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| 8-K - 8-K - META FINANCIAL GROUP INC | cash-20210127.htm |
| EX-99.1 - EX-99.1 - META FINANCIAL GROUP INC | cash12312020earningsreleas.htm |
Q U A R T E R LY I N V E S T O R U P DAT E F I R S T Q UA R T E R F I S C A L Y E A R 2 0 21
QUARTERLY INVESTOR UPDATE | FIRST QUARTER FISCAL YEAR 2021 | NASDAQ: CASH F O R WA R D - L O O K I N G S TAT E M E N T S 2 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, including the deployment and efficacy of the COVID-19 vaccines, 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; the impact of our participation as prepaid card issuer for the Economic Impact Payment (“EIP”) program and potential similar programs in the future, 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, 2020 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.
QUARTERLY INVESTOR UPDATE | FIRST QUARTER FISCAL YEAR 2021 | NASDAQ: CASH3 W E A R E A F I N A N C I A L E N A B L E M E N T C O M PA N Y We work with innovators to increase financial availability, choice, and opportunity for all. We strive to remove barriers that traditional institutions put in the way of financial access, and promote economic mobility by providing responsible, secure, high quality financial products that contribute to individuals and communities at the core of the real economy. We work to disrupt traditional banking norms by developing partnerships with fintechs and finservs, affinity groups, government agencies, and other banks to make a range of quality financial products and services available to the communities we serve nationally. Our national bank charter, coordination with regulators, and deep understanding of risk mitigation and compliance allows us to guide our partners and deliver the financial products and services that meet the needs of those who need them most. We believe in Financial Inclusion For All®. Our mission is about equal access to financial opportunity and is inherently ESG-oriented. Every day, our team members work to help individuals and organizations improve their economic status and set themselves on secure paths for growth and financial stability. During the first quarter of fiscal 2021, we increased resources dedicated to our ESG activities by hiring an experienced Vice President of ESG and Community Impact and formed a Board-level ESG committee to provide oversight. E N V I R O N M E N T A L , S O C I A L , A N D G O V E R N A N G E ( “ E S G ” )
QUARTERLY INVESTOR UPDATE | FIRST QUARTER FISCAL YEAR 2021 | NASDAQ: CASH4 S T R O N G R E V E N U E G R O W T H A N D D I S C I P L I N E D E X P E N S E M A N A G E M E N T D R I V E P R O F I TA B I L I T Y F I R S T Q U A R T E R E N D E D D E C E M B E R 3 1 , 2 0 2 0 INCOME STATEMENT ($ in thousands, except per share data) 1Q21 4Q20 1Q20 Net interest income 65,999 64,513 64,651 Provision for loan and lease losses 6,089 8,980 3,407 Payments card & deposit fees 22,564 21,422 21,499 Total noninterest income 45,455 40,750 37,483 Total noninterest expense 72,575 80,283 75,798 Net income before taxes 32,790 16,000 22,929 Income tax expense 3,533 1,791 680. Net income before non-controlling interest 29,257 14,209 22,249 Net income attributable to non-controlling interest 1,220 1,051 1,181 Net income attributable to parent $ 28,037 $ 13,158 $ 21,068 Earnings per share, diluted $ 0.84 $ 0.38 $ 0.56 Average diluted shares 32,790,895 33,783,659 36,647,789 • Revenue increased to $111.5 million, or 9%, compared to $102.1 million for the same quarter in fiscal 2020, driven by: — Previously disclosed $5 million loss from the sale of foreclosed property during the last year's first fiscal quarter, related to a legacy community bank agricultural relationship. — Receipt of $3.5 million dollars related to a portion of the Company’s liquidation insurance claims of unearned premiums on the ReliaMax estate related to our student loan portfolio. • Noninterest expense decreased 4% to $72.6 million for the fiscal 2021 first quarter, from $75.8 million for the same quarter of last year. • Earnings per share increased 50% year-over-year to $0.84 supported by strong net income and share repurchases completed since the first quarter of fiscal 2020.
QUARTERLY INVESTOR UPDATE | FIRST QUARTER FISCAL YEAR 2021 | NASDAQ: CASH5 H E A LT H Y B A L A N C E S H E E T W I T H R O B U S T PAY M E N T D E P O S I T G R O W T H F I R S T Q U A R T E R E N D E D D E C E M B E R 3 1 , 2 0 2 0 BALANCE SHEET PERIOD ENDING AVERAGE ($ in thousands) 1Q21 4Q20 1Q20 1Q21 1Q20 Loans and leases 3,448,675 3,322,765 3,590,474 3,341,023 3,601,302 Allowance for credit losses (72,389) (56,188) (30,176) (72,252) (28,853) Total assets $ 7,264,515 $ 6,092,074 $ 6,180,926 $ 6,481,823 $ 6,122,504 Noninterest-bearing checking 5,581,597 4,356,630 2,927,967 4,880,314 2,717,346 Total deposits 6,207,791 4,979,200 4,517,605 5,426,443 4,481,158 Total liabilities 6,451,305 5,244,766 5,343,858 5,675,676 5,283,173 Total stockholders' equity 813,210 847,308 837,068 806,147 839,331 Total liabilities and stockholders equity $ 7,264,515 $ 6,092,074 $ 6,180,926 $ 6,481,823 $ 6,122,504 Loans / Deposits 56 % 67 % 79 % 62 % 80 % Net Interest Margin 4.65 % 3.77 % 4.94 % 4.65 % 4.94 % Return on Average Assets 1.73 % 0.69 % 1.38 % 1.73 % 1.38 % Return on Average Equity 13.91 % 6.21 % 10.04 % 13.91 % 10.04 % • Total gross loans and leases at the end of the first quarter decreased $143.7 million, or 4%, to $3.45 billion compared to the same quarter of the prior year. • Average deposits from the payments divisions for the first quarter increased nearly 83% to $5.07 driven by the company’s participation in the EIP program, as well as growth associated with other government stimulus programs. • The effects of government stimulus programs have had a significant impact on the Company’s balance sheet. — These programs include Paycheck Protection Program loans, EIP, and enhanced unemployment benefits that flow through to existing prepaid card programs.
