UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.  20549

 

FORM 10-Q

 

x  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)

OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2008

 

o  TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15 (d)

OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transaction period from                      to                 

 

Commission File Number:  0-22140

 

META FINANCIAL GROUP, INC. ®

(Exact name of registrant as specified in its charter)

 

Delaware

 

42-1406262

(State or other jurisdiction of

 

(IRS Employer Identification No.)

incorporation or organization)

 

 

 

121 East Fifth Street, Storm Lake, Iowa  50588

(Address of principal executive offices)

 

(712) 732-4117

(Registrant’s telephone number, including area code)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x      No  o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer o

 

Accelerated filer o

 

 

 

Non-accelerated filer x

 

Smaller reporting company o

(Do not check if a smaller reporting company)

 

 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  o      No  x

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

 

Class:

 

Outstanding at May 14, 2008:

Common Stock, $.01 par value

 

2,596,084 Common Shares

 

 

 



 

META FINANCIAL GROUP, INC.

 

FORM 10-Q

 

Table of Contents

 

 

 

Page No.

 

 

 

Part I.Financial Information

 

 

 

 

 

Item 1.

Financial Statements (Unaudited):

 

 

 

 

 

Condensed Consolidated Statements of Financial Condition
as of March 31, 2008 and September 30, 2007

1

 

 

 

 

Condensed Consolidated Statements of Operations for the Three
and Six Months Ended March 31, 2008 and 2007

2

 

 

 

 

Condensed Consolidated Statements of Comprehensive Income (Loss)
for the Three and Six Months Ended March 31, 2008 and 2007

3

 

 

 

 

Condensed Consolidated Statements of Changes in Shareholders’
Equity for the Six Months Ended March 31, 2008 and 2007

4

 

 

 

 

Condensed Consolidated Statements of Cash Flows for the
Six Months Ended March 31, 2008 and 2007

5

 

 

 

 

Notes to Condensed Consolidated Financial Statements

6

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial
Condition and Results of Operations

16

 

 

 

Item 3.

Quantitative and Qualitative Disclosure About Market Risk

28

 

 

 

Item 4T.

Controls and Procedures

30

 

 

 

Part II. Other Information

 

 

 

 

 

Item 1.

Legal Proceedings

31

 

 

 

Item 1A.

Risk Factors

31

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

31

 

 

 

Item 3.

Defaults Upon Senior Securities

31

 

 

 

Item 4.

Submission of Matters to a Vote of Security Holders

31

 

 

 

Item 5.

Other Information

31

 

 

 

Item 6.

Exhibits

31

 

 

 

Signatures

 

32

 

 

i



 

META FINANCIAL GROUP, INC.®

AND SUBSIDIARIES

Condensed Consolidated Statements of Financial Condition (Unaudited)

(Dollars in Thousands, Except Share and Per Share Data)

 

 

 

March 31, 2008

 

September 30, 2007

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

Cash and due from banks

 

$

1,671

 

$

1,210

 

Interest-bearing deposits in other financial institutions

 

62,881

 

10,110

 

Total cash and cash equivalents

 

64,552

 

11,320

 

Federal funds sold

 

 

75,000

 

Investment securities available for sale

 

23,512

 

25,960

 

Mortgage-backed securities available for sale

 

225,750

 

132,741

 

Loans receivable - net of allowance for loan losses of $4,581 at March 31, 2008 and $4,493 at September 30, 2007

 

403,954

 

355,612

 

Federal Home Loan and Federal Reserve Bank stock, at cost

 

7,570

 

4,015

 

Accrued interest receivable

 

3,900

 

4,189

 

Bond insurance receivable

 

4,193

 

 

Premises and equipment, net

 

22,071

 

19,707

 

Bank-owned life insurance

 

12,507

 

12,261

 

Assets related to discontinued operations, held for sale

 

 

35,770

 

Goodwill

 

1,933

 

1,508

 

Other assets

 

40,593

 

7,997

 

 

 

 

 

 

 

Total assets

 

$

810,535

 

$

686,080

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

Non-interest-bearing checking

 

$

357,037

 

$

260,098

 

Interest-bearing checking

 

17,226

 

14,600

 

Savings deposits

 

10,406

 

10,265

 

Money market deposits

 

68,883

 

81,292

 

Time certificates of deposit

 

140,371

 

156,723

 

Total deposits

 

593,923

 

522,978

 

Advances from Federal Home Loan Bank

 

55,000

 

68,000

 

Securities sold under agreements to repurchase

 

82,214

 

224

 

Subordinated debentures

 

10,310

 

10,310

 

Accrued interest payable

 

760

 

842

 

Contingent liability

 

4,218

 

 

Liabilities related to discontinued operations, held for sale

 

 

30,949

 

Accrued expenses and other liabilities

 

11,234

 

4,679

 

Total liabilities

 

757,659

 

637,982

 

 

 

 

 

 

 

SHAREHOLDERS’ EQUITY

 

 

 

 

 

Preferred stock, 800,000 shares authorized, no shares issued or outstanding

 

 

 

Common stock, $.01 par value; 5,200,000 shares authorized, 2,957,999 shares issued, 2,596,084 and 2,589,717 shares outstanding at March 31, 2008 and September 30, 2007, respectively

 

30

 

30

 

Additional paid-in capital

 

22,299

 

21,958

 

Retained earnings - substantially restricted

 

38,435

 

36,805

 

Accumulated other comprehensive (loss)

 

(833

)

(3,345

)

Unearned Employee Stock Ownership Plan shares

 

(160

)

(377

)

Treasury stock, 361,915 and 368,282 common shares, at cost, at March 31, 2008 and September 30, 2007, respectively

 

(6,895

)

(6,973

)

Total shareholders’ equity

 

52,876

 

48,098

 

 

 

 

 

 

 

Total liabilities and shareholders’ equity

 

$

810,535

 

$

686,080

 

 

See Notes to Condensed Consolidated Financial Statements.

 

1



 

META FINANCIAL GROUP, INC. ®

AND SUBSIDIARIES

Condensed Consolidated Statements of Operations (Unaudited)

(Dollars in Thousands, Except Share and Per Share Data)

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

March 31,

 

March 31,

 

 

 

2008

 

2007

 

2008

 

2007

 

 

 

 

 

(As Restated)

 

 

 

(As Restated)

 

Interest and dividend income:

 

 

 

 

 

 

 

 

 

Loans receivable, including fees

 

$

6,599

 

$

6,297

 

$

12,877

 

$

12,782

 

Mortgage-backed securities

 

2,339

 

1,391

 

3,846

 

2,867

 

Other investments

 

957

 

2,032

 

2,071

 

3,854

 

 

 

9,895

 

9,720

 

18,794

 

19,503

 

Interest expense:

 

 

 

 

 

 

 

 

 

Deposits

 

2,031

 

2,975

 

4,455

 

6,282

 

FHLB advances and other borrowings

 

1,648

 

1,302

 

2,849

 

2,787

 

 

 

3,679

 

4,277

 

7,304

 

9,069

 

 

 

 

 

 

 

 

 

 

 

Net interest income

 

6,216

 

5,443

 

11,490

 

10,434

 

 

 

 

 

 

 

 

 

 

 

Provision for loan losses

 

200

 

(225

)

70

 

3,838

 

 

 

 

 

 

 

 

 

 

 

Net interest income after provision for loan losses

 

6,016

 

5,668

 

11,420

 

6,596

 

 

 

 

 

 

 

 

 

 

 

Non-interest income:

 

 

 

 

 

 

 

 

 

Card fees

 

11,514

 

3,671

 

16,957

 

7,257

 

Loan fees

 

207

 

244

 

405

 

480

 

Deposit fees

 

177

 

129

 

371

 

154

 

Bank-owned life insurance income

 

124

 

120

 

246

 

194

 

Gain on sale of securites available for sale, net

 

198

 

 

207

 

 

Other income

 

65

 

229

 

229

 

409

 

Total non-interest income

 

12,285

 

4,393

 

18,415

 

8,494

 

 

 

 

 

 

 

 

 

 

 

Non-interest expense:

 

 

 

 

 

 

 

 

 

Compensation and benefits

 

6,451

 

4,483

 

12,168

 

8,415

 

Card processing expense

 

5,044

 

1,589

 

8,101

 

3,242

 

Occupancy and equipment expense

 

1,795

 

1,024

 

3,040

 

1,939

 

Legal and consulting expense

 

790

 

780

 

1,229

 

1,516

 

Marketing

 

394

 

289

 

738

 

455

 

Data processing expense

 

322

 

107

 

582

 

332

 

Other expense

 

1,559

 

738

 

3,283

 

1,694

 

Total non-interest expense

 

16,355

 

9,010

 

29,141

 

17,593

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations before income tax expense (benefit)

 

1,946

 

1,051

 

694

 

(2,503

)

 

 

 

 

 

 

 

 

 

 

Income tax expense (benefit) from continuing operations

 

743

 

412

 

281

 

(847

)

 

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations

 

1,203

 

639

 

413

 

(1,656

)

 

 

 

 

 

 

 

 

 

 

Gain on sale from discontinued operations before taxes

 

2,309

 

 

2,309

 

 

Income (loss) from discontinued operations before taxes

 

4

 

152

 

76

 

(501

)

Income tax expense (benefit) from discontinued operations

 

478

 

56

 

500

 

(188

)

 

 

 

 

 

 

 

 

 

 

Income (loss) from discontinued operations

 

1,835

 

96

 

1,885

 

(313

)

 

 

 

 

 

 

 

 

 

 

Net Income (loss)

 

$

3,038

 

$

735

 

$

2,298

 

$

(1,969

)

 

 

 

 

 

 

 

 

 

 

Basic earnings (loss) per common share:

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations

 

$

0.47

 

$

0.25

 

$

0.16

 

$

(0.66

)

Income (loss) from discontinued operations

 

0.71

 

0.04

 

0.73

 

(0.12

)

Net income (loss)

 

$

1.18

 

$

0.29

 

$

0.89

 

$

(0.78

)

 

 

 

 

 

 

 

 

 

 

Diluted earnings (loss) per common share:

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations

 

$

0.46

 

$

0.24

 

$

0.16

 

$

(0.66

)

Income (loss) from discontinued operations

 

0.70

 

0.04

 

0.71

 

(0.12

)

Net income (loss)

 

$

1.16

 

$

0.28

 

$

0.87

 

$

(0.78

)

 

 

 

 

 

 

 

 

 

 

Dividends declared per common share:

 

$

0.13

 

$

0.13

 

$

0.26

 

$

0.26

 

 

See Notes to Condensed Consolidated Financial Statements.

 

2



 

META FINANCIAL GROUP INC.®

AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)

(Dollars in Thousands)

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

March 31,

 

March 31,

 

 

 

2008

 

2007

 

2008

 

2007

 

 

 

 

 

(As Restated)

 

 

 

(As Restated)

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

3,038

 

$

735

 

$

2,298

 

$

(1,969

)

 

 

 

 

 

 

 

 

 

 

Other comprehensive gain (loss)

 

 

 

 

 

 

 

 

 

Change in net unrealized gains (losses) on securities available for sale

 

1,749

 

774

 

3,800

 

3,495

 

Gains realized in net income

 

198

 

 

207

 

 

 

 

1,947

 

774

 

4,007

 

3,495

 

Deferred income tax effect

 

726

 

289

 

1,495

 

1,303

 

Total other comprehensive income (loss)

 

1,221

 

485

 

2,512

 

2,192

 

Total comprehensive income (loss)

 

$

4,259

 

$

1,220

 

$

4,810

 

$

223

 

 

See Notes to Condensed Consolidated Financial Statements.

