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| EX-99.1 - EX-99.1 - META FINANCIAL GROUP INC | exhibit991earningspres.htm |
| 8-K - 8-K - META FINANCIAL GROUP INC | cash-20201028.htm |
QUARTERLY INVESTOR UPDATE FOURTH QUARTER & FISCAL YEAR END 2020
FORWARD - LOOKING STATEMENTS This investor update contains “forward-looking statements” 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. These forward-looking statements are based on information currently available to us and assumptions about future events, and include statements with respect to the Company’s beliefs, expectations, estimates, and intentions, which are subject to significant risks and uncertainties, and are subject to change based on various factors, some of which are beyond the Company’s control. Such risks, uncertainties and other factors may cause our actual growth, results of operations, financial condition, cash flows, performance and business prospects and opportunities to differ materially from those expressed in, or implied by, these forward- looking statements. Such statements address, among others, the following subjects: future operating results; expectations in connection with the impact of the ongoing COVID-19 pandemic and related government actions on our business, our industry and the capital markets; customer retention; loan and other product demand; expectations concerning acquisitions and divestitures; new products and services, including those offered by Meta Payment Systems, Refund Advantage, EPS Financial and Specialty Consumer Services divisions; credit quality; the level of net charge-offs and the adequacy of the allowance for loan and lease losses; technology; and the Company's employees. The following factors, among others, could cause the Company's financial performance and results of operations to differ materially from the expectations, estimates, and intentions expressed in such forward-looking statements: maintaining our executive management team; expected growth opportunities may not be realized or may take longer to realize than expected; the potential adverse effects of the ongoing COVID-19 pandemic and any governmental or societal responses thereto, or other unusual and infrequently occurring events; actual changes in interest rates and the Fed Funds rate; additional changes in tax laws; the strength of the United States' economy, in general, and the strength of the local economies in which the Company operates; changes in, trade, monetary, and fiscal policies and laws, including interest rate policies of the Federal Reserve; inflation, market, and monetary fluctuations; the timely and efficient development of, and acceptance of, new products and services offered by the Company or its strategic partners, as well as risks (including reputational and litigation) attendant thereto, and the perceived overall value of these products and services by users; the risks of dealing with or utilizing third parties, including, in connection with the Company’s refund advance business, the risk of reduced volume of refund advance loans as a result of reduced customer demand for or usage of the Company’s strategic partners’ refund advance products; our relationship with, and any actions which may be initiated by, our regulators; the impact of changes in financial services laws and regulations, including, but not limited to, laws and regulations relating to the tax refund industry and the insurance premium finance industry and recent and potential changes in response to the COVID-19 pandemic such as the CARES Act and the rules and regulations that may be promulgated thereunder; technological changes, including, but not limited to, the protection of our electronic systems and information; the impact of acquisitions and divestitures; litigation risk; the growth of the Company’s business, as well as expenses related thereto; continued maintenance by MetaBank of its status as a well-capitalized institution, particularly in light of our deposit base, a portion of which has been characterized as “brokered;” changes in consumer spending and saving habits; losses from fraudulent or illegal activity, technological risks and developments and cyber threats, attacks or events; 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; and the other factors described under the caption “Risk Factors” and in other sections of the Company’s Annual Report on Form 10-K for the Company's fiscal year ended September 30, 2019 and in other filings made by the Company with the Securities and Exchange Commission (“SEC”). The forward-looking statements included herein speak only as of the date of this investor update. 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. 2 Fourth Quarter & Fiscal Year End 2020 | Nasdaq: CASH
