GlobeNewswire Inc | Jul 22, 2020 04:10PM EDT

July 22, 2020

- 2020 Fiscal Third Quarter Net Income of $18.2 Million, or $0.53 Per Diluted Share -

SIOUX FALLS, S.D., July 22, 2020 (GLOBE NEWSWIRE) -- Meta Financial Group, Inc. (Nasdaq: CASH) (Meta or the Company) reported net income of $18.2 million, or $0.53 per diluted share, for the three months ended June30, 2020, compared to net income of $29.3 million, or $0.75 per diluted share, for the three months ended June30, 2019.

I am proud of our performance to date during these unique and volatile times, both operationally and financially. While credit metrics remain sound, we have taken additional provision related to the uncertainty of the COVID-19 pandemic allowing us to build our allowance and strengthen our capital position, said President and CEO Brad Hanson. We are keeping the health and safety of our employees at the forefront as we continue serving customers, aligning for growth, and keeping our eyes on the long game, bringing sustainable value to shareholders.

Business Developments

-- On May 15, 2020, MetaBank, National Association (the Bank), a wholly owned subsidiary of the Company entered into a letter of intent ("LOI") with Emerald Financial Services, LLC (EFS), a wholly owned indirect subsidiary of H&R Block, Inc. (H&R Block). Under the LOI and subject to the negotiation and execution of a multi-year program management agreement (PMA), Meta will offer selected financial products to H&R Block clients, and negotiate the transition of certain financial products under an existing program manager agreement between H&R Block and a third party. -- On June 23, 2020, Brett Pharr was promoted to Co-President and Chief Operating Officer of MetaBank to better align business lines with Metas strategic initiatives. Brad Hanson remains Co-President and Chief Executive Officer of MetaBank and President and Chief Executive Officer of the Company. -- During the fiscal 2020 third quarter, the Company extended its agreement with Blackhawk Network, Inc. ("BlackHawk") through 2040. Blackhawk is a leading prepaid and payments company, which supports the program management and distribution of gift cards, prepaid telecom products and financial service products in a number of different retail, digital and incentive channels. -- The Company supported various COVID-19 relief efforts to include the Economic Impact Payment ("EIP") program and the Paycheck Protection Program ("PPP"), which are further described below.

Financial Highlights for the 2020 Fiscal Third Quarter Ended June30, 2020

-- Total gross loans and leases at June30, 2020 decreased $129.3 million, or 4%, to $3.50 billion, compared to June30, 2019 and decreased $114.1 million, or 3% when compared to March 31, 2020. -- Average deposits from the payments divisions for the fiscal 2020 third quarter increased nearly 131% to $6.32 billion when compared to the same quarter in fiscal 2019. A significant portion of the year-over-year increase reflected the Company's participation in the EIP program, as described further below. Excluding the balances on the EIP cards, average payments deposits for the fiscal 2020 third quarter were approximately $3.99 billion, representing an increase of 46% compared to the same quarter in fiscal 2019. -- Total revenue for the fiscal 2020 third quarter was $103.2 million, compared to $110.8 million for the same quarter in fiscal 2019. -- Net interest income for the fiscal 2020 third quarter was $62.1 million, compared to $67.0 million in the comparable quarter in fiscal 2019. -- Net interest margin ("NIM") decreased to 3.28% for the fiscal 2020 third quarter from 5.07% over the same period of the prior fiscal year, while the tax-equivalent net interest margin ("NIM, TE") decreased to 3.31% from 5.15% for that same period in fiscal 2019. The decrease in NIM during the fiscal 2020 third quarter was primarily driven by excess cash associated with the Company's participation in the Economic Impact Payment program, as described further below.

COVID-19 Business Update

The Company continues to focus on the well-being of its employees, partners and customers. Preventative health measures remain in place to protect employees and customers including mandating remote work options and social distancing measures where possible, restricting non-essential business travel and enhancing preventative cleaning services at all office locations. The Company's COVID-19 Crisis Command Center consisting of leadership and business continuity planning resources throughout the organization continues to effectively monitor possible interruptions related to the pandemic and to ensure business continuity.

The Company is participating in the PPP which is being administered by the Small Business Administration ("SBA"). As of June 30, 2020, the Company had 686 loans outstanding with a total of $215.5 million in loan balances that were originated as part of the program.

From a credit perspective, the Company continues to monitor each of its lending portfolios through these unprecedented times. Significant focus has been placed on the Company's hospitality loans and its small ticket equipment finance relationships. The credit management team has increased the monitoring of these relationships and has been in regular contact with these borrowers.

The Company's community bank hospitality loan balances increased to $169.0 million as of June 30, 2020 from $160.1 million as of March 31, 2020 and the average loan-to-value ratio on those loans improved to 60% at June 30, 2020 from 61% at March 31, 2020. 67% of the loan balances for these hotel relationships received PPP loans and 51% received some form of payment deferral modifications.

As of June 30, 2020, the Company had $245.9 million in small ticket equipment finance balances, of which $217.3 million were categorized within term lending and $28.6 million were categorized within lease financing. 27% of the balances on these small ticket equipment finance relationships received some form of payment deferral or other modifications.

The Company has granted deferral payments on a total of $352.1 million of loan and lease balances through June 30, 2020 as a result of interagency guidance issued on March 22, 2020 encouraging companies to work with customers impacted by COVID-19. As of June 30, 2020, loans and lease totaling $292.2 million were still in their deferment period. In addition, the Company has made other COVID-19 related modifications on a total of $52.9 million, of which $34.6 million are still active as of June 30, 2020. The majority of the other modifications were related to adjusting the type or amount of the customer's payments.

The Company increased its allowance for loan and lease losses during the fiscal third quarter primarily as a result of the ongoing economic uncertainty related to COVID-19 pandemic. The Company will continue to diligently monitor the allowance for loan and lease losses and adjust as necessary in future periods to maintain an appropriate and supportable level.