 

3



 

META FINANCIAL GROUP, INC.®

AND SUBSIDIARIES

Condensed Consolidated Statements of Changes in Shareholders’ Equity (Unaudited)

For the Six Months Ended March 31, 2008 and 2007 (RESTATED)

(Dollars in Thousands, Except Share and Per Share Data)

 

 

 

Common

Stock

 

Additional

Paid-in

Capital

 

Retained

Earnings

 

Accumulated

Other

Comprehensive

(Loss),

Net of Tax

 

Unearned

Employee

Stock

Ownership

Plan Shares

 

Treasury

Stock

 

Total

Shareholders’

Equity

 

Balance, September 30, 2006

 

$

30

 

$

20,969

 

$

36,953

 

$

(4,548

)

$

(509

)

$

(7,796

)

$

45,099

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash dividends declared on common stock ($.26 per share)

 

 

 

(663

)

 

 

 

(663

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of 5,636 common shares from treasury stock due to exercise of stock options

 

 

(227

)

 

 

 

339

 

112

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock compensation

 

 

170

 

 

 

 

 

170

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,999 common shares committed to be released under the ESOP

 

 

46

 

 

 

185

 

 

231

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in net unrealized gains on securities available for sale, net

 

 

 

 

2,192

 

 

 

2,192

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss for six months ended March 31, 2007

 

 

 

(1,969

)

 

 

 

(1,969

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, March 31, 2007

 

$

30

 

$

20,958

 

$

34,321

 

$

(2,356

)

$

(324

)

$

(7,457

)

$

45,172

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, September 30, 2007

 

$

30

 

$

21,958

 

$

36,805

 

$

(3,345

)

$

(377

)

$

(6,973

)

$

48,098

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash dividends declared on common stock ($.26 per share)

 

 

 

(668

)

 

 

 

(668

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of 3,967 common shares from treasury stock due to exercise of stock options

 

 

10

 

 

 

 

78

 

88

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock compensation

 

 

224

 

 

 

 

 

224

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6,378 common shares committed to be released under the ESOP

 

 

107

 

 

 

217

 

 

324

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net change in unrealized gains on securities available for sale, net of income taxes

 

 

 

 

2,512

 

 

 

2,512

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income for six months ended March 31, 2008

 

 

 

2,298

 

 

 

 

2,298

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, March 31, 2008

 

$

30

 

$

22,299

 

$

38,435

 

$

(833

)

$

(160

)

$

(6,895

)

$

52,876

 

 

See Notes to Condensed Consolidated Financial Statements.

 

4



 

META FINANCIAL GROUP, INC.®

AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (Unaudited)

(Dollars in Thousands)

 

 

 

Six Months Ended March 31,

 

 

 

2008

 

2007

 

 

 

 

 

(As Restated)

 

Cash flows from operating activities:

 

 

 

 

 

Net income (loss)

 

$

2,298

 

$

(1,969

)

Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:

 

 

 

 

 

Effect of contribution to employee stock ownership plan

 

324

 

231

 

Depreciation, amortization and accretion, net

 

1,545

 

1,206

 

Provision for loan losses

 

70

 

3,838

 

Stock compensation

 

224

 

170

 

(Gain) on sale of other

 

(52

)

(48

)

Net change in accrued interest receivable

 

289

 

464

 

Net change in other assets

 

(1,741

)

(817

)

Net change in accrued interest payable

 

(82

)

207

 

Net change in accrued expenses and other liabilities

 

(20,176

)

(1,218

)

Net cash (used in) provided by operating activities-continuing operations

 

(17,301

)

2,064

 

Net cash provided by operating activities-discontinued operations

 

6,029

 

598

 

Net cash (used in) provided by operating activities

 

(11,272

)

2,662

 

 

 

 

 

 

 

Cash flow from investing activities:

 

 

 

 

 

Purchase of securities available for sale

 

(102,790

)

 

Net change in federal funds sold

 

75,000

 

(100,000

)

Net change in securities purchased under agreement to resell

 

 

5,891

 

Proceeds from maturities and principal repayments of securities available for sale

 

15,725

 

12,732

 

Loans purchased

 

(7,313

)

(54,840

)

Net change in loans receivable

 

(41,348

)

57,104

 

Proceeds from sales of foreclosed real estate

 

329

 

33

 

Net change in FHLB / FRB stock

 

(3,555

)

713

 

Proceeds from the sale of premises and equipment

 

97

 

 

Purchase of premises and equipment

 

(3,759

)

(1,393

)

Other, net

 

(1,208

)

358

 

Net cash (used in) investing activities-continuing operations

 

(68,822

)

(79,402

)

Net cash provided by investing activities-discontinued operations

 

17,598

 

2,874

 

Net cash (used in) investing activities

 

(51,224

)

(76,528

)

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

Net change in checking, savings, and money market deposits

 

87,297

 

19,261

 

Net change in time deposits

 

(16,352

)

(6,990

)

Net repayments of advances from Federal Home Loan Bank

 

(13,000

)

(13,000

)

Net change in securities sold under agreements to repurchase

 

81,990

 

(9,896

)

Cash dividends paid

 

(668

)

(663

)

Proceeds from exercise of stock options

 

88

 

112

 

Other, net

 

 

(245

)

Net cash provided by (used in) financing activities-continuing operations

 

139,355

 

(11,421

)

Net cash (used in) provided by financing activities-discontinued operations

 

(33,210

)

419

 

Net cash provided by (used in) financing activities

 

106,145

 

(11,002

)

 

 

 

 

 

 

Net change in cash and cash equivalents

 

43,649

 

(84,868

)

 

 

 

 

 

 

Cash and cash equivalents at beginning of period

 

20,903

 

109,353

 

Cash and cash equivalents at end of period

 

$

64,552

 

$

24,485

 

 

 

 

 

 

 

Supplemental disclosure of cash flow information

 

 

 

 

 

Cash paid during the period for:

 

 

 

 

 

Interest

 

$

7,984

 

$

9,521

 

Income taxes

 

 

582

 

 

 

 

 

 

 

Supplemental schedule of non-cash investing and financing activities:

 

 

 

 

 

Loans transferred to foreclosed real estate

 

$

301

 

$

 

Cash received on sale of commercial bank

 

8,224

 

 

 

See Notes to Consolidated Financial Statements.

 

5



 

META FINANCIAL GROUP, INC. ®

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

 

NOTE 1.  BASIS OF PRESENTATION

 

The interim unaudited condensed consolidated financial statements contained herein should be read in conjunction with the audited consolidated financial statements and accompanying notes to the consolidated financial statements for the fiscal year ended September 30, 2007, filed as Exhibit 13 to Meta Financial Group, Inc.’s (“Meta Group” or the “Company”) Form 10-K filed with the Securities and Exchange Commission on January 11, 2008.  Accordingly, footnote disclosures, which would substantially duplicate the disclosure contained in the audited consolidated financial statements, have been omitted.

 

The financial information of the Company included herein has been prepared in accordance with U.S. generally accepted accounting principles for interim financial reporting and has been prepared pursuant to the rules and regulations for reporting on Form 10-Q and Rule 10-01 of Regulation S-X.  Such information reflects all adjustments (consisting of normal recurring adjustments), that are, in the opinion of management, necessary for a fair presentation of the financial position and results of operations for the periods presented. The results of the interim period ended March 31, 2008, are not necessarily indicative of the results expected for the year ending September 30, 2008.

 

NOTE 2.  DISCONTINUED BANK OPERATIONS

 

Sale of MetaBank West Central

 

On November 29, 2007, the Company entered into an agreement to sell MetaBank West Central (“MetaBank WC”).  MetaBank WC has three branch offices in Stuart, Casey, and Menlo, Iowa.  MetaBank WC is a state chartered commercial bank whose primary federal regulator is the Federal Reserve Bank of Chicago.  On March 28, 2008 the Company consummated the sale of MetaBank WC to Anita Bancorporation (Iowa).  The transaction involved the sale of the stock of MetaBank WC for approximately $8.2 million and generated a pre-tax gain on sale of $2.3 million.  The activity related to Meta Bank WC is accounted for as discontinued operations.

 

Activities related to discontinued bank operations have been recorded separately with current and prior period amounts reclassified as assets and liabilities related to discontinued operations on the condensed consolidated statements of financial condition and as discontinued operations on the condensed consolidated statements of operations and cash flows. The notes to the condensed consolidated financial statements have also been adjusted to eliminate the effect of discontinued bank operations.

 

6



 

NOTE 3.  ALLOWANCE FOR LOAN LOSSES

 

At March 31, 2008 the Company’s allowance for loan losses was $4.6 million, an increase of $100,000 from $4.5 million at September 30, 2007.  During the six months ended March 31, 2008 the Company recorded a provision for loan losses of $70,000, which was directly related to loan growth and continued improvement in the Company’s loan portfolio as compared to the same period in the prior fiscal year.  During the three months ended March 31, 2008 the Company recorded a provision for loan losses of $200,000.  The Company’s net charge-offs for the three and six months ended March 31, 2008 were minimal.  Further discussion of this change in the allowance is included in “Non-performing Assets and Allowance for Loan Loss” in Management’s Discussion and Analysis.

 

NOTE 4.  EARNINGS PER COMMON SHARE (“EPS”)

 

Basic EPS is computed by dividing income (loss) available to common shareholders (the numerator) by the weighted average number of common shares outstanding (the denominator) during the period. Shares issued during the period and shares reacquired during the period are weighted for the portion of the period that they were outstanding.  Diluted EPS shows the dilutive effect of additional common shares issuable pursuant to stock option agreements.

 

A reconciliation of the income (loss) and common stock share used in the computation of basic and diluted EPS for the three and six months ended March 31, 2008 and 2007 is presented below.

 

Three Months Ended March 31,

 

2008

 

2007

 

(Dollars in Thousands, Except Share and Per Share Data)

 

 

 

(As Restated)

 

 

 

 

 

 

 

Earnings

 

 

 

 

 

Income from continuing operations

 

$

1,203

 

$

639

 

Discontinued operations, net of tax

 

1,835

 

96

 

 

 

 

 

 

 

Net income

 

$

3,038

 

$

735

 

 

 

 

 

 

 

Basic EPS

 

 

 

 

 

Weighted average common shares outstanding

 

2,595,165

 

2,549,631

 

Less weighted average unallocated ESOP and nonvested shares

 

(19,334

)

(25,283

)

Weighted average common shares outstanding

 

2,575,831

 

2,524,348

 

 

 

 

 

 

 

Earnings Per Common Share

 

 

 

 

 

Income from continuing operations

 

$

0.47

 

$

0.25

 

Discontinued operations, net of tax

 

0.71

 

0.04

 

 

 

 

 

 

 

Net income

 

$

1.18

 

$

0.29

 

 

 

 

 

 

 

Diluted EPS

 

 

 

 

 

Weighted average common shares outstanding for basic earnings per common share

 

2,575,831

 

2,524,348

 

Add dilutive effect of assumed exercises of stock options, net of tax benefits

 

44,634

 

96,366

 

Weighted average common and dilutive potential common shares outstanding

 

2,620,465

 

2,620,714

 

 

 

 

 

 

 

Earnings Per Common Share

 

 

 

 

 

Income from continuing operations

 

$

0.46

 

$

0.24

 

Discontinued operations, net of tax

 

0.70

 

0.04

 

 

 

 

 

 

 

Net income

 

$

1.16

 

$

0.28

 

 

 

7



 

Six Months Ended March 31,

 

2008

 

2007

 

(Dollars in Thousands, Except Share and Per Share Data)

 

 

 

(As Restated)

 

 

 

 

 

 

 

Earnings (Loss)

 

 

 

 

 

Income (loss) from continuing operations

 

$

413

 

$

(1,656

)

Discontinued operations, net of tax

 

1,885

 

(313

)

 

 

 

 

 

 

Net income (loss)

 

$

2,298

 

$

(1,969

)

 

 

 

 

 

 

Basic EPS

 

 

 

 

 

Weighted average common shares outstanding

 

2,593,860

 

2,542,440

 

Less weighted average unallocated ESOP and nonvested shares

 

(19,758

)

(27,174

)

Weighted average common shares outstanding

 

2,574,102

 

2,515,266

 

 

 

 

 

 

 

Earnings (Loss) Per Common Share

 

 

 

 

 

Income (loss) from continuing operations

 

$

0.16

 

$

(0.66

)

Discontinued operations, net of tax

 

0.73

 

(0.12

)

 

 

 

 

 

 

Net income (loss)

 

$

0.89

 

$

(0.78

)

 

 

 

 

 

 

Diluted EPS

 

 

 

 

 

Weighted average common shares outstanding for basic earnings per common share

 

2,574,102

 

2,515,266

 

Add dilutive effect of assumed exercises of stock options, net of tax benefits

 

64,231

 

 

Weighted average common and dilutive potential common shares outstanding

 

2,638,333

 

2,515,266

 

 

 

 

 

 

 

Earnings (Loss) Per Common Share

 

 

 

 

 

Income (loss) from continuing operations

 

$

0.16

 

$

(0.66

)

Discontinued operations, net of tax

 

0.71

 

(0.12

)

 

 

 

 

 

 

Net income (loss)

 

$

0.87

 

$

(0.78

)

 

The calculation of the diluted loss per share for the six months ended March 31, 2007 does not reflect the assumed exercise of 89,207 stock options because the effect would have been anti-dilutive due to the net loss for the period.  Stock options totaling 125,018 were not considered in computing diluted EPS for the three months ended March 31, 2008 because they were not dilutive.  Stock options totaling 111,018 and 6,000 were not considered in computing diluted EPS for the six months ended March 31, 2008 and 2007, respectively, because they were not dilutive.