UPDATE ON KEY STRATEGIC INITIATIVES INCREASE PERCENTAGE OF OPTIMIZE INTEREST-EARNING IMPROVE OPERATING FUNDING FROM CORE DEPOSITS ASSET MIX EFFICIENCIES Partnered with Department of the Treasury’s Bureau of the Fiscal Service and Fiserv to facilitate portions of Economic Impact Sold off community bank division in Efficiency ratio improved from 69% for Payments (“EIP”). February 2020 – reduced legacy fiscal year 2019 to 64% for fiscal year community bank portfolio 60% to $485.6 Increased fiscal year average payments 2020. million as of September 30, 2020. deposits 32%, year-over-year, excluding EIP Pause on material mergers and related balances. Portfolio will continue to pay down over acquisitions. time or be sold. PROGRESSExtended and entered into agreements with FISCAL 2020strategic partners and continued the building out of our Faster Payments Platform. • Optimization and utilization of • Further enhancement of interest- • Explore and develop new niche existing business platforms. earning asset mix. deposit products and services. • Driving 2x operating leverage • Focus on commercial finance • Broaden existing relationships. across business lines. business lines to drive net interest • Add new strategic relationships. margin expansion. • Invest in technology to help drive F O C U S F O R A N D B E Y O N D FISCAL 2021 future efficiencies. LONG - TERM STRATEGY TO DRIVE SHAREHOLDER VALUE 3 Fourth Quarter & Fiscal Year End 2020 | Nasdaq: CASH
S E L E C T E D FINANCIAL HIGHLIGHTS Fourth Quarter Ended September 30, 2020 INCOME STATEMENT ($ in thousands, except per share data) 4Q20 3Q20 4Q19 FY 2020 FY 2019 Net interest income 64,513 62,137 65,617 259,038 264,207 Provision for loan and lease losses 8,980 15,093 4,121 64,776 55,650 Payments card & deposit fees 21,422 21,302 20,276 87,379 87,130 Total noninterest income 40,750 41,048 35,980 239,794 222,545 Total noninterest expense 80,283 71,241 76,143 319,051 333,160 Net income before taxes 16,000 16,851 21,333 115,005 97,942 Income tax expense (benefit) 1,791 (2,426) (130) 5,661 (3,374) Net income before non-controlling interest 14,209 19,277 21,463 109,344 101,316 Net income attributable to non-controlling interest 1,051 1,087 1,268 4,624 4,312 Net income attributable to parent $ 13,158 $ 18,190 $ 20,195 $ 104,720 $ 97,004 Earnings per share, diluted $ 0.38 $ 0.53 $ 0.53 $ 2.94 $ 2.49 Average diluted shares 34,596,422 34,623,114 37,912,616 35,651,709 38,921,637 BALANCE SHEET PERIOD ENDING AVERAGE ($ in thousands) 4Q20 3Q20 4Q19 FY 2020 FY 2019 Loans and leases 3,322,765 3,502,646 3,658,847 3,672,848 3,496,754 Allowance for loan and lease losses (56,188) (65,747) (29,149) (48,784) (35,592) Total assets $ 6,092,074 $ 8,779,026 $ 6,182,890 $ 7,209,631 $ 6,252,187 Noninterest-bearing checking 4,356,630 6,537,809 2,358,010 4,386,724 2,865,502 Total deposits 4,979,200 7,590,325 4,337,005 5,758,003 4,857,035 Total liabilities 5,244,766 7,949,117 5,338,932 6,373,786 5,450,510 Total stockholders' equity 847,308 829,909 843,958 835,845 801,677 Total liabilities and stockholders equity $ 6,092,074 $ 8,779,026 $ 6,182,890 $ 7,209,631 $ 6,252,187 Loans / Deposits 67 % 46 % 79 % 64 % 72 % Net Interest Margin 3.77 % 3.28 % 4.95 % 4.09 % 4.91 % Return on Average Assets 0.69 % 0.86 % 1.32 % 1.45 % 1.55 % Return on Average Equity 6.21 % 8.83 % 9.69 % 12.53 % 12.10 % 4 Fourth Quarter & Fiscal Year End 2020 | Nasdaq: CASH
DIFFERENTIATED BUSINESS REDUCES RISK AND PROVIDES GROWTH OPPORTUNITIES IN VARIOUS ECONOMIC ENVIRONMENTS REVENUE MAKEUP FISCAL YEAR 2020 COMMERCIAL ($ in millions) Provide customized business capital 48% solutions for small-and medium-sized Other Income Noninterest Income as a $39.7 businesses with innovative financial percent of Total Revenue solutions to niche markets nationwide. in Fiscal Year 2020 Rental Income $44.8 CONSUMER Tailored solutions enable payments Tax Product Income providers to grow their businesses and $67.9 build more profitable customer Net Interest Income relationships by creating and delivering $259.0 payment solutions nationwide. Generates stable funding source to Payments Fee deploy into lending business lines. Fee Income income generation from payments and $87.4 tax services business lines. TARGET NICHE COMMERCIAL AND CONSUMER INDUSTRIES TO PROVIDE OPPORTUNITIES FOR GROWTH. 5 Fourth Quarter & Fiscal Year End 2020 | Nasdaq: CASH