The Company's capital position remained strong as of June 30, 2020, even while absorbing the temporary impact from the EIP program, as described further below. As of June 30, 2020, the Bank's capital leverage ratio based on average assets was 6.89%. In addition, the Company has options available that can be used to effectively manage capital levels through these turbulent times, including a very strong and flexible balance sheet. The Company's capital leverage ratio was impacted by approximately 278 basis points due to the increase in total asset balances as a result of the EIP program.

Economic Impact Payment Program ("EIP") Update

On April 29, 2020, the Bank entered into an amendment of its existing agreement with the U.S. Department of the Treasurys Bureau of the Fiscal Service (Fiscal Service) to provide debit card services to support the distribution of a segment of the Economic Impact Payments payable by the Internal Revenue Service under the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act").

Under the EIP program, 3.6 million cards were delivered with total loads of $6.42 billion. As a result of the program, the Company saw a quick influx of deposits to its balance sheet in mid-May 2020 with limited visibility into the duration of those deposits. While this program's impact to earnings was negligible, it did have a significant impact on cash and deposit balances, leading to a net drag on the net interest margin along with pressuring the Company's leverage capital ratios.

The total balances remaining on the EIP cards as of June 30, 2020 were $2.68 billion and $2.08 billion as of July 19, 2020. The funds on these cards increased the Company's quarterly average noninterest deposit balances by $2.32 billion, leading to an overall improvement in cost of deposits. This short term influx of deposits also led to excess cash balances held at the Federal Reserve during the current period, which yielded approximately 10 basis points in interest income, and increased the quarterly average of interest-earning assets compared to previous periods. This increase of lower yielding cash balances resulted in a drag to the overall yield on total interest-earning assets during the current period. The net impact to NIM was approximately 140 basis points.

Net Interest IncomeNet interest income for the fiscal 2020 third quarter was $62.1 million, a decrease of 7%, from the same quarter in fiscal 2019. The decrease was primarily driven by lower overall balances and yields realized on the loan and lease portfolios along with a decrease in investment securities balances, partially offset by a reduction in total interest expense.

During the third quarter of fiscal year 2020, loan and lease interest income decreased $9.8 million and investment securities interest income decreased $4.4 million, when compared to the same quarter in fiscal 2019, while interest expense decreased $9.4 million over that same period. The quarterly average outstanding balance of loans and leases as a percentage of interest-earning assets for the quarter ended June30, 2020 decreased to 48%, from 68% for the quarter ended June30, 2019, while the quarterly average balance of total investments as a percentage of interest-earning assets decreased to 17% from 31% over that same period. These decreases were primarily due to the increase in interest-earning cash balances related to the EIP program. The Companys average interest-earning assets for the fiscal 2020 third quarter increased by $2.31 billion, to $7.61 billion from the comparable quarter in fiscal 2019, primarily due to the effects of the EIP program.

NIM decreased to 3.28% for the fiscal 2020 third quarter from 5.07% for the comparable quarter in fiscal 2019, primarily due to the effects of the EIP program. The net effect of purchase accounting accretion contributed two basis points to NIM for the fiscal 2020 third quarter as compared to three basis points and 25 basis points for the quarters ended March 31, 2020 and June 30, 2019, respectively.

The overall reported tax-equivalent yield (TEY) on average earning asset yields decreased by 267 basis points to 3.59% for the fiscal 2020 third quarter compared to the fiscal 2019 third quarter, driven primarily by excess low-yielding cash held at the Federal Reserve, along with a lower interest rate environment. The fiscal 2020 third quarter TEY on the securities portfolio was 2.22% compared to 3.09% for the same period of the prior fiscal year.

The Company's cost of funds for all deposits and borrowings averaged 0.28% during the fiscal 2020 third quarter, compared to 1.14% for the fiscal 2019 third quarter. This decrease was primarily due to a decrease in overnight borrowings rates as well as an increase in the average balance of the Company's noninterest-bearing deposits, mainly due to the EIP program noted above. The Company's overall cost of deposits was 0.17% in the fiscal third quarter of 2020, compared to 0.90% in the same quarter of fiscal 2019.

Noninterest IncomeFiscal 2020 third quarter noninterest income was $41.0 million, compared to $43.8 million for the same period of the prior year. This year-over-year decrease was primarily due to lower total tax product fee income and a reduction in gains on loan sales, partially offset by an increase in rental income.

Noninterest ExpenseNoninterest expense decreased 2% to $71.2 million for the fiscal 2020 third quarter, from $72.5 million for the same quarter of fiscal 2019, primarily driven by lower compensation and benefits, intangible amortization, total tax product expense, and occupancy and equipment expenses, partially offset by higher card processing expenses and operating lease equipment depreciation.

Income Tax ExpenseThe Company recorded an income tax benefit of $2.4 million, representing an effective tax rate of (14.4%), for the fiscal 2020 third quarter, compared to an income tax benefit of $1.2 million, representing an effective tax rate of (4.0)%, for the fiscal 2019 third quarter. The recorded income tax benefit during the current quarter was primarily due to ratably recognized investment tax credits and lower forecast earnings due to COVID-19.