 

NOTE 5.  COMMITMENTS AND CONTINGENCIES

 

At March 31, 2008 and September 30, 2007, the Company had outstanding commitments to originate and purchase loans totaling $64.7 million and $50.3 million, respectively.  It is expected that outstanding loan commitments will be funded with existing liquid assets.  At March 31, 2008, the Company had no commitments to purchase or sell securities available for sale.

 

Legal Proceedings

 

MetaBank (“the Bank”) has been named in several lawsuits whose eventual outcome could have an adverse effect on the consolidated financial position or results of operations of the Company.  Because the likelihood or amount of an adverse resolution to these matters cannot currently be reasonably estimated, the Company has not recorded a contingent liability related to these potential claims.

 

8



 

On June 11, 2004, the Sioux Falls School District filed suit in the Second Judicial Circuit Court alleging that MetaBank, a wholly-owned subsidiary of the Company, improperly allowed funds, which belonged to the school district, to be deposited into, and subsequently withdrawn from, a corporate account established by an employee of the school district.  The case has been settled and dismissed with no consequences to MetaBank.

 

A lawsuit was filed by a number of plaintiffs who had purchased vehicles naming MetaBank together with a number of other defendants.  MetaBank, in conjunction with a roster of participating banks, had provided a series of loans and lines of credit to Dan Nelson Auto Group (“DNAG”) and South Dakota Acceptance Corporation (“SDAC”). Plaintiffs allege that the defendants, including MetaBank, “participated in the fraudulent scheme” by virtue of providing these lines of credit and loans despite being aware of the predatory consumer practices of the Nelson companies, and that MetaBank profited by receiving undisclosed “special benefits” for providing these loans.  DNAG, SDAC and Nelson have since filed for bankruptcy.  Plaintiffs also allege that MetaBank did not vigorously pursue claims against Nelson and fellow DNAG executive Chris Tapken in their respective personal bankruptcies in order to allow these individuals to emerge with control over assets of their former companies.  The claims against J. Tyler Haahr personally and the MetaBank entities were dismissed with prejudice on January 4, 2008, and this matter is now on appeal.

 

In addition, as noted below, four banks have filed suit seeking recovery of loss they suffered when the Nelson Companies, including SDAC and DNAG, went out of business.

 

During the three months ended June 30, 2006 or shortly thereafter three lawsuits were filed against the Company’s MetaBank subsidiary.  Three of the complaints are related to the Company’s alleged actions in connection with its activities as lead lender to three companies involved in auto sales, service, and financing and their owner.  An additional bank, North American Banking Company, joined the First Midwest Bank-Deerfield Branches case, and these three bank plaintiffs were then joined in the action brought by First Premier Bank against MetaBank.  All four of these banks are now plaintiffs in one consolidated federal lawsuit, as discussed below. In addition, Home Federal Bank has brought a separate action, discussed below, in state court.

 

First Premier Bank, North American Banking Company, First Midwest Bank-Deerfield Branches and Mid-Country Bank  v. MetaBank (Civ. No. 06-4114).  On June 28, 2006, First Midwest Bank-Deerfield Branches and Mid-Country Bank filed suit against MetaBank in South Dakota’s Second Judicial Circuit Court, Minnehaha County, in the above titled action.  These consolidated complaints allege that plaintiff banks, who were participating lenders with MetaBank on a series of loans made to DNAG and SDAC, suffered damages as a result of MetaBank’s placement and administration of the loans that were the subject of the loan participation agreements.  The complaint sounds in breach of contract, negligence, gross negligence, negligent misrepresentation, fraud in the inducement, unjust enrichment and breach of fiduciary duty.  On July 17, 2006, MetaBank removed the case from state court to the United States District Court for the District of South Dakota, where the action has been assigned case no. Civ. 06-4114.  Plaintiff(s) moved to remand the case back to state court, but this motion was denied.  As noted above, North American Banking Company has been allowed by the United States District Court to join this action with similar claims and allegations against MetaBank.  Discovery is continuing and the case has been scheduled for trial later in 2008.

 

Home Federal Bank v. J. Tyler Haahr, Daniel A. Nelson and MetaBank (Civ. No. 06-2230).  On June 26, 2006, Home Federal Bank filed suit against MetaBank and two individuals, J. Tyler Haahr and Daniel A. Nelson, in South Dakota’s Second Judicial Circuit Court, Minnehaha County in the above titled action.  The complaint alleges that Home Federal, a participating lender with MetaBank on a series of loans made to DNAG and SDAC, suffered damages exceeding $3.8 million as a result of failure to make disclosures regarding an investigation of Nelson, DNAG and SDAC by the Iowa Attorney General at the time Home Federal agreed to an extension of the loan participation agreements.  The complaint sounds in fraud, negligent misrepresentation, breach of fiduciary duty, conspiracy and breach of duty of good faith and fair dealing.  Discovery is continuing and the case has been scheduled for trial later in 2008.

 

9



 

These actions are currently in discovery proceedings, and the amount of costs associated with these actions cannot be determined at this time.  The Company intends, however, to vigorously defend its actions.  Subject to a reservation of rights, the Company’s insurance carrier has agreed to cover the four claims described above and is currently paying for counsel to defend all four actions.

 

Visa Litigation Matters. The Company is a member of the Visa USA network.  During our 2008 first fiscal quarter, we were informed that VISA Inc. had reached a settlement in connection with the lawsuit brought against Visa by American Express in 2004 and had established a reserve related to an expected similar settlement with Discover Financial Services.  In addition, the Visa organization of affiliated entities had previously announced that it had completed a series of global restructuring transactions to combine its affiliated operating companies, including Visa USA, under a single holding company, Visa Inc.  Visa Inc. intends to issue and sell a majority of its shares to the public in an initial public offering.  Subsequent to the settlement announcement, the accounting treatment by member banks for the Visa restructuring transactions, including judgment sharing agreements previously executed among the Company and Visa Inc. (“Visa”) and certain other member banks of the Visa USA network has been addressed by the ABA.  Pursuant to this guidance, the Company will potentially have litigation liabilities associated with indemnification obligations under these agreements.  Based on the Company’s 0.00271% membership share of Visa USA and the accounting guidance we have received, we have recorded a litigation liability and corresponding expense of $158,000 for the first fiscal quarter ending December 31, 2007.  The Company also recorded a gain during the second fiscal quarter of 2008 for the redemption of its shares related to Visa’s initial public offering of $197,700 and a reversal of litigation expense of $73,500 related to the Visa IPO.

 

First Federal Bank Littlefield Texas ssb, formerly known as, First Federal Savings and Loan Association, Littlefield, Texas v. MetaBank, formerly known as First Federal Savings Bank of the Midwest. (Cause No. 17435).  The Frost National Bank v. MetaBank and Meta Financial Group, Inc.  (Cause No. 3:08-CV-625-M).  On April 3, 2008, First Federal Bank, filed suit against MetaBank in Texas State Court in Lubbock seeking recovery of a purported MetaBank certificate of deposit (CD) that it claims it had purchased.  On April 11, 2008, Frost National Bank, filed suit against MetaBank in the United States District Court for the District of Texas seeking a similar recovery. Earlier, MetaBank had been contacted by another institution, but could find no record of the CD it had allegedly purchased, and commenced an investigation. As a result of that investigation, it now appears that a former MetaBank employee had been selling fraudulent CDs, using MetaBank’s name and standard form of CD, to various financial institutions through an independent broker and instructing purchasers to wire the purchase money into one of a number of false accounts she had created at MetaBank.  MetaBank has received a number of demands from purchasers of these fraudulent CDs in addition to the lawsuits listed above. All evidence currently available indicates that the former employee ran this fraud for her own benefit and regularly took money from the MetaBank accounts to which the purchase monies had been wired.   As a result of the interruption of this fraud, there are some $4.2 million of bogus CDs still outstanding to various financial institutions.  As the former employee was apparently using the funds of new victims to pay off the previous victims of her scheme, it does not appear at this time that she stole any MetaBank money as part of this fraud.  MetaBank therefore does not appear at this time to have suffered any direct loss as a result of the fraud, but it may suffer a loss to the extent it is exposed to liability for claims such as these.    There are unresolved questions as whether, under what theory and to what degree MetaBank might be liable for the former employee’s actions.  At this time, MetaBank’s insurer has agreed to provide a defense to the two litigations in Texas under a reservation of rights.

 

There are no other material pending legal proceedings to which the Company or its subsidiaries is a party other than ordinary routine litigation to their respective businesses.

 

10



 

NOTE 6.  STOCK OPTION PLAN

 

The Company maintains the 2002 Omnibus Incentive Plan, which, among other things, provides for the awarding of stock options and nonvested (restricted) shares to certain officers and directors of the Company.  Awards are granted by the Stock Option Committee of the Board of Directors based on the performance of the award recipients or other relevant factors.

 

In accordance with SFAS No. 123(R), compensation expense for share based awards is recorded over the vesting period at the fair value of the award at the time of grant.  The exercise price of options or fair value of nonvested shares granted under the Company’s incentive plans is equal to the fair market value of the underlying stock at the grant date.  The Company assumes no projected forfeitures on its stock based compensation, since actual historical forfeiture rates on its stock based incentive awards has been negligible.

 

A summary of option activity for the six months ended March 31, 2008 is presented below:

 

 

 

 

 

 

 

Weighted

 

 

 

 

 

 

 

Weighted

 

Average

 

 

 

 

 

Number

 

Average

 

Remaining

 

Aggregate

 

 

 

of

 

Exercise

 

Contractual

 

Intrinsic

 

 

 

Shares

 

Price

 

Term (Yrs)

 

Value

 

 

 

(Dollars in Thousands, Except Share and Per Share Data)

 

 

 

 

 

 

 

 

 

 

 

Options outstanding, September 30, 2007

 

424,269

 

$

25.81

 

7.71

 

$

5,971

 

Granted

 

5,000

 

32.44

 

 

 

 

 

Exercised

 

(3,967

)

25.19

 

 

 

 

 

Forfeited or expired

 

(8,900

)

27.84

 

 

 

 

 

Options outstanding, March 31, 2008

 

416,402

 

$

25.88

 

7.39

 

$

5,854

 

 

 

 

 

 

 

 

 

 

 

Options exercisable at March  31, 2008

 

268,702

 

$

23.87

 

6.82

 

$

4,291

 

 

A summary of nonvested share activity for the six months ended March 31, 2008 is presented below:

 

 

 

 

 

Weighted

 

 

 

Number

 

Average

 

 

 

of

 

Fair Market Value

 

 

 

Shares

 

At Grant

 

 

 

(Dollars in Thousands, Except Share and Per Share Data)

 

 

 

 

 

 

 

Nonvested shares outstanding, September 30, 2007

 

6,666

 

$

24.43

 

Granted

 

 

 

Vested

 

 

 

Forfeited or expired

 

 

 

Nonvested shares outstanding, March 31, 2008

 

6,666

 

$

24.43

 

 

As of March 31, 2008, stock based compensation expense not yet recognized in income totaled $983,000 which is expected to be recognized over a weighted average remaining period of 1.13 years.