DIVERSIFIED EARNING ASSET PORTFOLIO QUARTERLY AVERAGE EARNING ASSET MIX At the Quarter Ended % in charts represent % of total interest earning assets September 30, 2020 September 30, 2019 ($ in thousands) 4 Q 2 0 4 Q 1 9 Y/Y Δ COMMERCIAL FINANCE 2,307,984 1,916,230 20 % 33% Term lending 805,323 641,742 25 % 29% Asset-based lending 182,419 250,465 (27) % SEP 2020 Factoring 281,173 296,507 (5) % $7.67 billion Lease financing 281,084 177,915 58 % INTEREST EARNING ASSETS 52% Insurance premium finance 337,940 361,105 (6) % SBA/USDA 318,387 88,831 258 % 11% Other commercial finance 101,658 99,665 2 % 19% 8% CONSUMER FINANCE 224,151 268,198 (16) % Consumer credit programs 89,809 106,794 (16) % Other consumer finance 134,342 161,404 (17) % 1% TAX SERVICES 3,066 2,240 37 % 36% 28% WAREHOUSE FINANCE 293,375 262,924 12 % NATIONAL LENDING 2,828,576 2,449,592 15 % SEP 2019 $5.26 billion INTEREST EARNING ASSETS COMMUNITY BANKING 485,564 1,201,821 (60) % 12% TOTAL GROSS LOANS & LEASES 3,314,140 3,651,413 (9) % 71% 23% CASH & INVESTMENTS 1,716,594 1,477,172 16 % TOTAL EARNING ASSETS 5,030,734 5,128,585 (2) % LOANS & LEASES INVESTMENTS CASH & FED FUNDS RENTAL EQUIPMENT, NET 205,964 208,537 (1) % Commercial Community Bank Consumer & Warehouse ASPIRATIONAL >55% 0% <15% TARGETS 6 Fourth Quarter & Fiscal Year End 2020 | Nasdaq: CASH
ASSET QUALITY 1 Excludes Tax Services NCOs and Related Seasonal Average Loans Tax Services NCOs and related seasonal average loans are excluded to adjust for the cyclicality of activity related to the overall economics of the tax services business line. Allowance for loan and lease losses (“ALLL”) $56.2 million, or 1.70% of total loans and leases as of September 30, 2020. • ALLL 165% of nonperforming loans • Legacy community bank hospitality and theater exposures ALLL coverage of 7.95% • Small ticket equipment finance ALLL coverage of 2.62% NPAs improved $8.1 million from the linked-quarter, increase in NPA ratio result of lower assets. As of September 30, 2020, nonperforming loans decreased $5.3 million, or 13%, to $34.0 million, on a linked-quarter basis. $2.2 million of NCOs were related to small ticket equipment finance relationships in the fiscal 2020 fourth quarter. Cumulative net charge-offs during the Great Recession³ were 2.59%, for 1 Non-GAAP measures, see appendix for reconciliations. Crestmark Bank and 0.01%, for the legacy community bank portfolio. ² Small ticket equipment finance NPLs include $8.9 million in term lending and $0.7 million in lease financing. ³ Source: S&P Global Market Intelligence for data prior to acquisition on August 1, 2018. 7 Fourth Quarter & Fiscal Year End 2020 | Nasdaq: CASH
ASSET QUALITY Excluding PPP loans, active deferments and modifications decreased from $327, or 10% of total gross loans and leases at June 30, 2020 to $193 million or 6% of total gross loans at September 30, 2020. COVID-19 LOAN AND LEASE MODIFICATIONS AND DEFERRALS September 30, 2020 Allowance build as a result of COVID-19 modifications and deferrals as well as economic uncertainty. ACTIVE COUNT $ BALANCE • Monitoring and placing limits on originations to higher risk industries and customers, and tightened underwriting standards. COMMERCIAL FINANCE 192 $66.8 • The Company has placed significant focus on hospitality and movie Term Lending 150 26.6 theater loans as well as small ticket equipment finance relationships. Asset based lending 5 7.9 Factoring 2 18.4 Lease financing 28 5.9 Past Due Loans & Leases + COVID-10 Modifications & Insurance premium finance 2 0.2 Deferrals SBA/USDA 4 7.7 Other commercial finance 1 0.0 Past Due / Total Loans and Leases 1.04% 3.98% 1.57% CONSUMER 276 $5.8 Past Due + COVID-19 Modifications & Deferrals / Total Loans and Leases COMMUNITY BANK 35 $120.7 1.04% 13.33% 7.41% Hospitality relationships 26 79.0 Theater Relationships 4 17.9 Other community bank 5 23.8 TOTAL 503 $193.3 $ in $ millions in $326.9 % TOTAL LOANS AND LEASES (excl. PPP) 6% There were 153 active modifications for small ticket equipment $193.3 finance¹ relationships representing $21.8 million in balances. $139.2 $38.0 $52.3 4Q19 3Q20 4Q20 Total Past Due COVID-19 Modifications & Deferrals 1 Small ticket equipment finance includes balances of $19.6 million in term lending and $2.2 million in lease receivables. 8 Fourth Quarter & Fiscal Year End 2020 | Nasdaq: CASH
