What changed in this filing

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Item 1. Financial Statements

2021-05-06 compared with 2021-02-08 · 327 added, 204 removed, 1290 unchanged (29% of the section changed)

3 unchanged sentences

Condensed Consolidated Statements of Financial Condition

(Dollars in Thousands, Except Share and Per Share Data) December 31, 2020 September 30, 2020

(Dollars in Thousands, Except Share and Per Share Data) March 31, 2021 September 30, 2020

ASSETS (Unaudited) (Audited)

34 unchanged sentences

STOCKHOLDERS’ EQUITY

Preferred stock, 3,000,000 shares authorized, no shares issued and no shares outstanding at December 31, 2020 and September 30, 2020, respectively

Preferred stock, 3,000,000 shares authorized, no shares issued and no shares outstanding at March 31, 2021 and September 30, 2020, respectively

Common stock, $ 0.01 par value;

90,000,000 shares authorized, 32,817,626 and 34,479,164 shares issued, 32,620,251 and 34,360,890 shares outstanding at December 31, 2020 and September 30, 2020, respectively

90,000,000 shares authorized, 32,128,403 and 34,479,164 shares issued, 31,926,008 and 34,360,890 shares outstanding at March 31, 2021 and September 30, 2020, respectively

Common stock, Nonvoting, $ 0.01 par value;

3,000,000 shares authorized, no shares issued, none outstanding at December 31, 2020 and September 30, 2020, respectively

3,000,000 shares authorized, no shares issued, none outstanding at March 31, 2021 and September 30, 2020, respectively

Additional paid-in capital 601,222 594,569

1 unchanged sentence

Accumulated other comprehensive income 12,809 17,542

Treasury stock, at cost, 197,375 and 118,274 common shares at December 31, 2020 and September 30, 2020, respectively

Treasury stock, at cost, 202,395 and 118,274 common shares at March 31, 2021 and September 30, 2020, respectively

( 5,655 ) ( 3,677 )

7 unchanged sentences

Condensed Consolidated Statements of Operations (Unaudited)

Three Months Ended

Three Months Ended March 31, Six Months Ended March 31,

(Dollars in Thousands, Except Share and Per Share Data) 2021 2020 2021 2020

7 unchanged sentences

FHLB advances and other borrowings 1,374 3,424 2,724 7,058

1,819 11,666 3,965 24,641

Net interest income 73,850 67,737 139,849 132,388

7 unchanged sentences

Rental income 9,846 11,100 19,731 23,451

Net gain realized on investment securities 6 — 6 —

Gain on divestitures — 19,275 — 19,275

Gain (loss) on sale of other 2,133 2,325 4,981 ( 244 )

25 unchanged sentences

Condensed Consolidated Statements of Comprehensive Income (Unaudited)

Three Months Ended December 31,

Three Months Ended March 31, Six Months Ended March 31,

(Dollars in Thousands) 2021 2020 2021 2020

1 unchanged sentence

Other comprehensive income (loss):

Change in net unrealized gain (loss) on debt securities 2,846 ( 3,412 )

Change in net unrealized (loss) on debt securities ( 9,923 ) ( 2,079 ) ( 7,077 ) ( 5,492 )

Net (gain) realized on investment securities ( 6 ) — ( 6 ) —

( 9,929 ) ( 2,079 ) ( 7,083 ) ( 5,492 )

Unrealized gain on currency translation 445 116

Unrealized gain (loss) on currency translation 126 ( 680 ) 571 ( 564 )

Deferred income tax effect ( 2,493 ) ( 518 ) ( 1,779 ) ( 1,371 )

Total other comprehensive income (loss) 2,577 ( 2,444 )

Total other comprehensive (loss) ( 7,310 ) ( 2,241 ) ( 4,733 ) ( 4,685 )

Total comprehensive income 52,599 51,367 84,434 71,172

7 unchanged sentences

Stockholders' Equity

Three Months Ended December 31, 2020

Three Months Ended March 31, 2021

Earnings Accumulated

3 unchanged sentences

Equity Noncontrolling Interest Total Equity

Balance, September 30, 2020 $ 344 $ 594,569 $ 234,927 $ 17,542 $ ( 3,677 ) $ 843,705 $ 3,603 $ 847,308

Adoption of Accounting Standards Update 2016-13, net of income taxes — — ( 8,351 ) — — ( 8,351 ) ( 2,452 ) ( 10,803 )

Balance, December 31, 2020

$ 326 $ 598,669 $ 198,000 $ 20,119 $ ( 5,440 ) $ 811,674 $ 1,536 $ 813,210

Cash dividends declared on common stock ($ 0.05 per share)

— — ( 1,595 ) — — ( 1,595 ) — ( 1,595 )

Issuance of common shares due to ESOP 2 3,034 — — — 3,036 — 3,036

Shares repurchased ( 7 ) 7 ( 30,000 ) — ( 215 ) ( 30,215 ) — ( 30,215 )

Stock compensation — 2,546 — — — 2,546 — 2,546

Total other comprehensive income — — — 2,577 — 2,577 — 2,577

Total other comprehensive (loss) — — — ( 7,310 ) — ( 7,310 ) — ( 7,310 )

Net income — — 59,066 — — 59,066 843 59,909

Net investment by (distribution to) noncontrolling interests — — — — — — ( 1,287 ) ( 1,287 )

Balance, March 31, 2021

$ 319 $ 601,222 $ 225,471 $ 12,809 $ ( 5,655 ) $ 834,166 $ 1,092 $ 835,258

Balance, December 31, 2019 $ 372 $ 587,678 $ 244,005 $ 3,895 $ ( 3,187 ) $ 832,763 $ 4,305 $ 837,068

Cash dividends declared on common stock ($ 0.05 per share)

— — ( 1,783 ) — — ( 1,783 ) — ( 1,783 )

Issuance of common shares due to exercise of stock options — 87 — — — 87 — 87

Shares repurchased ( 26 ) 26 ( 82,499 ) — ( 210 ) ( 82,709 ) — ( 82,709 )

Stock compensation — 2,891 — — — 2,891 — 2,891

Total other comprehensive (loss) — — — ( 2,241 ) — ( 2,241 ) — ( 2,241 )

Net income — — 52,304 — — 52,304 1,304 53,608

Net investment by (distribution to) noncontrolling interests — — — — — — ( 1,847 ) ( 1,847 )

Balance, March 31, 2020

$ 346 $ 590,682 $ 212,027 $ 1,654 $ ( 3,397 ) $ 801,312 $ 3,762 $ 805,074

(Dollars in Thousands, Except Share and Per Share Data) Meta Financial Group, Inc.

Stockholders' Equity

Three Months Ended December 31, 2019

Six Months Ended March 31, 2021

Earnings Accumulated

5 unchanged sentences

Balance, September 30, 2020

$ 344 $ 594,569 $ 234,927 $ 17,542 $ ( 3,677 ) $ 843,705 $ 3,603 $ 847,308

Adoption of Accounting Standards Update 2016-13, net of income taxes — — ( 8,351 ) — — ( 8,351 ) ( 2,452 ) ( 10,803 )

Cash dividends declared on common stock ($ 0.10 per share)

— — ( 3,209 ) — — ( 3,209 ) — ( 3,209 )

Issuance of common shares due to ESOP 2 3,034 — — — 3,036 — 3,036

Shares repurchased ( 27 ) 27 ( 84,999 ) — ( 1,978 ) ( 86,977 ) — ( 86,977 )

Stock compensation — 3,592 — — — 3,592 — 3,592

Total other comprehensive (loss) — — — ( 4,733 ) — ( 4,733 ) — ( 4,733 )

Net income — — 87,103 — — 87,103 2,064 89,167

Net investment by (distribution to) noncontrolling interests — — — — — — ( 2,123 ) ( 2,123 )

Balance, March 31, 2021

$ 319 $ 601,222 $ 225,471 $ 12,809 $ ( 5,655 ) $ 834,166 $ 1,092 $ 835,258

Six Months Ended March 31, 2020

Balance, September 30, 2019

$ 378 $ 580,826 $ 252,813 $ 6,339 $ ( 445 ) $ 839,911 $ 4,047 $ 843,958

Cash dividends declared on common stock ($ 0.10 per share)

— — ( 3,653 ) — — ( 3,653 ) — ( 3,653 )

Issuance of common shares due to exercise of stock options — 205 — — — 205 — 205

3 unchanged sentences

Stock compensation — 6,397 — — — 6,397 — 6,397

Total other comprehensive income — — — ( 2,444 ) — ( 2,444 ) — ( 2,444 )

Total other comprehensive (loss) — — — ( 4,685 ) — ( 4,685 ) — ( 4,685 )

Net income — — 73,372 — — 73,372 2,485 75,857

Net investment by (distribution to) noncontrolling interests — — — — — — ( 2,770 ) ( 2,770 )

Balance, December 31, 2019 $ 372 $ 587,678 $ 244,005 $ 3,895 $ ( 3,187 ) $ 832,763 $ 4,305 $ 837,068

Balance, March 31, 2020

$ 346 $ 590,682 $ 212,027 $ 1,654 $ ( 3,397 ) $ 801,312 $ 3,762 $ 805,074

See Notes to Condensed Consolidated Financial Statements.

