107% growth in non-interest income at Meta Payment Systems highlights third
quarter.
Highlights for the third quarter and nine months ending June 30, 2008
- Quarterly revenue rose 28% and was 31% higher year to date, adjusted for
the 2007 sale of four branches
- Meta Payment Systems third quarter 2008 non-interest income increased
107% over the 2007 quarter
- A loss of ($0.4) million was reported for the third quarter with net
income of $1.9 million year to date
- MetaBank non-performing assets ratio remained strong at 0.36%
- Meta Payment Systems(R) (MPS) filed five additional patents related to
various payment products
STORM LAKE, Iowa, Aug. 14 /PRNewswire-FirstCall/ -- Meta Financial
Group (Nasdaq: CASH) (the Company) reported a diluted loss of 16 cents per
share for the third quarter of 2008 on a net loss of $0.4 million compared
to diluted earnings per share of 96 cents and net income of $2.6 million
for the third quarter of 2007. The 2007 quarter included a $3.3 million
pre-tax gain on the sale of four branches in northwest Iowa. Year to date
earnings for the nine months ending June 30 are $1.9 million or 72 cents
per diluted share compared to 2007 results of $0.6 million of net income or
23 cents per share.
President and Chief Executive Officer J. Tyler Haahr stated, "We are
excited by the growth trajectory at Meta Payment Systems and the stability
of the MetaBank loan portfolio. MPS third quarter fee revenue more than
doubled year-over-year and our continuing investment in MPS provides a
platform for sustaining the high rate of growth in the division as well as
product innovation, as underscored by the five additional patents filed
during the quarter. Meanwhile, despite difficult industry conditions, we
are pleased with the overall credit quality and stability of our loan
portfolio."
Summary Financial Data * Three Months Ended Nine Months Ended
6/30/08 3/31/08 6/30/07 6/30/08 6/30/07
Net Interest
Income - millions $6.0 $6.2 $5.1 $17.5 $15.5
Non Interest
Income - millions 8.5 12.3 8.0 26.9 16.5
Net Income (Loss)
- millions $(0.4) $3.0 $2.6 $1.9 $0.6
Diluted earnings
(loss) per share (0.16) 1.16 0.96 0.72 0.23
Net interest margin 3.32% 3.59% 3.45% 3.45% 3.30%
Non-performing assets
- % of total assets 0.36% 0.39% 0.29%
MPS active cards
- millions 12.1 11.4 7.9
MPS transaction
volume - billions $2.0 $2.3 $1.1 $5.7 $2.9
* Also, please see a more detailed Financial Highlights table at the
end of this document.
Financial Summary
Revenue Total revenue for the third quarter of fiscal year 2008 reached $17.7
million compared to $17.1 million for the same quarter in fiscal year 2007.
Prior year revenue contained a $3.3 million gain on sale of four bank
branches in northwest Iowa. Excluding the effect of that transaction,
revenue grew by $3.9 million or 28%. That growth was driven by increased
Meta Payment Systems card fee income from both existing relationship growth
and new programs. The Company experienced relatively flat interest income.
Revenue for the nine months ending June 30, 2008 was $54.9 million
compared to $45.1 million in 2007, an increase of $9.8 million or 22%.
Adjusting for the branch sales, revenue increased $13.1 million or 31%.
Interest Income was down slightly, $0.7 million or 2%, on lower average
yields.
Net Interest Income
Net interest income for the third quarter was $6.0 million, up $0.9
million or 17% from the same quarter last year. This growth reflects an
increase of $126.5 million in interest-earning assets and was offset in
part by a 13 basis point decrease in the Company's net interest margin. Net
interest margin was 3.32% for the 2008 quarter compared to 3.45 % in the
third quarter of 2007. Both asset yields and liability costs decreased by
over 100 basis points compared to the prior year period. As of June 30,
2008, low- and no-cost checking and prepaid card deposits represented 66%
of total deposits compared to 53% one year earlier, due to a 39% growth in
card-related deposits at MPS.
Net interest income for the nine months ending June 30, 2008 was $17.5
million up $1.9 million or 13% higher than 2007. Contributing to this
increase was an 8% increase in earning assets, a shift in earning assets to
higher-yielding loans, and a 15 basis point increase in net interest margin
as reduced funding costs outpaced higher asset yields.
Non-Interest Income
2008 third quarter non-interest income reached $8.5 million, an
increase of $0.6 million, or 7%, over the same quarter in 2007.
Non-interest income grew by $3.9 million or 84% adjusted for the $3.3
million gain on the sale of four former northwest Iowa branches in 2007.
MPS fee income grew by $3.9 million or 107% as all product lines were
higher than the 2007 quarter. MPS also continued its controlled roll out of
iAdvance, its new patent-pending micro-credit product. Thus far, iAdvance
pilot performance has validated expectations. MPS third quarter revenue was
down from the prior quarter by $3.4 million primarily due to the seasonal
reduction in tax related programs. Although third quarter results have
historically been slower than the second and fourth quarters, the
development of new products and the expansion of existing product offerings
should begin to make seasonality less pronounced.
2008 year-to date non-interest income of $26.9 million reflects growth
of $10.5 million or 64%; $13.8 million or 105% when adjusted for the gain
on the 2007 branch sales. MPS fee income accounts for $13.6 million of the
comparable period growth. Approximately two thirds of the MPS growth comes
from product lines launched since June 30, 2007.
Non-Interest Expense
Non-interest expense grew $5.7 million, or 60%, to $15.1 million from
the third quarter of fiscal year 2007 to the same period in the current
fiscal year. The bulk of the increase occurred in card processing,
personnel, occupancy and equipment expense and primarily is related to
continued growth in MPS.
Compensation expense was $6.6 million for the third quarter of fiscal
year 2008 up $1.8 million or 37% from the same period in 2007. The increase
primarily supported new program growth within MPS.
Card processing expense was $2.0 million higher than the same period in
2007, primarily due to increased sales and transaction volumes from the
expansion of existing and new card programs at MPS.
The Company's occupancy and equipment expense was $0.9 million higher
than the same period in 2007, primarily driven by the addition of
administrative office space in Sioux Falls and Omaha to support growth at
MPS and a new branch office in Des Moines as well as investment in computer
hardware and software to support expanding product development efforts and
meet compliance requirements based on the PCI Data Security Standard.
Other general and administrative expenses rose primarily due to the
increase in the number of employees and the general increase in business
activities.
Credit Quality
The Company's credit quality remains stable. Non-performing loans at
June 30, 2008 were $2.8 million representing 0.66% of total loans compared
to $2.3 million, or 0.64% at September 30, 2007. The Company believes it
has been thoughtful in extending credit to new borrowers and has continued
to actively manage risk profiles on existing customers. The Company's
underlying credit trends are strong, and the Company continues to foster a
conservative credit culture. The Company does not have any direct exposure
to subprime mortgage loans or securities.
Loans
Total loans, net of allowance for loan losses, increased $67.7 million,
or 19%, to $423.3 million during the nine months ended June 30, 2008. This
increase primarily relates to growth of $42.3 million in loans for
commercial real estate, $7.6 million in consumer loans, and $7.5 million in
agriculture operating. The increase in the consumer loan portfolio is
primarily from MPS credit-related programs.
Deposits and Other Liabilities
The Company continues to grow its low- and no-cost deposit portfolio as
a result of new and existing program growth at MPS. June 30, 2008 prepaid
card deposits were $320.5 million, up $90.5 million, or 39%, from June 30,
2007.
Business Segment Performance
Meta Payment Systems
Year-over-year MPS revenue (interest income plus non-interest income)
grew by 90%, from $5.3 million in the third quarter of 2007 to $10.1
million in the 2008 quarter. It now comprises 57% of the Company's total
revenue from continuing operations compared to 31% of total revenues in the
same quarter last year and 39% when adjusted for the $3.3 million gain on
the 2007 sale of the northwest Iowa branches. MPS recorded a net loss of
$0.2 million, or $0.07 per diluted share, for the third quarter of fiscal
year 2008, compared to net income of $0.5 million, or $0.20 per diluted
share, for the same period last year, in line with management's
expectations. Net income for the quarter was impacted by seasonal factors,
continued investment in support of future growth initiatives and a 196
basis point reduction in the average transfer pricing yield from 5.22% in
the third quarter of 2007 to 3.26% in the 2008 period, consistent with
market conditions.
Non-interest income, primarily card fees, grew 107% from $3.7 million
in the 2007 third quarter to $7.6 million in 2008. Interest income
increased from $1.7 million in 2007 to $2.5 million, or 52%, in the 2008
third quarter.
Traditional Banking
The Traditional Banking segment recorded a net loss of $0.1 million, or
$0.05 per diluted share, for the third quarter of fiscal year 2008,
compared to net income of $2.4 million, or $0.89 per diluted share for the
same period last year. The prior year results include $2.0 million of net
income related to the aforementioned branch bank sales. Net interest margin
compressed during the third quarter but was offset by an increase in
average earning assets from the same period in 2007 to remain relatively
flat in total. The provision for loan losses increased by $0.6 million from
the prior year due to loan portfolio growth.