 

11



 

NOTE 7.  SEGMENT INFORMATION

 

An operating segment is generally defined as a component of a business for which discrete financial information is available and whose results are reviewed by the chief operating decision-maker. Operating segments are aggregated into reportable segments if certain criteria are met.  The Company has determined that it has two reportable segments.  The traditional banking segment consisting of its two banking subsidiaries, MetaBank and MetaBank WC, and Meta Payment Systems® (“MPS”), a division of MetaBank.  MetaBank and MetaBank WC operate as traditional community banks providing deposit, loan and other related products to individuals and small businesses, primarily in the communities where their offices are located.  MPS provides a number of products and services, primarily to third parties, including financial institutions and other businesses. These products and services include issuance of prepaid debit cards, sponsorship of ATMs into the debit networks, ACH origination services, a gift card program, rebate programs and tax related programs.  Other programs are in the process of development.  The remaining grouping under the caption “All Others” consists of the operations of Meta Financial Group, Inc. and Meta Trust Company®.  MetaBank WC is accounted for as discontinued bank operations.  It was reported as part of the traditional banking segment and has been separately classified to show the effect of continuing operations.  Transactions between affiliates, the resulting revenues of which are shown in the intersegment revenue category, are conducted at market prices, meaning prices that would be paid if the companies were not affiliates.  The following tables present segment data for the Company for the three and six months ended March 31, 2008 and 2007, respectively.

 

 

 

Traditional

 

Meta Payment

 

 

 

 

 

 

 

Banking

 

Systems®

 

All Others

 

Total

 

 

 

 

 

Three Months Ended March 31, 2008

 

 

 

 

 

 

 

 

 

Net interest income (loss)

 

$

3,069

 

$

3,226

 

$

(79

)

$

6,216

 

Provision for loan losses

 

200

 

 

 

$

200

 

Non-interest income

 

693

 

11,528

 

64

 

$

12,285

 

Non-interest expense

 

4,449

 

11,588

 

318

 

$

16,355

 

Income (loss) from continuing operations before tax

 

(887

)

3,166

 

(333

)

$

1,946

 

Income tax expense (benefit)

 

(157

)

1,009

 

(109

)

$

743

 

Income (loss) from continuing operations

 

$

(730

)

$

2,157

 

$

(224

)

$

1,203

 

 

 

 

 

 

 

 

 

 

 

Inter-segment revenue (expense)

 

$

(1,448

)

$

1,448

 

$

 

$

 

Total assets

 

457,923

 

349,610

 

3,002

 

$

810,535

 

Total deposits

 

258,721

 

335,202

 

 

$

593,923

 

 

 

 

 

 

 

 

 

 

 

 

 

West Central

 

 

 

 

 

 

 

Three Months Ended March 31, 2008

 

 

 

 

 

 

 

 

 

Net interest income

 

$

91

 

 

 

 

 

 

 

Provision for loan losses

 

(21

)

 

 

 

 

 

 

Non-interest income, including gain on sale

 

2,346

 

 

 

 

 

 

 

Non-interest expense

 

145

 

 

 

 

 

 

 

Income from discontinued operations before tax

 

2,313

 

 

 

 

 

 

 

Income tax expense

 

478

 

 

 

 

 

 

 

Income from discontinued operations

 

$

1,835

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Inter-segment revenue (expense)

 

$

83

 

 

 

 

 

 

 

Total assets

 

 

 

 

 

 

 

 

Total deposits

 

 

 

 

 

 

 

 

 

 

12



 

 

 

Traditional

 

Meta Payment

 

 

 

 

 

 

 

Banking

 

Systems®

 

All Others

 

Total

 

 

 

(Dollars in Thousands)

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 2007 (As Restated)

 

 

 

 

 

 

 

 

 

Net interest income (expense)

 

$

3,984

 

$

1,697

 

$

(238

)

$

5,443

 

Provision for loan losses

 

(225

)

 

 

(225

)

Non-interest income

 

678

 

3,691

 

24

 

4,393

 

Non-interest expense

 

4,281

 

4,370

 

359

 

9,010

 

Net income (loss) before tax

 

606

 

1,018

 

(573

)

1,051

 

Income tax expense (benefit)

 

225

 

347

 

(160

)

412

 

Net income (loss)

 

$

381

 

$

671

 

$

(413

)

$

639

 

 

 

 

 

 

 

 

 

 

 

Inter-segment revenue (expense)

 

$

(1,699

)

$

1,699

 

$

 

$

 

Total assets

 

460,784

 

229,466

 

(1,812

)

688,438

 

Total deposits

 

326,933

 

223,507

 

 

550,440

 

 

 

 

 

 

 

 

 

 

 

 

 

West Central

 

 

 

 

 

 

 

Three Months Ended March 31, 2007

 

 

 

 

 

 

 

 

 

Net interest income (loss)

 

$

231

 

 

 

 

 

 

 

Provision for loan losses

 

(55

)

 

 

 

 

 

 

Non-interest income

 

48

 

 

 

 

 

 

 

Non-interest expense

 

182

 

 

 

 

 

 

 

Income from discontinued operations before tax

 

152

 

 

 

 

 

 

 

Income tax expense

 

56

 

 

 

 

 

 

 

Income from discontinued operations

 

$

96

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Inter-segment revenue (expense)

 

$

 

 

 

 

 

 

 

Total assets

 

40,988

 

 

 

 

 

 

 

Total deposits

 

28,430

 

 

 

 

 

 

 

 

 

 

 

Traditional

 

Meta Payment

 

 

 

 

 

 

 

Banking

 

Systems®

 

All Others

 

Total

 

 

 

 

 

Six Months Ended March 31, 2008

 

 

 

 

 

 

 

 

 

Net interest income (loss)

 

$

5,512

 

$

6,277

 

$

(299

)

$

11,490

 

Provision for loan losses

 

70

 

 

 

$

70

 

Non-interest income

 

1,276

 

17,038

 

101

 

$

18,415

 

Non-interest expense

 

8,604

 

20,116

 

421

 

$

29,141

 

Income (loss) from continuing operations before tax

 

(1,886

)

3,199

 

(619

)

$

694

 

Income tax expense (benefit)

 

(631

)

1,119

 

(207

)

$

281

 

Income (loss) from continuing operations

 

$

(1,255

)

$

2,080

 

$

(412

)

$

413

 

 

 

 

 

 

 

 

 

 

 

Inter-segment revenue (expense)

 

$

(2,671

)

$

2,671

 

$

 

$

 

Total assets

 

457,923

 

349,610

 

3,002

 

$

810,535

 

Total deposits

 

258,721

 

335,202

 

 

$

593,923

 

 

 

 

 

 

 

 

 

 

 

 

 

West Central

 

 

 

 

 

 

 

Six Months Ended March 31, 2008

 

 

 

 

 

 

 

 

 

Net interest income

 

$

262

 

 

 

 

 

 

 

Provision for loan losses

 

(57

)

 

 

 

 

 

 

Non-interest income, including gain on sale

 

2,440

 

 

 

 

 

 

 

Non-interest expense

 

374

 

 

 

 

 

 

 

Income from discontinued operations before tax

 

2,385

 

 

 

 

 

 

 

Income tax expense

 

500

 

 

 

 

 

 

 

Income from discontinued operations

 

$

1,885

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Inter-segment revenue (expense)

 

$

175

 

 

 

 

 

 

 

Total assets

 

 

 

 

 

 

 

 

Total deposits

 

 

 

 

 

 

 

 

 

 

13



 

 

 

Traditional

 

Meta Payment

 

 

 

 

 

 

 

Banking

 

Systems®

 

All Others

 

Total

 

 

 

(Dollars in Thousands)

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended March 31, 2007 (As Restated)

 

 

 

 

 

 

 

 

 

Net interest income (expense)

 

$

7,821

 

$

3,084

 

$

(471

)

$

10,434

 

Provision for loan losses

 

3,838

 

 

 

3,838

 

Non-interest income

 

1,114

 

7,331

 

49

 

8,494

 

Non-interest expense

 

8,533

 

8,321

 

739

 

17,593

 

Net income (loss) before tax

 

(3,436

)

2,094

 

(1,161

)

(2,503

)

Income tax expense (benefit)

 

(1,200

)

704

 

(351

)

(847

)

Net income (loss)

 

$

(2,236

)

$

1,390

 

$

(810

)

$

(1,656

)

 

 

 

 

 

 

 

 

 

 

Inter-segment revenue (expense)

 

$

(3,066

)

$

3,066

 

$

 

$

 

Total assets

 

460,784

 

229,466

 

(1,812

)

688,438

 

Total deposits

 

326,933

 

223,507

 

 

550,440

 

 

 

 

 

 

 

 

 

 

 

 

 

West Central

 

 

 

 

 

 

 

Six Months Ended March 31, 2007

 

 

 

 

 

 

 

 

 

Net interest income (loss)

 

$

499

 

 

 

 

 

 

 

Provision for loan losses

 

657

 

 

 

 

 

 

 

Non-interest income

 

86

 

 

 

 

 

 

 

Non-interest expense

 

429

 

 

 

 

 

 

 

Income from discontinued operations before tax

 

(501

)

 

 

 

 

 

 

Income tax expense

 

(188

)

 

 

 

 

 

 

Income from discontinued operations

 

$

(313

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Inter-segment revenue (expense)

 

$

 

 

 

 

 

 

 

Total assets

 

40,988

 

 

 

 

 

 

 

Total deposits

 

28,430

 

 

 

 

 

 

 

 

 

14



 

NOTE 8.  NEW ACCOUNTING PRONOUNCEMENTS

 

At its September 2006 meeting, the Emerging Issues Task Force (“EITF”) reached a final consensus on Issue No. 06-04, Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar Life Insurance Arrangements.  The consensus stipulates that an agreement by an employer to share a portion of the proceeds of a life insurance policy with an employee during the postretirement period is a postretirement benefit arrangement required to be accounted for under Statement No. 106 (“SFAS No. 106”) or Accounting Principles Board (“APB”) Opinion No. 12, Omnibus Opinion - 1967. The consensus concludes that the purchase of a split-dollar life insurance policy does not constitute a settlement under SFAS No. 106 and, therefore, a liability for the postretirement obligation must be recognized under SFAS No. 106 if the benefit is offered under an arrangement that constitutes a plan or under APB No. 12 if it is not part of a plan. Issue 06-04 is effective for the Company beginning October 1, 2008.  The Company has endorsement split-dollar life insurance policies and is currently assessing the financial statement impact of implementing EITF 06-04.

 

In February 2007, the FASB issued FASB Statement No. 159, The Fair Value Option for Financial Assets and Financial Liabilities — Including an Amendment of FASB Statement No. 115 (“SFAS No. 159”). SFAS No. 159 permits companies to choose to measure many financial instruments and certain other  items at fair value that are not currently required to be measured at fair value. The objective of SFAS No. 159 is to provide opportunities to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply hedge accounting principles. SFAS No. 159 also establishes presentation and disclosure requirements designed to facilitate comparisons between companies that choose different measurement attributes for similar types of assets and liabilities. The Statement is effective for financial statements issued for the year beginning after November 15, 2007. The Company is currently evaluating the impact that the Statement will have on its consolidated financial statements.

 

At its March 2007 meeting, the EITF reached a final consensus on Issue No. 06-10, Accounting for Collateral Assignment Split-Dollar Life Insurance Arrangements.  A consensus was reached that an employer should recognize a liability for the postretirement benefit related to a collateral assignment split-dollar life insurance arrangement in accordance with either FASB Statement No. 106 or APB Opinion No. 12, as appropriate, if the employer has agreed to maintain a life insurance policy during the employee’s retirement or provide the employee with a death benefit based on the substantive agreement with the employee.  A consensus also was reached that an employer should recognize and measure an asset based on the nature and substance of the collateral assignment split-dollar life insurance arrangement.  The consensuses are effective for the Company beginning October 1, 2008, including interim periods within those fiscal years, with early application permitted.  The Company has endorsement split-dollar life insurance policies and is currently assessing the financial statement impact of implementing EITF 06-10.

 

In September 2006, the FASB issued Statement No. 157, (“SFAS No. 157”), Fair Value Measurements.  SFAS No. 157 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements.  It clarifies that fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the market in which the reporting entity transacts.  SFAS No. 157 does not require any new fair value measurements, but rather, it provides enhanced guidance to other pronouncements that require or permit assets or liabilities to be measured at fair value.  SFAS No. 157 is effective for fiscal years beginning after November 15, 2007, with earlier adoption permitted.  The Company does not expect that the adoption of SFAS No. 157 will have a material impact on its financial position, results of operation and cash flows.

 

15



 

Part I.         Financial Information

Item 2.        Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

META FINANCIAL GROUP, INC®.

AND SUBSIDIARIES

 

FORWARD LOOKING STATEMENTS

 

The Company, and its wholly-owned subsidiaries, MetaBank and Meta Trust, may from time to time make written or oral “forward-looking statements,” including statements contained in its filings with the Securities and Exchange Commission, in its reports to shareholders, and in other communications by the Company, which are made in good faith by the Company pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995.

 

These forward-looking statements include statements with respect to the Company’s beliefs, expectations, estimates, and intentions that 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 statements address the following subjects:  future operating results; customer retention; loan and other product demand; important components of the Company’s balance sheet and income statements; growth and expansion; new products and services, such as those offered by MPS or MetaBank; credit quality and adequacy of reserves; technology; and our employees.  The following factors, among others, could cause the Company’s financial performance to differ materially from the expectations, estimates, and intentions expressed in such forward-looking statements:  the strength of the United States economy in general and the strength of the local economies in which the Company conducts operations; the effects of, and changes in, trade, monetary, and fiscal policies and laws, including interest rate policies of the Federal Reserve Board; inflation, interest rate, market, and monetary fluctuations; the timely development of and acceptance of new products and services offered by the Company as well as risks (including litigation) attendant thereto and the perceived overall value of these products and services by users; the risks of dealing with or utilizing third-party vendors; the impact of changes in financial services’ laws and regulations; technological changes, including but not limited to the protection of electronic files or databases; acquisitions; risk in general, including but not limited to those risks involving the MPS division; the growth of the Company’s business as well as expenses related thereto; changes in consumer spending and saving habits; and the success of the Company at managing and collecting assets of borrowers in default.

 

The foregoing list of factors is not exclusive.  Additional discussions of factors affecting the Company’s business and prospects are contained in the Company’s periodic filings with the SEC.  The Company expressly disclaims any intent or obligation to update any forward-looking statement, whether written or oral, that may be made from time to time by or on behalf of the Company or its subsidiaries.

 

GENERAL
 

Meta Group is a unitary savings and loan holding company whose primary subsidiary is MetaBank.  The Company was incorporated in 1993 as a unitary non-diversified savings and loan holding company that, on September 20 of that year, acquired all of the capital stock of MetaBank, a federal savings bank, in connection with MetaBank’s conversion from mutual to stock form of ownership.  On September 30, 1996, the Company became a bank holding company in conjunction with the acquisition of MetaBank WC, a state-chartered commercial bank.  Finally, in connection with a transaction that closed on March 28, 2008, whereby Meta Financial sold its ownership interest in MetaBank WC, Meta Financial again became a unitary savings and loan holding company regulated by the Office of Thrift Supervision.  The sale of MetaBank WC has been accounted for as discontinued bank operations.

 

The following discussion focuses on the consolidated financial condition of the Company and its subsidiaries, at March 31, 2008, compared to September 30, 2007 and the consolidated results of operations for the three and six

 

16



 

months ended March 31, 2008 and 2007. This discussion should be read in conjunction with the Company’s consolidated financial statements, and notes thereto, for the year ended September 30, 2007.

 

CORPORATE DEVELOPMENTS AND OVERVIEW

 

The Bank’s MPS division delivered record revenues and profits in the Company’s 2008 fiscal second quarter. The division was created in May 2004 and is now recognized as an industry leader in a number of different areas within the payment systems industry including prepaid debit cards, ATMs, other payment products and services.

 

MPS launched new programs with Jackson Hewitt, AAA and H&R Block, experienced growth in rebate cards, and saw exciting adoption rates on iAdvance, its new patent-pending micro-credit product.  On a business segment basis, its revenues (interest income plus non-interest income) grew by 179% over the same quarter a year ago and now comprise 68% of the Company’s total revenue from continuing operations compared to 38% in the second quarter of the prior year.  Although prepaid card-related deposits increased during the quarter, the average transfer pricing yield realized by MPS on these deposits dropped by 132 basis points, or 28%, in line with market conditions.  MPS will have some seasonality in its results going forward from its relationships in the tax industry.

 

MPS also continued to demonstrate industry leadership and positive results from its ongoing investment in innovation and infrastructure.  The Company filed 5 patents in the quarter and received several industry awards, including Most Innovative Product (iAdvance), Best Promotion Card Program (Hasbro/Young America), and the divisions top officers, Brad Hanson and Scott Galit received Industry Leadership awards.

 

The Bank continues to emphasize expansion in the growing metropolitan areas of Sioux Falls, South Dakota and Des Moines, Iowa.  The Bank has added seven branches in approximately the past seven years in these markets.  The Company focuses primarily on establishing lending and deposit relationships with commercial businesses and commercial real estate developers in these communities.  During the quarter, the Company sold its commercial banking subsidiary, MetaBank WC, which included three branches in rural West-Central Iowa.  The transaction closed March 28, 2008.  The Company is now a unitary savings and loan holding company, and not a bank holding company, and is subject to the jurisdiction of the Office of Thrift Supervision (“OTS”).  These transactions allow the Company to increase its focus on higher growth markets and business lines.  The Bank now operates 13 retail banking branches: in Brookings (1) and Sioux Falls (4), South Dakota, in Des Moines (6) and Storm Lake (2), Iowa and a non-retail service branch in Memphis, Tennessee.

 

The Company’s stock trades on the NASDAQ Global Market under the symbol “CASH.”

 

FINANCIAL CONDITION

 

As of March 31, 2008, the Company had assets totaling $810.5 million compared to $686.1 million at September 30, 2007, even with the sale of approximately $41.0 million of assets as part of the MetaBank WC sale.  The increase in assets of $124.4 million, or 18.1%, resulted primarily from increases in the Company’s securities, loan portfolios and other assets offset in part by decreases in the Company’s cash and assets related to discontinued operations.

 

Total cash and cash equivalents and federal funds sold were $64.5 million at March 31, 2008, a decrease of $21.8 million, or 25.2%, from $86.3 million at September 30, 2007.  The decrease was primarily the result of the Company’s loan growth and decision to purchase mortgage-backed securities during the first two quarters.  In general, the Company maintains its cash investments in interest-bearing overnight deposits with various correspondent banks.  Federal funds sold deposits are maintained at various large commercial banks.

 

Investment securities available for sale, including mortgage-backed securities, increased $90.6 million, or 57.1%, to $249.3 million at March 31, 2008, as investment purchases exceeded related maturities, sales, and principal paydowns.  The Company’s portfolio of investment securities available for sale consists primarily of mortgage-backed

 

17



 

securities with balloon maturities, which have relatively short expected lives and limited maturity extension risk.  During the six month period ended March 31, 2008, the Company purchased $102.8 million of mortgage-backed securities with average lives of three to four years or stated finals of approximately eleven years or less.

 

The Company’s portfolio of net loans receivable increased $48.4 million, or 13.6%, to $404.0 million at March 31, 2008, even with the sale of approximately $8.0 million of loans as part of the MetaBank WC sale.  The Company’s loan growth primarily relates to strong demand for commercial real estate loans.

 

Bond insurance receivable increased $4.2 million at March 31, 2008 due to the Company recording a receivable during the first quarter of fiscal 2008 from our insurance company related to a potential recovery of certificate of deposit fraud.

 

Other assets increased $32.6 million to $40.6 million at March 31, 2008 from $8.0 million at September 30, 2007.  The increase was primarily related to an increase in prepaid card funding in transit items at MPS.

 

Assets related to discontinued operations, held for sale, decreased 100.0% or $35.8 million from the levels at September 30, 2007 due to the sale of MetaBank WC on March 28, 2008.  See Note 2 to the Notes to Condensed Consolidated Financial Statements for further discussion on discontinued operations.

 

Total deposits increased $70.9 million, or 13.6%, to $593.9 million at March 31, 2008, even with the sale of approximately $29.0 million of deposits as part of the MetaBank WC sale.  The majority of this increase related to an increase in non-interest-bearing checking deposits due to growth at MPS, though non-MPS deposits grew as well.  The Company’s deposit mix continues to shift from higher costing certificates of deposit and money market deposits toward low- and no-cost checking deposits.

 

Total borrowings increased $69.0 million, or 101.1%, much of which is due to a short-term borrowing need at the end of the quarter, from $78.5 million at September 30, 2007 to $147.5 million at March 31, 2008.

 

The Company’s contingent liability for potential loss on a certificates of deposit fraud increased $4.2 million for the six month period ended March 31, 2008 as compared to the prior year.  This liability is offset by the above referenced bond insurance receivable recorded during the first quarter of fiscal 2008.

 

Liabilities related to discontinued operations, held for sale, decreased 100.0% or $30.9 million from the levels at September 30, 2007 due to the sale of MetaBank WC on March 28, 2008.  See Note 2 to the Notes to Condensed Consolidated Financial Statements for further discussion on discontinued operations.

 

At March 31, 2008, the Company’s shareholders’ equity totaled $52.9 million, up $4.8 million from $48.1 million at September 30, 2007.  The increase was related to an increase in unrealized gain in the Company’s available for sale securities portfolio and the fiscal 2008 year-to-date net income (see “Results of Operations” below) partially offset by the payment of dividends on the Company’s common stock.  At March 31, 2008, MetaBank continues to meet regulatory requirements for classification as well-capitalized institution.

 

Non-performing Assets and Allowance for Loan Losses

 

Generally, when a loan becomes delinquent 90 days or more or when the collection of principal or interest becomes doubtful, the Company will place the loan on a non-accrual status and, as a result of this action, previously accrued interest income on the loan is taken out of current income.  The loan will remain on non-accrual status until the loan has been brought current or until other circumstances occur that provide adequate assurance of full repayment of interest and principal.

 

18



 

At March 31, 2008, the Company’s loan portfolio exhibited strong credit quality with 30+ day delinquencies of $5.8 million, or 1.4% of total loans compared to $7.2 million, or 1.9% of total loans, at September 30, 2007.

 

At March 31, 2008, commercial and multi-family real estate 30+ day delinquencies totaled $1.4 million, or 0.35% of total loans.  This compares to $1.6 million or 0.45% of total loans at September 30, 2007.  Multi-family and commercial real estate loans generally present different risks than loans secured by one-to-four family residences, including, but not limited to, the concentration of principal in a limited number of loans and borrowers, the effect of general economic conditions on income producing properties and the higher level of difficulty of evaluating and monitoring these types of loans.

 

At March 31, 2008, commercial business 30+ day delinquencies totaled $2.7 million, or 0.67% of total loans.  This compares to $4.8 million, or 1.32% of total loans, at September 30, 2007.  Risks associated with commercial business lending include, but are not limited to: payments on loans are typically dependent on the cash flows derived from the operation or management of the business to which the loan is made, and the success of the loan may also be affected by factors outside the control of the business, such as unforeseen changes in economic conditions for the business, the industry in which the business operates or the general environment.

 

At December 31, 2007, agricultural 30+ day delinquencies totaled $400,000, or 0.10% of total loans.  This compares to $163,000, or 0.05% of total loans, at September 30, 2007.  Agricultural lending also typically involves larger loan amounts. In addition, payments on loans are dependent on the successful operation or management of the farm property securing the loan or for which an operating loan is utilized.  The success of the loan may also be affected by factors outside the control of the agricultural borrower, such as the weather and grain and livestock prices.

 

The Company believes that the level of allowance for loan losses adequately reflects potential risks related to these loans; however there can be no assurance that all loans will be fully collectible.

 

19



 

The table below sets forth the amounts and categories of non-performing assets in the Company’s loan portfolio.  Foreclosed assets include assets acquired in settlement of loans.  Balances related to discontinued bank operations have been eliminated for all periods presented.

 

 

 

Non-performing Assets As Of

 

 

 

March 31, 2008

 

September 30, 2007

 

 

 

(Dollars in Thousands)

 

 

 

 

 

 

 

Non-accruing loans:

 

 

 

 

 

One- to four-family

 

$

967

 

$

243

 

Agricultural real estate

 

 

13

 

Consumer

 

2

 

5

 

Commercial business

 

1,769

 

1,867

 

Total

 

2,738

 

2,128

 

 

 

 

 

 

 

Accruing loans delinquent 90 days or more:

 

 

 

Total

 

 

 

 

 

 

 

 

 

Restructured loans:

 

 

 

 

 

Agricultural operating

 

121

 

150

 

Commercial business

 

 

15

 

Total

 

121

 

165

 

 

 

 

 

 

 

Foreclosed assets:

 

 

 

 

 

One- to four-family

 

267

 

 

Commercial and multi-family

 

 

229

 

Consumer

 

 

24

 

Commercial business

 

 

65

 

Total

 

267

 

318

 

Less: Allowance for losses

 

 

 

Foreclosed assets, net

 

267

 

318

 

 

 

 

 

 

 

Total non-performing assets

 

$

3,126

 

$

2,611

 

Non-performing assets as a percentage of total assets

 

0.39

%

0.38

%

 

Classified assets.  Federal regulations provide for the classification of loans and other assets such as debt and equity securities considered by the OTS to be of lessor quality as “substandard”, “doubtful” or “loss.”  An asset is considered “substandard” if it is inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any.  “Substandard” assets include those characterized by the “distinct possibility” that the savings association will sustain “some loss” if the deficiencies are not corrected.  Assets classified as “doubtful” have all the weaknesses inherent in those classified as “substandard,” with the added characteristic that the weaknesses present make “collection or liquidation in full,” on the basis of currently existing facts, conditions and values, “highly questionable and improbable.”  Assets classified as “loss” are those considered “uncollectible” and of such minimal value that their continuance as assets without the establishment of a specific reserve is not warranted.  When assets are classified as either substandard or doubtful, the Bank may establish general allowances for loan losses in an amount deemed prudent by management.  General allowances represent loss allowances which have been established to recognize the inherent risk associated with lending activities, but which, unlike specific allowances, have not been allocated to particular problem assets.  When assets are classified as “loss,” the Bank is required either to establish a specific allowance for loan losses equal to 100% of that portion of the asset so classified or to charge-off such amount. The Bank’s determination as to the classification of its assets and the amount of its valuation allowances are subject to review by its regulatory authorities, who may require the establishment of additional general or specific loss allowances.  The discovery of

 

20



 

additional information in the future may also affect both the level of classification and the amount of loss allowances.

 

On the basis of management’s review of its loans and other assets, at March 31, 2008, the Company had classified (from continuing operations) a total of $3.7 million of its assets as substandard, $78,000 as doubtful and none as loss.  This compares to classifications at September 30, 2007 of $6.0 million substandard, $82,000 doubtful and none as loss.

 

Allowance for loan losses.  The Company establishes its provision for loan losses, and evaluates the adequacy of its allowance for loan losses based upon a systematic methodology consisting of a number of factors including, among others, historic loss experience, the overall level of classified assets and non-performing loans, the composition of its loan portfolio and the general economic environment within which the Company and its borrowers operate.

 

Management closely monitors economic developments both regionally and nationwide, and considers these factors when assessing the adequacy of its allowance for loan losses. While the Company has no direct exposure to sub-prime mortgage loans, management has previously expressed its concern that developments in the sub-prime mortgage market may have a ripple effect on residential real estate prices.  In addition, the economic slowdown and increase in energy prices are straining the financial condition of some borrowers.  Management therefore believes that future losses in the residential portfolio may be somewhat higher than historical experience.  Over the past six years, loss rates in the commercial and multi-family real estate market have remained moderate.  Management recognizes that low charge-off rates over the past several years reflect the strong economic environment and are not indicative of likely losses over a full business cycle.  This observation, as well as the aforementioned concerns regarding economic slowdown, has led management to the conclusion that future losses in this portfolio may be somewhat higher than recent historical experience, excluding loan losses related to fraud by borrowers.  On the other hand, current trends in agricultural markets continue to be positive.  Higher commodity prices as well as higher yields have created strong economic conditions for most farmers.  Nonetheless, management still expects that future losses in this portfolio, which have been very low, could be higher than recent historical experience.  Management believes that the slowdown in economic growth during this fiscal year may also negatively impact consumers’ repayment capacities.  Additionally, a sizable portion of the Company’s consumer loan portfolio is secured by residential real estate, as discussed above, is an area to be closely monitored by management in view of its stated concerns.  Notwithstanding these concerns, the loan portfolios’ delinquency trends strengthened during the quarter.

 

Management believes that, based on a detailed review of the loan portfolio, historic loan losses, current economic conditions, the size of the loan portfolio, and other factors, the current level of the allowance for loan losses at March 31, 2008 reflects an adequate allowance against probable losses from the loan portfolio.   Although the Company maintains its allowance for loan losses at a level that it considers to be adequate, investors and others are cautioned that there can be no assurance that future losses will not exceed estimated amounts, or that additional provisions for loan losses will not be required in future periods.  In addition, the Company’s determination of the allowance for loan losses is subject to review by its regulatory agencies, which can require the establishment of additional general or specific allowances.

 

At March 31, 2008, the Company has established an allowance for loan losses totaling $4.6 million, or 160% of non-performing loans, compared to $4.5 million, or 196% of non-performing loans at September 30, 2007.

 

21



 

The following table sets forth an analysis of the activity in the Company’s allowance for loan losses for the three and six months ended March 31, 2008 and 2007.

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

March 31,

 

March 31,

 

(Dollars in Thousands)

 

2008

 

2007

 

2008

 

2007

 

 

 

 

 

 

 

 

 

(As Restated)

 

 

 

 

 

 

 

 

 

 

 

Beginning balance

 

$

4,370

 

$

9,362

 

$

4,493

 

$

6,391

 

Provision for loan losses

 

200

 

(225

)

70

 

3,838

 

Charge-offs

 

(5

)

(4,076

)

(30

)

(5,169

)

Recoveries

 

16

 

44

 

48

 

45

 

Ending balance

 

$

4,581

 

$

5,105

 

$

4,581

 

$

5,105

 

 

The allowance for loan losses reflects management’s best estimate of probable losses inherent in the portfolio based on currently available information.  In addition to the factors mentioned above, future additions to the allowance for loan losses may become necessary based upon changing economic conditions, increased loan balances or changes in the underlying collateral of the loan portfolio.

 

CRITICAL ACCOUNTING POLICIES
 

The Company’s financial statements are prepared in accordance with accounting principles generally accepted in the United States of America.  The financial information contained within these statements is, to a significant extent, financial information that is based on approximate measures of the financial effects of transactions and events that have already occurred.  Based on its consideration of accounting policies that involve the most complex and subjective decisions and assessments, management has identified its most critical accounting policies to be those related to the allowance for loan losses and asset impairment judgments including the recoverability of goodwill.

 

The Company’s allowance for loan loss methodology incorporates a variety of risk considerations, both quantitative and qualitative, in establishing an allowance for loan loss that management believes is appropriate at each reporting date. Quantitative factors include the Company’s historical loss experience, delinquency and charge-off trends, collateral values, changes in non-performing loans, and other factors. Quantitative factors also incorporate known information about individual loans, including borrowers’ sensitivity to interest rate movements.  Qualitative factors include the general economic environment in the Company’s markets, including economic conditions throughout the Midwest and, in particular, the state of certain industries.  Size and complexity of individual credits in relation to loan structure, existing loan policies, and pace of portfolio growth are other qualitative factors that are considered in the methodology.  As the Company adds new products and increases the complexity of its loan portfolio, it will enhance its methodology accordingly.  Management may have reported a materially different amount for the provision for loan losses in the statement of operations to change the allowance for loan losses if its assessment of the above factors were different.  This discussion and analysis should be read in conjunction with the Company’s financial statements and the accompanying notes presented elsewhere herein, as well as the portion of this Management’s Discussion and Analysis section entitled “Non-performing Assets and Allowance for Loan Losses.”  Although management believes the level of the allowance as of March 31, 2008 was adequate to absorb probable losses inherent in the loan portfolio, a decline in local economic conditions or other factors could result in increasing losses.

 

Goodwill represents the excess of acquisition costs over the fair value of the net assets acquired in a purchase acquisition. Goodwill is tested annually for impairment.

 

22



 

RESULTS OF OPERATIONS

 

General.  The Company’s income from continuing operations was $1.2 million, or $0.46 per diluted share, for the three months ended March 31, 2008 compared to income from continuing operations of $639,000, or $0.24 per diluted share, for the three months ended March 31, 2007.  The Company recorded net income of $3.0 million, or $1.16 per diluted share, for the three months ended March 31, 2008 compared to net income of $735,000, or $0.28 per diluted share, for the same period in fiscal year 2007.  Net earnings in the current period were impacted by a pre-tax gain of $2.3 million resulting from the sale of the Company’s commercial banking subsidiary, MetaBank WC.  See Note 2 to the Notes to Condensed Consolidated Financial Statements for further discussion on discontinued operations.  Additionally, earnings were impacted by increased income from card fees income from MPS’ income tax related programs and services, loan growth and higher net interest income.  In particular, MPS-related card fees for the current quarter grew by 214% over the same period in the prior year.  Offsetting these factors, in part, were higher operating expenses as MPS solidified its management team, infrastructure and operational scalability and, to a lesser extent, increased income tax expense and an increased provision for loan losses.

 

The Company’s income from continuing operations was $413,000, or $0.16 per diluted share, for the six months ended March 31, 2008 compared to a loss from continuing operations of $1.7 million, or $0.66 per diluted share, for the same period in fiscal year 2007.  The Company recorded net income of $2.3 million, or $0.87 per diluted share, for the six months ended March 31, 2008 compared to a net loss of $2.0 million, or $0.78 per diluted share, for the same period in fiscal year 2007.  Earnings for the six month period ended March 31, 2008 were impacted by the aforementioned factors while earnings in the prior period were impacted by the recognition of an impairment on a commercial loan relationship which reduced pre-tax earnings by $4.95 million.

