CASH - Meta Financial Group Inc.® Announces Results for 2022 Fiscal First Quarter

- Fiscal 2022 First Quarter Net Income of $61.3 million, or $2.00 Per Diluted Share -

- Rebranding Process Underway Following Agreement to Sell Meta Names and Trademarks -

- Completes Sale of Remaining Community Bank Loans -

Meta Financial Group, Inc. ^® (Nasdaq: CASH) (“Meta” or the “Company”) reported net income of $61.3 million, or $2.00 per share, for the three months ended December 31, 2021, compared to net income of $28.0 million, or $0.84 per share, for the three months ended December 31, 2020. During the fiscal first quarter of 2022, the Company recognized a gain on sale of Meta names and trademarks of $50.0 million. Excluding the impact of the gain on sale of these assets, the Company's adjusted net income for the quarter totaled $23.9 million, or $0.78 per share. See non-GAAP reconciliation table below.

"We made continued progress towards our three strategic initiatives, as reflected in our strong fiscal first quarter results,” said CEO Brett Pharr. “We generated growth in earnings per share while positioning the Company for future growth through two significant strategic transactions during the first quarter.”

“Following the initiation of a comprehensive brand strategy review earlier in calendar 2021, we announced our agreement to sell the Meta name and trademarks to Beige Key LLC. This transaction provides significant funds, allowing us to advance a new corporate name and brand that represent our significant evolution and better enable us to fulfill our vision of 'Financial Inclusion for All®,'” Pharr noted.

Executive Vice President and CFO Glen Herrick added, “We are also pleased to have sold our remaining legacy community bank loans, completing the wind-down of that portfolio and marking another critical step in optimizing our interest-earning asset mix. Coupled with our strong financial results, our momentum continues to build, giving us confidence in our positive outlook and growth trajectory.”

Business Development Highlights for the 2022 Fiscal First Quarter

• Entered into an agreement with Beige Key LLC to sell the Meta names and trademarks for $60 million, of which $50 million was recognized as noninterest income in the first fiscal quarter. The Company plans to use a portion of the proceeds to implement its new corporate name and brand, which is expected to be completed by the end of 2022, and estimates its rebranding expenses will range between $15 million to $20 million. The remainder of the proceeds will be used for general corporate purposes including tax-efficient capital allocation.

• Sold all remaining $192.5 million of community banking loans, reducing this portfolio to zero and generating a favorable pre-tax impact of approximately $3.9 million after netting the recovery of provision expense from the portfolio's $12.3 million allowance and the loss on sale of loans of $8.4 million.

• Extended the agreement with Emerald Financial Services, LLC, a wholly-owned, indirect subsidiary of H&R Block, through June 30, 2025. The agreement adds valuable new financial product offerings and capabilities for customers, including Spruce Accounts, a mobile banking platform that features a spending account with an attached debit card. This innovative product, designed to help a consumer better manage their financial resources and meet spending goals, is powered by MetaBank.

• Originated $21.2 million in aggregate principal of renewable energy loan financing for the first quarter of fiscal 2022, resulting in $5.7 million in total net investment tax credits.

• Repurchased 1,711,501 shares, at an average price of $58.97, in the first fiscal quarter. The company purchased an additional 130,000 shares through January 20, 2022 at an average share price of $61.26 and has 5,474,375 shares available for repurchase under the common stock share repurchase program announced during the fourth quarter of fiscal year 2021.

Financial Highlights for the 2022 Fiscal First Quarter

• Total revenue for the first quarter was $158.2 million, an increase of $46.7 million, or 42%, compared to the same quarter in fiscal 2021, primarily driven by the gain on sale of the Meta names and trademarks.

• Net interest income for the first quarter was $71.6 million, an increase of $5.6 million compared to $66.0 million in the first quarter last year.

• Net interest margin ("NIM") was essentially unchanged, declining to 4.59% for the first quarter from 4.65% during the same period of last year. The increase in higher-yielding loans and leases was offset by an increase in lower-yielding investment securities balances and the continued low interest rate environment.