2 unchanged sentences

Condensed Consolidated Statements of Cash Flows (Unaudited)

Three Months Ended December 31,

Six Months Ended March 31,

(Dollars in Thousands) 2021 2020

5 unchanged sentences

Provision (recovery):

Loan and lease losses 6,089 3,407

Credit losses 36,379 40,703

Deferred taxes ( 5,933 ) ( 633 )

6 unchanged sentences

Other assets — 361

Divestitures — ( 19,275 )

Foreclosed real estate and repossessed assets ( 4 ) 5,039

Securities available for sale, net ( 6 ) —

Loans held for sale ( 4,610 ) ( 3,265 )

1 unchanged sentence

Other assets ( 28,635 ) ( 4,588 )

Deposits held for sale — 1,535

Accrued interest payable ( 1,244 ) ( 5,807 )

2 unchanged sentences

Change in bank-owned life insurance value ( 1,227 ) ( 1,254 )

Impairment on assets held for sale — 242

Net cash provided by operating activities 385,925 265,007

2 unchanged sentences

Purchases ( 411,458 ) ( 40,686 )

Proceeds from sales 50,468 —

Proceeds from maturities and principal repayments 137,635 106,049

15 unchanged sentences

Purchases ( 4,254 ) ( 4,817 )

Proceeds from divestitures — 3,498

Net cash (used in) investing activities ( 660,588 ) ( 146,653 )

21 unchanged sentences

Cash and cash equivalents at end of fiscal period $ 3,724,242 $ 108,733

Three Months Ended December 31,

Six Months Ended March 31,

(Dollars in Thousands) 2021 2020

20 unchanged sentences

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 three months ended December 31, 2020 are not necessarily indicative of the results expected for the fiscal year ending September 30, 2021.

The results of the three and six months ended March 31, 2021 are not necessarily indicative of the results expected for the fiscal year ending September 30, 2021.

Certain prior year amounts have been reclassified to conform to the current year financial statement presentation.

5 unchanged sentences

The ACL represents management’s estimate of current credit losses expected to be incurred by the loan and lease portfolio over the life of each financial asset as of the balance sheet date.

The Company individually evaluates loans and leases that do not share similar risk characteristics with other financial assets for impairment, which generally means loans and leases identified as troubled debt restructures or loans and leases on nonaccrual status.

All other loans and leases are evaluated collectively for impairment.

16 unchanged sentences

Net charge-offs are included in historical data utilized for calculating the ACL.

For commercial loans, the Company generally fully charges off or charges down to net realized value (fair value of collateral, less estimated costs to sell) for loans secured by collateral when management judges the loan to be uncollectible, repayment is deemed to be protracted beyond a reasonable timeframe, the loan has been classified as a loss by either the Company’s internal loan review process or its banking regulatory agencies, the Company has filed bankruptcy and the loss becomes evident owing to lack of assets, or the loans meets a defined number of days past due unless the loan is both well-secured and is in the process of collection.

For commercial loans, the Company generally fully charges off or charges down to net realizable value (fair value of collateral, less estimated costs to sell) for loans secured by collateral when management judges the loan to be uncollectible, repayment is deemed to be protracted beyond a reasonable timeframe, the loan has been classified as a loss by either the Company’s internal loan review process or its banking regulatory agencies, the Company has filed bankruptcy and the loss becomes evident owing to lack of assets, or the loans meets a defined number of days past due unless the loan is both well-secured and is in the process of collection.

For consumer loans, the Company fully charges off or charges down to net realizable value when deemed uncollectible due to bankruptcy or other factors or meets a defined number of days past due.

13 unchanged sentences

The Company evaluates investment securities held-to-maturity for credit losses on a quarterly basis and records any such losses as a component of provision for credit losses in the Condensed Consolidated Statements of Operations.

The Company has concluded its portfolio as of December 31, 2020 has a zero risk of credit loss due to the U.S.

The Company has concluded that its portfolio as of March 31, 2021 has a zero risk of credit loss due to the U.S.

Government financial guarantees underlying the securities within the held-to-maturity portfolio and as a result has not recorded an allowance for credit loss.

13 unchanged sentences

The cumulative tax effected adjustment to record ACL and to increase the unfunded commitments liability resulted in a reduction to retained earnings of $ 8.4 million along with $ 2.5 million attributable to noncontrolling interests.

Post adoption, as loans and leases are added to the portfolio, the Company expects higher levels of ACL determined by CECL assumptions, resulted in accelerated recognition of provision for credit losses, as compared to historical results.

Post adoption, as loans and leases are added to the portfolio, the Company expects higher levels of ACL determined by CECL assumptions, resulting in accelerated recognition of provision for credit losses, as compared to historical results.

In response to the COVID-19 pandemic, regulatory agencies have published a final rule that provides the option to delay the cumulative effect of the day 1 impact to CECL adoption on regulatory capital for two years, followed by a three-year phase in period.

42 unchanged sentences

In addition to the CARES Act, the U.S.

federal government enacted the Consolidated Appropriations Act of 2021 ("CAA") on December 27, 2020, which provides additional COVID-19 relief to American families and business.

federal government enacted the Consolidated Appropriations Act of 2021 ("CAA") on December 27, 2020 and the American Rescue Plan Act of 2021 ("ARP Act") on March 11, 2021, which provide additional COVID-19 relief to American families and business.

The Company is participating in the Paycheck Protection Program ("PPP"), which is being administered by the Small Business Administration ("SBA").

5 unchanged sentences

Additionally, for COVID modifications on loans, the Company adjusted its effective interest rate to reflect the payment deferral modification and continued accruing interest during this period.

Short-term modifications made on a good faith basis in response to COVID-19 borrowers whose payments were current prior to any relief, are not to be considered troubled debt restructurings, and will not be considered delinquent so long as they meet their revised obligations in the modification agreement.

The table below presents the outstanding balances of active COVID-19 related modifications.

As of the Period Ended

(Dollars in Thousands) December 31, 2020 September 30, 2020 June 30, 2020

(Dollars in Thousands) March 31, 2021 December 31, 2020 September 30, 2020

National Lending

13 unchanged sentences

Commercial real estate and operating 58,707 60,319 120,695

Consumer one-to-four family real estate and other — — 2,534

Total Community Banking 58,707 60,319 120,695

Total loans and leases 66,474 85,293 193,328

Rental equipment — — 819

Total COVID-19 related modifications $ 66,474 $ 85,293 $ 193,328

6 unchanged sentences

The Company entered a servicing agreement with Central Bank for the retained Community Bank loan portfolio that became effective on the Closing Date.

The Company recognized $ 1.1 million and none in servicing fee expense during the three months ended December 31, 2020 and 2019, respectively, and $ 3.5 million for the fiscal year ended September 30, 2020.

The Company recognized $ 1.6 million and $ 0.3 million in servicing fee expense during the six months ended March 31, 2021 and 2020, respectively, and $ 3.5 million for the fiscal year ended September 30, 2020.

Since the Closing Date, the Company has entered into subsequent loan portfolio sale agreements with Central Bank.

The Company sold additional loans from the retained Community Bank portfolio in the amount of $ 129.8 million and none in the three months ended December 31, 2020 and 2019, respectively, and $ 135.0 million for the fiscal year ended September 30, 2020.

The Company sold additional loans from the retained Community Bank portfolio in the amount of $ 103.2 million and none in the three months ended March 31, 2021 and 2020, respectively, and $ 233.0 million and none for the six months ended March 31, 2021 and 2020, respectively.

The sales did not result in any significant gains or losses to the Condensed Consolidated Statements of Operations.

The amortized cost, gross unrealized gains and losses and estimated fair values of available for sale ("AFS") and held to maturity ("HTM") debt securities are presented below.