The Company originated $1.3 million in solar leases during the fiscal 2020 third quarter, compared to $49.1 million during the fiscal 2019 third 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

June 30, 2020 March 31, December 31, September 30, June 30, 2019 2020 2019 2019Total $ 1,268,416 $ 1,310,476 $ 1,337,840 $ 1,407,257 $ 1,502,640 investments Loans held for saleConsumercredit 391 ? ? 122,299 45,582 productsSBA/USDA 31,438 13,610 13,883 26,478 17,257 Community 48,076 ? 250,383 ? ? Bank^(1)Total loansheld for 79,905 13,610 264,266 148,777 62,839 sale National LendingTerm lending 738,454 725,581 695,347 641,742 562,557 ^(2)Asset based 181,130 250,211 250,633 250,465 229,573 lending^(2)Factoring 206,361 285,495 285,776 296,507 320,344 Leasefinancing^ 264,988 238,788 223,715 177,915 165,136 (2)Insurancepremium 359,147 332,800 349,299 361,105 358,772 financeSBA/USDA 308,611 92,000 90,269 88,831 99,791 Othercommercial 100,214 101,472 99,617 99,665 99,677 financeCommercial 2,158,905 2,026,347 1,994,656 1,916,230 1,835,850 FinanceConsumercredit 102,808 113,544 115,843 106,794 155,539 productsOtherconsumer 138,777 144,895 154,772 161,404 164,727 financeConsumer 241,585 258,439 270,615 268,198 320,266 FinanceTax Services 19,168 95,936 101,739 2,240 24,410 Warehouse 277,614 333,829 272,522 262,924 250,003 FinanceTotalNationalLending 2,697,272 2,714,551 2,639,532 2,449,592 2,430,529 loans andleasesCommunity BankingCommercialreal estate 608,303 654,429 682,399 883,932 877,412 andoperatingConsumerone-to-fourfamily real 166,479 205,046 220,588 259,425 256,853 estate andotherAgriculturalreal estate 24,655 36,759 40,778 58,464 61,169 andoperatingTotalCommunity 799,437 896,234 943,765 1,201,821 1,195,434 BankingloansTotal grossloans and 3,496,709 3,610,785 3,583,297 3,651,413 3,625,963 leasesAllowancefor loan and (65,747 ) (65,355 ) (30,176 ) (29,149 ) (43,505 )lease lossesNet deferredloan andlease 5,937 8,139 7,177 7,434 5,068 originationfeesTotal loansand leases,net of $ 3,436,899 $ 3,553,569 $ 3,560,298 $ 3,629,698 $ 3,587,526 allowance^(3)

(1) The June 30, 2020 balance included approximately $28.7 million of commercial real estate and operating loans, $11.3 million of consumer one-to-four family real estate and other loans, and $8.1 million of agricultural real estate and operating loans. The December 31, 2019 balance included approximately $197.5 million of commercial real estate and operating loans, $40.4 million of consumer one-to-four family real estate and other loans, and $12.7 million of agricultural real estate and operating loans.

(2) The Company updated the presentation of its loan and lease table beginning in the fiscal 2020 first quarter. The new presentation includes a new category called term lending. Certain balances previously included in the asset based lending and lease financing categories were reclassified into the new term lending category during the fiscal 2020 first quarter. Prior period balances have been conformed to the new presentation.

(3) As of June 30, 2020, the remaining balance of acquired loans and leases from the acquisition of Crestmark Bancorp, Inc. ("Crestmark") and its bank subsidiary, Crestmark Bank (the "Crestmark Acquisition") was $188.3 million and the remaining balances of the credit and interest rate mark discounts related to the acquired loans and leases held for investment were $3.4 million and $2.9 million, respectively. On August 1, 2018, the Company acquired loans and leases from the Crestmark Acquisition totaling $1.06 billion and recorded related credit and interest rate mark discounts of $12.3 million and $6.0 million, respectively.

The Company's investment security balances continued to decline at June30, 2020 to a total of $1.27 billion, as compared to $1.50 billion at June30, 2019.

Total gross loans and leases decreased $129.3 million, or 4%, to $3.50 billion at June30, 2020, from $3.63 billion at June30, 2019, with most of the decline attributable to the sale of community bank loan balances during the second quarter of fiscal 2020 along with a decrease in the consumer finance portfolio, partially offset by growth in the commercial finance portfolio.

At June30, 2020, commercial finance loans, which comprised 62% of the Company's gross loan and lease portfolio, totaled $2.16 billion, reflecting growth of $132.6 million, or 7%, from March 31, 2020. SBA/USDA loans at June 30, 2020 increased by $216.6 million compared to March 31, 2020, with $215.5 million of the sequential increase related to PPP loans. Warehouse finance loans totaled $277.6 million at June30, 2020, a 17% decrease from March 31, 2020.

Community bank loans totaled $799.4 million as of June30, 2020, as compared to $896.2 million at March 31, 2020 and $1.20 billion at June 30, 2019. As of June 30, 2020, the Company had $48.1 million of community bank loans classified as held for sale and expects to sell those loans during the fourth quarter of fiscal 2020.

Asset QualityThe Companys allowance for loan and lease losses was $65.7 million at June30, 2020, compared to $43.5 million at June30, 2019, driven primarily by increases in the allowance of $17.1 million in commercial finance and $12.0 million in the community banking portfolio, partially offset by decreases in the tax services and consumer lending portfolios of $4.0 million and $2.9 million, respectively.

The following table presents the Company's allowance for loan and lease losses as a percentage of its total loans and leases.

