 
4.75
%
 
 
 
$
26,196

 
3.04
%
 
 
 
 
 
 
 
 
 
 
 
 
Net interest margin
 
 
 
 
4.60
%
 
 
 
 
 
2.76
%
Tax-equivalent effect
 
 
 
 
0.16
%
 
 
 
 
 
0.30
%
Net interest margin, tax-equivalent(3)
 
 
 
 
4.76
%
 
 
 
 
 
3.06
%
(1) Tax rate used to arrive at the TEY for the three months ended December 31, 2018 was 21%.
(2) Tax rate used to arrive at the TEY for the three months ended December 31, 2017 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, believe the presentation of this non-GAAP financial measure may be useful for peer comparison purposes.

10


Selected Financial Information
As of and for the three months ended:
December 31,
2018
 
September 30,
2018
 
June 30,
2018
 
March 31,
2018
 
December 31,
2017
 
 
 
 
 
 
 
 
 
 
Equity to total assets
12.47
%
 
12.81
%
 
10.65
%
 
10.31
%
 
8.08
%
Book value per common share outstanding
$
19.56

 
$
19.09

 
$
15.25

 
$
15.25

 
$
15.10

Tangible book value per common share outstanding
$
10.18

 
$
9.54

 
$
10.28

 
$
10.22

 
$
9.95

Tangible book value per common share outstanding excluding AOCI
$
10.92

 
$
10.39

 
$
11.26

 
$
10.94

 
$
9.75

Common shares outstanding
39,405,508

 
39,167,280

 
29,101,605

 
29,098,773

 
28,994,538

Non-performing assets to total assets
0.73
%
 
0.72
%
 
0.86
%
 
0.84
%
 
0.61
%
Non-performing loans and leases to total loans and leases
0.42
%
 
0.35
%
 
0.36
%
 
0.40
%
 
2.19
%
Net interest margin
4.60
%
 
4.05
%
 
2.94
%
 
2.61
%
 
2.76
%
Net interest margin, tax-equivalent
4.76
%
 
4.27
%
 
3.23
%
 
2.89
%
 
3.06
%
Return on average assets
1.03
%
 
0.65
%
 
0.64
%
 
2.67
%
 
0.45
%
Return on average equity
8.19
%
 
5.34
%
 
6.11
%
 
28.37
%
 
4.30
%
Full-time equivalent employees
1,229

 
1,219

 
932

 
916

 
878

Select Quarterly Expenses
(Dollars in Thousands)
Actual
Anticipated
For the Three Months Ended
Dec 31,
2018
Mar 31,
2019
Jun 30,
2019
Sep 30,
2019
Dec 31,
2019
Mar 31,
2020
Jun 30,
2020
Sep 30,
2020
Dec 31,
2020
 
 
 
 
 
 
 
 
 
 
Amortization of Intangibles (1)
$
4,383

$
5,602

$
4,383

$
3,366

$
2,683

$
3,409

$
2,640

$
2,286

$
2,683

Executive Officer Stock Compensation (2)
$
941

$
917

$
927

$
937

$
679

$
669

$
669

$
676

$
485

(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 are not expected to be 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, tax, national commercial lending, community banking, national consumer lending, and insurance premium financing. 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 acquiring 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
 

11