(Dollars in Thousands) Amortized Cost Gross Unrealized Gains Gross Unrealized (Losses) Fair Value

At December 31, 2020

Securities Available For Sale

(Dollars in Thousands) Amortized Cost Gross Unrealized Gains Gross Unrealized (Losses) Fair

At March 31, 2021

Debt securities AFS

5 unchanged sentences

Total debt securities AFS $ 1,464,144 $ 26,480 $ ( 9,844 ) $ 1,480,780

(Dollars in Thousands) Amortized Cost Gross Unrealized Gains Gross Unrealized (Losses) Fair Value

At September 30, 2020

6 unchanged sentences

Total debt securities AFS $ 1,244,384 $ 30,967 $ ( 7,249 ) $ 1,268,102

(Dollars in Thousands) Amortized Cost Gross Unrealized Gains Gross Unrealized (Losses) Fair Value

At December 31, 2020

Securities Held To Maturity

(Dollars in Thousands) Amortized Cost Gross Unrealized Gains Gross Unrealized (Losses) Fair

At March 31, 2021

Debt securities HTM

2 unchanged sentences

Total debt securities HTM $ 72,112 $ 1,182 $ — $ 73,294

(Dollars in Thousands) Amortized Cost Gross Unrealized Gain Gross Unrealized (Losses) Fair Value

At September 30, 2020

6 unchanged sentences

(Dollars in Thousands) Fair

Value Unrealized

(Losses) Fair

Value Unrealized

(Losses) Fair

Value Unrealized

At December 31, 2020

Value Gross Unrealized (Losses) Fair

Value Gross Unrealized (Losses)

At March 31, 2021

Debt securities AFS

SBA securities $ 25,310 $ ( 24 ) $ 31,825 $ ( 164 ) $ 57,135 $ ( 188 )

Obligations of state and political subdivisions 1,980 ( 1 ) — — 1,980 ( 1 )

Non-bank qualified obligations of states and political subdivisions 53,328 ( 682 ) — — 53,328 ( 682 )

Asset-backed securities 75,473 ( 782 ) 189,365 ( 2,227 ) 264,838 ( 3,009 )

3 unchanged sentences

(Dollars in Thousands) Fair

Value Unrealized

(Losses) Fair

Value Unrealized

(Losses) Fair

Value Unrealized

Value Gross Unrealized (Losses) Fair

Value Gross Unrealized (Losses)

At September 30, 2020

5 unchanged sentences

Total debt securities AFS $ 283,334 $ ( 2,036 ) $ 191,664 $ ( 5,213 ) $ 474,998 $ ( 7,249 )

There were no debt securities HTM with a continuous loss position at December 31, 2020.

There were no debt securities HTM with a continuous loss position at March 31, 2021.

LESS THAN 12 MONTHS OVER 12 MONTHS TOTAL

(Dollars in Thousands) Fair

Value Unrealized

(Losses) Fair

Value Unrealized

(Losses) Fair

Value Unrealized

Value Gross Unrealized (Losses) Fair

Value Gross Unrealized (Losses)

At September 30, 2020

3 unchanged sentences

The adoption of CECL was inconsequential to debt securities AFS.

At December 31, 2020, there was no ACL for debt securities AFS.

At December 31, 2020, there were 27 securities AFS in an unrealized loss position.

At March 31, 2021, there were no ACL for debt securities AFS.

At March 31, 2021, there were 49 securities AFS in an unrealized loss position.

Management assessed each investment security with unrealized losses for credit impairment and determined substantially all unrealized losses on these securities were due to credit spreads and interest rates versus credit impairment.

6 unchanged sentences

However, certain prepayment penalties may apply.

Securities AFS at Fair Value Amortized Cost Fair Value

(Dollars in Thousands)

At December 31, 2020

Due in one year or less $ 720 $ 724

Due after one year through five years 22,799 23,707

Due after five years through ten years 32,099 33,738

Due after ten years 727,553 739,194

783,171 797,363

Mortgage-backed securities 418,390 430,761

Total securities AFS, at fair value $ 1,201,561 $ 1,228,124

(Dollars in Thousands) Amortized Cost Fair Value

At September 30, 2020

At March 31, 2021 At September 30, 2020

(Dollars in Thousands) Amortized Cost Fair

Value Amortized Cost Fair

Securities AFS at Fair Value

Due in one year or less $ 245 $ 247 $ 1,385 $ 1,398

5 unchanged sentences

Total securities AFS, at fair value $ 1,464,144 $ 1,480,780 $ 1,244,384 $ 1,268,102

Securities HTM at Fair Value Amortized Cost Fair Value

(Dollars in Thousands)

At December 31, 2020

Due after ten years $ 76,176 $ 77,590

76,176 77,590

Mortgage-backed securities 5,152 5,337

Total securities HTM, at cost $ 81,328 $ 82,927

(Dollars in Thousands) Amortized Cost Fair Value

At September 30, 2020

At March 31, 2021 At September 30, 2020

(Dollars in Thousands) Amortized Cost Fair

Value Amortized Cost Fair

Securities HTM at Fair Value

Due after ten years $ 67,709 $ 68,792 $ 87,183 $ 88,194

4 unchanged sentences

Equity Securities

Equity securities without a readily determinable fair value totaled $ 13.7 million at December 31, 2020 and $ 11.0 million at September 30, 2020.

Equity securities without a readily determinable fair value totaled $ 13.7 million at March 31, 2021 and $ 11.0 million at September 30, 2020.

The Bank is required by federal law to subscribe to capital stock (divided into shares of $100 each) as a member of the FRB of Minneapolis with an amount equal to six per centum of the paid-up capital stock and surplus.

One-half of the subscription is paid at time of application, and one-half is subject to call of the Board of Governors of the Federal Reserve System.

FRB of Minneapolis stock held by the Bank totaled $ 19.7 million at December 31, 2020 and September 30, 2020.

FRB of Minneapolis stock held by the Bank totaled $ 19.7 million at March 31, 2021 and September 30, 2020.

These equity securities are 'restricted' in that they can only be owned by member banks.

4 unchanged sentences

The FHLB stock is carried at cost since it is generally redeemable at par value.

The carrying value of the stock held at the FHLB was $ 7.5 million at December 31, 2020 and September 30, 2020.

The absence of change in FHLB stock directly correlates with no short-term borrowings balances at both December 31, 2020 and September 30, 2020.

The carrying value of the stock held at the FHLB was $ 8.8 million and $ 7.5 million at March 31, 2021 and September 30, 2020, respectively.

These equity securities are ‘restricted’ in that they can only be sold back to the respective institution from which they were acquired or another member institution at par.

1 unchanged sentence

The Company evaluates impairment for investments held at cost on at least an annual basis based on the ultimate recoverability of the par value.

There was a $ 0.9 million impairment recognized for such investments for the three months ended December 31, 2020.

Equity Security Impairment

For investments held at cost, impairment is evaluated on at least an annual basis on the recoverability of the par value.

All other equity investments, including those under the equity method, are reviewed for other-than-temporary impairment on at least a quarterly basis.

The Company recognized $ 1.5 million in impairment recognized for such investments for the six months ended March 31, 2021.

LOANS AND LEASES, NET

Loans and leases consist of the following:

(Dollars in Thousands) December 31, 2020 September 30, 2020

(Dollars in Thousands) March 31, 2021 September 30, 2020

National Lending

19 unchanged sentences

Total loans and leases 3,648,028 3,314,140

Net deferred loan origination fees (costs) 9,111 8,625

Net deferred loan origination costs (fees) 9,503 8,625

Total gross loans and leases 3,657,531 3,322,765

1 unchanged sentence

Total loans and leases, net $ 3,558,639 $ 3,266,577

During the three months ended December 31, 2020, the Company transferred $ 100.4 million of Community Banking loans to held for sale.

During the three months ended December 31, 2019, the Company transferred $ 251.9 million of Community Banking loans to held for sale.

During the three months ended December 31, 2020 and 2019, the Company originated $ 303.5 million of other consumer finance, SBA/USDA, and consumer credit product loans as held for sale and $ 16.2 million of SBA/USDA and consumer credit product loans as held for sale, respectively.

The Company sold held for sale loans resulting in proceeds of $ 451.7 million and gains on sale of $ 3.5 million during the three months ended December 31, 2020.

The Company sold held for sale loans resulting in proceeds of $ 143.0 million and gains on sale of $ 1.9 million during the three months ended December 31, 2019.

Loans purchased and sold by portfolio segment, including participation interests, for the three months ended were as follows:

Three Months Ended December 31,

During the six months ended March 31, 2021, the Company transferred $ 99.9 million of Community Banking loans to held for sale.