As of the Period Ended(Unaudited) June 30, 2020 March 31, 2020 June 30, 2019 Commercial finance 1.36 % 1.28 % 0.67 %Consumer finance 1.75 % 1.74 % 2.22 %Tax services 59.67 % 22.22 % 63.19 %Warehouse finance 0.10 % 0.10 % 0.10 %National Lending 1.68 % 1.92 % 1.44 %Community Bank 2.55 % 1.49 % 0.70 %Total loans and leases 1.88 % 1.81 % 1.20 %

The Company continued to assess each of its loan and lease portfolios during the fiscal third quarter and increased its allowance for loan and lease losses as a percentage of total loans and leases in the community bank and commercial finance portfolios primarily as a result of the on-going COVID-19 pandemic. Tax services coverage rates were driven by typical seasonal activity and have not been materially impacted by COVID-19 as the tax-lending season is now complete. Warehouse finance remained largely unchanged due to the structure of the credit protections in place. The Company expects to continue to diligently monitor the allowance for loan and lease losses and adjust as necessary in future periods to maintain an appropriate and supportable level. When adding the $3.4 million balance of the credit mark to the allowance for loan and lease losses, the commercial finance coverage ratio increases to 1.52% and the total loans and leases coverage ratio increases to 1.98%, as of June 30, 2020. Within commercial finance, the coverage ratio on Crestmark division loans and leases was 1.52% at June 30, 2020, as compared to 1.41% at March 31, 2020 and 0.77% at June 30, 2019, and the coverage ratio on the insurance premium finance portfolio over those same periods were 0.66%, 0.64%, and 0.28%, respectively.

Activity in the allowance for loan and lease losses for the periods presented were as follows.

(Unaudited) Three Months Ended Nine Months Ended June 30, March 31, June 30, June 30, June 30, 2020 2020 2019 2020 2019(Dollars in thousands)Beginning $ 65,355 $ 30,176 $ 48,672 $ 29,149 $ 13,040 balanceProvision - tax (100 ) 19,596 914 20,407 24,883 services loansProvision - allother loans and 15,193 17,700 8,198 35,390 26,646 leasesCharge-offs -tax services (9,797 ) ? (9,627 ) (9,797 ) (9,670 )loansCharge-offs -all other loans (5,808 ) (3,187 ) (5,124 ) (12,912 ) (14,407 )and leasesRecoveries - tax 15 74 36 827 212 services loansRecoveries - allother loans and 889 996 436 2,684 2,801 leasesEnding balance $ 65,747 $ 65,355 $ 43,505 $ 65,747 $ 43,505

Provision for loan and lease losses was $15.1 million for the quarter ended June30, 2020, compared to $9.1 million for the comparable period in the prior fiscal year. The increase in provision was primarily within the remaining community banking and commercial finance portfolios, partially offset by decreases in the consumer finance and tax services portfolios. Provision increases in the community banking and commercial finance portfolios was primarily attributable to the increased stress that the hospitality loans and its small ticket equipment finance relationships have experienced stemming from the ongoing economic uncertainty related to the COVID-19 pandemic. Loans and leases that received short-term payment deferrals were also analyzed and additional provision was applied as appropriate. Management believes that given the structure of the credit protections put in place for the consumer and warehouse finance lending lines, the coverage ratio for those loan portfolios was adequate as of June 30, 2020. Net charge-offs were $14.7 million for the quarter ended June30, 2020 compared to $14.3 million for the quarter ended June30, 2019. Total net charge-offs for the quarter ended June 30, 2020 consisted primarily of seasonal net charge-offs of $9.8 million in the tax services loan portfolio. The overall increase in total net charge-offs from the comparable quarter of the prior fiscal year was primarily within the commercial finance portfolio, offset partially by a decrease in the consumer finance portfolio.

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

As of June Accruing and Nonaccruing Loans and Leases Nonperforming Loans and Leases30, 2020(Dollars > Total Loans > 89 Daysin 30-59 Days 60-89 Days 89 Days Total Past Current and Leases Past Due Non-accrual TotalThousands) Past Due Past Due Past Due Due Receivable and balance Accruing Commercial $ 13,865 $ 16,005 $ 27,150 $ 57,020 $ 2,101,885 $ 2,158,905 $ 8,635 $ 22,285 $ 30,920 financeConsumer 650 623 909 2,182 239,403 241,585 909 ? 909 financeTax ? 19,168 ? 19,168 ? 19,168 ? ? ? servicesWarehouse ? ? ? ? 277,614 277,614 ? ? ? financeTotalNational 14,515 35,796 28,059 78,370 2,618,902 2,697,272 9,544 22,285 31,829 LendingTotalCommunity 4,910 625 6,885 12,420 787,017 799,437 4,995 2,470 7,465 BankingTotalloans andleases $ 19,425 $ 36,421 $ 34,944 $ 90,790 $ 3,405,919 $ 3,496,709 $ 14,539 $ 24,755 $ 39,294 held forinvestment

As ofMarch 31, Accruing and Nonaccruing Loans and Leases Nonperforming Loans and Leases2020(Dollars Total Loans > 89 Daysin 30-59 Days 60-89 Days > 89 Days Total Past Current and Leases Past Due Non-accrual TotalThousands) Past Due Past Due Past Due Due Receivable and balance Accruing Commercial $ 35,810 $ 7,487 $ 18,721 $ 62,018 $ 1,964,329 $ 2,026,347 $ 9,372 $ 16,024 $ 25,396 financeConsumer 1,781 1,078 1,345 4,204 254,235 258,439 1,345 ? 1,345 financeTax 668 ? ? 668 95,268 95,936 ? ? ? servicesWarehouse ? ? ? ? 333,829 333,829 ? ? ? financeTotalNational 38,259 8,565 20,066 66,890 2,647,661 2,714,551 10,717 16,024 26,741 LendingTotalCommunity 1,012 2,735 4,723 8,470 887,764 896,234 2,905 1,818 4,723 BankingTotalloans andleases $ 39,271 $ 11,300 $ 24,789 $ 75,360 $ 3,535,425 $ 3,610,785 $ 13,622 $ 17,842 $ 31,464 held forinvestment

The Company's nonperforming assets at June30, 2020, were $56.1 million, representing 0.64% of total assets, compared to $39.4 million, or 0.67% of total assets at March 31, 2020 and $51.0 million, or 0.84% of total assets at June30, 2019. The increase in nonperforming assets on a linked quarter basis was primarily driven by an increase in commercial finance and community banking nonperforming loans and leases, as well as an increase in nonperforming operating leases. The year-over-year increase in nonperforming assets was primarily driven by an increase in commercial finance nonperforming loans and leases and an increase in nonperforming operating leases, mostly offset by a reduction in foreclosed and repossessed assets. The decrease in nonperforming assets as a percentage of total assets was primarily due to higher period-end assets at June 30, 2020 related to excess cash held at the Federal Reserve stemming from the additional EIP deposit balances.