COMMERCIAL FINANCE & COMMUNITY BANK PORTFOLIOS 9 Fourth Quarter & Fiscal Year End 2020 | Nasdaq: CASH
LIMITED TOTAL EXPOSURE TO COVID - 19 HIGH IMPACT INDUSTRIES HIGH IMPACT INDUSTRY EXPOSURES COMMUNITY COMMERCIAL ($ in millions) BANK FINANCE PPP LOANS TOTAL % OF TOTAL¹ HOSPITALITY $179.3 $46.9 $0.8 $227.0 6.4% RETAIL (excl. consumer staples²) $48.2 $40.5 $1.4 $90.1 2.6% FITNESS AND RECREATIONAL CENTERS $1.5 $19.9 $1.0 $22.4 0.6% MOVIE THEATERS $17.9 $0.8 - $18.7 0.5% RESTAURANTS $1.0 $12.3 $1.7 $14.9 0.4% TOTAL $247.9 $113.7 $11.6 $373.2 10.6% As of September 30, 2020, funded 689 loans totaling $219.0 million for the Paycheck Protection Program (“PPP”) administered by the Small Business Administration; 5.3% of PPP loans are in high impact industries. ¹ Total includes total gross loans & leases of $3.52 billion and rental equipment, net of $206.0M, as of September 30, 2020, exposures are based on current outstanding balances as of September 30, 2020 ² Consumer staples incudes grocery, pharmacy, gas stations, and convenience stores 10 Fourth Quarter & Fiscal Year End 2020 | Nasdaq: CASH
COMMERCIAL FINANCE LOAN AND LEASE PORTFOLIO TERM LENDING. Collateralized conventional term loans and notes receivable, weighted average life Rental Equipment, of 53 months. Exposure is concentrated in solar/alternative energy, most of which are construction net projects that will convert to longer term government guaranteed facilities upon completion. Small Other $206.0M ticket equipment financing relationships, through equipment finance agreements and installment $101.7M NA% purchase agreements, make up $255.1 million or 32% of term lending portfolio. Average loan size 6.60% approximately $180 thousand; small ticket equipment finance approximately $70 thousand ASSET-BASED LENDING. Asset-based loans secured by accounts receivable, inventory, machinery SBA/USDA Term Lending & equipment, work-in-process and other assets. Approximately 70% backed by accounts receivable, $318.4M $805.3M generally 85% advance rates. Exposure managed within a collateral borrowing base. Well diversified 3.97% $2.51 billion 7.49% in terms of industry and geographic concentrations. Average loan size approximately $1.4 million. COMMERCIAL FINANCE PORTFOLIO (includes Rental Equipment, net) FACTORING. Factoring services where clients provide detailed inventory, accounts receivable, and as of September 30, 2020 work-in-process reports for lending arrangements. Bank secures dominion of funds which secures repayment when applicable accounts receivables or invoices are paid. Approximately 95% backed by Insurance accounts receivable, generally 85% advance rates. Average loan size approximately $320 thousand. Premium 7.53% Finance 4Q20 Quarterly Yield LEASE FINANCING. Leasing solutions for technology, capital equipment and select transportation $337.9M % in chart represents assets like tractors, trailers and construction equipment. Majority of portfolio relationships are to 5.61% current quarter yield Asset-Based Fortune 1000 clients. Average lease size approximately $145 thousand. Lending $182.4M INSURANCE PREMIUM FINANCE. Short-term, primarily collateralized financing to facilitate the 9.84% Lease purchase of commercial insurance for various forms of risk. Over 90% of insurance company Factoring Financing partners have an investment grade rating through AM Best as well as an internal risk rating system. $281.2M $281.1M 13.45% Average loan size approximately $30 thousand. 8.25% SBA/USDA. Originate loans through SBA or USDA programs, primarily SBA 7(a), USDA B&I, USDA REAP. Focus on specific verticals such as investment advisory practices, insurance agencies and solar. Includes $219.0 million of PPP loans. Average loan size approximately $530 thousand, Top geographic state concentrations1 by % excluding PPP loans. 1. California 17.3% OTHER COMMERCIAL FINANCE. Includes healthcare receivables loan portfolio primarily 2. Texas 11.9% comprised of loans to individuals for medical services received. Majority of these loans are 3. Michigan 8.6% guaranteed by the referring hospital. 4. Florida 7.6% 5. North Carolina 5.6% RENTAL EQUIPMENT. Leased assets related to operating leases generated from the commercial 6. New York 4.7% finance business line. Primarily consists of solar panels, motor vehicles, and computers and IT 7. Illinois 3.7% networking equipment. 8. Pennsylvania 3.1% 1 Excludes certain joint ventures; percentages calculated based on aggregate principal amount of commercial finance loans and leases includes operating lease rental equipment of $206.0M 11 Fourth Quarter & Fiscal Year End 2020 | Nasdaq: CASH