During the six months ended March 31, 2020, the Company transferred $ 277.0 million of Community Banking loans to held for sale.

During the six months ended March 31, 2021 and 2020, the Company originated $ 361.7 million of other consumer finance, SBA/USDA, and consumer credit product loans as held for sale and $ 32.2 million of SBA/USDA and consumer credit product loans as held for sale, respectively.

The Company sold held for sale loans resulting in proceeds of $ 476.0 million and gains on sale of $ 4.6 million during the six months ended March 31, 2021.

The Company sold held for sale loans resulting in proceeds of $ 432.0 million and gains on sale of $ 6.2 million during the six months ended March 31, 2020.

Loans purchased and sold by portfolio segment, including participation interests, for the three and six months ended were as follows:

Three Months Ended March 31, Six Months Ended March 31,

(Dollars in Thousands) 2021 2020 2021 2020

12 unchanged sentences

The net investment in direct financing and sales-type leases was comprised of the following:

(Dollars in Thousands) December 31, 2020 September 30, 2020

(Dollars in Thousands) March 31, 2021 September 30, 2020

Carrying amount $ 327,238 $ 299,487

3 unchanged sentences

Total net investment in direct financing and sales-type leases $ 310,416 $ 283,162

The carrying amount of direct financing and sales-type leases subject to residual value guarantees was $ 8.4 million at December 31, 2020.

The carrying amount of direct financing and sales-type leases subject to residual value guarantees was $ 8.1 million at March 31, 2021.

The components of total lease income were as follows:

Three Months Ended December 31,

Three Months Ended March 31, Six Months Ended March 31,

(Dollars in Thousands) 2021 2020 2021 2020

4 unchanged sentences

Profit (loss) recorded on commencement date on sales-type leases 59 16 130 487

1,687 1,831 1,756 2,581

Total leasing and equipment finance noninterest income 11,481 13,110 21,662 25,534

2 unchanged sentences

Undiscounted future minimum lease payments receivable for direct financing and sales-type leases and a reconciliation to the carrying amount recorded were as follows:

(Dollars in Thousands) December 31, 2020

(Dollars in Thousands) March 31, 2021

Remaining in 2021 $ 63,369

3 unchanged sentences

Third-party residual value guarantees —

Total carrying amount of direct financing and sales-type leases $ 300,748

The Company did not record any contingent rental income from direct financing and sales-type leases in the three months ended December 31, 2020.

During the Company's fiscal 2020 second quarter, the COVID-19 pandemic began impacting global and US markets and macroeconomic conditions, and continues to have an impact.

Although the ultimate impact of the pandemic on the Company's loan and lease portfolio continues to be difficult to predict, management continues to evaluate the loan and lease portfolio in order to assess the impact on repayment sources and underlying collateral that could result in additional losses and continues to assess the impact to our customers and businesses as a result of COVID-19 and will refine our estimate as more information becomes available.

Total carrying amount of direct financing and sales-type lease $ 327,238

The Company did not record any contingent rental income from direct financing and sales-type leases in the six months ended March 31, 2021.

The COVID-19 pandemic began impacting the U.S.

and global economies in the first calendar quarter of 2020.

Since the onset of this pandemic, macroeconomic conditions and markets have significantly deteriorated.

Although the ultimate impact of this pandemic on the Company's loan and lease portfolio is difficult to predict, management continues to evaluate the loan and lease portfolio in order to assess the impact on repayment sources and underlying collateral that could result in additional losses and the impact to our customers and businesses as a result of COVID-19 and will refine our estimate as more information becomes available.

Effective October 1, 2020, the Company adopted ASU 2016-13, Financial Instruments – Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments and related ASUs on a modified retrospective basis.

Financial information at and for the quarter ended December 31, 2020 is reflected as such.

Measurement of Credit Losses on Financial Instruments, and subsequent related ASUs on a modified retrospective basis.

Financial information at and for the quarter ended March 31, 2021 is reflected as such.

The historical information disclosed is in accordance with Topic 310.

Activity in the allowance for credit losses and balances of loans and leases by portfolio segment for each of the three months ended was as follows:

Three Months Ended December 31, 2020

Activity in the allowance for credit losses and balances of loans and leases by portfolio segment was as follows:

Three Months Ended March 31, 2021

(Dollars in Thousands) Beginning Balance Provision (Recovery) for Credit Losses (2)

Charge-offs Recoveries Ending Balance

Allowance for credit losses:

National Lending

Term lending $ 28,220 $ 1,396 $ ( 2,477 ) $ 176 $ 27,315

Asset based lending 1,809 539 ( 599 ) — 1,749

Factoring 3,719 ( 545 ) — 36 3,210

Lease financing 6,784 420 ( 471 ) 130 6,863

Insurance premium finance 1,285 103 ( 149 ) 87 1,326

SBA/USDA 3,164 136 — — 3,300

Other commercial finance 479 62 — — 541

Commercial finance 45,460 2,111 ( 3,696 ) 429 44,304

Consumer credit products 835 155 — — 990

Other consumer finance 10,176 266 ( 419 ) 70 10,093

Consumer finance 11,011 421 ( 419 ) 70 11,083

Tax services 1,412 27,680 — 54 29,146

Warehouse finance 319 13 — — 332

Total National Lending 58,202 30,225 ( 4,115 ) 553 84,865

Community Banking

Commercial real estate and operating 14,121 ( 22 ) ( 134 ) — 13,965

Consumer one-to-four family real estate and other 19 ( 2 ) — — 17

Agricultural real estate and operating 47 ( 2 ) — — 45

Total Community Banking 14,187 ( 26 ) ( 134 ) — 14,027

Total loans and leases 72,389 30,199 ( 4,249 ) 553 98,892

Unfunded commitments (1)

688 91 — — 779

Total $ 73,077 $ 30,290 $ ( 4,249 ) $ 553 $ 99,671

(1) Reserve for unfunded commitments is recognized within other liabilities on the Condensed Consolidated Statements of Financial Condition.

(2) As a result of the adoption of CECL, effective October 1, 2020, the provision for credit losses includes the provision for unfunded commitments that was previously included within other noninterest expense.

Six Months Ended March 31, 2021

(Dollars in Thousands) Beginning Balance Impact of CECL Adoption Provision (Recovery) for Credit Losses (2)

25 unchanged sentences

Total $ 56,220 $ 13,604 $ 36,379 $ ( 9,923 ) $ 3,391 $ 99,671

(1) Reserve for unfunded commitments is recognized within other liabilities on the Consolidated Statement of Financial Condition.

(1) Reserve for unfunded commitments is recognized within other liabilities on the Condensed Consolidated Statements of Financial Condition.

Three Months Ended December 31, 2019

Three Months Ended March 31, 2020

(Dollars in Thousands) Beginning Balance Provision (Recovery) for Loan and Lease Losses Charge-offs Recoveries Ending Balance

21 unchanged sentences

Total $ 30,176 $ 37,296 $ ( 3,187 ) $ 1,070 $ 65,355

The following tables provide additional disclosures previously required by ASC Topic 310 related to the Company's September 30, 2020 balances.

Six Months Ended March 31, 2020

(Dollars in Thousands) Beginning balance Provision (recovery) for loan and lease losses Charge-offs Recoveries Ending balance

Allowance for loan and lease losses:

National Lending

Term lending $ 5,533 $ 9,081 $ ( 3,172 ) $ 205 $ 11,647

Asset based lending 2,437 342 — 47 2,826

Factoring 3,261 1,489 ( 735 ) 429 4,444

Lease financing 1,275 1,546 ( 367 ) 229 2,683

Insurance premium finance 1,024 2,076 ( 1,074 ) 116 2,142

SBA/USDA 383 1,292 ( 117 ) — 1,558

Other commercial finance 683 ( 131 ) — — 552

Commercial finance 14,596 15,695 ( 5,465 ) 1,026 25,852

Consumer credit products 1,044 38 — — 1,082

Other consumer finance 5,118 ( 833 ) ( 1,640 ) 769 3,414

Consumer finance 6,162 ( 795 ) ( 1,640 ) 769 4,496

Tax services — 20,507 — 813 21,320

Warehouse finance 263 71 — — 334

Total National Lending 21,021 35,478 ( 7,105 ) 2,608 52,002

Community Banking

Commercial real estate and operating 6,208 3,861 — — 10,069

Consumer one-to-four family real estate and other 1,053 1,297 — — 2,350

Agricultural real estate and operating 867 67 — — 934

Total Community Banking 8,128 5,225 — — 13,353

Total $ 29,149 $ 40,703 $ ( 7,105 ) $ 2,608 $ 65,355

The following table provide additional disclosures previously required by ASC Topic 310 related to the Company's September 30, 2020 balances.