The Company's nonperforming loans and leases at June30, 2020, were $39.3 million, representing 1.10% of total gross loans and leases, compared to $31.5 million, or 0.87% of total gross loans and leases at March 31, 2020 and $20.8 million, or 0.57% of total gross loans and leases at June30, 2019.

Deposits, Borrowings and Other LiabilitiesTotal average deposits for the fiscal 2020 third quarter increased by $2.61 billion to $7.22 billion compared to the same period in fiscal 2019, primarily due to the effects of the EIP program. Average noninterest-bearing deposits increased $3.35 billion, or 123%, for the fiscal 2020 third quarter when compared to the same period in fiscal 2019, while average wholesale deposits decreased $704.2 million, or 46%. Average deposits from the payments divisions increased 131% to $6.32 billion for the fiscal 2020 third quarter when compared to the same period in fiscal 2019. Excluding the balances on the EIP cards, average payments deposits for the fiscal 2020 third quarter were $3.99 billion, representing an increase of 46% compared to the same period of the prior year, which was largely driven by various stimulus payments loaded on partner cards along with lower levels of consumer spending.

The average balance of total deposits and interest-bearing liabilities was $7.49 billion for the three-month period ended June30, 2020, compared to $5.14 billion for the same period in the prior fiscal year, representing an increase of 46%.

Total end-of-period deposits increased 59% to $7.59 billion at June30, 2020, compared to $4.78 billion at June30, 2019. The increase in end-of-period deposits was primarily driven by an increase in noninterest bearing deposits of $4.18 billion, of which $2.68 billion was attributable to the balances on the EIP cards. The increase in total end-of-period deposits was partially offset by a decrease of $884.2 million in wholesale deposits, as well as the sale of $290.5 million of community bank deposits during the second quarter of fiscal 2020.

Regulatory CapitalThe Company and MetaBank, remained above the federal regulatory minimum capital requirements at June30, 2020 and continued to be classified as well-capitalized institutions. Regulatory capital ratios of the Company and the Bank are stated in the table below.

The tables below include certain non-GAAP financial measures that are used by investors, analysts and bank regulatory agencies to assess the capital position of financial services companies. Management reviews these measures along with other measures of capital as part of its financial analysis.

As of the dates June March December September Juneindicated 30, 31, 31, 30, 30, 2020 2020 2019 2019 2019Company Tier 1 leverage capital 5.91 % 7.28 % 8.28 % 8.33 % 8.05 %ratioCommon equity Tier 1 11.51 % 10.27 % 10.10 % 10.35 % 10.19 %capital ratioTier 1 capital ratio 11.90 % 10.63 % 10.46 % 10.71 % 10.55 %Total capital ratio 14.99 % 13.61 % 12.74 % 13.01 % 13.22 %MetaBank Tier 1 leverage capital 6.89 % 8.52 % 9.70 % 9.65 % 9.37 %ratioCommon equity Tier 1 13.82 % 12.39 % 12.18 % 12.31 % 12.22 %capital ratioTier 1 capital ratio 13.86 % 12.44 % 12.24 % 12.37 % 12.27 %Total capital ratio 15.12 % 13.69 % 12.90 % 13.02 % 13.26 %

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:

Standardized June 30, March 31, December 31, September June 30,Approach^(1) 2020 2020 2019 30, 2019 2019(Dollars in Thousands)Totalstockholders' $ 829,909 $ 805,074 $ 837,068 $ 843,958 $ 822,901 equityAdjustments: LESS: Goodwill,net of associated 302,814 303,625 304,020 304,020 302,850 deferred taxliabilitiesLESS: Certainother intangible 42,865 44,909 47,855 50,501 53,249 assetsLESS: Net deferredtax assets fromoperating loss and 10,360 11,589 16,876 15,569 13,858 tax creditcarry-forwardsLESS: Netunrealized gains(losses) on 8,382 2,337 3,897 6,458 2,329 available-for-salesecuritiesLESS:Non-controlling 3,787 3,762 4,305 4,047 3,508 interestCommon Equity Tier 461,701 438,852 460,115 463,363 447,107 1^(1)Long-termborrowings andother instruments 13,661 13,661 13,661 13,661 13,661 qualifying as Tier1Tier 1 minorityinterest notincluded in common 1,894 2,036 2,372 2,350 2,119 equity tier 1capitalTotal Tier 1 477,256 454,549 476,148 479,374 462,887 CapitalAllowance for loan 50,338 53,580 30,239 29,272 43,641 and lease lossesSubordinateddebentures (net of 73,765 73,724 73,684 73,644 73,605 issuance costs)Total qualifying $ 601,359 $ 581,853 $ 580,071 $ 582,290 $ 580,133 capital

(1) Capital ratios were determined using the Basel III capital rules that became effective on January 1, 2015. Basel III revised the definition of capital, increased minimum capital ratios, and introduced a minimum CET1 ratio; those changes are being fully phased in through the end of 2021.

The following table provides a reconciliation of tangible common equity 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.