DISTRIBUTION OF COMMERCIAL FINANCE PORTFOLIO BY I N D U S T R Y ¹ $ in millions $- $50 $100 $150 $200 $250 $300 $350 $400 $450 Manufacturing Transportation and Warehousing Utilities Finance and Insurance Health Care and Social Assistance Construction Wholesale Trade Admin and Support and Waste Mgmt and Remediation Services Mining, Quarrying, and Oil and Gas Extraction Professional, Scientific, and Technical Services Other Real Estate and Rental and Leasing Accommodation and Food Services Other Services (except Public Administration) Retail Trade Information Arts, Entertainment, and Recreation Agriculture, Forestry, Fishing and Hunting Educational Services Management of Companies and Enterprises Public Administration MANUFACTURING TRANSPORTATION & WAREHOUSING UTILITIES OIL & GAS 22% Term lending 41% Factoring 50% Term lending 48% Term lending 21% Lease financing 27% Term lending 23% Rental equipment, net 21% SBA/USDA 20% Asset-based lending 22% Insurance premium finance 22% SBA/USDA 10% Lease financing 14% SBA/USDA 8% Insurance premium finance 10% Factoring 1 Distribution by NAICS codes; excludes certain joint ventures; percentages calculated based on aggregate principal amount of commercial finance loans and leases includes operating lease rental equipment of $206.0M 12 Fourth Quarter & Fiscal Year End 2020 | Nasdaq: CASH
COMMERCIAL FINANCE MIX¹ MANUFACTURING UTILITIES Total Exposure $413.8 million % of Total² 11.8% Total Exposure $311.9 million % of Total² 8.9% • Limited exposure to single borrowers • 97% of Utilities exposure is to Solar Electric Power Generation, majority of • Diversified across multiple subsectors – greatest concentration of subsectors which is related to permanent solar generators. is 2.0% of total² • Well collateralized, majority backed by power purchase agreements with highly rated, large public utilities Outstanding % of Balance Total² MANUFACTURING $413. 8 11. 8% Computer and Electronic Product Manufacturing 70.8 2.0% Fabricated Metal Product Manufacturing 51.0 1.5% Transportation Equipment Manufacturing 47.3 1.3% Chemical Manufacturing 29.8 0.8% Plastics and Rubber Products Manufacturing 29.8 0.8% Solar Electric Power Generation Electrical Equipment, Appliance, and Component Manufacturing 27.4 0.8% Nonmetallic Mineral Product Manufacturing 26.9 0.8% Machinery Manufacturing 25.7 0.7% Printing and Related Support Activities 23.5 0.7% Other Utilities Food Manufacturing 19.1 0.6% Other³ 62.5 1.8% TRANSPORTATION & WAREHOUSING OIL & GAS Total Exposure $376.7 million % of Total² 10.7% Total Exposure $51.6 million % of Total² 1.5% • $250.7 million exposure to truck transportation, over 89% in general freight trucking. • $47.3 million exposure related to support activities for Oil & Gas Operations • Less than $17.0 million exposure to passenger air transportation and support - Approximately half of outstandings are in working capital lines, primarily activities. collateralized by accounts receivable, remaining collateralized by • Receive invoices and back-up, verify a portion of the purchases and monitor these machinery and equipment accounts under a Dominion of Funds to ensure that our balances are covered by collateral 1 Excludes certain joint ventures; percentages calculated based on aggregate principal amount of loans includes operating lease rental equipment of $206.0M ² Total includes total gross loans & leases of $3.52 billion and rental equipment, net of $206.0M, as of September 30, 2020, exposures are based on current outstanding balances as of September 30, 2020 3 Other includes manufacturing subsectors comprised of less than 0.5% of total² 13 Fourth Quarter & Fiscal Year End 2020 | Nasdaq: CASH
