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Meta Financial Group Inc.$22.75($.03)(.13%)

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 Meta Financial Group Announces Results for 2019 Fiscal First Quarter
   Monday, January 28, 2019 4:15:00 PM ET

- 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., Jan. 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.

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.

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 products24,233         
SBA/USDA(1)9,327  15,606       
Total loans held for sale33,560  15,606       
          
National Lending loans and leases         
Asset based lending554,072  477,917       
Factoring284,912  284,221       
Lease financing290,889  265,315       
Insurance premium finance330,712  337,877  303,603  240,640  235,671 
SBA/USDA67,893  59,374       
Other commercial finance89,402  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 products96,144  80,605  26,583     
Other consumer finance182,510  189,756  194,344  201,942  209,137 
Consumer finance278,654  270,361  220,927  201,942  209,137 
Tax services76,575  1,073  14,281  58,794  67,424 
Warehouse finance176,134  65,000       
Total National Lending loans and leases2,149,243  1,846,283  550,229  509,417  518,538 
Community Banking loans         
Commercial real estate and operating863,753  790,890  751,146  723,091  680,785 
Consumer one-to-four family real estate and other256,341  247,318  237,704  228,415  225,841 
Agricultural real estate and operating58,971  60,498  60,096  58,773  85,999 
Total Community Banking loans1,179,065  1,098,706  1,048,946  1,010,279  992,625 
Total gross loans and leases3,328,308  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 fees1,190  (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.

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 activityDecember 31, 2018 September 30, 2018 December 31, 2017
(Dollars in thousands)     
Beginning balance$13,040  $21,950  $7,534 
Provision - tax services loans1,496  1,009  1,017 
Provision - all other loans and leases7,603  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 loans92  31  413 
Recoveries - all other loans and leases1,863  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.

As of the periods indicatedDecember 31,
2018
 September 30,
2018
 June 30,
2018
 March 31,
2018
 December 31,
2017
Company         
Tier 1 leverage ratio7.90% 8.50% 8.29% 7.26% 7.68%
Common equity Tier 1 capital ratio10.11% 10.56% 13.92% 13.74% 12.88%
Tier 1 capital ratio10.47% 10.97% 14.35% 14.18% 13.32%
Total qualifying capital ratio12.69% 13.18% 18.37% 18.48% 16.91%
MetaBank         
Tier 1 leverage ratio9.01% 9.75% 10.16% 8.93% 9.61%
Common equity Tier 1 capital ratio11.87% 12.50% 17.57% 17.43% 16.64%
Tier 1 capital ratio11.91% 12.56% 17.57% 17.43% 16.64%
Total qualifying capital ratio12.41% 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 liabilities299,037  299,456  94,781  95,262  95,705 
LESS: Certain other intangible assets61,317  64,716  46,098  47,724  40,417 
LESS: Net deferred tax assets from operating loss and tax credit carry-forwards4,720         
LESS: Net unrealized gains (losses) on available-for-sale securities(28,829) (33,114) (28,601) (21,166) 5,782 
LESS: Non-controlling interest3,267  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 113,661  13,661  10,310  10,310  10,310 
Tier 1 minority interest not included in common equity tier 1 capital1,796  2,118       
Total Tier 1 capital447,030  428,870  341,945  332,192  306,111 
Allowance for loan and lease losses21,422  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.
 

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: Goodwill303,270 
Less: Intangible assets66,366 
Tangible common equity401,092 
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.

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.

Condensed Consolidated Statements of Operations (Unaudited)
(Dollars in Thousands, Except Share and Per Share Data)

ASSETSDecember 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 value1,340,870  1,484,160  1,349,642  1,417,012  1,390,411 
Mortgage-backed securities available for sale, at fair value354,186  364,065  575,999  654,890  600,112 
Investment securities held to maturity, at cost153,075  163,893  215,850  226,308  234,714 
Mortgage-backed securities held to maturity, at cost7,661  7,850  8,218  8,393  8,468 
Loans held for sale33,560  15,606       
Loans and leases3,329,498  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 cost15,600  23,400  7,446  17,846  57,443 
Accrued interest receivable22,076  22,016  17,825  17,604  21,089 
Premises, furniture, and equipment, net44,299  40,458  20,374  20,278  20,571 
Rental equipment, net146,815  107,290       
Bank-owned life insurance87,934  87,293  86,655  86,021  85,371 
Foreclosed real estate and repossessed assets31,548  31,638  29,922  30,050  128 
Goodwill303,270  303,270  98,723  98,723  98,723 
Intangible assets66,366  70,719  46,098  47,724  50,521 
Prepaid assets31,483  27,906  23,211  26,342  29,758 
Deferred taxes23,607  18,737  23,025  20,939  5,379 
Other assets48,038  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 checking128,662  111,578  103,065  123,398  84,390 
Savings deposits52,229  54,765  57,356  65,345  53,535 
Money market deposits54,559  51,995  45,115  48,070  47,451 
Time certificates of deposit170,629  276,180  57,151  71,712  128,220 
Wholesale deposits1,790,611  1,531,186  620,959  181,087  420,404 
  Total deposits4,936,447  4,430,987  3,521,633  3,340,497  3,513,645 
Short-term debt231,293  425,759  27,290  315,777  1,313,401 
Long-term debt88,983  88,963  85,580  85,572  85,552 
Accrued interest payable11,280  7,794  3,705  1,315  4,065 
Accrued expenses and other liabilities144,034  133,838  87,038  114,829  63,595 
  Total liabilities5,412,037  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 capital572,156  565,811  267,610  265,491  262,678 
Retained earnings228,453  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 parent767,461  744,152  443,913  443,703  437,705 
Non-controlling interest3,267  3,574       
Total stockholders’ equity770,728  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.
 