• Total gross loans and leases at December 31, 2021 increased $243.0 million, to $3.68 billion, or 7%, compared to December 31, 2020 and increased $74.8 million, or 2%, when compared to September 30, 2021. The increase was driven by growth across our loan portfolios, partially offset by the sale of all remaining community banking loans during the quarter.

Net Interest Income

Net interest income for the first quarter of fiscal 2022 was $71.6 million, an increase of 9% from the same quarter in fiscal 2021. The increase was mainly attributable to an improved earning asset and liability mix, along with increased loan balances.

The first quarter average outstanding balance of loans and leases increased $211.3 million compared to the same quarter of the prior year, primarily due to increases in our core loan and lease portfolios, partially offset by the sale of the remaining community bank portfolio. The Company’s average interest-earning assets for the first quarter increased by $547.2 million to $6.18 billion compared with the same quarter in fiscal 2021, primarily due to growth in total investments and total loans and leases.

Fiscal 2022 first quarter NIM decreased to 4.59% from 4.65% in the first quarter of last year. The overall reported tax-equivalent yield (“TEY”) on average earning asset yields decreased 13 basis points to 4.69% compared to the prior year quarter, primarily driven by an increase in lower-yielding investment securities balances of $561.4 million. The TEY on the securities portfolio was 1.58% compared to 1.79% for the comparable period last year.

The Company's cost of funds for all deposits and borrowings averaged 0.08% during the fiscal 2022 first quarter, compared to 0.15% during the prior year quarter, primarily driven by a reduction in wholesale deposit balances along with an increase in noninterest bearing deposits. The Company's overall cost of deposits was 0.01% in the fiscal first quarter of 2022, compared to 0.06% in the same quarter last year.

Noninterest Income

Fiscal 2022 first quarter noninterest income increased to $86.6 million, compared to $45.5 million for the same period of the prior year. The significant increase was driven by the $50 million gain on sale of the Meta names and trademarks and to a lesser extent an increase in payments fee income and rental income.

The Company also recognized a loss on sale of other during the quarter of $3.5 million, a $6.3 million decrease from the prior year period, primarily consisting of a $8.4 million loss attributable to the sale of the remaining community bank loans partially offset by a $3.4 million gain on sale of SBA loans.

Also partially offsetting the increase during the quarter was a decrease in other income, which includes a net unrealized loss of $3.3 million on a prior investment in MoneyLion Inc. This loss partially offsets a net unrealized gain of $4.1 million recognized by the Company during the fourth quarter of fiscal 2021 following the completion of MoneyLion's de-SPAC process and listing on the New York Stock Exchange on September 22, 2021.

Noninterest Expense

Noninterest expense increased 14% to $82.4 million for the fiscal 2022 first quarter, from $72.6 million for the same quarter last year. The increase in expense was primarily driven by an increase in compensation expense, other expense, occupancy and equipment expense, and card processing expense. When comparing the fiscal 2022 first quarter to the fourth quarter of 2021, non-interest expense decreased by $11.2 million.

Income Tax Expense

The Company recorded income tax expense of $14.3 million, representing an effective tax rate of 18.9%, for the fiscal 2022 first quarter, compared to $3.5 million, representing an effective tax rate of 10.8%, for the first quarter last year. The increase in income tax expense was primarily due to increased earnings.

The Company originated $21.2 million in solar leases during the fiscal 2022 first quarter, compared to $38.5 million in last year's first quarter. Investment tax credits related to solar leases are recognized ratably based on income throughout each fiscal year. The timing and impact of future solar tax credits are expected to vary from period to period, and Meta intends to undertake only those tax credit opportunities that meet the Company's underwriting and return criteria.

Investments, Loans and Leases

The Company's investment security balances at December 31, 2021 totaled $1.83 billion, as compared to $1.92 billion at September 30, 2021 and $1.31 billion at December 31, 2020.