June 30, March 31, December 31, September June 30, 2020 2020 2019 30, 2019 2019(Dollars in Thousands)TotalStockholders' $ 829,909 $ 805,074 $ 837,068 $ 843,958 $ 822,901 EquityLess: 309,505 309,505 309,505 309,505 307,941 GoodwillLess:Intangible 43,974 46,766 50,151 52,810 56,153 assetsTangible 476,430 448,803 477,412 481,643 458,807 common equityLess:Accumulatedother 7,995 1,654 3,895 6,339 2,308 comprehensiveincome (loss)("AOCI")Tangiblecommon equity $ 468,435 $ 447,149 $ 473,517 $ 475,304 $ 456,499 excludingAOCI

Conference CallThe Company will host a conference call and earnings webcast at 4:00 p.m. Central Time (5:00 p.m. Eastern Time) on Wednesday, July22, 2020. The live webcast of the call can be accessed from Metas Investor Relations website at www.metafinancialgroup.com.Telephone participants may access the live conference call by dialing (844) 461-9934 beginning approximately 10 minutes prior to start time. Please ask to join the Meta Financial conference call, and provide conference ID 8468707 upon request. International callers should dial (636) 812-6634. A webcast replay will also be archived at www.metafinancialgroup.com for one year.

Forward-Looking StatementsThe Company and MetaBank, N.A. ("MetaBank") may from time to time make written or oral forward-looking statements, including statements contained in this press release, the Companys filings with the SEC, the Companys 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 Companys 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 Companys 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 the 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 and adequacy of reserves; technology; and the Company's employees. The following factors, among others, could cause the Company's financial performance and results of operations to differ materially from the expectations, estimates, and intentions expressed in such forward-looking statements: 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 conducts operations; changes in, trade, monetary, and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System (the Federal Reserve); 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 Company's ability to finalize a definitive program management agreement with H&R Block and the terms thereof; the risks of dealing with or utilizing third parties, including, in connection with the Companys refund advance business, the risk of reduced volume of refund advance loans as a result of reduced customer demand for or usage of Metas 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 Coronavirus Aid, Relief, and Economic Security Act ("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 Companys 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; 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 Companys business and prospects are reflected under the caption Risk Factors and in other sections of the Companys Annual Report on Form 10-K for the Companys fiscal year ended September 30, 2019, and in other filings made with the SEC. The Company expressly disclaims any intent or obligation to update any forward-looking statements, whether written or oral, that may be made from time to time by or on behalf of the Company or its subsidiaries, whether as a result of new information, changed circumstances, or future events or for any other reason.

Condensed Consolidated Statements of Financial Condition (Unaudited)(Dollars in Thousands, Except Share Data)

ASSETS June 30, 2020 March 31, December 31, September 30, June 30, 2019 2020 2019 2019Cash and cash $ 3,108,141 $ 108,733 $ 152,189 $ 126,545 $ 100,732 equivalentsInvestmentsecurities 825,579 840,525 852,603 889,947 961,897 available for sale,at fair valueMortgage-backedsecurities 338,250 355,094 362,120 382,546 395,201 available for sale,at fair valueInvestmentsecurities held to 98,205 108,105 116,313 127,582 138,128 maturity, at costMortgage-backedsecurities held to 6,382 6,752 6,804 7,182 7,414 maturity, at costLoans held for sale 79,905 13,610 264,266 148,777 62,839 Loans and leases 3,502,646 3,618,924 3,590,474 3,658,847 3,631,031 Allowance for loan (65,747 ) (65,355 ) (30,176 ) (29,149 ) (43,505 )and lease lossesFederal ReserveBank and Federal 31,836 29,944 13,796 30,916 17,236 Home Loan Bankstocks, at costAccrued interest 17,545 16,958 18,687 20,400 19,722 receivablePremises,furniture, and 40,361 38,871 38,671 45,932 46,360 equipment, netRental equipment, 216,336 200,837 211,673 208,537 184,732 netBank-owned life 91,697 91,081 90,458 89,827 89,193 insuranceForeclosed realestate and 6,784 7,249 1,328 29,494 29,514 repossessed assetsGoodwill 309,505 309,505 309,505 309,505 307,941 Intangible assets 43,974 46,766 50,151 52,810 56,153 Prepaid assets 6,806 9,727 14,813 9,476 22,023 Deferred taxes 15,944 20,887 19,752 18,884 21,630 Other assets 104,877 85,652 97,499 54,832 52,831 Total assets $ 8,779,026 $ 5,843,865 $ 6,180,926 6,182,890 $ 6,101,072 LIABILITIES ANDSTOCKHOLDERS? EQUITY LIABILITIES Deposits held for $ ? $ ? $ 288,975 $ ? $ ? saleDeposits: Noninterest-bearing 6,537,809 2,900,484 2,927,967 2,358,010 2,751,931 checkingInterest-bearing 187,003 152,504 67,642 185,768 157,802 checkingSavings deposits 55,896 37,615 17,436 49,773 52,179 Money market 40,811 37,266 42,286 76,911 68,604 depositsTime certificates 25,000 25,492 23,454 109,275 116,698 of depositWholesale deposits 743,806 809,043 1,438,820 1,557,268 1,628,000 Total deposits 7,590,325 3,962,404 4,517,605 4,337,005 4,775,214 Short-term ? 717,000 194,000 646,019 146,613 borrowingsLong-term 209,781 211,353 213,070 215,838 209,765 borrowingsAccrued interest 4,332 3,607 6,620 9,414 12,350 payableAccrued expensesand other 144,679 144,427 123,588 130,656 134,229 liabilitiesTotal liabilities 7,949,117 5,038,791 5,343,858 5,338,932 5,278,171 STOCKHOLDERS? EQUITYPreferred stock ? ? ? ? ? Common stock, $.01 346 346 372 378 379 par valueCommon stock,Nonvoting, $.01 par ? ? ? ? ? valueAdditional paid-in 592,693 590,682 587,678 580,826 578,715 capitalRetained earnings 228,500 212,027 244,005 252,813 238,004 Accumulated othercomprehensive 7,995 1,654 3,895 6,339 2,308 incomeTreasury stock, at (3,412 ) (3,397 ) (3,187 ) (445 ) (13 )costTotal equityattributable to 826,122 801,312 832,763 839,911 819,393 parentNoncontrolling 3,787 3,762 4,305 4,047 3,508 interestTotal stockholders? 829,909 805,074 837,068 843,958 822,901 equity Total liabilitiesand stockholders? $ 8,779,026 $ 5,843,865 $ 6,180,926 $ 6,182,890 $ 6,101,072 equity