LEGACY COMMUNITY BANK PORTFOLIO BREAKDOWN As of September 30, 2020 | Serviced by Central Bank During the quarter, sold $135 million loans and classified Outstanding another $130 million as held for sale. ($ in millions) Balance % of Total¹ • Sales did not result in any material gain. Commercial Real Estate $440.4 12.5% As a result of COVID-19, tightened focus on directly impacted Commercial Operating 17.0 0.5% industries – Hospitality & Movie Theater 1-4 Family Real Estate 15.2 0.4% • 65% and 15% of active community bank COVID-related modifications and deferrals tied to hospitality and theater Agricultural 11.7 0.3% exposures, respectively. Consumer 1.3 0.1% Total $485.6 13.8% COMMERCIAL REAL ESTATE Portfolio Composition Type Insurance Theater Other² Agencies and 3.9% 2.1% • 76% commercial mortgage, 24% commercial construction Brokerages 4.5% • ALLL coverage of 4.75% of total commercial real estate loans, primarily Multifamily Office Building 29.9% related to the hospitality and theater commercial real estate loans 9.3% - Low historical charge-offs (2bps 5-year average NCO/average loans) • Past due commercial real estate balances were 0.01%, as of September 30, Retail 2020 10.9% • $50 thousand in nonperforming loans as of September 30, 2020 ¹ Total includes total gross loans & leases of $3.52 billion and rental equipment, net of $206.0M, as of September 30, 2020, exposures are based on Hotel/Motel current outstanding balances as of September 30, 2020 39.4% ² Other includes subsectors comprised of less than 1% of total commercial real estate as of September 30, 2020 ($440.4 million) 14 Fourth Quarter & Fiscal Year End 2020 | Nasdaq: CASH
LEGACY COMMUNITY BANK | HOTEL PORTFOLIO As of September 30, 2020 | Serviced by Central Bank $179.3 million outstanding, total exposure of $201.3 million including unfunded commitments $170.6 million in commercial real estate and $8.7 million in C&I • Portfolio comprised of 30 relationships representing 33 individual hotels and 3,146 total rooms • Five borrowers, or $7.7 million outstanding, currently have property improvement projects (“PIP”) in place, $45.6 million related to construction • 10% of current outstanding are participation loans • 99% flagged hotel relationships (i.e. Holiday Inn Express, Hampton Inn, Hyatt Place, etc.); 100% limited-service • 26% of balances located in South Dakota and Iowa with majority of the remaining balances through developers headquartered in South Dakota and Iowa - Lower unemployment rate in Sioux Falls & Des Moines MSA, relative to National rates sign of stronger local economies • Majority of loans have guarantors by individuals with a strong combined net worth • Average loan-to-value of 60% at September 30, 2020 • One nonperforming loan representing $50 thousand as of September 30, 2020 COVID-19 Response and Monitoring • 67% of hotel relationships received PPP loans • Active third-round COVID-related deferrals and modifications on $79.0 million in hospitality balances outstanding • Frequent monitoring and discussions with impacted borrowers, including short-term planning (90-day deferrals) 15 Fourth Quarter & Fiscal Year End 2020 | Nasdaq: CASH
PAYMENTS 16 Fourth Quarter & Fiscal Year End 2020 | Nasdaq: CASH
PAYMENTS BUSINESS SOLUTIONS PAYMENTS BUSINESS PROVIDES PRIMARY DEPOSIT SOURCE GENERATES STABLE, LOW COST CORE DEPOSITS AND FEE INCOME PREPAID BANKING AS A SERVICE DEPOSITS + FEE INCOME DEPOSITS + FEE INCOME Leading prepaid card issuer. Facilitate Transactional Payments: Faster Payments, ACH, merchant Partner to top prepaid program managers. acquiring and ATM Sponsorship. Leader in applying innovative prepaid MetaBank ranked among Top 50 solutions to address key consumer and on Nacha’s 2019 Top ACH business payments needs. Originators & Receivers By Volume Loyalty 11% Provide deposit account services Awards Promotion for fintech/neobank/challenger banks. 12% Gift Named Partner Bank of the Year by Tearsheet for MoneyLion’s PREPAID CARD RoarMoney banking product. General DISTRIBUTION 59% Purpose based on balances as of Reloadable September 30, 2020 18% Payroll 17 Fourth Quarter & Fiscal Year End 2020 | Nasdaq: CASH
PAYMENTS BUSINESS UPDATE Payments Card and Deposit Fee Income Breakout Fourth Quarter Fiscal 2020 • Increased monitoring of our partners due to COVID-19; providing payment 9% modifications and deferrals where necessary, immaterial impact to date. • Selected as the prepaid debit card issuer for Economic Impact Payments (“EIP 11% Cards”) as Treasury’s financial agent. – Issued 3.6 million cards representing $6.42 billion in funding. – As of September 30, 2020, $942.2 million in balances remained outstanding. • Payments deposits, excluding EIP Cards, represented 87% of total average deposits for the fiscal 2020 fourth quarter. 80% Prepaid Deposit Banking Services Banking Services includes ATM, ACH/Faster Payments, Merchant Acquiring Average Payments Deposits Payments Card and Deposit Fee Income ($ in billions) ($ in millions) Percent of Total Revenue 21% CAGR 20% 21% 12% 21% 20% 2018 – 2020 Excl. EIP Card Balances $1.62 EIP Card Balances $0.98 EIP Card $4.20 Balances $23.2 $3.57 $21.5 $21.3 $21.4 $20.3 $2.71 $2.63 $2.45 2018 2019 2020 4Q19 4Q20 4Q19 1Q20 2Q20 3Q20 4Q20 Fiscal Year Average Quarter Average 18 Fourth Quarter & Fiscal Year End 2020 | Nasdaq: CASH