Allowance Loans and Leases

26 unchanged sentences

Total $ 5,119 $ 51,069 $ 56,188 $ 51,278 $ 3,262,862 $ 3,314,140

Information on impaired loans and leases, all of which are deemed to be collateral dependent and are evaluated individually for the ACL, as of December 31, 2020 was as follows:

(Dollars in Thousands) December 31, 2020

Information on impaired loans and leases, all of which are deemed to be collateral dependent and are evaluated individually for the ACL was as follows:

(Dollars in Thousands) March 31, 2021

National Lending

1 unchanged sentence

Asset based lending 373

Factoring 842

Lease financing 2,389

Commercial finance 17,191

Consumer credit products 2,097

Consumer finance 2,097

Total National Lending 19,288

37 unchanged sentences

Total $ 14,378 $ 14,390 $ 5,119

In response to the ongoing COVID-19 pandemic, the Company allowed modifications, such as payment deferrals and temporary forbearance, to credit-worthy borrowers who are experiencing temporary hardship due to the effects of COVID-19.

In response to the ongoing COVID-19 pandemic, the Company allowed modifications, such as payment deferrals and temporary forbearances, to credit-worthy borrowers who are experiencing temporary hardship due to the effects of COVID-19.

Accordingly, if all payments were less than 30 days past due prior to the onset of the pandemic effects, the loan or lease will not be reported as past due during the deferral or forbearance period.

As of December 31, 2020, $ 84.2 million of loan and lease balances that were granted deferral payments by the Company were still in their deferment period due to performing borrowers experiencing temporary hardship from COVID-19.

As of March 31, 2021, $ 66.5 million of loan and lease balances that were granted deferral payments by the Company were still in their deferment period due to performing borrowers experiencing temporary hardship from COVID-19.

These modifications consisted solely of payment deferrals ranging from 30 days to six months .

These modifications are in line with applicable regulatory guidelines and, therefore, they are not reported as troubled debt restructurings.

The Company elected to accrue and recognize interest income on these modifications during the payment deferral period.

Other than the loan modifications that are on nonaccrual status, the Company is accruing and recognizing interest income on these modifications during the payment deferral period.

The Company continues to regularly assess the collectability of the income on these active deferral relationships and considers adjustments to the accruing status on an individual case basis.

The Company recognizes that concentrations of credit may naturally occur and may take the form of a large volume of related loans and leases to an individual, a specific industry, or a geographic location.

Credit concentration is a direct, indirect, or contingent obligation that has a common bond where the aggregate exposure equals or exceeds a certain percentage of the Company’s Tier 1 Capital plus the Allowance for Loan and Lease Losses.

Federal regulations provide for the classification of loans and other assets such as debt and equity securities considered by the Bank's primary regulator, the Office of the Comptroller of the Currency (the “OCC”), to be of lesser quality as “substandard,” “doubtful” or “loss.”

1 unchanged sentence

Due to the unique risks associated with these portfolios, the Company monitors other credit quality indicators in their evaluation of the appropriateness of the allowance for credit losses on these portfolios, and as such, these loans are not included in the asset classification table below.

The outstanding balances of consumer finance loans and tax services loans were $ 251.0 million and $ 92.5 million at December 31, 2020, respectively, and $ 224.2 million and $ 3.1 million at September 30, 2020, respectively.

The outstanding balances of consumer finance loans and tax services loans were $ 235.7 million and $ 225.9 million at March 31, 2021, respectively, and $ 224.2 million and $ 3.1 million at September 30, 2020, respectively.

The amortized cost basis of loans and leases by asset classification and year of origination was as follows:

1 unchanged sentence

(Dollars in Thousands) Term Loans and Leases by Origination Year Revolving Loans and Leases Total

As of December 31, 2020 2021 2020 2019 2018 2017 Prior

As of March 31, 2021 2021 2020 2019 2018 2017 Prior

Pass $ 200,824 $ 392,195 $ 123,457 $ 67,408 $ 5,541 $ 19,373 $ — $ 808,798

37 unchanged sentences

Watch 642 — — — 857 1,327 — 2,826

Special Mention — — — — — — — —

Substandard — — — 278 — — — 278

15 unchanged sentences

Substandard — 300 700 16,897 — 306 — 18,203

Doubtful — — 560 — — — — 560

Total — 14,335 110,431 149,786 53,499 7,536 — 335,587

1 unchanged sentence

Pass — — 159 875 374 2,869 — 4,277

Watch — — — 236 — — — 236

Special Mention — — — — 139 66 206 411

Substandard — — 110 — 41 139 — 290

2 unchanged sentences

Pass — — 85 108 — 2,586 — 2,779

Watch — 1,583 — — — — — 1,583

Special Mention — — — 111 — 2,694 — 2,805

Substandard — 3,278 — 1,263 — 591 — 5,132

5 unchanged sentences

Substandard — 3,578 810 18,160 41 1,036 — 23,625

Doubtful — — 560 — — — — 560

Total — 17,613 110,785 152,032 53,914 13,721 — 348,065

33 unchanged sentences

Receivable > 89 Days Past Due and Accruing Non-accrual balance Total

As of December 31, 2020

As of March 31, 2021

Loans held for sale $ — $ — $ — $ — $ 67,635 $ 67,635 $ — $ — $ —

53 unchanged sentences

Amortized Cost Basis

(Dollars in Thousands) Term Loans and Leases by Origination Year Revolving Loans and Leases Total

December 31, 2020 2021 2020 2019 2018 2017 Prior

(Dollars in Thousands) Term Loans and Leases by Origination Year Revolving Loans and Leases Total Nonaccrual With No ACL

March 31, 2021 2021 2020 2019 2018 2017 Prior

National Lending

15 unchanged sentences

(Dollars in Thousands) Term Loans and Leases by Origination Year Revolving Loans and Leases Total

December 31, 2020 2021 2020 2019 2018 2017 Prior

March 31, 2021 2021 2020 2019 2018 2017 Prior

National Lending

14 unchanged sentences

The following table provides the average recorded investment in non-accrual loans and leases:

Three Months Ended December 31, 2020

(Dollars in Thousands) Average Recorded Investment

Average Recorded Investment

(Dollars in Thousands) Three Months Ended March 31, 2021 Six Months Ended March 31, 2021

National Lending

3 unchanged sentences

Lease financing 2,990 3,273

SBA/USDA 600 600

Commercial finance 16,935 18,988

6 unchanged sentences

Total loans and leases $ 37,134 $ 33,304

The recognized interest income on the Company's nonaccrual loans and leases during the quarter ended December 31, 2020 was not significant.

The recognized interest income on the Company's nonaccrual loans and leases for the three and six months ended March 31, 2021 was not significant.

The following table provides the average recorded investment in impaired loans and leases:

Three Months Ended December 31, 2019

(Dollars in Thousands) Average Recorded Investment Recognized Interest Income

Three Months Ended March 31, 2020 Six Months Ended March 31, 2020

(Dollars in Thousands) Average Recorded Investment Recognized Interest Income Average Recorded Investment Recognized Interest Income

National Lending

15 unchanged sentences

The Company’s troubled debt restructurings ("TDRs") typically involve forgiving a portion of interest or principal on existing loans, making loans at a rate materially less than current market rates, or extending the term of the loan.

There were $ 0.1 million of national lending loans that were modified in a TDR during the three months ended December 31, 2020, all of which were modified to extend the term of the loan, and no community banking loans.

There were $ 0.6 million community banking loans and $ 0.4 million of national lending loans and leases that were modified in a TDR during the three months ended December 31, 2019.

During the three months ended December 31, 2020, the Company had $ 0.4 million of national lending loans and no community banking loans that were modified in a TDR within the previous 12 months and for which there was a payment default.

During the three months ended December 31, 2019, the Company had $ 1.2 million of community banking loans and $ 0.3 million national lending loans that were modified in a TDR within the previous 12 months and for which there was a payment default.

TDR net charge-offs and the impact of TDRs on the Company's allowance for loan and lease losses were insignificant during the quarters ended December 31, 2020 and December 31, 2019.

There were $ 2.1 million of national lending loans that were modified in a TDR during the three months ended March 31, 2021, all of which were modified to extend the term of the loan, and no community banking loans.

There were $ 3.7 million of national lending loans and leases that were modified in a TDR during the three months ended March 31, 2020 and no community banking loans.