Other Information
Please see the Meta Financial Group, Inc. press release issued on March
31, 2008, regarding the sale of its MetaBank West Central subsidiary. This
transaction, which involved the sale of the stock of MetaBank West Central,
closed on March 28, 2008 and is included in financial results for the nine
months ending June 30, 2008.
On February 15, 2008, the Company announced that it was investigating a
possible defalcation regarding the issuance of fraudulent certificates of
deposit by a former employee over a number of years. We believe that there
are some $4.2 million of fraudulent CDs outstanding to various financial
institutions. At this point, there has been no determination of liability
for the Company. While we do not expect the Company to be held liable for
the fraudulent activity, the Company believes its insurance will provide
coverage in such an event.
Meta Financial Group and MetaBank continue to meet regulatory
requirements for classification as well-capitalized institutions.
This press release and other important information about the Company
are available at http://www.metacash.com.
Corporate Profile: Meta Financial Group, Inc(R). (doing business as
Meta Financial Group) is the holding company for MetaBank and Meta Trust
Company(R). MetaBank is a federally-chartered savings bank with four market
areas: Northwest Iowa Market, Brookings Market, Central Iowa Market, Sioux
Empire Market; and the Meta Payment Systems(R) prepaid card division.
Thirteen retail banking offices and one administrative office support
customers throughout northwest and central Iowa, and in Brookings and Sioux
Falls, South Dakota.
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.
Financial Highlights
Consolidated Statement of Financial Condition
(Dollars In Thousands)
Assets June 30, 2008 September 30, 2007
Cash and cash equivalents $27,599 $86,320
Investments and mortgage-backed
securities 232,546 158,701
Loans receivable, net 423,338 355,612
Other assets 98,251 85,447
Total assets $781,734 $686,080
Liabilities
Deposits $544,496 $522,978
Other borrowings 176,227 78,534
Other liabilities 11,611 36,470
Total liabilities $732,334 $637,982
Shareholders' equity $49,400 $48,098
Total liabilities and
shareholders' equity $781,734 $686,080
Consolidated Statements of Income
For the 3 Months For the 9 Months
(Dollars In Thousands, except per Ended June 30: Ended June 30:
share data) 2008 2007 2008 2007
(As Restated) (As Restated)
Interest income $9,171 $9,157 $27,965 $28,660
Interest expense 3,180 4,058 10,484 13,127
Net interest income 5,991 5,099 17,481 15,533
Provision for loan losses 125 (500) 195 3,338
Net interest income after
provision for loan losses 5,866 5,599 17,286 12,195
Non-interest income 8,529 7,956 26,944 16,450
Non-interest expense 15,140 9,475 44,281 27,069
Income (loss) from continuing
operations before income tax
expense (benefit) (745) 4,080 (51) 1,576
Income tax expense (benefit) from
continuing operations (335) 1,642 (54) 795
Income (loss) from continuing
operations (410) 2,438 3 781
Gain on sale from discontinued
operations before taxes - - 2,309 -
Income (loss) from discontinued
operations before taxes - 45 76 (455)
Income tax expense (benefit) from
discontinued operations - (81) 500 (269)
Income (loss) from discontinued
operations - 126 1,885 (186)
Net income (loss) $(410) $2,564 $1,888 $595
Earnings (loss) per common share
Basic-income (loss) from
continuing operations $(0.16) $0.96 $- $0.31
Basic-net income (loss) $(0.16) $1.01 $0.73 $0.24
Diluted-income (loss) from
continuing operations $(0.16) $0.91 $- $0.30
Diluted-net income (loss) $(0.16) $0.96 $0.72 $0.23
Selected Financial Information
For the 9 Months Ended June 30, 2008 2007
Return on average assets-
continuing operations 0.00% 0.15%
Return on average equity-
continuing operations 0.01% 2.32%
Average shares outstanding for
diluted earnings per share 2,606,904 2,515,266
At Period Ended: June 30, 2008 September 30,2007
Equity to total assets 6.32% 7.01%
Book value per common share
outstanding $19.00 $18.57
Tangible book value per common
share outstanding $18.22 $17.99
Common shares outstanding 2,599,361 2,589,717
Non-performing assets to total
assets-continuing operations 0.36% 0.38%
SOURCE Meta Financial Group
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Related links:
http://www.metacash.com
CONTACT:
Investor Relations of Meta Financial Group,
+1-712-732-4117
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