INTEREST RATE RISK AND CAPITAL 19 Fourth Quarter & Fiscal Year End 2020 | Nasdaq: CASH
INTEREST RATE RISK MANAGEMENT September 30, 2020 12-Month Interest Rate Sensitivity from Base Net Interest Income • Lower for longer rate environment -- focus is on reducing wholesale funding and redeploying deposits 25% and assets into positive carry opportunities. 20% 15% • Interest rate risk shows asset sensitive balance sheet - net interest income modeled under an instantaneous, 10% parallel rate shock and a gradual parallel ramp. 5% 0% • Management also employs rigorous modeling techniques under a variety of yield curve shapes, twists -5% -100 +100 +200 +300 and ramps. Parallel Shock Ramp 1 Earning Asset Pricing Attributes Asset/Liability Gap Analysis 7% 3,500 3,000 2,500 28% 2,000 1,500 52% 1,000 500 Volume ($MM) Volume 13% 0 -500 -1,000 Fixed Rate > 1 Year Floating or Variable Month 1-12 Month 13-36 Month 37-60 Month 61-180 Fixed Rate < 1 Year Federal Reserve Bank Deposits Period Variance Total Assets Total Liabilities (Floating or Variable) 1 Fixed rate securities, loans and leases are shown for contractual periods less than 12 months and greater than 12 months. 20 Fourth Quarter & Fiscal Year End 2020 | Nasdaq: CASH
STRONG CAPITAL AND SOURCES OF LIQUIDITY Regulatory Capital as of September 30, 2020 At September 30, 2020 Meta Financial Group, Inc. MetaBank Tier 1 Leverage 6.58% 7.56% Capital Ratio Trends Tier 1 Leverage – Adjusted¹ N/A 9.66% Common Equity Tier 1 11.78% 13.96% Tier 1 Capital 12.18% 14.00% Total Capital 15.30% 15.26% • MetaBank period end Tier 1 Leverage of 9.66% better reflects the go-forward balance sheet reducing the impact from the temporary EIP Card balances. • MetaBank remains well-capitalized. • Repurchased 898,416 shares at a weighted average price of $21.80 since resuming share repurchases in September 2020 through October 23, 2020. Primary & Secondary Liquidity Sources ($ in millions) Cash and Cash Equivalents $425 Unpledged Investment Securities $325 FHLB Borrowing Capacity $1,005 Funds Available through Fed Discount Window $345 PPP Loan Collateral $215 Meta Financial Group, Inc. MetaBank Unsecured Lines of Credit $1,265 - $1,535 Minimum Requirement to be Well-Capitalized under Prompt Corrective Action Provisions 1 Non-GAAP measure, see appendix for reconciliations. 21 Fourth Quarter & Fiscal Year End 2020 | Nasdaq: CASH
APPENDIX 22 Fourth Quarter & Fiscal Year End 2020 | Nasdaq: CASH
WAREHOUSE FINANCE Total Exposure $293.4 million % of Total¹ 8.3% All Loan/Collateral Cash Flows Asset-backed warehouse lines of credit used to support strategic initiatives. • Lines are primarily secured by consumer receivables, whereby Meta is in a senior, secured position as the first out participant. Admin Fees (0-5%) • Have never had a charge off or loss. • Agreements trigger waterfall protection for the “First Out” participant: First-Out Tranche (Meta - The waterfall could be “triggered” due to items such as: collateral Position) underperformance, collateral days past due, covenant breaches, $55MM (55%) concentration limit breaches, missed payments, regulatory events, material adverse effects, etc. $100M Junior Tranche Facility EXAMPLE $35MM (35%) EXAMPLE In the example $100M scenario, all cash flows of the outstanding facility are used to pay the First Out Tranche’s (i.e. – Meta’s) outstanding principal and interest. The First Out’s position must be paid down in full prior to the junior and equity tranches receiving any cash flow. Effectively, the First Out receives the benefit of $100M of Equity Tranche loans/collateral to pay down its $55M full principal and interest $10MM (10%) position. ¹ Total includes total gross loans & leases of $3.52 billion and rental equipment, net of $206.0M, as of September 30, 2020 23 Fourth Quarter & Fiscal Year End 2020 | Nasdaq: CASH