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

Three Months Ended Nine Months Ended June 30, March 31, June 30, June 30, June 30, 2020 2020 2019 2020 2019Interest and dividend income:Loans and leases, $ 59,911 $ 70,493 $ 69,732 $ 199,107 $ 203,900 including feesMortgage-backed 2,269 2,493 3,063 7,151 8,622 securitiesOther investments 5,226 6,417 8,837 18,176 32,380 67,406 79,403 81,632 224,434 244,902 Interest expense: Deposits 3,130 8,242 10,395 20,712 35,731 FHLB advances and 2,139 3,424 4,269 9,197 10,581 other borrowings 5,269 11,666 14,664 29,909 46,312 Net interest income 62,137 67,737 66,968 194,525 198,590 Provision for loan 15,093 37,296 9,112 55,796 51,529 for lease losses Net interest incomeafter provision for 47,044 30,441 57,856 138,729 147,061 loan and leaselosses Noninterest income: Refund transfer 4,595 28,939 6,697 33,726 38,559 product feesTax advance product 28 29,536 34 31,840 34,757 feesPayments card and 21,302 23,156 21,377 65,957 66,855 deposit feesOther bank and 214 381 495 1,083 1,449 deposit feesRental income 11,231 11,100 9,386 34,682 30,167 Gain on sale ofsecurities ? ? 440 ? 649 available-for-sale,netGain on ? 19,275 ? 19,275 ? divestituresGain (loss) on sale 1,214 2,325 2,620 969 6,117 of otherOther income 2,464 5,801 2,741 11,512 8,012 Total noninterest 41,048 120,513 43,790 199,044 186,565 income Noninterest expense:Compensation and 32,102 34,260 35,176 100,631 117,350 benefitsRefund transfer (139 ) 7,449 287 7,482 7,478 product expenseTax advance product (11 ) 1,698 425 2,820 3,101 expenseCard processing 7,128 6,696 4,613 19,432 18,670 Occupancy and 6,502 7,013 7,136 20,169 20,806 equipment expenseOperating leaseequipment 8,536 8,421 6,029 25,237 18,280 depreciationLegal and 4,660 5,909 4,065 15,242 12,341 consultingIntangible 2,636 3,402 4,374 8,714 14,352 amortizationImpairment expense ? 507 ? 750 9,660 Other expense 9,827 16,374 10,363 38,291 34,978 Total noninterest 71,241 91,729 72,468 238,768 257,016 expense Income before 16,851 59,225 29,178 99,005 76,610 income tax expense Income tax expense (2,426 ) 5,617 (1,158 ) 3,870 (3,244 )(benefit) Net income beforenoncontrolling 19,277 53,608 30,336 95,135 79,854 interestNet incomeattributable to 1,087 1,304 1,045 3,573 3,045 noncontrollinginterestNet incomeattributable to $ 18,190 $ 52,304 $ 29,291 $ 91,562 $ 76,809 parent Earnings per common shareBasic $ 0.53 $ 1.45 $ 0.75 $ 2.54 $ 1.96 Diluted $ 0.53 $ 1.45 $ 0.75 $ 2.54 $ 1.95 Shares used incomputing earnings per shareBasic 34,616,038 35,948,799 38,903,266 36,004,877 39,220,793 Diluted 34,623,114 35,970,296 38,977,690 36,016,037 39,289,011

Average Balances, Interest Rates and Yields

The following table presents, for the periods indicated, the total dollar amount of interest income from average interest-earning assets and the resulting yields, as well as the interest expense on average interest-bearing liabilities, expressed both in dollars and in rates. Only the yield/rate reflects tax-equivalent adjustments. Non-accruing loans and leases have been included in the table as loans carrying a zero yield.