Total gross loans and leases totaled $3.68 billion at December 31, 2021, as compared to $3.61 billion at September 30, 2021 and $3.44 billion and as compared to December 31, 2020. The primary drivers for the increase on a linked quarter basis were tax services, commercial finance, consumer credit, and warehouse finance loans, partially offset by the sale of all remaining community bank loans.

Commercial finance loans, which comprised 76% of the Company's gross loan and lease portfolio, totaled $2.80 billion at December 31, 2021, reflecting growth of $72.3 million, or 3%, from September 30, 2021 and $374.6 million, or 15%, from December 31, 2020.

As of December 31, 2021, the Company had 275 loans outstanding with total loan balances of $63.8 million originated as part of the Paycheck Protection Program ("PPP"), compared with 370 loans outstanding with total loan balances of $96.0 million for the quarter ended September 30, 2021. In total, approximately 80% of the PPP loan balances were forgiven through December 31, 2021.

During the first fiscal quarter of 2022, the Company sold all remaining community banking loans. The outstanding balance of community banking loans at September 30, 2021 and December 31, 2020 was $199.1 million and $353.9 million, respectively. The amount of community banking loans sold during the quarter totaled $192.5 million.

Asset Quality

The Company’s allowance for credit losses ("ACL") totaled $67.6 million at December 31, 2021, a decrease compared to $68.3 million at September 30, 2021 and $72.4 million at December 31, 2020. The reduction in the ACL at December 31, 2021, when compared to September 30, 2021, was primarily due to a $12.3 million decrease attributable to the community banking portfolio, as all loans have now been sold. This decrease was partially offset by increases within commercial finance of $8.7 million, tax services of $1.6 million, and consumer finance of $1.2 million.

The $4.8 million year-over-year decrease in the ACL was primarily driven by a $14.2 million decrease attributable to the community banking portfolio, due to pay downs and the aforementioned loan sales, along with a $2.4 million decrease in the consumer finance portfolio. These decreases were partially offset by a $11.5 million increase within the commercial finance portfolio, and to a lesser extent, increases within the tax services and warehouse finance portfolios.

The following table presents the Company's ACL as a percentage of its total loans and leases.

The Company's ACL as a percentage of total loans and leases decreased to 1.84% at December 31, 2021 from 1.89% at September 30, 2021. The decrease in the total loans and leases coverage ratio reflected the release of the community banking portfolio allowance. The coverage ratio for the commercial finance portfolio increased compared to the September 30, 2021 quarter due to specific reserves on two individually evaluated loan relationships. The consumer finance coverage ratio decreased primarily due to an improved overall macroeconomic outlook while the tax services coverage increased due to the seasonal start of tax season, similar to the same period of the prior year. The Company expects to continue to diligently monitor the ACL and adjust as necessary in future periods to maintain an appropriate and supportable level.

Activity in the allowance for credit losses for the periods presented was as follows.

The Company recognized a provision for credit losses of $0.2 million for the quarter ended December 31, 2021, compared to $6.1 million for the comparable period in the prior fiscal year. Net charge-offs were $1.1 million for the quarter ended December 31, 2021, compared to $2.8 million for the quarter ended December 31, 2020. Net charge-offs attributable to the commercial finance portfolio for the quarter were $3.2 million, partially offset by net recoveries from the tax services portfolio of $2.3 million.

The Company's past due loans and leases were as follows for the periods presented.

The Company's nonperforming assets at December 31, 2021 were $44.3 million, representing 0.58% of total assets, compared to $61.8 million, or 0.92% of total assets at September 30, 2021 and $53.2 million, or 0.73% of total assets at December 31, 2020. The changes in the nonperforming assets as a percentage of total assets at December 31, 2021 were driven in large part by a decrease in nonperforming assets in the community bank and tax services portfolios, partially offset by an increase in nonperforming assets in the commercial finance portfolio, when compared to the linked-quarter. When comparing the current period to the same period of the prior year, the decrease in nonperforming assets was due to a decrease in nonperforming assets in the community bank portfolio, partially offset by an increase in nonperforming assets in the commercial finance portfolio.