CONSUMER CREDIT PROGRAMS Consumer Payments Principal, Interest, Fees Total Exposure $89.8 million % of Total¹ 2.6% Consumer credit programs offer Meta a risk adjusted return, protected by certain layers of credit support and balance sheet flexibility. Programs are offered to strategic partners with Collection Account payments distribution potential. • Agreements typically provide for “excess spread” build-up and protection through a priority of payment within a waterfall Principal • Consumer interest rate and fees flow through a waterfall: Principal Losses Repayment to Servicing to Meta - Covers principal losses and Meta’s required rate of interest. Meta’s Meta interest rate is substantially less than the consumer’s APR - Structure provides for a build up of excess spread to allow protection from loan losses and ensure Meta’s contractual rate of interest is covered Meta’s Agreed upon interest return - Structure provides for ALLL on a portfolio basis rather than loan level basis - Excess spread in the escrow account only released to partner when certain conditions are satisfied Remaining Excess Spread to Meta-owned escrow - Escrow account balance has increased since program inception reserve Reserve release to partner is conditional (subordinate) based on product performance ¹ Total includes total gross loans & leases of $3.52 billion and rental equipment, net of $206.0M, as of September 30, 2020 24 Fourth Quarter & Fiscal Year End 2020 | Nasdaq: CASH
FINANCIAL MEASURE RECONCILIATIONS Efficiency Ratio For the last twelve months ended ($ in thousands) Sep 30, 2020 Jun 30, 2020 Mar 31, 2020 Dec 31, 2019 Sep 30, 2019 Noninterest Expense - GAAP 319,051 314,911 316,138 334,663 333,160 Net Interest Income 259,038 260,142 264,973 268,586 264,207 Noninterest Income 239,794 235,024 237,766 222,278 222,545 Total Revenue: GAAP 498,832 495,166 502,739 490,864 486,752 Efficiency Ratio, LTM 63.96 % 63.60 % 62.88 % 68.18 % 68.45 % Non-GAAP Reconciliation Adjusted Annualized NCOs and Adjusted Average Loans and Leases For the quarter ended ($ in thousands) Sep 30, 2020 Jun 30, 2020 Mar 31, 2020 Dec 31, 2019 Sep 30, 2019 Net Charge-offs 18,538 14,700 2,117 2,380 18,476 Less: Tax services net charge-offs 13,034 9,782 (74) (739) 15,416 Adjusted Net Charge-offs $ 5,504 $ 4,918 $ 2,191 $ 3,119 $ 3,060 Quarterly Average Loans and Leases 3,536,997 3,622,928 4,195,772 3,735,196 3,729,545 Less: Quarterly Average Tax Services Loans 16,650 39,845 516,491 24,429 21,445 Adjusted Quarterly Loans and Leases $ 3,520,347 $ 3,583,083 $ 3,679,281 $ 3,710,767 $ 3,708,100 Annualized NCOs/Average Loans and Leases 2.10 % 1.62 % 0.20 % 0.25 % 1.98 % Adjusted Annualized NCOs/Adjusted Average Loans and Leases1 0.63 % 0.55 % 0.24 % 0.34 % 0.33 % 1 Tax Services NCOs and average loans are excluded to adjust for the cyclicality of activity related to the overall economics of the Company's tax services business line. 25 Fourth Quarter & Fiscal Year End 2020 | Nasdaq: CASH
NON - GAAP RECONCILIATIONS Three Months Ended MetaBank Period-end Tier 1 Leverage September 30, 2020 Adjusted Net Interest Margin September 30, 2020 Total stockholder's equity $ 933,430 Average interest-earning assets 6,806,366 ADJUSTMENTS: Net interest income 64,513 LESS: Goodwill, net of associated deferred tax liabilities 302,396 Net interest margin 3.77 % LESS: Certain other intangible assets 40,964 LESS: Net deferred tax assets from operating loss and tax credit carry- ADJUSTMENTS FOR EIP CARDS forwards 18,361 Interest-earning assets 6,806,366 LESS: Net unrealized gains (losses) on available-for-sale securities 17,762 LESS: Cash adjustment 1,573,727 LESS: Non-controlling interest 3,603 Adjusted average interest-earning assets 5,232,639 Common Equity Tier 1 Capital ("CET1") (1) 550,344 Tier 1 minority interest not included in common equity tier 1 capital 1,894 Net Interest Income 64,513 Total Tier 1 capital 552,238 LESS: Cash interest adjustment 396 Adjusted net interest income 64,117 Total Assets (Quarter Average) $ 7,679,897 Adjusted net Interest margin 4.87 % ADD: Available for sale securities amortized cost (22,844) ADD: Deferred tax 5,724 LESS: Deductions from CET1 361,721 Adjusted total assets $ 7,301,056 MetaBank Regulatory Tier 1 Leverage 7.56 % Total Assets (Period End) $ 6,095,030 ADD: Available for sale securities amortized cost (23,718) ADD: Deferred tax 5,956 LESS: Deductions from CET1 $ 361,721 Adjusted total assets $ 5,715,547 MetaBank Period-end Tier 1 Leverage 9.66 % 26 Fourth Quarter & Fiscal Year End 2020 | Nasdaq: CASH