 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 securities2,698  3,724  3,758 
Other investments11,780  11,346  10,656 
 74,976  60,201  30,857 
Interest expense:     
Deposits10,596  8,057  1,885 
FHLB advances and other borrowings4,108  3,607  2,776 
 14,704  11,664  4,661 
      
Net interest income60,272  48,537  26,196 
      
Provision for loan for lease losses9,099  4,706  1,068 
      
Net interest income after provision for loan and lease losses51,173  43,831  25,128 
      
Non-interest income:     
Refund transfer product fees261  526  192 
Tax advance product fees1,685  (36) 1,947 
Card fees19,351  19,536  25,247 
Rental income10,890  7,333   
Loan and lease fees1,247  1,025  1,292 
Bank-owned life insurance642  638  669 
Deposit fees1,938  1,487  848 
Loss on sale of securities(22) (6,979) (1,010)
Gain on sale of loans and leases867  355   
Gain (loss) on foreclosed real estate15    (19)
Other income877  728  102 
Total non-interest income37,751  24,613  29,268 
      
Non-interest expense:     
Compensation and benefits33,010  30,093  22,340 
Refund transfer product expense10  85  101 
Tax advance product expense452  81  280 
Card processing7,085  5,485  6,540 
Occupancy and equipment6,458  5,653  4,890 
Operating lease equipment depreciation expense7,765  5,386   
Legal and consulting3,969  6,628  2,416 
Marketing539  1,037  553 
Data processing437  268  414 
Intangible amortization expense4,383  3,564  1,681 
Intangible impairment expense  18   
Other expense10,187  8,342  4,827 
Total non-interest expense74,295  66,640  44,042 
      
Income before income tax expense14,629  1,804  10,354 
      
Income tax expense (benefit)(1,691) (7,591) 5,684 
      
Net income before non-controlling interest16,320  9,395  4,670 
Net income attributable to non-controlling interest922  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     
Basic39,335,054  35,711,400  28,970,334 
Diluted39,406,507  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.
 

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 securities381,285  2,698  2.81% 673,411  3,758  2.21%
Tax exempt investment securities1,237,198  7,803  3.17% 1,408,552  8,698  3.25%
Asset-backed securities298,445  2,712  3.61% 93,631  765  3.24%
Other investment securities110,879  710  2.54% 78,584  586  2.96%
Total investments2,027,807  13,923  3.13% 2,254,178  13,807  2.93%
Commercial finance loans and leases1,562,054  39,281  9.98% 249,927  2,868  4.55%
Consumer finance loans291,421  6,230  8.48% 204,024  3,109  6.04%
Tax services loans11,009  2  0.07% 12,378    %
Warehouse finance loans99,818  1,632  6.49%     %
National lending loans and leases1,964,302  47,145  9.52% 466,329  5,977  5.09%
Community banking loans1,156,072  13,353  4.58% 940,161  10,466  4.42%
Total loans and leases3,120,374  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 assets787,973      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%
Savings53,661  10  0.07% 53,084  8  0.06%
Money markets54,288  64  0.47% 47,899  27  0.22%
Time deposits205,049  881  1.71% 128,496  366  1.13%
Wholesale deposits1,698,492  9,583  2.24% 483,878  1,434  1.18%
Total interest-bearing deposits2,114,370  10,596  1.99% 784,805  1,885  0.95%
Overnight fed funds purchased393,315  2,481  2.50% 139,152  525  1.50%
FHLB advances    % 268,913  937  1.38%
Subordinated debentures73,504  1,161  6.27% 73,359  1,113  6.02%
Other borrowings30,058  466  6.15% 22,982  201  3.47%
Total borrowings496,877  4,108  3.28% 504,406  2,776  2.18%
Total interest-bearing liabilities2,611,247  14,704  2.23% 1,289,211  4,661  1.43%
Non-interest bearing deposits2,489,148    % 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 liabilities128,900      71,398     
Total liabilities5,229,295      ?3,688,768?     
Shareholders' equity752,242      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.
 


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 assets12.47% 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 outstanding39,405,508  39,167,280  29,101,605  29,098,773  28,994,538 
Non-performing assets to total assets0.73% 0.72% 0.86% 0.84% 0.61%
Non-performing loans and leases to total loans and leases0.42% 0.35% 0.36% 0.40% 2.19%
Net interest margin4.60% 4.05% 2.94% 2.61% 2.76%
Net interest margin, tax-equivalent4.76% 4.27% 3.23% 2.89% 3.06%
Return on average assets1.03% 0.65% 0.64% 2.67% 0.45%
Return on average equity8.19% 5.34% 6.11% 28.37% 4.30%
Full-time equivalent employees1,229  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  $   $2,683  $3,409  $2,640  $2,286  $2,683 
Executive Officer Stock Compensation (2)$941   $917  $927  $   $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  

Meta Financial Group Logo.jpg

Source: MetaBank


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