QUARTERLY INVESTOR UPDATE | FIRST QUARTER FISCAL YEAR 2021 | NASDAQ: CASH6 D I F F E R E N T I AT E D B U S I N E S S L I N E S W I T H S I G N I F I C A N T G R O W T H O P P O R T U N I T I E S C O M M E R C I A L F I N A N C E Enables fintechs, finservs, and various organizations by distributing prepaid cards, deposit accounts, and payment related transactions to consumers. Enables small and medium-sized businesses, as well as large enterprises, with flexible capital solutions P A Y M E N T S T A X S E R V I C E S C O N S U M E R F I N A N C E M E T A V E N T U R E S Enables tax preparation firms to provide underbanked consumers with access to electronic tax payments and refund advances. Enables consumers to better control their financial futures with empowered spending and reliable access to funds. Enables emerging and strategic companies that align with our mission and contribute to our goal of bringing Financial Inclusion For All®. 49% Noninterest Income as a percent of Total Revenue in LTM ending December 31, 2020 Net Interest Income $260.4 Payments Fee Income $88.5 Tax Product Income $68.0 Rental Income $42.3 Other Income $48.9 R E V E N U E M A K E U P L A S T T W E L V E M O N T H S E N D I N G D E C E M B E R 3 1 , 2 0 2 0 ($ in millions)
QUARTERLY INVESTOR UPDATE | FIRST QUARTER FISCAL YEAR 2021 | NASDAQ: CASH7 F I R S T Q U A R T E R B U S I N E S S H I G H L I G H T S & K E Y S T R AT E G I C I N I T I AT I V E S INCREASE PERCENTAGE OF FUNDING FROM CORE DEPOSITS OPTIMIZE INTEREST-EARNING ASSET MIX IMPROVE OPERATING EFFICIENCIES Efficiency ratio improved to 62.2% from 68.2% a year prior Driving optimization and utilization of existing business platforms. Leveraging technology to help drive future efficiencies. ACHIEVED YEAR-OVER-YEAR NET INCOME AND EARNINGS PER SHARE GROWTH OF 33% AND 50%, RESPECTIVELY Executing large, national programs requiring Meta’s scale • Selected as issuing bank to distribute Economic Impact Payments (“EIP”) on prepaid debit cards. • Facilitator for H&R Block’s suite of financial services products. RETURNED CAPITAL BY REPURCHASING OVER 1.8 MILLION SHARES IN THE FIRST QUARTER OF FISCAL 2021 Focus on commercial finance business lines • Sold Community Bank division in fiscal 2020. • Replacing community bank loans with commercial finance loans and leases.
QUARTERLY INVESTOR UPDATE | FIRST QUARTER FISCAL YEAR 2021 | NASDAQ: CASH 72% 26% 2% 38% 23% 11% 62% 23% 15% D I V E R S I F I E D E A R N I N G A S S E T P O R T F O L I O 8 QUARTERLY AVERAGE EARNING ASSET MIX DEC 2019 $5.20 billion INTEREST EARNING ASSETS 43% 9% 10% DEC 2020 $5.64 billion INTEREST EARNING ASSETS CASH & FED FUNDSINVESTMENTSLOANS & LEASES Commercial Community Bank Consumer & Warehouse % in charts represent % of total interest earning assets ASPIRATIONAL TARGETS >55% 0% <15% At the Quarter Ended December 31, 2020 December 31, 2019 ($ in thousands) 1 Q 2 1 1 Q 2 0 Y/Y Δ COMMERCIAL FINANCE 2,423,119 1,994,656 21% Term lending 881,306 695,347 27% Asset-based lending 242,298 250,633 (3)% Factoring 275,650 285,776 (4)% Lease financing 283,722 223,715 27% Insurance premium finance 338,227 349,299 (3)% SBA/USDA¹ 300,707 90,269 233% Other commercial finance 101,209 99,617 2% CONSUMER FINANCE 251,018 270,615 (7)% Consumer credit programs 88,595 115,843 (24)% Other consumer finance 162,423 154,772 5% TAX SERVICES 92,548 101,739 (15)% WAREHOUSE FINANCE 318,937 272,522 17% NATIONAL LENDING 3,085,622 2,639,532 17% COMMUNITY BANKING 353,942 943,765 (62)% TOTAL GROSS LOANS & LEASES HFI 3,439,564 3,583,297 (4)% TOTAL GROSS LOANS & LEASES HFS 133,658 264,266 (49)% CASH & INVESTMENTS 2,802,598 1,426,769 96% TOTAL EARNING ASSETS 6,375,820 5,274,332 21% RENTAL EQUIPMENT, NET 206,732 211,673 (2)% 1 Includes balances of $194.3 million in Paycheck Protection Program loans.