Three Months Ended 2020 2019June 30, Average Interest Yield Average Interest Yield /(Dollars in Outstanding Earned / / Outstanding Earned / Rate^Thousands) Balance Paid Rate^ Balance Paid (1) (1)Interest-earning assets:Cash and fed funds $ 2,692,270 $ 783 0.12 % $ 80,100 $ 521 2.61 %soldMortgage-backed 342,174 2,269 2.67 % 421,725 3,063 2.91 %securitiesTax exemptinvestment 417,042 1,658 2.02 % 690,732 4,058 2.98 %securitiesAsset-backed 336,562 1,770 2.11 % 307,581 2,701 3.52 %securitiesOther investment 197,643 1,014 2.06 % 199,681 1,557 3.13 %securitiesTotal investments 1,293,420 6,711 2.22 % 1,619,719 11,379 3.09 %Commercial finance 2,160,175 40,375 7.52 % 1,775,905 44,332 10.01 %loans and leasesConsumer finance 247,824 4,635 7.52 % 364,633 8,178 9.00 %loansTax services loans 39,845 ? ? % 45,142 ? ? %Warehouse finance 304,839 4,582 6.05 % 223,546 3,491 6.26 %loansNational lending 2,752,683 49,592 7.25 % 2,409,226 56,001 9.32 %loans and leasesCommunity banking 870,245 10,319 4.77 % 1,189,912 13,731 4.63 %loansTotal loans and 3,622,928 59,911 6.65 % 3,599,138 69,732 7.77 %leasesTotalinterest-earning $ 7,608,618 $ 67,406 3.59 % $ 5,298,957 $ 81,632 6.26 %assetsNon-interest-earning 830,589 820,474 assetsTotal assets $ 8,439,206 $ 6,119,431 Interest-bearing liabilities:Interest-bearing $ 226,382 $ ? ? % $ 137,950 $ 85 0.25 %checking^(2)Savings 55,572 1 0.01 % 54,247 9 0.07 %Money markets 40,091 33 0.33 % 58,782 107 0.73 %Time deposits 25,392 113 1.78 % 128,165 633 1.98 %Wholesale deposits 817,414 2,983 1.47 % 1,521,594 9,561 2.52 %Totalinterest-bearing 1,164,852 3,130 1.08 % 1,900,738 10,395 2.19 %depositsOvernight fed funds 59,055 48 0.33 % 363,857 2,368 2.61 %purchasedFHLB advances 110,000 670 2.45 % 54,341 324 2.39 %Subordinated 73,738 1,153 6.29 % 73,583 1,163 6.34 %debenturesOther borrowings 27,032 268 3.98 % 40,653 414 4.08 %Total borrowings 269,825 2,139 3.19 % 532,434 4,269 3.22 %Totalinterest-bearing 1,434,677 5,269 1.48 % 2,443,172 14,664 2.42 %liabilitiesNoninterest-bearing 6,057,314 ? ? % 2,710,288 ? ? %depositsTotal deposits andinterest-bearing $ 7,491,991 $ 5,269 0.28 % $ 5,143,460 $ 14,664 1.14 %liabilitiesOthernoninterest-bearing 122,940 149,207 liabilitiesTotal liabilities 7,614,931 5,292,667 Shareholders' equity 824,276 826,764 Total liabilitiesand shareholders' $ 8,439,206 $ 6,119,431 equityNet interest incomeand net interestrate spread $ 62,137 3.30 % $ 66,968 5.12 %includingnoninterest-bearingdeposits Net interest margin 3.28 % 5.07 %Tax-equivalent 0.02 % 0.08 %effectNet interest margin, 3.31 % 5.15 %tax-equivalent^(3)

(1) Tax rate used to arrive at the TEY for the three months ended June 30, 2020 and 2019 was 21%.(2) Of the total balance, $226.1 million are interest-bearing deposits where interest expense is paid by a third party and not by the Company.(3) Net interest margin expressed on a fully-taxable-equivalent basis ("net interest margin, tax-equivalent") is a non-GAAP financial measure. The tax-equivalent adjustment to net interest income recognizes the estimated income tax savings when comparing taxable and tax-exempt assets and adjusting for federal and state exemption of interest income. The Company believes that it is a standard practice in the banking industry to present net interest margin expressed on a fully taxable equivalent basis and, accordingly, believes the presentation of this non-GAAP financial measure may be useful for peer comparison purposes.

Selected Financial Information

As of and For June 30, March 31, December 31, September 30, June 30,the Three 2020 2020 2019 2019 2019Months EndedEquity to 9.45 % 13.78 % 13.54 % 13.65 % 13.49 %total assetsBook value percommon share $ 23.96 $ 23.26 $ 22.52 $ 22.32 $ 21.72 outstandingTangible bookvalue per $ 13.76 $ 12.97 $ 12.84 $ 12.74 $ 12.11 common shareoutstandingTangible bookvalue percommon share $ 13.53 $ 12.92 $ 12.74 $ 12.57 $ 12.05 outstandingexcluding AOCICommon shares 34,631,160 34,607,962 37,172,081 37,807,064 37,878,205 outstandingNon-performingassets to 0.64 % 0.67 % 0.48 % 0.91 % 0.84 %total assetsNon-performingloans andleases to 1.10 % 0.87 % 0.62 % 0.70 % 0.57 %total loansand leasesNet interest 3.28 % 4.78 % 4.94 % 4.95 % 5.07 %marginNet interestmargin, 3.31 % 4.82 % 4.99 % 5.00 % 5.15 %tax-equivalentReturn on 0.86 % 3.16 % 1.38 % 1.32 % 1.91 %average assetsReturn on 8.83 % 25.15 % 10.04 % 9.69 % 14.17 %average equityFull-timeequivalent 999 992 1,088 1,186 1,218 employees

Quarterly Amortization of Intangibles Expense

(Dollars in Thousands) Actual AnticipatedFor the Three Months Jun 30, Sep 30, Dec 31, Mar 31, Jun 30, Sep 30, Dec 31, Mar 31, Jun 30,Ended 2020 2020 2020 2021 2021 2021 2021 2022 2022 Amortization of $ 2,636 $ 2,265 $ 2,013 $ 2,757 $ 2,013 $ 1,761 $ 1,488 $ 2,170 $ 1,176 intangibles^(1)

(1) These amounts are based upon the current reporting periods intangible assets only. This table makes no assumption for expenses related to future acquired intangible assets.

About Meta Financial Group Meta Financial Group, Inc. (Nasdaq: CASH) is a South Dakota-based financial holding company. Meta Financial Groups banking subsidiary, MetaBank, N.A., (Meta), is a leader in providing innovative financial solutions to consumers and businesses in under-served niche markets and believes in financial inclusion for all. Metas commercial lending division works with high-value niche industries, rapid-growth companies and technology adopters to grow their businesses and build more profitable customer relationships nationwide. Meta is one of the largest issuers of prepaid cards in the U.S., having issued more than a billion cards in partnership with banks, program managers, payments providers and other businesses, and offers a total payments services solution that includes ACH origination, wire transfers, and more. For more information, visit the Meta Financial Group website.

Investor Relations Contact: Brittany Kelley Elsasser Director of Investor Relations 605-362-2423 bkelley@metabank.com Media Relations: mediarelations@metabank.com