During the six months ended March 31, 2021, there were $ 2.2 million of national lending loans and no community bank loans that were modified in a TDR, all of which were modified to extend the term of the loan.

There were $ 4.1 million of national lending loans and leases and $ 0.6 million of community banking loans that were modified in a TDR during the six months ended March 31, 2020.

During the six months ended March 31, 2021, the Company had $ 0.1 million of national lending loans and no community banking loans that were modified in a TDR within the previous 12 months and for which there was a payment default.

During the six months ended March 31, 2020, the Company had $ 3.2 million of community banking loans and $ 2.9 million national lending loans that were modified in a TDR within the previous 12 months and for which there was a payment default.

TDR net charge-offs and the impact of TDRs on the Company's allowance for credit losses were insignificant during the quarters ended March 31, 2021 and March 31, 2020.

EARNINGS PER COMMON SHARE ("EPS")

8 unchanged sentences

A reconciliation of net income and common stock share amounts used in the computation of basic and diluted earnings per share is presented below.

Three Months Ended

Three Months Ended March 31, Six Months Ended March 31,

(Dollars in Thousands, Except Share and Per Share Data) 2021 2020 2021 2020

18 unchanged sentences

(1) Represents the effect of the assumed exercise of stock options and vesting of performance share units and restricted stock, as applicable, utilizing the treasury stock method.

(2) Excluded from the computation of diluted earnings per share for the three months ended December 31, 2020 and 2019, respectively, were 660,659 and 818,089 weighted average shares of nonvested restricted stock because their inclusion would be anti-dilutive.

(2) Excluded from the computation of diluted earnings per share for the three months ended March 31, 2021 and 2020, respectively, were 605,459 and 834,746 weighted average shares of nonvested restricted stock because their inclusion would be anti-dilutive.

Excluded from the computation of diluted earnings per share for the six months ended March 31, 2021 and 2020, respectively, were 633,553 and 826,262 weighted average shares of nonvested restricted stock because their inclusion would be anti-dilutive.

RENTAL EQUIPMENT, NET

Rental equipment consists of the following:

(Dollars in Thousands) December 31, 2020 September 30, 2020

(Dollars in Thousands) March 31, 2021 September 30, 2020

Computers and IT networking equipment $ 16,313 $ 15,926

7 unchanged sentences

Undiscounted future minimum lease payments expected to be received for operating leases were as follows:

(Dollars in Thousands)

(Dollars in Thousands) March 31, 2021

Remaining in 2021 $ 17,689

3 unchanged sentences

The following table provides an analysis of changes in foreclosed real estate and repossessed assets:

Three Months Ended

Six Months Ended March 31,

(Dollars in Thousands) 2021 2020

2 unchanged sentences

Write-downs 466 104

Net proceeds from sale 2,657 23,085

Sales 8,021 23,085

(Gain) loss on sale ( 4 ) 5,039

1 unchanged sentence

Balance, ending of period $ 1,483 $ 7,249

At December 31, 2020 and September 30, 2020, the Company had established a valuation allowance of $ 0.6 million and $ 0.5 million for repossessed assets, respectively.

As of December 31, 2020 and September 30, 2020, the Company had no loans or leases in the process of foreclosure.

At March 31, 2021 and September 30, 2020, the Company had established a valuation allowance of $ 1.0 million and $ 0.5 million for repossessed assets, respectively.

As of March 31, 2021 and September 30, 2020, the Company had no loans or leases in the process of foreclosure.

During the fiscal year ended September 30, 2020, the Company sold $ 28.1 million of other real estate owned ("OREO"), which consisted of assets related to a Community Bank agriculture real estate customer.

2 unchanged sentences

GOODWILL AND INTANGIBLE ASSETS

The Company held a total of $ 309.5 million of goodwill at December 31, 2020.

The Company held a total of $ 309.5 million of goodwill at March 31, 2021.

The recorded goodwill is a result of multiple business combinations that have been consummated since fiscal year 2015, with the most recent being the merger with Crestmark pursuant to the Crestmark Acquisition that closed on August 1, 2018.

1 unchanged sentence

The assessment is done at a reporting unit level, which is one level below the operating segments.

There have been no changes to the carrying amount of goodwill during the three months ended December 31, 2020.

The changes in the carrying amount of the Company’s intangible assets for the three months ended December 31, 2020 and 2019 were as follows:

There have been no changes to the carrying amount of goodwill during the six months ended March 31, 2021.

The changes in the carrying amount of the Company’s intangible assets for the six months ended March 31, 2021 and 2020 were as follows:

(Dollars in Thousands) Trademark (1)

2 unchanged sentences

All Others (4)

Intangible Assets

Balance as of September 30, 2020 $ 10,901 $ 422 $ 24,333 $ 6,036 $ 41,692

2 unchanged sentences

Write-offs during the period — — — ( 24 ) ( 24 )

Balance as of December 31, 2020 $ 10,629 $ 327 $ 22,847 $ 5,857 $ 39,660

Balance as of March 31, 2021 $ 10,357 $ 231 $ 20,617 $ 5,698 $ 36,903

Gross carrying amount $ 14,624 $ 2,481 $ 82,088 $ 10,123 $ 109,316

1 unchanged sentence

Accumulated impairment — — ( 10,248 ) ( 218 ) ( 10,466 )

Balance as of December 31, 2020 $ 10,629 $ 327 $ 22,847 $ 5,857 $ 39,660

Balance as of March 31, 2021 $ 10,357 $ 231 $ 20,617 $ 5,698 $ 36,903

(1) Book amortization period of 5 - 15 years.

10 unchanged sentences

All Others (4)

Intangible Assets

Balance as of September 30, 2019 $ 11,959 $ 827 $ 33,207 $ 6,817 $ 52,810

1 unchanged sentence

Amortization during the period ( 528 ) ( 212 ) ( 4,997 ) ( 340 ) ( 6,077 )

Balance as of December 31, 2019 $ 11,695 $ 714 $ 31,092 $ 6,650 $ 50,151

Balance as of March 31, 2020 $ 11,431 $ 615 $ 28,210 $ 6,510 $ 46,766

Gross carrying amount $ 14,624 $ 2,480 $ 82,088 $ 10,736 $ 109,928

1 unchanged sentence

Accumulated impairment — — ( 10,248 ) ( 659 ) ( 10,907 )

Balance as of December 31, 2019 $ 11,695 $ 714 $ 31,092 $ 6,650 $ 50,151

Balance as of March 31, 2020 $ 11,431 $ 615 $ 28,210 $ 6,510 $ 46,766

(1) Book amortization period of 5 - 15 years.

7 unchanged sentences

The estimated amortization expense of intangible assets assumes no activities, such as acquisitions, which would result in additional amortizable intangible assets.

Estimated amortization expense of intangible assets in the remaining nine months of fiscal 2021 and subsequent fiscal years was as follows:

(Dollars in Thousands) December 31, 2020

Estimated amortization expense of intangible assets in the remaining six months of fiscal 2021 and subsequent fiscal years was as follows:

(Dollars in Thousands) March 31, 2021

Remaining in 2021 $ 3,775

2 unchanged sentences

The Company tests intangible assets for impairment at least annually or more often if conditions indicate a possible impairment.

There were no impairments to intangible assets during the three months ended December 31, 2020 and 2019.

There were no impairments to intangible assets during the six months ended March 31, 2021 and 2020.

OPERATING LEASE RIGHT-OF-USE ASSETS AND LIABILITIES

Operating lease ROU assets, included in other assets, were $ 25.2 million at December 31, 2020.

Operating lease liabilities, included in accrued expenses and other liabilities, were $ 26.7 million at December 31, 2020.

Operating lease ROU assets, included in other assets, were $ 36.1 million at March 31, 2021.

Operating lease liabilities, included in accrued expenses and other liabilities, were $ 38.1 million at March 31, 2021.

Undiscounted future minimum operating lease payments and a reconciliation to the amount recorded as operating lease liabilities were as follows:

(Dollars in Thousands) December 31, 2020

(Dollars in Thousands) March 31, 2021

Remaining in 2021 $ 2,219

4 unchanged sentences

The weighted-average discount rate and remaining lease term for operating leases were as follows:

December 31, 2020

March 31, 2021

Weighted-average discount rate 2.31 %

1 unchanged sentence

The components of total lease costs for operating leases were as follows:

(Dollars in Thousands) Three Months Ended December 31, 2020

Three Months Ended March 31, Six Months Ended March 31,

(Dollars in Thousands) 2021 2020 2021 2020

Lease expense $ 991 $ 869 $ 1,945 $ 1,613

7 unchanged sentences

This authorization is effective from November 21, 2019 through December 31, 2022.