 

 Net interest income.  Net interest income from continuing operations for the second quarter of fiscal year 2008 increased by $773,000, or 14.2%, to $6.2 million for the second quarter of fiscal year 2007.  Lower liability costs primarily contributed to this increase.  Net interest margin rose 14 basis points to 3.59% in the current quarter.  The improvement resulted primarily from the shift in the Company’s funding mix attributable to growth in non-interest-bearing deposits and decreases in higher costing certificates and public funds deposits.  Total asset yields were 5.71%, down 45 basis points for the same quarter last year.  Total liability costs fell 62 basis points to 2.09% in the current quarter.  Non-interest-bearing checking comprises 60% of total deposits at December 31, 2007 compared to 50% at September 30, 2007.  Average non-interest-bearing deposits as a percent of total average deposits and interest-bearing liabilities was 51% in the current quarter compared to 38% the same quarter a year ago.  For the six month period ended March 31, 2008 net interest income was $11.5 million compared to $10.4 million for the same period in the prior fiscal year.  Net interest margin was 3.52% for the six months ended March 31, 2008, up 6 basis points from 3.46% for the same period in the prior fiscal year.

 

23



 

The following table presents, for the periods indicated, the Company’s total dollar amount of interest income from average interest-earning assets and the resulting yields, as well as the interest expense on average interest-bearing liabilities, expressed both in dollars and rates.  No tax equivalent adjustments have been made.  Non-accruing loans have been included in the table as loans carrying a zero yield.  Balances related to discontinued bank operations have been reclassified to non-interest-earning assets and non-interest-bearing liabilities for all periods presented.

 

Three Months Ended March 31,

 

2008

 

2007

 

 

 

Average

 

Interest

 

 

 

Average

 

Interest

 

 

 

 

 

Outstanding

 

Earned /

 

Yield /

 

Outstanding

 

Earned /

 

Yield /

 

(Dollars in Thousands)

 

Balance

 

Paid

 

Rate

 

Balance

 

Paid

 

Rate

 

Interest-earning assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans receivable

 

$

426,059

 

$

6,599

 

6.23

%

$

353,064

 

$

6,297

 

7.23

%

Mortgage-backed securities

 

212,773

 

2,339

 

4.42

%

137,303

 

1,391

 

4.11

%

Other investments and fed funds sold

 

58,388

 

957

 

6.59

%

150,037

 

2,032

 

5.49

%

Total interest-earning assets

 

697,220

 

$

9,895

 

5.71

%

640,404

 

$

9,720

 

6.16

%

Non-interest-earning assets

 

63,773

 

 

 

 

 

87,326

 

 

 

 

 

Total assets

 

$

760,993

 

 

 

 

 

$

727,730

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-interest bearing deposits

 

$

364,811

 

$

 

0.00

%

$

243,178

 

$

 

0.00

%

Interest-bearing liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing checking

 

16,613

 

32

 

0.77

%

26,012

 

161

 

2.51

%

Savings

 

10,201

 

28

 

1.10

%

19,026

 

117

 

2.50

%

Money markets

 

56,447

 

353

 

2.52

%

60,978

 

478

 

3.18

%

Time deposits

 

143,762

 

1,617

 

4.52

%

198,588

 

2,219

 

4.53

%

FHLB advances

 

70,443

 

864

 

4.93

%

76,300

 

1,001

 

5.32

%

Other borrowings

 

46,578

 

785

 

6.78

%

15,963

 

301

 

7.65

%

Total interest-bearing liabilities

 

344,044

 

3,679

 

4.30

%

396,867

 

4,277

 

4.37

%

Total deposits and interest-bearing liabilities

 

708,855

 

$

3,679

 

2.09

%

640,045

 

$

4,277

 

2.71

%

Other non-interest bearing liabilities

 

9,788

 

 

 

 

 

44,052

 

 

 

 

 

Total liabilities

 

718,643

 

 

 

 

 

684,097

 

 

 

 

 

Shareholders’ equity

 

42,350

 

 

 

 

 

43,633

 

 

 

 

 

Total liabilities and shareholders’ equity

 

$

760,993

 

 

 

 

 

$

727,730

 

 

 

 

 

Net interest income and net interest rate spread including non-interest bearing deposits

 

 

 

$

6,216

 

3.62

%

 

 

$

5,443

 

3.45

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest margin

 

 

 

 

 

3.59

%

 

 

 

 

3.45

%

 

 

24



 

 

Six Months Ended March 31,

 

2008

 

2007

 

 

 

Average

 

Interest

 

 

 

Average

 

Interest

 

 

 

 

 

Outstanding

 

Earned /

 

Yield /

 

Outstanding

 

Earned /

 

Yield /

 

(Dollars in Thousands)

 

Balance

 

Paid

 

Rate

 

Balance

 

Paid

 

Rate

 

Interest-earning assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans receivable

 

$

398,281

 

$

12,877

 

6.47

%

$

338,286

 

$

12,782

 

7.58

%

Mortgage-backed securities

 

178,659

 

3,846

 

4.31

%

126,304

 

2,867

 

4.55

%

Other investments and fed funds sold

 

76,079

 

2,071

 

5.44

%

140,602

 

3,854

 

5.50

%

Total interest-earning assets

 

653,019

 

$

18,794

 

5.76

%

605,192

 

$

19,503

 

6.46

%

Non-interest-earning assets

 

50,263

 

 

 

 

 

126,994

 

 

 

 

 

Total assets

 

$

703,282

 

 

 

 

 

$

732,186

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-interest bearing deposits

 

$

320,809

 

$

 

0.00

%

$

219,283

 

$

 

0.00

%

Interest-bearing liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing checking

 

15,804

 

75

 

0.95

%

22,750

 

405

 

3.57

%

Savings

 

10,327

 

75

 

1.45

%

20,270

 

303

 

2.99

%

Money markets

 

60,893

 

910

 

2.99

%

66,509

 

1,142

 

3.44

%

Time deposits

 

147,860

 

3,395

 

4.59

%

184,226

 

4,432

 

4.82

%

FHLB advances

 

68,539

 

1,795

 

5.24

%

71,603

 

2,111

 

5.91

%

Other borrowings

 

30,925

 

1,054

 

6.82

%

20,270

 

676

 

6.69

%

Total interest-bearing liabilities

 

334,348

 

7,304

 

4.37

%

385,628

 

9,069

 

4.72

%

Total deposits and interest-bearing liabilities

 

655,157

 

$

7,304

 

2.23

%

604,911

 

$

9,069

 

3.01

%

Other non-interest bearing liabilities

 

7,285

 

 

 

 

 

82,617

 

 

 

 

 

Total liabilities

 

662,442

 

 

 

 

 

687,528

 

 

 

 

 

Shareholders’ equity

 

40,840

 

 

 

 

 

44,658

 

 

 

 

 

Total liabilities and shareholders’ equity

 

$

703,282

 

 

 

 

 

$

732,186

 

 

 

 

 

Net interest income and net interest rate spread including non-interest bearing deposits

 

 

 

$

11,490

 

3.53

%

 

 

$

10,434

 

3.45

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest margin

 

 

 

 

 

3.52

%

 

 

 

 

3.46

%

 

 

25



 

Provision for loan loss.  The Company recorded a provision for loan losses in the second quarter of fiscal year 2008 of $200,000 compared to a negative provision of $225,000 for the same period in the prior fiscal year.  For the six months ended March 31, 2008 the Company recorded a provision of $70,000, primarily related to loan growth, compared to a provision of $3.8 million for the same period in the prior fiscal year.  Due to continued positive delinquency trends in the Company’s loan portfolio, the Company was able to reduce the level of required loan loss allowances in the current year.  The provision recorded in the same period in the prior fiscal year was directly related to a $4.95 million provision on a purchased participation loan relationship.  See “Non-performing Assets and Allowance for Loan Losses” herein.

 

Non-interest income.  Non-interest income increased by $7.9 million, or 179.6%, to $12.3 million from $4.4 million in the prior fiscal year second quarter.  The increase is the result of higher fee income earned on prepaid debit cards, income tax related programs and other products and services offered by MPS.  Fees earned on prepaid debit cards, tax related programs and other payment systems products and services were $11.5 million for the second quarter of fiscal year 2008, compared to $3.7 million for the same quarter in fiscal year 2007.  For the six months ended March 31, 2008, non-interest income increased by $9.9 million, or 116.6%, to $18.4 million from $8.5 million for the same period in the prior fiscal year.  Fees earned on prepaid debit cards and other payment systems products and services were $17.0 million for the six months ended March 31, 2008, compared to $7.3 million for the same period in fiscal year 2007.

 

Non-interest expense.  Non-interest expense increased by $7.4 million, or 82.2%, to $16.4 million for the second quarter of fiscal year 2008 from $9.0 million for the same quarter in fiscal year 2007.  Non-interest expense increased by $11.5 million, or 65.3%, to $29.1 million for the six months ended March 31, 2008 from $17.6 million for the same period in fiscal year 2007.

 

Compensation expense rose $2.0 million on a quarter over quarter basis to $6.5 million.  For the six months ended March 31, 2008, compensation expense totaled $12.2 million, compared to $8.4 million for the same period in the prior fiscal year.  The increase represents the addition of executive level management, client relations, compliance and operations support staff within MPS, as well as software developers, Information Technology (“IT”) support staff, and other administrative support within the Company.  Many of the new employees at MPS and in IT are focused on developing and supporting new product lines and increasing market penetration of our payments systems products and services.

 

Costs associated with the operational support of card-related products at MPS also increased.  Card processing expenses rose $3.4 million from $1.6 million in the second quarter of fiscal year 2007 to $5.0 million in the current quarter as a result of the significant growth in the division’s product lines.  For the six months ended March 31, 2008, card processing expense totaled $8.1 million, compared to $3.2 million for the same period in the prior fiscal year. These expenses primarily stem from MPS’ SimplexusTM prepaid card product and other prepaid card programs managed by MPS.  Other card processing expense increases are attributable to settlement functions for value loading, card sales and anticipated growth of existing products.  Management expects that these costs will continue to increase as MPS issues more cards and offers new and expanded products and services.

 

The Company’s occupancy and equipment expense also rose during the second quarter of fiscal year 2008 as compared to the same period in the prior fiscal year, primarily driven by the addition of administrative office space in Sioux Falls, SD, and Omaha, NE, and a new branch/administrative office in downtown Des Moines, IA, as well as investment in computer hardware and software, primarily to support growth at MPS.  Occupancy and equipment expense for the first quarter of fiscal year 2008 was $1.8 million compared to $1.0 million for the same period in fiscal year 2007.  Occupancy and equipment expense for the six months ended March 31, 2008 was $3.0 million compared to $1.9 million for the same period in fiscal year 2007.

 

Income tax expense.  Income tax expense from continuing operations for the second quarter of fiscal year 2008 was $743,000, or an effective tax rate of 38.2%, compared to $412,000, or an effective tax rate of 39.2% for the same period in the prior fiscal year.  The change is primarily due to the change in income from continuing

 

26



 

operations before income tax expense.  For the six months ended March 31, 2008, the Company recorded income tax expense from continuing operations in the amount of $281,000, or an effective tax rate of 40.5%, compared to an income tax benefit of $847,000, or an effective tax rate of 33.8% for the same period in the prior fiscal year.  The change is due primarily to the change in net income before income tax expense.  The Company’s recorded income tax expense was also impacted by permanent differences between book and taxable income.

 

Discontinued Operations.  Income from discontinued operations was $1.8 million for the three months ended March 31, 2008 compared to $96,000 for the same period in the prior fiscal year.  Income (loss) from discontinued operations was income of $1.9 million for the six months ended March 31, 2008 compared to a loss of $313,000 for the same period in the prior fiscal year.  The increase in earnings was primarily related to a pre-tax gain on sale of discontinued operations in the current period of $2.3 million.  See Note 2 to the Notes to Condensed Consolidated Financial Statements for further discussion on discontinued operations.

 

LIQUIDITY AND CAPITAL RESOURCES

 

The Company’s primary sources of funds are deposits, borrowings, principal and interest payments on loans and mortgage-backed securities, and maturing investment activities. While scheduled loan repayments and maturing investments are relatively predictable, deposit flows and early loan repayments are influenced by the level of interest rates, general economic conditions, and competition.

 

The Company uses its capital resources principally to meet ongoing commitments to fund maturing certificates of deposits and loan commitments, to maintain liquidity, and to meet operating expenses.  At March 31, 2008, the Company had commitments to originate and purchase loans totaling $64.7 million.  The Company believes that loan repayment and other sources of funds will be adequate to meet its foreseeable short- and long-term liquidity needs.

 

Regulations require MetaBank to maintain minimum amounts and ratios of total risk-based capital and Tier 1 capital to risk-weighted assets, and a leverage ratio consisting of Tier 1 capital to average assets.  The following table sets forth MetaBank’s actual capital and required capital amounts and ratios at March 31, 2008 which, at that date, exceeded the minimum capital adequacy requirements.

 

 

 

 

 

 

 

Minimum

 

 

 

 

 

 

 

Requirement to Be

 

 

 

 

 

Minimum

 

Well Capitalized

 

 

 

 

 

Requirement For

 

Under Prompt

 

 

 

 

 

Capital Adequacy

 

Corrective Active

 

 

 

Actual

 

Purposes

 

Provisions

 

At March 31, 2008

 

Amount

 

Ratio

 

Amount

 

Ratio

 

Amount

 

Ratio

 

 

 

(Dollars in Thousands)

 

MetaBank

 

 

 

 

 

 

 

 

 

 

 

 

 

Tangible capital (to tangible assets)

    

$

57,197

    

7.05

%  

$

12,161

    

1.50

%  

n/a

    

n/a

 

Tier 1 (core) capital (to adjusted total assets)

 

57,197

 

7.05

 

32,430

 

4.00

 

$

40,538

 

5.00

%

Tier 1 (core) capital (to risk-weighted assets)

 

57,197

 

10.41

 

21,969

 

4.00

 

32,953

 

6.00

 

Total risk-based capital (to risk-weighted assets)

 

60,589

 

11.03

 

43,937

 

8.00

 

54,922

 

10.00

 

 

The Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA) established five regulatory capital categories and authorized the banking regulators to take prompt corrective action with respect to institutions in an undercapitalized category.  At March 31, 2008, MetaBank exceeded minimum requirements for the well-capitalized category.

 

27



 

OTHER MATTERS

 

The Company utilizes various third parties for, among other things, the marketing of its card programs and the processing needed to support those programs, both with respect to standard bank operations and with respect to its MPS division.  MPS was very recently notified by a processor, one that certain of its clients had selected to manage card programs, that the processor’s computer system had been breached, which led to the unauthorized load and spending of funds from Bank-issued cards.  At no point were any Bank systems breached and no Bank employees were involved in any fraudulent activity.  At this point the Bank believes the amount in question to be approximately $2 million and the processor has notified its insurer.  Appropriate law enforcement agencies have been notified, and remedial measures have been instituted with respect to such processor, as the Bank, the processor, and program manager continue to investigate.  The processor and program manager both have agreements with the Bank to indemnify it for any losses as a result of such unauthorized activity, and the processor has already notified the Bank that it is sufficiently insured for such events.  As a result, the Bank does not presently anticipate any loss with respect to this event.

 

Part I.         Financial Information

Item 3.        Quantitative and Qualitative Disclosure About Market Risk

 

MARKET RISK

 

The Company is exposed to the impact of interest rate changes and changes in the market value of its investments.

 

The Company originates predominantly adjustable-rate loans and fixed-rate loans up to ten years.  Long-term fixed-rate residential mortgages are generally sold into the secondary market.  As a result of its lending practices, the Company’s loan portfolio is relatively short in duration and yields respond quickly to the overall level of interest rates.

 

The Company’s primary objective for its investment portfolio is to provide the liquidity necessary to meet the Company’s cash demands.  This portfolio may also be used in the ongoing management of interest rate risk.  As a result, funds may be invested among various categories of security types and maturities based upon the Company’s need for liquidity and its desire to create an economic hedge against the effects changes in interest rates may have on the overall market value of the Company.

 

The Company offers a full range of deposit products which are generally short term in nature.  Interest-bearing checking, savings, and money market accounts generally provide a stable source of funds for the bank and also respond relatively quickly to changes in short term interest rates.  The Company offers certificates of deposit with maturities of three months through five years, which serve to extend the duration of the overall deposit portfolio.  A significant and increasing portion of the Company’s deposit portfolio is concentrated in non-interest-bearing checking accounts.  These accounts serve to decrease the Company’s overall cost of funds and reduce its sensitivity to changes in short term interest rates.

 

The Company also maintains a portfolio of wholesale borrowings, predominantly advances from the Federal Home Loan Bank which carry fixed terms and fixed rates of interest.  The Company utilizes this portfolio to manage liquidity demands and also, when appropriate, in the ongoing management of interest rate risk.

 

The Board of Directors, as well as the Office of Thrift Supervision, has established limits on the level of acceptable interest rate risk.  There can be no assurance, however, that, in the event of an adverse change in interest rates, the Company’s efforts to limit interest rate risk will be successful.

 

28



 

Net Portfolio Value.  The Company uses a Net Portfolio Value (“NPV”) approach to the quantification of interest rate risk.  This approach calculates the difference between the present value of expected cash flows from assets and the present value of expected cash flows from liabilities, as well as cash flows from any off-balance sheet contracts.  Management of the Company’s assets and liabilities is performed within the context of the marketplace, but also within limits established by the Board of Directors on the amount of change in NPV that is acceptable given certain interest rate changes.

 

Presented below (including discontinued operations), as of March 31, 2008 and September 30, 2007, is an analysis of the Company’s interest rate risk as measured by changes in NPV for an instantaneous and sustained parallel shift in the yield curve, in 100 basis point increments, up and down 200 basis points.  As illustrated in the table below, at March 31, 2008, the Company was in a similar interest rate risk position compared to September 30, 2007, with a nearly equivalent amount of exposure to increases and declines in interest rates.  At both March 31, 2008 and September 30, 2007, the Company’s interest rate risk profile was within the limits set by the Board of Directors.  As of March 31, 2008, MetaBank’s interest rate risk profile was within the limits set forth by the Office of Thrift Supervision.

 

Change in Interest Rates

 

Board Limit

 

At March 31, 2008

 

At September 30, 2007

 

(Basis Points)

 

% Change

 

$ Change

 

% Change

 

$ Change

 

% Change

 

 

 

 

 

(Dollars in thousands)

 

+200 bp

 

(20

)%

$

(5,281

)

(6

)%

$

(606

)

(1

)%

+100 bp

 

(10

)

(1,826

)

(2

)

(221

)

(1

)

0 bp (Base Case)

 

 

 

 

 

 

-100 bp

 

(10

)

(1,544

)

(2

)

(545

)

(1

)

-200 bp

 

(20

)

(7,397

)

(9

)

(3,226

)

(4

)

 

Certain shortcomings are inherent in the method of analysis presented in the preceding table. For example, although certain assets and liabilities may have similar maturities or periods to repricing, they may react in different degrees to changes in market interest rates. Also, the interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market interest rates, while interest rates on other types may lag behind changes in market rates. Additionally, certain assets, such as adjustable-rate mortgage loans, have features that restrict changes in interest rates on a short-term basis and over the life of the asset. Furthermore, although management has estimated changes in the levels of prepayments and early withdrawal in these rate environments, such levels would likely deviate from those assumed in calculating the table. Finally, the ability of some borrowers to service their debt may decrease in the event of an interest rate increase.

 

In addition to the NPV approach, the Company also reviews gap reports, which measure the differences in assets and liabilities repricing in given time periods, and net income simulations to assess its interest rate risk profile. Management reviews its interest rate risk profile on a quarterly basis.

 

29



 

Part I.         Financial Information

Item 4T.     Controls and Procedures

 

CONTROLS AND PROCEDURES

 

Any control system, no matter how well designed and operated, can provide only reasonable (not absolute) assurance that its objectives will be met.  Furthermore, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected.

 

DISCLOSURE CONTROLS AND PROCEDURES

 

The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 (Exchange Act) as of the end of the period covered by the report.

 

Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of March 31, 2008 our disclosure controls and procedures were effective to provide reasonable assurance that (i) the information required to be disclosed by us in this Report was recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (ii) information required to be disclosed by us in our reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

 

INTERNAL CONTROL OVER FINANCIAL REPORTING

 

With the participation of the Company’s management, including its Chief Executive Officer and Chief Financial Officer, the Company also conducted an evaluation of the Company’s internal control over financial reporting to determine whether any changes occurred during the Company’s fiscal quarter ended March 31, 2008, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.  Based on such evaluation, management concluded that, as of the end of the period covered by this report, there have not been any changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

30



 

META FINANCIAL GROUP, INC.

 

PART II - OTHER INFORMATION

 

FORM 10-Q

 

Item 1.            Legal Proceedings — See “Legal Proceedings” of Note 5 to the Notes to Condensed Consolidated Financial Statements, which is incorporated herein by reference.

 

Item 1A.         Risk Factors - In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended September 30, 2007.  Additional risks and uncertainties not currently known to us or that we currently deem immaterial may also materially and adversely affect us.

 

Item 2.            Unregistered Sales of Equity Securities and Use of Proceeds - None

 

Item 3.            Defaults Upon Senior Securities - None

 

Item 4.            Submission of Matters to a Vote of Security Holders

 

At the Company’s Annual Meeting of Shareholders held on February 12, 2008 (the “Annual Meeting”), the shareholders elected the two individuals nominated to serve as directors until 2011 or until their respective successors are elected and qualified, as set forth in Proposal I in the Company’s Proxy Statement relating to the Annual Meeting.  The two individuals elected, and the number of votes cast for, or withheld, with respect to each of them, is as follows:

 

E. Thurman Gaskill

 

For: 2,250,578

 

Vote Withheld: 148,321

Rodney G. Muilenburg

 

For: 2,254,578

 

Vote Withheld: 144,321

 

The following directors continue to serve on the Board of Directors following the Annual Meeting:  James S. Haahr, J. Tyler Haahr, Frederick V. Moore, E. Wayne Cooley, Bradley C. Hanson and Jeanne Partlow.

 

Additionally, the shareholders ratified the amendment of the Company’s 2002 Omnibus Incentive Plan as set forth in Proposal II in the Company’s Proxy Statement relating to the Annual Meeting.  The number of votes cast for and against the amendment, together with abstentions and non-votes, are as follows:

 

For:

 

1,369,191

Against:

 

311,805

Abstain:

 

105,421

Non-Votes:

 

612,482

 

Item 5.            Other Information - None

 

Item 6.            Exhibits

 

(a)     Exhibits:

                                  31.1           Section 302 certification of Chief Executive Officer.

                                  31.2           Section 302 certification of Chief Financial Officer.

                                  32.1           Section 906 certification of Chief Executive Officer.

                                  32.2           Section 906 certification of Chief Financial Officer.

 

31



 

META FINANCIAL GROUP, INC.

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

 

META FINANCIAL GROUP, INC.

 

 

 

 

 

 

 

 

 

Date:

 May 15, 2008

 

By:

 /s/ J. Tyler Haahr

 

 

 

J. Tyler Haahr, President,
and Chief Executive Officer

 

 

 

 

 

 

 

 

 

Date:

 May 15, 2008

 

By:

 /s/ David W. Leedom

 

 

 

David W. Leedom, Senior Vice President
and Chief Financial Officer

 

 

32