The Company's nonperforming loans and leases at December 31, 2021, were $43.2 million, representing 1.16% of total gross loans and leases, compared to $55.9 million, or 1.52% of total gross loans and leases at September 30, 2021 and $43.5 million, or 1.17% of total gross loans and leases at December 31, 2020. The decreases are related to the aforementioned decreases in nonperforming assets in the community bank and tax services portfolios, partially offset by an increase in nonperforming assets in the commercial finance portfolio.

The Company has various portfolios of consumer lending and tax services loans that present unique risks that are statistically managed. Due to the unique risks associated with these portfolios, the Company monitors other credit quality indicators in their evaluation of the appropriateness of the allowance for credit losses on these portfolios, and as such, these loans are not included in the asset classification table below. The Company's loans and leases held for investment by asset classification were as follows for the periods presented.

Deposits, Borrowings and Other Liabilities

Total average deposits for the fiscal 2022 first quarter increased by $494.9 million to $5.92 billion compared to the same period in fiscal 2021, primarily due to an increase in noninterest-bearing deposits of $808.2 million. Average wholesale deposits decreased $193.8 million for the fiscal 2022 first quarter when compared to the same period in fiscal 2021.

The average balance of total deposits and interest-bearing liabilities was $6.01 billion for the three-month period ended December 31, 2021, compared to $5.52 billion for the same period in the prior fiscal year, representing an increase of 9%.

Total end-of-period deposits increased 5% to $6.53 billion at December 31, 2021, compared to $6.21 billion at December 31, 2020. The increase in end-of-period deposits was primarily driven by an increase in noninterest-bearing deposits of $688.0 million, partially offset by a decrease in wholesale deposits of $161.2 million. The increase in noninterest-bearing deposits was driven by government stimulus-related dollars loaded on various partner cards.

Of the 16.5 million prepaid cards issued in conjunction with the three EIP stimulus programs, totaling approximately $24.15 billion, $1.38 billion were outstanding as of December 31, 2021, of which only $28.1 million was on Meta’s balance sheet with the remainder being held by other banks.

Regulatory Capital

The Company and MetaBank remained above the federal regulatory minimum capital requirements at December 31, 2021, continued to be classified as well-capitalized, and in good standing with the regulatory agencies. 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.

The following table provides the non-GAAP financial measures used to compute certain of the ratios included in the table above, as well as a reconciliation of such non-GAAP financial measures to the most directly comparable financial measure in accordance with GAAP:

The following table provides a reconciliation of tangible common equity and tangible common equity excluding accumulated other comprehensive income ("AOCI"), each of which is used in calculating tangible book value data, to Total Stockholders' Equity. Each of tangible common equity and tangible common equity excluding AOCI is a non-GAAP financial measure that is commonly used within the banking industry.

Conference Call

The Company will host a conference call and earnings webcast at 4:00 p.m. Central Time (5:00 p.m. Eastern Time) on Wednesday, January 26, 2022. The live webcast of the call can be accessed from Meta’s Investor Relations website at www.metafinancialgroup.com . Telephone participants may access the conference call by dialing (844) 200-6205 approximately 10 minutes prior to start time and reference access code 483958. A webcast replay will also be archived at www.metafinancialgroup.com for one year.

Upcoming Investor Events

• KBW Financial Services Symposium, February 17, 2022 | Boca Raton, FL

• Raymond James Institutional Investors Conference, March 8, 2022 | Orlando, FL

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 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; 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 credit 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 prepaid card and refund advance businesses, the risk of reduced volume of refund advance loans as a result of reduced customer demand for or usage of Meta’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; 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; changes in consumer spending and saving habits; losses from fraudulent or illegal activity; technological risks and developments and cyber threats, attacks, or events; 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, 2021, 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.