During the three months ended December 31, 2020, and 2019, the Company repurchased 1,943,575 and 899,371 shares, respectively, as part of the share repurchase program.

During the six months ended March 31, 2021, and 2020, the Company repurchased 2,683,579 and 3,497,565 shares, respectively, as part of the share repurchase program.

Under the repurchase program, repurchased shares were retired and designated as authorized but unissued shares.

1 unchanged sentence

When the repurchase price is greater than the original issue proceeds, the excess is charged to retained earnings.

As of December 31, 2020, the remaining number of shares available for repurchase under this program was 2,285,157 shares of common stock.

For the three months ended December 31, 2020, and 2019, the Company also repurchased 79,101 and 82,971 shares, or $ 1.8 million and $ 2.7 million of common stock, respectively, in settlement of employee tax withholding obligations due upon the vesting of restricted stock.

As of March 31, 2021, the remaining number of shares available for repurchase under this program was 1,550,173 shares of common stock.

For the six months ended March 31, 2021, and 2020, the Company also repurchased 84,121 and 88,784 shares, or $ 1.9 million and $ 2.9 million of common stock, respectively, in settlement of employee tax withholding obligations due upon the vesting of restricted stock.

STOCK COMPENSATION

5 unchanged sentences

The Company has elected, with the adoption of ASU 2016-09, to record forfeitures as they occur.

The following tables show the activity of nonvested (restricted) shares and PSUs granted, exercised, or forfeited under the 2002 Omnibus Incentive Plan for the three months ended December 31, 2020.

There were no options granted, exercised or forfeited under this plan during the three months ended December 31, 2020.

The following tables show the activity of nonvested (restricted) shares and PSUs granted, exercised, or forfeited under the 2002 Omnibus Incentive Plan for the six months ended March 31, 2021.

There were no options granted, exercised or forfeited under this plan during the six months ended March 31, 2021.

(Dollars in Thousands, Except Per Share Data) Number of Shares Weighted Average Fair Value at Grant

4 unchanged sentences

Forfeited or expired ( 98,399 ) 29.66

Nonvested shares outstanding, December 31, 2020

Nonvested shares outstanding, March 31, 2021

606,775 $ 30.24

2 unchanged sentences

Forfeited or expired — —

Performance share units outstanding, December 31, 2020

Performance share units outstanding, March 31, 2021

60,984 $ 34.03

(1) The number of PSUs granted reflects the target number of PSUs able to be earned under a given award.

At December 31, 2020, stock-based compensation expense not yet recognized in income totaled $ 9.4 million, which is expected to be recognized over a weighted average remaining period of 2.26 years.

The Company recorded an income tax expense of $ 3.5 million for the three months ended December 31, 2020, resulting in an effective tax rate of 10.77 %, compared to an income tax benefit of $ 0.7 million, or an effective tax rate of 2.97 %, for the three months ended December 31, 2019.

At March 31, 2021, stock-based compensation expense not yet recognized in income totaled $ 8.9 million, which is expected to be recognized over a weighted average remaining period of 2.10 years.

The Company recorded an income tax expense of $ 4.7 million for the six months ended March 31, 2021, resulting in an effective tax rate of 4.97 %, compared to an income tax expense of $ 6.3 million, or an effective tax rate of 7.66 %, for the six months ended March 31, 2020.

The Company’s effective tax rate was lower than the U.S.

2 unchanged sentences

The table below compares the income tax expense components for the periods presented.

Three Months Ended December 31,

Six Months Ended March 31,

(Dollars in Thousands) 2021 2020

9 unchanged sentences

Effective tax rate 4.97 % 7.66 %

The Company does not expect significant income tax impacts due to the CARES Act or the CAA, which were signed in response to the COVID-19 pandemic.

COMMITMENTS AND CONTINGENCIES

In the normal course of business, the Bank makes various commitments to extend credit that are not reflected in the accompanying Condensed Consolidated Financial Statements as described below.

At December 31, 2020 and September 30, 2020, unfunded loan commitments approximated $ 1.35 billion and $ 1.22 billion, respectively, excluding undisbursed portions of loans in process.

At March 31, 2021 and September 30, 2020, unfunded loan commitments approximated $ 1.28 billion and $ 1.22 billion, respectively, excluding undisbursed portions of loans in process.

Commitments, which are disbursed subject to certain limitations, extend over various periods of time.

Generally, unused commitments are canceled upon expiration of the commitment term as outlined in each individual contract.

The Company had no commitments to purchase securities at December 31, 2020 or September 30, 2020.

The Company had no commitments to sell securities at December 31, 2020 or September 30, 2020.

The Company had no commitments to purchase securities at March 31, 2021 or September 30, 2020.

The Company had no commitments to sell securities at March 31, 2021 or September 30, 2020.

The exposure to credit loss in the event of non-performance by other parties to financial instruments for commitments to extend credit is represented by the contractual amount of those instruments.

11 unchanged sentences

The Court ruled in favor of MetaBank on cross motions for summary judgment and vacated the trial.

Card Limited has appealed this decision.

The Bank intends to continue to vigorously defend this claim.

An estimate of a range of reasonably possible loss cannot be made at this stage of the litigation.

Card Limited has appealed the decision, but thereafter agreed to settle this claim for a nominal amount.

This payment has been made and the case has been dismissed.

On February 9, 2018, the Bank’s AFS/IBEX division filed a lawsuit in the United States District Court for the Eastern District of New York captioned AFS/IBEX, a division of MetaBank v.

6 unchanged sentences

The Bank is seeking recovery of all amounts to which it is entitled at law or equity and intends to vigorously pursue its claims against the defendants.

The Bank filed a Motion for Summary Judgment which was granted by the trial court, but is subject to appeal.

From time to time, the Company or its subsidiaries are subject to certain legal proceedings and claims in the ordinary course of business.

7 unchanged sentences

(Dollars in Thousands) Consumer Commercial Corporate Services/Other Consolidated Company

Three Months Ended December 31, 2020 2019 2020 2019 2020 2019 2020 2019

Three Months Ended March 31, 2021 2020 2021 2020 2021 2020 2021 2020

Net interest income (1)

8 unchanged sentences

5 5 9,841 11,094 — 1 9,846 11,100

Net gain realized on investment securities (1)

— — — — 6 — 6 —

Gain on divestitures (1)

— — — — — 19,275 — 19,275

Gain (loss) on sale of other (1)

2 unchanged sentences

919 1,831 2,349 1,582 950 2,388 4,218 5,801

Total noninterest income (expense) 25,335 24,764 15,166 14,980 4,954 ( 2,261 ) 45,455 37,483

Total noninterest income 98,041 83,208 13,940 15,523 1,472 21,782 113,453 120,513

Revenue $ 123,126 $ 99,370 $ 56,344 $ 52,549 $ 7,833 $ 36,331 $ 187,303 $ 188,250

2 unchanged sentences

The scope of Topic 606 explicitly excludes net interest income as well as many other revenues for financial assets and liabilities, including loans, leases, and securities.

(Dollars in Thousands) Consumer Commercial Corporate Services/Other Consolidated Company

Six Months Ended March 31, 2021 2020 2021 2020 2021 2020 2021 2020

Net interest income (1)

$ 47,432 $ 32,719 $ 84,252 $ 76,762 $ 8,165 $ 22,907 $ 139,849 $ 132,388

Noninterest income:

Refund transfer product fees 23,327 29,131 — — — — 23,327 29,131

Tax advance product fees (1)

46,522 31,812 — — — — 46,522 31,812

Payment card and deposit fees 52,439 44,655 — — — — 52,439 44,655

Other bank and deposit fees — — 360 546 10 322 370 868

Rental income (1)

10 9 19,721 22,128 — 1,314 19,731 23,451

Net gain realized on investment securities (1)

— — — — 6 — 6 —

Gain on divestitures (1)

— — — — — 19,275 — 19,275

Gain (loss) on sale of other (1)

— ( 19 ) 4,216 4,917 765 ( 5,142 ) 4,981 ( 244 )

Other income (1)

1,078 2,384 4,809 2,911 5,645 3,752 11,532 9,047

Total noninterest income 123,376 107,972 29,106 30,502 6,426 19,521 158,908 157,995

Revenue $ 170,808 $ 140,691 $ 113,358 $ 107,264 $ 14,591 $ 42,428 $ 298,757 $ 290,383

(1) These revenues are not within the scope of Topic 606.