QUARTERLY INVESTOR UPDATE | FIRST QUARTER FISCAL YEAR 2021 | NASDAQ: CASH PAY MENT S & TA X SERVICES 9
QUARTERLY INVESTOR UPDATE | FIRST QUARTER FISCAL YEAR 2021 | NASDAQ: CASH10 PAY M E N T S B U S I N E S S S O L U T I O N S P R E P A I D B A N K I N G A S A S E R V I C E Facilitate Transactional Payments including: Faster Payments, ACH, merchant acquiring and ATM Sponsorship. Ranked among Top 50 on Nacha’s 2019 Top ACH Originators & Receivers By Volume. Provide deposit account services for fintech/neobank/challenger banks. Named Partner Bank of the Year by Tearsheet for MoneyLion’s RoarMoney banking product. P A Y M E N T S B U S I N E S S P R O V I D E S P R I M A R Y D E P O S I T S O U R C E G E N E R A T E S S T A B L E , L O W C O S T C O R E D E P O S I T S A N D F E E I N C O M E Leading prepaid card issuer. Partner to top prepaid program managers. Leader in applying innovative prepaid solutions to address key consumer and business payments needs. P R E P A I D C A R D D I S T R I B U T I O N based on balances as of December 31, 2020 General Purpose Reloadable Loyalty Awards Promotion Gift Payroll 23% 17% 42% DEPOSITS + FEE INCOME DEPOSITS + FEE INCOME 13% Demand Deposit Accounts 5%
QUARTERLY INVESTOR UPDATE | FIRST QUARTER FISCAL YEAR 2021 | NASDAQ: CASH $2.45 $2.71 $3.57 $2.78 $4.32 $0.98 $0.75 2018 2019 2020 1Q20 1Q21 Average Payments Deposits ($ in billions) 11 PAY M E N T S B U S I N E S S U P DAT E 21% CAGR 2018 – 2020 Excl. EIP Card Balances • Selected as the prepaid debit card issuer for Economic Impact Payments as Treasury’s financial agent. – Disbursed $6.42 billion in funding for EIP round 1 (“EIP1”) and $7.10 billion for EIP round 2 (“EIP2”). Distribution of initial payments for EIP2 begun January 4, 2021. – As of December 31, 2020, $605.1 million in balances remained outstanding from EIP1. – As of January 20, 2021, $569.2 million and $5.80 billion in balances remained outstanding on EIP1 and EIP2, respectively. – Program execution provides opportunities to work with large-scale programs and program managers in the future, as well as increase MetaBank’s presence in the payments space. • Total average payments deposits were up nearly 83% year-over-year, excluding EIP Card balances issued by MetaBank, average payments deposits were up 55% year- over-year. – Deposit growth largely associated with government stimulus programs and is expected to be temporary in nature. – Also contributing to growth was $150 million in deposits acquired as a component of the H&R Block relationship that began in the fiscal first quarter. $21.5 $23.2 $21.3 $21.4 $22.6 1Q20 2Q20 3Q20 4Q20 1Q21 Payments Card and Deposit Fee Income ($ in millions) Percent of Total Revenue 21% 12% 21% 20% 20% 79% 11% 10% Prepaid Deposit Banking Services Banking Services includes ATM, ACH/Faster Payments, Merchant Acquiring Payments Card and Deposit Fee Income Breakout First Quarter Fiscal 2021 Quarter AverageFiscal Year Average EIP Card Balances EIP Card Balances $5.07 $4.55
QUARTERLY INVESTOR UPDATE | FIRST QUARTER FISCAL YEAR 2021 | NASDAQ: CASH12 PROGRAM MANAGER H&R Block / Emerald Financial Services, LLC PAYMENTS Emerald Prepaid Mastercard® Emerald Savings® TAX SERVICES Refund Advance Refund Transfers CONSUMER FINANCE Emerald Advance® Line of Credit O V E R V I E W O F S T R AT E G I C R E L AT I O N S H I P W I T H H & R B L O C K
QUARTERLY INVESTOR UPDATE | FIRST QUARTER FISCAL YEAR 2021 | NASDAQ: CASH COMMERCIA L F INA NCE & COMMUNIT Y BA NK POR T FOL IOS 13
QUARTERLY INVESTOR UPDATE | FIRST QUARTER FISCAL YEAR 2021 | NASDAQ: CASH TERM LENDING. Collateralized conventional term loans and notes receivable, weighted average life of 53 months. Exposure is concentrated in solar/alternative energy, most of which are construction projects that will convert to longer term government guaranteed facilities upon completion. Also includes equipment financing relationships, through equipment finance agreements and installment purchase agreements. Average loan size approximately $180 thousand; small ticket equipment finance approximately $70 thousand ASSET-BASED LENDING. Asset-based loans secured by accounts receivable, inventory, machinery & equipment, work-in-process and other assets. Approximately 70% backed by accounts receivable, generally 85% advance rates. Exposure managed within a collateral borrowing base. Well diversified in terms of industry and geographic concentrations. Average loan size approximately $1.4 million. FACTORING. Factoring services where clients provide detailed inventory, accounts receivable, and 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 accounts receivable, generally 85% advance rates. Average loan size approximately $320 thousand. LEASE FINANCING. Leasing solutions for technology, capital equipment and select transportation assets like tractors, trailers and construction equipment. Majority of portfolio relationships are to Fortune 1000 clients. Average lease size approximately $145 thousand. INSURANCE PREMIUM FINANCE. Short-term, primarily collateralized financing to facilitate the purchase of commercial insurance for various forms of risk. Over 90% of insurance company partners have an investment grade rating through AM Best as well as an internal risk rating system. Average loan size approximately $30 thousand. 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 $194.3 million of PPP loans. Average loan size approximately $530 thousand, excluding PPP loans. OTHER COMMERCIAL FINANCE. Includes healthcare receivables loan portfolio primarily comprised of loans to individuals for medical services received. Majority of these loans are guaranteed by the referring hospital. RENTAL EQUIPMENT. Leased assets related to operating leases generated from the commercial finance business line. Primarily consists of solar panels, motor vehicles, and computers and IT networking equipment. C O M M E R C I A L F I N A N C E L O A N A N D L E A S E P O R T F O L I O 14 Top geographic state concentrations1 by % 1. California 16.7% 2. Texas 11.3% 3. Michigan 7.8% 4. Florida 7.0% 5. North Carolina 4.6% 6. New York 4.5% 7. Illinois 4.1% 8. Pennsylvania 3.2% 1 Excludes certain joint ventures; percentages calculated based on aggregate principal amount of commercial finance loans and leases includes operating lease rental equipment of $206.7M $2.63 billion COMMERCIAL FINANCE PORTFOLIO (includes Rental Equipment, net) as of December 31, 2020 Asset-Based Lending $242.3M 10.67% SBA/USDA $300.7M 4.02% Other $101.2M 7.63% Factoring $275.7M 12.82% Insurance Premium Finance $338.2M 5.39% Term Lending $881.3M 7.03% 7.49% 1Q21 Quarterly Yield % in chart represents current quarter yield Rental Equipment, net $206.7M NA% Lease Financing $283.7M 7.68% Small Ticket Equipment Financing $266.0M Solar/alternative energy $235.3M Equipment financing $181.8M Wealth management/ insurance $135.9M Other $62.3M
QUARTERLY INVESTOR UPDATE | FIRST QUARTER FISCAL YEAR 2021 | NASDAQ: CASH D I S T R I B U T I O N O F C O M M E R C I A L F I N A N C E P O R T F O L I O B Y I N D U S T R Y ¹ 15 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 $206.7M Manufacturing Transportation and Warehousing Utilities Finance and Insurance Wholesale Trade Health Care and Social Assistance Construction Admin and Support and Waste Mgmt and Remediation Services Mining, Quarrying, and Oil and Gas Extraction Other Professional, Scientific, and Technical Services Real Estate and Rental and Leasing Retail Trade Accommodation and Food Services Other Services (except Public Administration) Information Arts, Entertainment, and Recreation Agriculture, Forestry, Fishing and Hunting Educational Services Management of Companies and Enterprises Public Administration $- $50 $100 $150 $200 $250 $300 $350 $400 $450 $ in millions MANUFACTURING 24% Asset-based lending 22% Term lending 21% Lease financing 12% SBA/USDA 10% Factoring TRANSPORTATION & WAREHOUSING 37% Factoring 30% Term lending 22% Insurance premium finance UTIL IT IES 55% Term lending 20% Rental equipment, net 20% SBA/USDA OIL & GAS 42% Term lending 18% SBA/USDA 16% Factoring 9% Lease financing
QUARTERLY INVESTOR UPDATE | FIRST QUARTER FISCAL YEAR 2021 | NASDAQ: CASH Outstanding Balance % of Total² M A N UF ACTURING $ 4 1 9 . 1 1 1 . 5 % Computer and Electronic Product Manufacturing 67.2 1.8% Fabricated Metal Product Manufacturing 51.2 1.4% Transportation Equipment Manufacturing 42.3 1.2% Nonmetallic Mineral Product Manufacturing 39.1 1.1% Machinery Manufacturing 34.7 1.0% Electrical Equipment, Appliance, and Component Manufacturing 30.8 0.8% Plastics and Rubber Products Manufacturing 29.6 0.8% Chemical Manufacturing 29.2 0.8% Printing and Related Support Activities 27.9 0.8% Food Manufacturing 17.4 0.5% Other³ 49.7 1.3% Solar Electric Power Generation Other Utilities C O M M E R C I A L F I N A N C E M I X ¹ 16 1 Excludes certain joint ventures; percentages calculated based on aggregate principal amount of loans includes operating lease rental equipment of $206.7M ² Total includes total gross loans & leases of $3.44 billion and rental equipment, net of $206.7M, as of December 31, 2020, exposures are based on current outstanding balances as of December 31, 2020 3 Other includes manufacturing subsectors comprised of less than 0.5% of total² • $51.0 million exposure related to support activities for Oil & Gas Operations - Approximately half of outstandings are in working capital lines, primarily collateralized by accounts receivable, remaining collateralized by machinery and equipment • Limited exposure to single borrowers • Diversified across multiple subsectors – greatest concentration of subsectors is 1.8% of total² • 98% of Utilities exposure is to Solar Electric Power Generation, majority of which is related to permanent solar generators. • Well collateralized, majority backed by power purchase agreements with highly rated, large public utilities • $236.9 million exposure to truck transportation, over 89% in general freight trucking. • Less than $18.0 million exposure to passenger air transportation and support activities. • Receive invoices and back-up, verify a portion of the purchases and monitor these accounts under a Dominion of Funds to ensure that our balances are covered by collateral MANUFACTURING UTILITIES TRANSPORTATION & WAREHOUSING OIL & GAS Total Exposure $371.3 million % of Total² 10.2% Total Exposure $419.1 million % of Total² 11.5% Total Exposure $348.3 million % of Total² 9.6% Total Exposure $54.7 million % of Total² 1.5%
QUARTERLY INVESTOR UPDATE | FIRST QUARTER FISCAL YEAR 2021 | NASDAQ: CASH L E G A C Y C O M M U N I T Y B A N K P O R T F O L I O B R E A K D O W N A S O F D E C E M B E R 3 1 , 2 0 2 0 | S E R V I C E D B Y C E N T R A L B A N K 17 COMMERCIAL REAL ESTATE INDUSTRY COMPOSITION ($ in millions) Outstanding Balance % of Total¹ Commercial Real Estate $322.4 8.8% Commercial Operating 16.8 0.5% Agricultural 9.7 0.3% 1-4 Family Real Estate 4.2 0.1% Consumer 0.9 0.0% Total $353.9 9.7% • 70% commercial mortgage, 30% commercial construction • ACL coverage of 4.18% of total commercial real estate loans, primarily related to the hospitality and theater commercial real estate loans - Low historical charge-offs (2bps 5-year average NCO/average loans) • Past due commercial real estate balances were less than 0.01%, as of December 31, 2020 • $17.2 million in nonperforming loans as of December 31, 2020 COMMERCIAL REAL ESTATE Hotel/Motel 56.0% Multifamily 19.3% Retail 12.8% Theater 5.3% Office Building 5.3% Other² 1.3% ¹ Total includes total gross loans & leases of $3.44 billion and rental equipment, net of $206.7M, as of December 31, 2020, exposures are based on current outstanding balances as of December 31, 2020 ² Other includes subsectors comprised of less than 1% of total commercial real estate as of December 31, 2020 ($322.4 million) During the quarter, sold $130 million loans and had $100 million of community bank loans classified as held for sale as of December 31, 2020. • Sale did not result in any material gain. As a result of COVID-19, tightened focus on directly impacted industries – Hospitality & Movie Theater • 68% and 30% of active community bank COVID-related modifications and deferrals tied to hospitality and theater exposures, respectively.
QUARTERLY INVESTOR UPDATE | FIRST QUARTER FISCAL YEAR 2021 | NASDAQ: CASH L E G A C Y C O M M U N I T Y B A N K | H O T E L P O R T F O L I O A S O F D E C E M B E R 3 1 , 2 0 2 0 | S E R V I C E D B Y C E N T R A L B A N K 18 $186.7 million outstanding, total exposure of $197.9 million including unfunded commitments • $29.9 million related to construction. $180.4 million in commercial real estate and $6.3 million in C&I • Portfolio comprised of 29 relationships representing 32 individual hotels and 3,084 total rooms • 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 December 31, 2020 • No nonperforming loans as of December 31, 2020 COVID-19 Monitoring • Most hospitality loans that were on deferral are back to P&I payments • Active COVID-related deferrals and modifications on $40.8 million in hospitality balances outstanding, working with borrowers on a case-by-case basis
QUARTERLY INVESTOR UPDATE | FIRST QUARTER FISCAL YEAR 2021 | NASDAQ: CASH A SSET QUA L IT Y, INT ER EST R AT E R ISK , & CA PITA L 19
QUARTERLY INVESTOR UPDATE | FIRST QUARTER FISCAL YEAR 2021 | NASDAQ: CASH A S S E T Q U A L I T Y 20 Credit quality remains strong. Allowance for credit losses (“ACL”) $72.4 million, or 2.10% of total loans and leases as of December 31, 2020. • ACL 171% of nonperforming loans • Legacy community bank hospitality and theater exposures ACL coverage of 5.80% • Small ticket equipment finance ACL coverage of 5.19% Uptick in NPAs and NPLs driven primarily by isolated theater relationship in the legacy community bank portfolio. For fiscal 2021 first quarter, $3.3 million of NCOs were related to small ticket equipment finance relationships. 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. 1 Non-GAAP measures, see appendix for reconciliations. $29.8 $39.4 $56.1 $48.0 $53.2 0.48% 0.67% 0.64% 0.79% 0.73% 1Q20 2Q20 3Q20 4Q20 1Q21 $ i n m il li o n s Period Ended Nonperforming Assets (“NPAs”) NPAs NPAs / Total Assets $24.0 $31.5 $39.3 $34.0 $42.3 0.62% 0.87% 1.10% 0.97% 1.18% 1Q20 2Q20 3Q20 4Q20 1Q21 $ i n m il li o n s Period Ended Nonperforming Loans (“NPLs”) NPLs NPLs / Total Loans $3.1 $2.2 $4.9 $5.5 $3.8 0.34% 0.24% 0.55% 0.63% 0.44% 1Q20 2Q20 3Q20 4Q20 1Q21 $ i n m il li o n s Period Ended Adjusted Net Charge-Offs (“NCOs”)¹ NCOs NCOs / Average Loans
QUARTERLY INVESTOR UPDATE | FIRST QUARTER FISCAL YEAR 2021 | NASDAQ: CASH $53.7 $52.3 $51.2 $193.3 $85.3 1Q20 4Q20 1Q21 $ i n m il li o n s Past Due Loans & Leases + COVID-10 Modifications & Deferrals Total Past Due COVID-19 Modifications & Deferrals A S S E T Q U A L I T Y 21 1 Small ticket equipment finance includes balances of $16.0 million in term lending and $0.5 million in lease receivables. Portfolio showing strong improvement in COVID-related modifications and deferrals. Excluding PPP loans, active deferments and modifications decreased from $193.3, or 6% of total gross loans and leases at September 30, 2020 to $85.3 million or 3% of total gross loans at December 31, 2020. The Company continues to place significant focus on hospitality and movie theater loans as well as small ticket equipment finance relationships. • Working with borrowers on a case-by-case basis. • Most hospitality loans that were on deferral are back to P&I payments. ACTIVE COVID-19 LOAN AND LEASE MODIFICATIONS AND DEFERRALS December 31, 2020 September 30, 2020 COUNT $ BALANCE COUNT $ BALANCE AREAS OF CREDIT FOCUS 138 $75.2 183 $118.7 Hospitality 11 40.8 26 79.0 Movie Theater 4 17.9 4 17.9 Small ticket equipment finance¹ 123 16.5 153 21.8 COMMERCIAL FINANCE 130 $21.1 192 $66.8 CONSUMER 200 $3.9 276 $5.8 COMMUNITY BANK 16 $60.3 35 $120.7 TOTAL 346 $85.3 503 $193.3 % TOTAL LOANS AND LEASES (excl. PPP) 3% 6% Past Due / Total Loans and Leases Past Due + COVID-19 Modifications & Deferrals / Total Loans and Leases 1.50% 1.57% 1.43% 1.50% 7.41% 3.82%
QUARTERLY INVESTOR UPDATE | FIRST QUARTER FISCAL YEAR 2021 | NASDAQ: CASH Month 1-12 Month 13-36 Month 37-60 Month 61-180 -2,000 -1,000 0 1,000 2,000 3,000 4,000 5,000 V o lu m e ( $ M M ) Period Variance Total Assets Total Liabilities -5% 5% 15% 25% 35% 45% -100 +100 +200 +300 12-MONTH INTEREST RATE SENSITIVITY FROM BASE NET INTEREST INCOME Parallel Shock Ramp 24% 24% 11% 41% EARNING ASSET PRICING ATTRIBUTES 1 22 • Lower for longer rate environment -- focus is on reducing wholesale funding and redeploying deposits and assets into positive carry opportunities. • Interest rate risk shows asset sensitive balance sheet - net interest income modeled under an instantaneous, parallel rate shock and a gradual parallel ramp. • Management also employs rigorous modeling techniques under a variety of yield curve shapes, twists and ramps. ASSET/LIABILITY GAP ANALYSIS 1 Fixed rate securities, loans and leases are shown for contractual periods less than 12 months and greater than 12 months. I N T E R E S T R AT E R I S K M A N A G E M E N T D E C E M B E R 3 1 , 2 0 2 0 Fixed Rate > 1 Year Fixed Rate < 1 Year Floating or Variable Federal Reserve Bank Deposits (Floating or Variable)
QUARTERLY INVESTOR UPDATE | FIRST QUARTER FISCAL YEAR 2021 | NASDAQ: CASH S T R O N G C A P I TA L A N D S O U R C E S O F L I Q U I D I T Y R E G U L A T O R Y C A P I T A L A S O F D E C E M B E R 3 1 , 2 0 2 0 23 Minimum Requirement to be Well-Capitalized under Prompt Corrective Action Provisions Meta Financial Group, Inc. MetaBank, N.A. CAPITAL RATIO TRENDS At December 31, 2020¹ Meta Financial Group, Inc. MetaBank, N.A. Tier 1 Leverage 7.40% 8.62% Tier 1 Leverage – EIP-adjusted² N/A 9.61% Common Equity Tier 1 10.76% 12.91% Tier 1 Capital 11.11% 12.93% Total Capital 14.18% 14.19% • MetaBank EIP-adjusted Tier 1 Leverage of 9.61% better reflects the balance sheet reducing the impact from the temporary EIP card- related balances. • MetaBank remains well-capitalized. Granted temporary exemption from meeting certain capital leverage ratios by the OCC, related to participation in distributing EIP cards. • Repurchased 1,864,474 shares at a weighted average price of $29.46 during the 2021 first fiscal quarter. As of January 20, 2021, approximately 2 million shares remain under current authorization. Primary & Secondary Liquidity Sources ($ in millions) Cash and Cash Equivalents $1,585 Unpledged Investment Securities $90 FHLB Borrowing Capacity $970 Funds Available through Fed Discount Window $340 PPP Loan Collateral $190 Unsecured Lines of Credit $1,265 - $1,535 1 Regulatory capital reflects the Company's election of the five-year CECL transition for regulatory capital purposes. ² Non-GAAP measure, see appendix for reconciliations. 8.28% 7.28% 5.91% 6.58% 7.40% 9.70% 8.52% 6.89% 7.56% 8.62% 1Q20 2Q20 3Q20 4Q20 1Q21 Tier 1 Leverage Ratio 12.74% 13.61% 14.99% 15.30% 14.18% 12.90% 13.69% 15.12% 15.26% 14.19% 1Q20 2Q20 3Q20 4Q20 1Q21 Total Capital Ratio 10% 5%
QUARTERLY INVESTOR UPDATE | FIRST QUARTER FISCAL YEAR 2021 | NASDAQ: CASH A PPENDIX 24
QUARTERLY INVESTOR UPDATE | FIRST QUARTER FISCAL YEAR 2021 | NASDAQ: CASH N O N - G A A P R E C O N C I L I AT I O N S E I P - R E L A T E D A D J U S T M E N T S 25 THREE MONTHS ENDED NET INTEREST MARGIN DECEMBER 31, 2020 SEPTEMBER 30, 2020 JUNE 30, 2020 Average interest-earning assets 5,636,445 6,806,366 7,608,616 Net interest income 65,999 64,513 62,137 Net interest margin 4.65% 3.77% 3.28% ADJUSTMENT FOR EIP-RELATED ASSETS Interest-earning assets 5,636,445 6,806,366 7,608,618 LESS: Cash adjustment 624,857 1,573,727 2,323,425 EIP-ADJUSTED AVERAGE INTEREST-EARNING ASSETS 5,011,588 5,232,639 5,285,193 Net interest income 65,999 64,513 62,137 LESS: Cash interest adjustment 157 396 578 EIP-ADJUSTED NET INTEREST INCOME 65,842 64,177 61,559 EIP-ADJUSTED NET INTEREST MARGIN 5.21% 4.87% 4.68% RETURN ON AVERAGE ASSETS (“ROAA”) DECEMBER 31, 2020 SEPTEMBER 30, 2020 JUNE 30, 2020 Net income 28,037 13,158 18,190 Average assets 6,481,823 7,672,773 8,439,206 ROAA 1.73% 0.69% 0.86% LESS: Cash adjustment 624,857 1,573,727 2,323,425 EIP-ADJUSTED AVERAGE ASSETS 5,856,966 6,099,046 6,115,781 EIP-ADJUSTED ROAA 1.91% 0.86% 1.19%
QUARTERLY INVESTOR UPDATE | FIRST QUARTER FISCAL YEAR 2021 | NASDAQ: CASH N O N - G A A P R E C O N C I L I AT I O N S E I P - R E L A T E D C A P I T A L A D J U S T M E N T S 26 METABANK TIER 1 LEVERAGE DECEMBER 31, 2020 SEPTEMBER 30, 2020 JUNE 30, 2020 Total stockholder's equity $ 912,508 $ 933,430 $ 923,520 LESS: Goodwill, net of associated deferred tax liabilities 301,999 302,396 302,815 LESS: Certain other intangible assets 39,403 40,946 42,865 LESS: Net deferred tax assets from operating loss and tax credit carry-forwards 24,105 18,361 10,360 LESS: Net unrealized gains (losses) on available-for-sale securities 19,894 17,762 8,382 LESS: Non-controlling interest 1,536 3,603 3,787 Common Equity Tier 1 Capital ("CET1") 525,571 550,344 555,311 Tier 1 minority interest not included in common equity tier 1 capital 750 1,894 1,894 Total Tier 1 capital 526,321 552,238 557,205 Total Assets (Quarter Average) $ 6,487,231 $ 7,679,897 $ 8,446,393 ADD: Available for sale securities amortized cost (24,694) (22,844) (8,420) ADD: Deferred tax 6,201 5,724 2,104 LESS: Deductions from CET1 365,507 361,721 356,040 ADJUSTED TOTAL ASSETS $ 6,103,231 $ 7,301,056 $ 8,084,037 METABANK REGULATORY TIER 1 LEVERAGE 8.62 % 7.56 % 6.89% ADJUSTMENT FOR EIP-RELATED ASSETS Adjusted total assets $ 6,103,231 $ 7,301,056 $ 8,084,037 LESS: EIP prepaid card-related assets (cash) 624,857 1,573,727 2,323,425 EIP-ADJUSTED TOTAL ASSETS $ 5,478,375 $ 5,727,329 $ 5,760,612 METABANK EIP-ADJUSTED TIER 1 LEVERAGE 9.61 % 9.64 % 9.67%
QUARTERLY INVESTOR UPDATE | FIRST QUARTER FISCAL YEAR 2021 | NASDAQ: CASH F I N A N C I A L M E A S U R E R E C O N C I L I AT I O N S 27 Efficiency Ratio For the last twelve months ended ($ in thousands) Dec 31, 2020 Sep 30, 2020 Jun 30, 2020 Mar 31, 2020 Dec 31, 2019 Noninterest Expense - GAAP 315,828 319,051 314,911 316,138 334,663 Net Interest Income 260,386 259,038 260,142 264,973 268,586 Noninterest Income 247,766 239,794 235,024 237,766 222,278 Total Revenue: GAAP 508,152 498,832 495,166 502,739 490,864 Efficiency Ratio, LTM 62.15 % 63.96 % 63.60 % 62.88 % 68.18 % Non-GAAP Reconciliation Adjusted Annualized NCOs and Adjusted Average Loans and Leases For the quarter ended ($ in thousands) Dec 31, 2020 Sep 30, 2020 Jun 30, 2020 Mar 31, 2020 Dec 31, 2019 Net Charge-offs 2,836 18,538 14,700 2,117 2,380 Less: Tax services net charge-offs (956) 13,034 9,782 (74) (739) Adjusted Net Charge-offs $ 3,792 $ 5,504 $ 4,918 $ 2,191 $ 3,119 Quarterly Average Loans and Leases 3,495,696 3,536,997 3,622,928 4,195,772 3,735,196 Less: Quarterly Average Tax Services Loans 25,104 16,650 39,845 516,491 24,429 Adjusted Quarterly Loans and Leases $ 3,470,592 $ 3,520,347 $ 3,583,083 $ 3,679,281 $ 3,710,767 Annualized NCOs/Average Loans and Leases 0.32 % 2.10 % 1.62 % 0.20 % 0.25 % Adjusted Annualized NCOs/Adjusted Average Loans and Leases1 0.44 % 0.63 % 0.55 % 0.24 % 0.34 % 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.
QUARTERLY INVESTOR UPDATE | FIRST QUARTER FISCAL YEAR 2021 | NASDAQ: CASH L I M I T E D T O TA L E X P O S U R E T O C O V I D - 1 9 H I G H I M PA C T I N D U S T R I E S 28 ¹ Total includes total gross loans & leases of $3.44 billion and rental equipment, net of $206.7M, as of December 31, 2020, exposures are based on current outstanding balances as of December 31, 2020 ² Consumer staples incudes grocery, pharmacy, gas stations, and convenience stores. HIGH IMPACT INDUSTRY EXPOSURES D E C E M BE R 31 , 2 0 2 0 ($ in millions) COMMUNITY BANK COMMERCIAL FINANCE PPP LOANS TOTAL % OF TOTAL¹ HOSPITALITY $186.7 $56.2 $2.2 $245.1 6.7% RETAIL (excl. consumer staples²) $41.3 $64.6 $1.6 $107.5 2.9% FITNESS AND RECREATIONAL CENTERS $0.6 $18.1 $0.9 $19.6 0.5% MOVIE THEATERS $17.9 $0.8 - $18.7 0.5% RESTAURANTS $0.8 $11.9 $1.5 $14.2 0.4% TOTAL $247.3 $151.6 $6.2 $405.1 11.0% As of December 31, 2020, $194.3 million Paycheck Protection Program (“PPP”) loans administered by the Small Business Administration remained; 3.2% of PPP loans are in high impact industries.
QUARTERLY INVESTOR UPDATE | FIRST QUARTER FISCAL YEAR 2021 | NASDAQ: CASH WA R E H O U S E F I N A N C E 29 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. • Have never had a charge off or loss. • Agreements trigger waterfall protection for the “First Out” participant: - The waterfall could be “triggered” due to items such as: collateral underperformance, collateral days past due, covenant breaches, concentration limit breaches, missed payments, regulatory events, material adverse effects, etc. All Loan/Collateral Cash Flows Admin Fees (0-5%) Junior Tranche $35MM (35%) Equity Tranche $10MM (10%) First-Out Tranche (Meta Position) $55MM (55%) $100M Facility EXAMPLEEXAMPLE 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 loans/collateral to pay down its $55M full principal and interest position. Total Exposure $318.9 million % of Total¹ 8.7% ¹ Total includes total gross loans & leases of $3.44 billion and rental equipment, net of $206.7M, as of December 31, 2020
QUARTERLY INVESTOR UPDATE | FIRST QUARTER FISCAL YEAR 2021 | NASDAQ: CASH C O N S U M E R C R E D I T P R O G R A M S 30 Consumer Payments Principal, Interest, Fees Principal Losses to Meta Collection Account Principal Repayment to Meta Servicing Meta’s Agreed upon interest return Remaining Excess Spread to Meta-owned escrow reserve 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 payments distribution potential. • Agreements typically provide for “excess spread” build-up and protection through a priority of payment within a waterfall • Consumer interest rate and fees flow through a waterfall: - Covers principal losses and Meta’s required rate of interest. Meta’s 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 - 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 - Escrow account balance has increased since program inception • As of December 31, 2020, MetaBank had two consumer credit programs with strategic partners. Reserve release to partner is conditional (subordinate) based on product performance Total Exposure $88.6 million % of Total¹ 2.4% ¹ Total includes total gross loans & leases of $3.44 billion and rental equipment, net of $206.7M, as of December 31, 2020