Additional details are included in other footnotes to the accompanying financial statements.

The scope of Topic 606 explicitly excludes net interest income as well as many other revenues for financial assets and liabilities, including loans, leases, and securities.

Following is a discussion of key revenues within the scope of Topic 606.

10 unchanged sentences

The transaction price for such activity is based upon stand-alone fees within the terms and conditions.

At December 31, 2020 and September 30, 2020, there were no receivables related to refund transfer fees, which reflect earned revenue with unconditional rights to payment for product fee income.

At March 31, 2021 and September 30, 2020, there were no receivables related to refund transfer fees, which reflect earned revenue with unconditional rights to payment for product fee income.

All refund transfer fees are recorded within the Consumer reporting segment.

42 unchanged sentences

The Company adopted ASU 2018-02 as of October 1, 2020.

The amendments in this ASU allow for a reclassification from AOCI to Retained Earnings for stranded tax effects from the Tax Cuts and Jobs Act ("TCJA").

The amendments in this ASU allow for a reclassification from AOCI to Retained Earnings for stranded tax effects from the Tax Cuts and Jobs Act of 2017 ("TCJA").

For the Company, these amendments are limited to any unrealized gains and losses held in Other Comprehensive Income for debt securities AFS held at the time of the TCJA enactment.

1 unchanged sentence

The following tables present segment data for the Company:

Three Months Ended December 31, 2020

Three Months Ended March 31, 2021

(Dollars in Thousands) Consumer Commercial Corporate

4 unchanged sentences

Noninterest expense 30,189 27,829 37,953 95,971

Income (loss) before income tax expense (benefit) 27,154 23,379 ( 17,743 ) 32,790

Income (loss) before income tax expense 64,917 26,312 ( 30,187 ) 61,042

Total assets 531,305 3,030,088 6,228,730 9,790,123

1 unchanged sentence

Total deposits 8,447,910 12,177 182,326 8,642,413

Three Months Ended December 31, 2019

Three Months Ended March 31, 2020

(Dollars in Thousands) Consumer Commercial Corporate

4 unchanged sentences

Noninterest expense 30,450 27,361 33,918 91,729

Income (loss) before income tax expense (benefit) 23,606 24,289 ( 24,966 ) 22,929

Income (loss) before income tax expense 49,350 13,194 ( 3,319 ) 59,225

Total assets 387,871 2,529,665 2,926,329 5,843,865

1 unchanged sentence

Total deposits 3,078,481 9,214 874,709 3,962,404

Six Months Ended March 31, 2021

(Dollars in Thousands) Consumer Commercial Corporate

Services/Other Total

Net interest income $ 47,432 $ 84,252 $ 8,165 $ 139,849

Provision for credit losses 30,386 8,670 ( 2,677 ) 36,379

Noninterest income 123,376 29,106 6,426 158,908

Noninterest expense 48,351 54,997 65,198 168,546

Income (loss) before income tax expense 92,071 49,691 ( 47,930 ) 93,832

Total assets 531,305 3,030,088 6,228,730 9,790,123

Total goodwill 87,145 222,360 — 309,505

Total deposits 8,447,910 12,177 182,326 8,642,413

Six Months Ended March 31, 2020

(Dollars in Thousands) Consumer Commercial Corporate

Services/Other Total

Net interest income $ 32,719 $ 76,762 $ 22,907 $ 132,388

Provision for loan and lease losses 20,544 15,695 4,464 40,703

Noninterest income 107,972 30,502 19,521 157,995

Noninterest expense 47,190 54,086 66,250 167,526

Income (loss) before income tax expense 72,957 37,483 ( 28,286 ) 82,154

Total assets 387,871 2,529,665 2,926,329 5,843,865

Total goodwill 87,145 222,360 — 309,505

Total deposits 3,078,481 9,214 874,709 3,962,404

FAIR VALUES OF FINANCIAL INSTRUMENTS

14 unchanged sentences

The following tables summarize the fair values of debt securities available for sale and equity securities as they are measured at fair value on a recurring basis:

Fair Value At December 31, 2020

Fair Value At March 31, 2021

(Dollars in Thousands) Total Level 1 Level 2 Level 3

10 unchanged sentences

$ 4,265 $ — $ — $ —

(1) Equity securities at fair value are included within other assets on the Condensed Consolidated Statements of Financial Condition at December 31, 2020 and September 30, 2020.

(1) Equity securities at fair value are included within other assets on the Condensed Consolidated Statements of Financial Condition at March 31, 2021 and September 30, 2020.

(2) Consists of certain non-marketable equity securities that are measured at fair value using net asset value ("NAV") per share (or its equivalent) as a practical expedient and are excluded from the fair value hierarchy.

12 unchanged sentences

$ 2,784 $ — $ — $ —

(1) Equity securities at fair value are included within other assets on the Condensed Consolidated Statements of Financial Condition at December 31, 2020 and September 30, 2020.

(1) Equity securities at fair value are included within other assets on the Condensed Consolidated Statements of Financial Condition at March 31, 2021 and September 30, 2020.

(2) Consists of certain non-marketable equity securities that are measured at fair value using NAV per share (or its equivalent) as a practical expedient and are excluded from the fair value hierarchy.

8 unchanged sentences

The following table summarizes the assets of the Company that are measured at fair value in the Condensed Consolidated Statements of Financial Condition on a non-recurring basis:

Fair Value At December 31, 2020

Fair Value At March 31, 2021

(Dollars in Thousands) Total Level 1 Level 2 Level 3

19 unchanged sentences

(Dollars in Thousands) Fair Value at

December 31, 2020

March 31, 2021

Fair Value at

6 unchanged sentences

Management discloses the estimated fair value of financial instruments, including assets and liabilities on and off the Condensed Consolidated Statements of Financial Condition, for which it is practicable to estimate fair value.

These fair value estimates were made at December 31, 2020 and September 30, 2020 based on relevant market information and information about financial instruments.

These fair value estimates were made at March 31, 2021 and September 30, 2020 based on relevant market information and information about financial instruments.

Fair value estimates are intended to represent the price at which an asset could be sold or a liability could be settled.

3 unchanged sentences

The following tables present the carrying amount and estimated fair value of the financial instruments held by the Company:

December 31, 2020

March 31, 2021

(Dollars in Thousands) Carrying

17 unchanged sentences

Accrued interest payable 679 679 679 — —

(1) Equity securities at fair value are included within other assets on the Condensed Consolidated Statements of Financial Condition at December 31, 2020 and September 30, 2020.

(1) Equity securities at fair value are included within other assets on the Condensed Consolidated Statements of Financial Condition at March 31, 2021 and September 30, 2020.

(2) Includes certain non-marketable equity securities that are measured at fair value using NAV per share (or its equivalent) as a practical expedient and are excluded from the fair value hierarchy.

21 unchanged sentences

Accrued interest payable 1,923 1,923 1,923 — —

(1) Equity securities at fair value are included within other assets on the Condensed Consolidated Statements of Financial Condition at December 31, 2020 and September 30, 2020.

(1) Equity securities at fair value are included within other assets on the Condensed Consolidated Statements of Financial Condition at March 31, 2021 and September 30, 2020.

(2) Includes certain non-marketable equity securities that are measured at fair value using NAV per share (or its equivalent) as a practical expedient and are excluded from the fair value hierarchy.

SUBSEQUENT EVENTS

Management has evaluated subsequent events that occurred after December 31, 2020.

During this period, up to the filing date of this Quarterly Report on Form 10-Q, management identified the following subsequent events:

• On January 13, 2021, the Company sold an additional $ 103.2 million of the retained Community Bank loan portfolio to Central Bank.

The sale did not result in any material gain to the Company.

The loans included in the sale were classified as held for sale at December 31, 2020.

• Beginning January 4, 2021, the Bank disbursed approximately $ 7.10 billion of the second round of Economic Impact Payments ("EIP") under the CAA, pursuant to the Company's amendment of its existing agreement with the U.S.

Department Treasury's Bureau of the Fiscal Service ("Fiscal Service") entered into on December 27, 2020.

Management has evaluated subsequent events that occurred after March 31, 2021.

During this period, up to the filing date of this Quarterly Report on Form 10-Q, management identified the following subsequent event:

• The Bank is reorganizing its payments team to best support its emerging and established customers.

In connection with this realignment, Sheree S.

Thornsberry, Executive Vice President and Head of Payments of the Bank, will no longer be employed in her position effective May 7, 2021.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements