What changed in this filing

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Item 1. Business

2021-11-23 compared with 2020-11-30 · 350 added, 401 removed, 819 unchanged (48% of the section changed)

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Unless the context otherwise requires, references herein to the Company include Meta and the Bank, and all subsidiaries of Meta, direct or indirect, on a consolidated basis.

The Company strives to remove barriers to financial access and promote economic mobility by working with third parties to provide responsible, secure, high quality financial products that contribute to the social and economic benefit of communities at the core of the real economy.

Meta works to increase financial availability, choice, and opportunity for all.

The Company's national bank charter, coordination with regulators, and deep understanding of risk mitigation and compliance help to disrupt traditional banking norms, guide its partners, and deliver financial products, services, and funding to the businesses and people who need them most.

Meta believes in financial inclusion for all®.

The Bank, a wholly-owned full-service banking subsidiary of Meta, operates through three reportable segments (Consumer, Commercial, and Corporate Services/Other).

The diagram below reflects the Company's divisions and how they fall within the Company's segment structure.

The Company works with high-value niche industries, strategic-growth companies and technology adopters to grow their businesses and build more profitable customer relationships.

The Company tailors solutions for bank and non-bank businesses, and provides a focused collaborative approach.

The business of the Bank primarily consists of attracting deposits and investing those funds in its loan and lease portfolios, along with providing prepaid cards and other financial products and solutions to business and consumer customers.

Segment Reporting for further information on the reportable segments.

The business of the Bank primarily consists of attracting deposits and investing those funds in its loan and lease portfolios, along with providing banking-as-a-service (BaaS) solutions to third parties to offer their customers financial solutions.

In addition to originating loans and leases, the Bank also occasionally contracts to sell loans, such as tax refund advance loans, consumer credit product loans, and government guaranteed loans, to third party buyers.

The Bank also sells and purchases loan participations from time to time to and from other financial institutions, as well as mortgage-backed securities ("MBS") and other investments permissible under applicable regulations.

On February 29, 2020 (the "Closing Date"), the Company sold the Bank's Community Bank division, a component of the Company's Corporate Services/Other segment, to Central Bank, a state-chartered bank headquartered in Storm Lake, Iowa.

The sale included all of the Community Bank's deposits, branch locations, fixed assets and employees and a portion of the Community Bank’s loan portfolio.

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

The retained Community Bank loan portfolio is included in the Corporate Services/Other segment.

In addition to its lending and deposit gathering activities, the Bank issues prepaid cards, offers innovative consumer credit products, sponsors automated teller machines (“ATMs”) in various debit networks, and offers tax refund-transfer services and other payment industry products and services.

Through its activities, the Meta Payment Systems (“MPS”) division generates both fee income and low-cost deposits for the Bank.

In April 2017, the Company formed a new entity, Meta Capital, LLC ("Meta Capital"), that is a wholly-owned service corporation subsidiary of MetaBank.

Meta Capital was formed for the purpose of making minority equity investments.

In addition to its lending and deposit gathering activities, the Bank offers BaaS solutions by issuing prepaid cards, offering innovative consumer credit products, sponsoring merchant acquiring and automated teller machines (“ATMs”) in various debit networks, and offering tax refund-transfer services and other payment industry products and services.

Through its activities, the Meta Payments division generates both fee income and low-cost deposits for the Bank.

OTHER SUBSIDIARIES

Meta Capital, LLC ("Meta Capital"), a wholly-owned service corporation subsidiary of MetaBank was formed in 2017 for the purpose of making minority equity investments.

Meta Capital focuses on investing in companies in the financial services industry.

First Midwest Financial Capital Trust I, also a wholly-owned subsidiary of Meta, was established in July 2001 and Crestmark Capital Trust I, acquired by the Company in August 2018, was established in June 2005 for the purpose of issuing trust preferred securities.

First Midwest Financial Capital Trust I, a wholly-owned subsidiary of Meta, was established in July 2001 and Crestmark Capital Trust I, acquired by the Company in August 2018, was established in June 2005 for the purpose of issuing trust preferred securities.

The Consumer segment, which provides payments products and services and lending solutions nationwide, primarily operates out of Sioux Falls, South Dakota, with additional offices in Louisville, Kentucky and Easton, Pennsylvania.

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LENDING ACTIVITIES

The diagram below shows the composition of the Company's lending portfolio by loan type.

The Company focuses its lending activities on the origination of commercial finance loans, consumer finance loans and taxpayer advance loans.

The Company emphasizes credit quality and seeks to avoid undue concentrations of loans and leases to a single industry or based on a single class of collateral.

The Company has established lending policies that include a number of underwriting factors that it considers in making a loan, including loan-to-value ratio, cash flow, interest rate and credit history of the borrower.

The Company focuses its lending activities on the origination of commercial finance loans, consumer finance loans and taxpayer advance loans.

Effective on the Closing Date of the Community Bank division sale to Central Bank, the Company substantially ceased originating loans within its Community Banking loan portfolio.

At September 30, 2020, the Company’s loans and leases receivable, net of allowance for loan and lease losses, totaled $3.27 billion, or 54% of the Company’s total assets, as compared to $3.63 billion, or 59%, at September 30, 2019.

At September 30, 2021, the Company’s loans and leases receivable, net of allowance for credit losses, totaled $3.54 billion, or 53% of the Company’s total assets, as compared to $3.27 billion, or 54%, at September 30, 2020.

Loan and lease applications are initially considered and approved at various levels of authority, depending on the type and amount of the loan or lease as directed by the Bank's lending policies.

The Company has a loan committee structure in place for oversight of its lending activities.

Loans and leases in excess of certain amounts require approval by either an Executive Credit Committee or a Board Credit Committee.

Loans and leases in excess of certain amounts require approval by an Executive Credit Committee.

The Company may discontinue, adjust, or create new lending programs to respond to competitive factors.

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The following table provides information about the composition of the Company’s loan and lease portfolio in dollar amounts and in percentages as of the dates indicated.

In general, for the fiscal year ended September 30, 2020, the aggregate principal amounts in all categories of loans and leases discussed below, except agricultural loans, increased over levels from the prior fiscal year.

Loan and lease tables have been conformed to be consistent with the Company's updated categorization of its lending portfolio between National Lending and Community Banking.

In general, for the fiscal year ended September 30, 2021, the aggregate principal amounts in all categories of loans and leases discussed below, except community banking loans, increased over levels from the prior fiscal year.

At September 30,

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Real Estate Loans

National Lending

Commercial finance $ 154,991 4.3 % $ 52,207 1.6 % $ 42,266 1.2 % $ 14,971 0.5 % $ — — %

Total National Lending 52,207 1.6 % 42,266 1.2 % 14,971 0.5 % — — % — — %

Community banking 192,337 5.3 % 464,661 14.1 % 1,121,565 30.7 % 1,008,841 34.3 % 844,016 63.6 %

Commercial real estate and operating 440,369 13.3 % 849,171 23.3 % 748,579 25.4 % 585,510 44.1 % 422,932 45.7 %

Consumer one-to-four family real estate and other 15,170 0.5 % 235,365 6.4 % 223,482 7.7 % 196,706 14.8 % 162,298 17.5 %

Agricultural real estate and operating 9,122 0.3 % 37,029 1.0 % 36,780 1.2 % 61,800 4.7 % 63,612 6.9 %

Total Community Banking 464,661 14.1 % 1,121,565 30.7 % 1,008,841 34.3 % 844,016 63.6 % 648,842 70.1 %

Total real estate loans 347,328 9.6 % 516,868 15.7 % 1,163,831 31.9 % 1,023,812 34.8 % 844,016 63.6 %

Other Loans and Leases

National Lending

Commercial finance 2,570,504 71.3 % 2,255,777 68.1 % 1,873,964 51.3 % 1,494,878 50.8 % 255,308 19.2 %

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Warehouse finance 419,926 11.6 % 293,375 8.8 % 262,924 7.2 % 65,000 2.2 % — — %

Total National Lending 2,776,369 83.8 % 2,407,326 65.9 % 1,831,312 62.2 % 395,729 29.8 % 188,524 20.4 %

Community banking 6,795 0.2 % 20,903 0.5 % 80,256 2.2 % 89,865 3.0 % 87,087 6.6 %

Commercial real estate and operating 17,002 0.4 % 34,761 0.9 % 42,311 1.4 % 30,718 2.3 % 28,651 3.1 %

Consumer one-to-four family real estate and other 1,316 — % 24,060 0.7 % 23,836 0.8 % 22,775 1.7 % 22,794 2.5 %

Agricultural real estate and operating 2,585 0.1 % 21,435 0.6 % 23,718 0.8 % 33,594 2.5 % 37,083 4.0 %

Total Community Banking 20,903 0.5 % 80,256 2.2 % 89,865 3.0 % 87,087 6.6 % 88,528 9.6 %

Total other loans and leases 3,260,487 90.4 % 2,797,272 84.3 % 2,487,582 68.1 % 1,921,177 65.2 % 482,816 36.4 %

Total loans and leases $ 3,314,140 100.0 % $ 3,651,413 100.0 % $ 2,944,989 100.0 % $ 1,326,832 100.0 % $ 925,894 100.0 %

Total loans and leases, net $ 3,607,815 100.0 % $ 3,314,140 100.0 % $ 3,651,413 100.0 % $ 2,944,989 100.0 % $ 1,326,832 100.0 %

The following table shows the composition of the Company’s loan and lease portfolio by fixed- and adjustable-rate at the dates indicated.

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Fixed-Rate Loans and Leases

National Lending

Commercial finance $ 1,754,706 48.6 % $ 1,687,130 50.9 % $ 1,113,071 30.5 % $ 956,920 32.5 % $ 250,459 18.9 %

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Tax services 10,405 0.3 % 3,066 0.1 % 2,240 0.1 % 1,073 — % — — %

3,066 0.1 % 2,240 0.1 % 1,073 — % — — % — — %

Warehouse finance 322,682 8.9 % 124,012 3.7 % — — % — — % — — %

Total National Lending 1,922,914 58.0 % 1,138,276 31.2 % 979,086 33.2 % 266,948 20.1 % 185,904 20.0 %

Community banking 190,240 5.3 % 433,458 13.1 % 1,096,750 30.0 % 1,016,361 34.6 % 854,274 64.5 %

Commercial real estate and operating 408,585 12.3 % 828,603 22.7 % 749,258 25.5 % 580,092 43.8 % 417,281 45.1 %

Consumer one-to-four family real estate and other 15,312 0.5 % 226,375 6.2 % 220,163 7.5 % 193,765 14.6 % 160,956 17.4 %

Agricultural real estate and operating 9,561 0.3 % 41,772 1.1 % 46,940 1.6 % 80,419 6.1 % 86,651 9.4 %

Total Community Banking 433,458 13.1 % 1,096,750 30.0 % 1,016,361 34.6 % 854,274 64.5 % 664,888 71.9 %

Total fixed-rate loans and leases 2,432,202 67.4 % 2,356,372 71.1 % 2,235,026 61.2 % 1,995,447 67.8 % 1,121,222 84.5 %

Adjustable-Rate Loans and Leases

National Lending

Commercial finance 970,789 26.9 % 620,854 18.7 % 803,159 22.0 % 552,929 18.8 % 4,849 0.4 %

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Warehouse finance 97,244 2.7 % 169,363 5.1 % 262,924 7.2 % 65,000 2.2 % — — %

Total National Lending 905,662 27.3 % 1,311,316 35.9 % 867,197 29.4 % 128,783 9.7 % 2,620 0.3 %

Community banking 8,892 0.3 % 52,106 1.6 % 105,071 2.9 % 82,345 2.8 % 76,827 5.8 %

Commercial real estate and operating 48,786 1.5 % 55,329 1.5 % 41,632 1.4 % 36,136 2.8 % 34,302 3.7 %

Consumer one-to-four family real estate and other 1,174 — % 33,050 0.9 % 27,155 0.9 % 25,716 1.9 % 24,136 2.6 %

Agricultural real estate and operating 2,146 0.1 % 16,692 0.5 % 13,558 0.5 % 14,975 1.1 % 14,044 1.5 %

Total Community Banking 52,106 1.6 % 105,071 2.9 % 82,345 2.8 % 76,827 5.8 % 72,482 7.8 %

Total adjustable-rate loans and leases 1,175,613 32.6 % 957,768 28.9 % 1,416,387 38.8 % 949,542 32.2 % 205,610 15.5 %

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Deferred fees and discounts 1,748 8,625 7,434 (250) (1,461)

Allowance for loan and lease losses (56,188) (29,149) (13,040) (7,534) (5,635)

Allowance for credit losses (68,281) (56,188) (29,149) (13,040) (7,534)

Total loans and leases receivable, net $ 3,541,282 $ 3,266,577 $ 3,629,698 $ 2,931,699 $ 1,317,837

(1) Certain tax services loans do not bear interest.

The following table illustrates the maturity analysis of the Company’s loan and lease portfolio at September 30, 2020.

The table reflects management’s estimate of the effects of loan and lease prepayments or curtailments based on data from the Company’s historical experiences and other third-party sources.

Due in one year or less Due after one year through five years Due after five years Total

(Dollars in Thousands) Amount Weighted

Rate Amount Weighted

National Lending

The following table illustrates the maturity analysis of the Company’s loan and lease portfolio at September 30, 2021 and reflects management’s estimate of the effects of loan and lease prepayments or curtailments based on data from the Company’s historical experiences and other third-party sources.

Due In 1 Year Or Less Due After 1 Year Through 5 Years Due After 5 Years Total

(Dollars in Thousands) Amount Weighted Average Rate Amount Weighted Average Rate Amount Weighted Average Rate Amount

Commercial finance $ 1,843,719 7.43 % $ 758,414 6.48 % $ 123,362 5.57 % $ 2,725,495

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Warehouse finance 80,770 6.09 % 339,156 6.16 % — — % 419,926

Total National Lending 1,725,435 7.79 % 1,000,024 6.69 % 103,117 5.76 % 2,828,576

Community banking 33,267 4.15 % 93,965 4.15 % 71,901 4.05 % 199,133

Commercial real estate and operating 50,017 4.60 % 197,376 4.58 % 209,978 4.49 % 457,371

Consumer one-to-four family real estate and other 4,936 3.74 % 9,568 3.78 % 1,982 3.87 % 16,486

Agricultural real estate and operating 2,151 4.58 % 5,892 4.33 % 3,664 3.32 % 11,707

Total Community Banking 57,104 4.52 % 212,836 4.53 % 215,624 4.46 % 485,564

Total loans and leases $ 2,093,213 7.25 % $ 1,306,143 6.19 % $ 208,459 5.06 % $ 3,607,815

National Lending

Commercial Finance

The Company's commercial finance product lines include term lending, asset based lending, factoring, leasing, insurance premium finance, government guaranteed lending and other commercial finance products offered on a nationwide basis.

The Company's commercial finance product lines include term lending, asset based lending, factoring, lease financing, insurance premium finance, government guaranteed lending and other commercial finance products offered on a nationwide basis.

Term Lending .

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As of September 30, 2021, 33% of the term lending portfolio exposure is concentrated in solar/alternative energy, most of which are construction projects that will convert to longer term government guaranteed facilities upon completion of the construction phase.

Equipment Finance Agreements and Installment Purchase Agreements make up $349.9 million, or 43%, of the term lending total as of September 30, 2020.

The remaining 31% are a variety of investment advisory loans and other more traditional term equipment and general purpose commercial loans.

Equipment Finance Agreements make up 33%, of the term lending total as of September 30, 2021.

The remaining 34% are a variety of investment advisory and insurance agency loans and other more traditional term equipment and general purpose commercial loans.

Asset Based Lending .

Through its Crestmark division, the Bank provides asset based loans secured by short-term assets such as inventory, accounts receivable, and work-in-process.

Through its Crestmark division, the Bank provides asset based loans secured by short-term assets such as accounts receivable and inventory.

Asset based loans may also be secured by real estate and equipment.

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Loans are typically revolving lines of credit with terms of one year to three years, whereby the Bank withholds a contingency reserve representing the difference between the amount advanced and the fair value of the invoice amount or other collateral value.

Credit risk is managed through advance rates appropriate for the collateral (generally, advance rates on accounts receivable is 85% and inventory advance rates range from 40% to 50%), standardized loan policies, established and authorized credit limits, attentive portfolio management and the use of lock box agreements and similar arrangements which result in the Company receiving and controlling the debtors' cash receipts.

Credit risk is managed through advance rates appropriate for the collateral (generally, advance rates on accounts receivable ranges from 80% to 95% and inventory advance rates range from 40% to 50%), standardized loan policies, established and authorized credit limits, attentive portfolio management and the use of lock box agreements and similar arrangements which result in the Company receiving and controlling the debtors' cash receipts.

As of September 30, 2021, approximately 55% of these loans were backed by accounts receivable.

Through its Crestmark division, the Bank provides factoring lending where clients provide detailed inventory, accounts receivable, and work-in-process reports for lending arrangements.

Through its Crestmark division, the Bank provides factoring lending where clients provide detailed accounts receivable reports for lending arrangements.

The factoring clients are diversified as to industry and geography.

With these loans, the Crestmark division withholds a contingency reserve, which is the difference between the fair value of the invoice amount or other collateral value and the amount advanced (generally, advance rates are 85% on accounts receivable).

This reserve is withheld for nonpayment of factored receivables, service fees and other adjustments.

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In addition, clients generally guarantee the payment of purchased accounts receivable.

As of September 30, 2020, approximately 95% of these loans were backed by accounts receivable.

Lease Financing.

Through its Crestmark division, the Bank provides creative, flexible lease solutions for technology, capital equipment and select transportation assets like tractors and trailers.

Direct financing leases and sales-type leases substantially transfer the benefits and risks of equipment ownership to the lessee.

Through its Crestmark division, the Bank provides creative, flexible lease solutions for equipment needs of middle market companies.

Leases that transfer substantially all of the benefits and risks of ownership to the lessee are accounted for as sales-type or direct financing leases.

The lease may contain provisions that transfer ownership to the lessee at the end of the initial term, contain a bargain purchase option or allow for purchase of the equipment at fair market value.

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Lease maturities are generally no greater than 84 months.

The focus in this lease financing category is to support middle market companies by providing a variety of financing products to help them meet their business objectives.

Insurance Premium Finance.

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The Bank originates loans through programs partially guaranteed by the SBA or USDA.

These loans are made to small businesses and professionals with what the Bank believes are lower risk characteristics.

These loans are made to small businesses and professionals.

Certain guaranteed portions of these loans are generally sold to the secondary market.

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As of September 30, 2021, there were 10 loans with a retained outstanding balance of $1.8 million receiving six months principal and interest from the SBA.

The Company is also participating in the PPP, which is being administered by the SBA.

The Company expects that some portion of these loans will ultimately be forgiven by the SBA in accordance with the terms of the program.

Loans funded through the Paycheck Protection Program (the "PPP") are fully guaranteed by the U.S.

As of September 30, 2020, the Company authorized 689 applications, totaling $219.0 million in PPP loan requests as part of the program.

The Company is also participating in the Paycheck Protection Program (the "PPP") which is being administered by the SBA.

The Company expects that the major portion of these loans will ultimately be forgiven by the SBA in accordance with the terms of the program.

Loans funded through the PPP are fully guaranteed by the U.S.

As of September 30, 2021, the Company had 370 loans outstanding with total loan balances of $96.0 million originated as part of the PPP program.

In total, 69% of the PPP loan balances were forgiven through September 30, 2021.

Other Commercial Finance.

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The Bank will hold a sizable portion of the originated asset on its own balance sheet but retains the flexibility to sell a portion of the originated asset to other interested parties, thereby supporting program liquidity.

As of September 30, 2020, the Bank has two consumer credit programs.

The loan products offered under these programs are generally closed-end installment loans with terms between 12 months and 84 months and revolving lines of credit with durations between six months and 60 months.

As of September 30, 2021, the Bank has multiple consumer credit programs.

The loan products offered under these programs are generally closed-end installment loans with terms between 12 months and 84 months.

Other Consumer Finance

Student Lending.

The Bank's purchased student loan portfolios are seasoned, floating rate, private portfolios that are serviced by a third-party servicer.

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An Order of Liquidation was entered on June 27, 2018 by the Sixth Circuit Court in Hughes County, South Dakota, declaring ReliaMax insolvent and appointing the South Dakota Division of Insurance as liquidator to adopt a plan of liquidation.

The Company expects to ultimately recover a portion of the unearned premiums, though the Company can provide no assurance as to the timing and amount of any such recovery.

The Company expects to ultimately recover a portion of the unearned premiums.

During fiscal year 2021 the Bank recovered $4.99 million of these unearned premiums which have been recorded in other income.

Direct to Consumer.

The Bank is piloting a new direct line of credit, which will enhance the products offered to many of our existing BaaS partners.

Emerald Advance.

Through the Bank’s partner program, the Bank serves as a facilitator of a line of credit, where customers draw on a line of credit and the balance must be paid down to zero by February 15 to maintain an account with good standing.

Funds are loaded onto a prepaid card and the line of credit gives customers the ability to repeatedly borrow and repay money and has an annual resting period from January 27 to February 15 during which draws cannot be made.

The primary source of repayment is the income tax refund.

Upon the end of the 2021 tax season the remaining loan balances were acquired by H&R Block in accordance with an agreement between MetaBank and H&R Block.

As of September 30, 2021, there were no remaining loan balances for this product type and no new balances are expected until the 2022 tax season begins in the first quarter of fiscal 2022.

The Bank's Tax Services division provides short-term taxpayer advance loans.

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The Bank will charge off the balance of a taxpayer advance loan if there is a balance at the end of the calendar year, or when collection of principal becomes doubtful.

Through its tax services division, the Bank provides short-term electronic return originator ("ERO") advance loans on a nationwide basis.

Through its tax services division and partner programs, the Bank provides short-term electronic return originator ("ERO") advance loans on a nationwide basis.

These loans are typically utilized by tax preparers to purchase tax preparation software and to prepare tax office operations for the upcoming tax season.

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Generally, the Bank will charge off the balance of an ERO advance loan if there is a balance at the end of June, or when collection of principal becomes doubtful.

On August 5, 2020, the Bank entered into a three-year program management agreement with Emerald Financial Services, LLC, a wholly-owned indirect subsidiary of H&R Block, Inc.

(“H&R Block”), to serve as a facilitator for H&R Block's suite of financial services products which include:

Emerald Prepaid MasterCard®, Refund Transfers, Refund Advances, Emerald Advance® lines of credit, and other products through H&R Block’s distribution channels.

Under the Refund Transfer program, the Bank opens a temporary bank account for each H&R Block customer who is receiving an income tax refund and elects to defer payment of his or her tax preparation fees.

After the Internal Revenue Service and any state income tax authorities transfer the refund into the customer’s account, the net funds are transferred to the customer and the temporary deposit account is closed.

We earn a fixed fee paid by H&R Block for each of the H&R Block customers electing a refund transfer.

Under the Refund Transfer program, the Bank opens a temporary bank account for each customer who is receiving an income tax refund and elects to defer payment of his or her tax preparation fees.

After the IRS and any state income tax authorities transfer the refund into the customer’s account, the net funds are transferred to the customer and the temporary deposit account is closed.

Warehouse Finance

The Bank participates in several asset-backed warehouse lines of credit whereby the Bank is in a senior, secured position as the first out participant.

The Bank participates in several collateral-based warehouse lines of credit whereby the Bank is in a senior, secured position as the first out participant.

These facilities are primarily collateralized by consumer receivables, with the Bank holding a senior collateral position enhanced by a subordinate party structure.

Community Banking

Effective on the Closing Date of the Community Bank division sale to Central Bank, the Company substantially ceased originating loans within its Community Banking loan portfolio.

Effective on February 29, 2020 (the "Closing Date") of the Community Bank division sale to Central Bank, the Company substantially ceased originating loans within its Community Banking loan portfolio.

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

Divestitures for further information related to the Community Banking lending portfolio.

Commercial Real Estate and Operating

The Company's commercial and multi-family real estate loans are secured primarily by apartment buildings, office buildings, and hotels.

The Company’s only remaining loan balances for the Community Bank division were commercial and multi-family real estate loans which consist primarily of hospitality and theater loans which are secured primarily by theater buildings and hotels.

Commercial and multi-family real estate loans generally are underwritten with terms not exceeding 20 years, have loan-to-value ratios of up to 80% of the appraised value of the property securing the loan, and are typically secured by guarantees of the borrowers.

As of September 30, 2020, multi-family real estate loan balances totaled $51.6 million, over 88% of which were located within the Community Bank division's footprint of South Dakota and Iowa.

The average loan-to-value ratio on multi-family real estate loans at the time of the Company's most recently completed annual stress test analysis was approximately 69%.

As of September 30, 2020, hospitality loan balances totaled $179.3 million, of which approximately 26% were located in the Community Bank division's footprint of South Dakota and Iowa, while the majority of the remaining balances were through developers headquartered in the Community Bank division footprint with properties located in Minnesota, North Dakota, Nebraska, Wisconsin, Kansas, Arizona, Colorado and California.

Over 99% of the outstanding loan balances are flagged hotel relationships and a large majority of the loans have guarantees by individuals with a high combined net worth.

Based on the latest appraisals the Company has on file, the average loan-to-value ratio on hospitality loans was approximately 60%.

Most of the Company's commercial operating loans were extended to finance local and regional businesses and include short-term loans to finance machinery and equipment purchases, inventory and accounts receivable.

Commercial loans also may involve the extension of revolving credit for a combination of equipment acquisitions and working capital in expanding companies.

The maximum term for loans extended on machinery and equipment is based on the projected useful life of such machinery and equipment.

Generally, the maximum term on non-mortgage lines of credit is one year.

Consumer One-to-Four Family Real Estate and Other

The Company's one-to-four family residential mortgage loans have terms up to a maximum of 30 years and with loan-to-value ratios up to 100% of the lesser of the appraised value of the property securing the loan or the contract price.

However, the vast majority of these loans are originated with loan-to-value ratios below 80%.

The Company also has five year and ten year ARM loans.

As of September 30, 2020, over 99% of the one-to-four family real estate loans were located within the Community Bank division's footprint of South Dakota and Iowa.

The Company also has a variety of secured consumer loans, including home equity and home improvement loans.

Substantially all of the Company’s home equity loans and lines of credit are secured by second mortgages on principal residences.

The Bank lent amounts which, together with all prior liens, may be up to 90% of the appraised value of the property securing the loan.

Home equity loans and lines of credit generally have maximum terms of five years.

As of September 30, 2020, the outstanding balance in these secured consumer loans was $1.3 million and all of those were located within the Community Bank division's footprint of South Dakota and Iowa.

Agricultural Real Estate and Operating

The Company's agricultural loans finance the purchase of farmland, livestock, farm machinery and equipment, seed, fertilizer, and other farm-related products.

Agricultural operating loans are at either an adjustable- or fixed-rate of interest for up to a one-year term or, in the case of livestock, are due upon sale.

Agricultural real estate loans are frequently originated with adjustable rates of interest.

Generally, such loans provide for a fixed rate of interest for the first five years to 10 years, after which the loan will balloon or the interest rate will adjust annually.

These loans generally amortize over a period of 20 years to 25 years.

Fixed-rate agricultural real estate loans typically have terms up to 10 years.

Agricultural real estate loans are generally limited to 75% of the value of the property securing the loan.

As of September 30, 2020, 78% of the agricultural loans were real estate loans while the remaining 22% were agricultural operating loans and approximately 82% of the total agricultural loans were located within the Community Bank division's footprint of South Dakota and Iowa.

Subsequent to September 30, 2021 the Company agreed to two loan sales that included the significant majority of the remaining loan balances in the community banking loan portfolio.

Subsequent Events for further information on these sales.

ORIGINATIONS, SALES AND SERVICING OF LOANS AND LEASES

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If the SBA or USDA establishes that a loss on a guaranteed loan is attributable to significant technical deficiencies in the manner in which the loan was originated, funded or serviced by the Company, the SBA or USDA may seek recovery of the principal loss related to the deficiency from the Company, which could materially adversely affect our business, results of operations and financial condition.

On August 4, 2020 and September 17, 2020, the Company sold an additional $58.6 million and $76.4 million, respectively, of the retained Community Bank portfolio to Central Bank.

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

As of September 30, 2020, the Company had $130.1 million of community bank loans classified as held for sale and expects to sell those loans during the first quarter of fiscal year 2021.

During the fiscal year ended September 30, 2020, the Company sold the Bank's Community Bank division, a component of the Company's Corporate segment, to Central Bank, a state-chartered bank headquartered in Storm Lake, Iowa.

The sale included $268.6 million of loans along with deposits, premises, furniture, and equipment and other assets.

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 $308.1 million and $135.0 million for the fiscal years ended September 30, 2021 and 2020, respectively.

Divestitures and Note 25.

Subsequent Events for further information related to the Community Banking lending portfolio.

In periods of economic uncertainty, the Company’s ability to originate large dollar volumes of loans and leases may be substantially reduced or restricted, with a resultant decrease in related loan origination fees, other fee income and operating earnings.

1 unchanged sentence

The following table shows the loan and lease originations (including draws, loan and lease renewals, and undisbursed portions of loans and leases in process), purchases, and sales and repayment activities of the Company for the periods indicated.

Fiscal Years Ended September 30,

2020 2019 2018

Originations:

Fiscal Year Ended September 30,

(Dollars in Thousands) 2021 2020 2019

2 unchanged sentences

Tax services 1,841,326 1,395,348 1,513,509

Total National Lending 9,581,096 10,435,151 3,750,206

Commercial real estate and operating 155,085 409,280 472,035

Consumer one-to-four family real estate and other 52,675 85,809 96,863

Agricultural real estate and operating 2,507 40,567 66,906

Total Community Banking 210,267 535,656 635,804

Community banking — 210,267 535,656

Total loans and leases originated 12,618,372 9,791,363 10,970,807

Commercial finance — 2,400 25,069

Total National Lending — — 1,063,504

Total loans and leases acquired — — 1,063,504

Commercial finance 2,400 25,069 —

Consumer finance — — 72,751

Warehouse finance 308,014 130,130 226,292

Total National Lending 132,530 251,361 137,751

Commercial real estate and operating 18,905 26,444 27,919

Consumer one-to-four family real estate and other — 260 —

Total Community Banking 18,905 26,704 27,919

Community banking 3,318 18,905 26,704

Total loans and leases purchased 311,332 151,435 278,065

2 unchanged sentences

Consumer finance 494,584 120,389 57,503

Total National Lending 183,508 126,126 17,621

Commercial real estate and operating 265,154 13,069 22,571

Consumer one-to-four family real estate and other 125,104 — —

Agricultural real estate and operating 27,029 — 40

Total Community Banking 417,287 13,069 22,611

Total loan sales 600,795 139,195 40,232

Community banking 321,793 417,287 13,069

Total loans and leases sales 905,793 600,795 139,195

Loan and lease principal repayments 11,857,619 9,644,476 10,270,082

1 unchanged sentence

Total reductions 12,763,412 10,245,271 10,409,277

(Decrease) increase in other items, net (25,849) (8,425) 4,295

Net increase $ (328,321) $ 831,170 $ 1,629,468

Increase (decrease) in other items, net (18,970) (25,849) (8,425)

Net increase (decrease) $ 147,322 $ (328,321) $ 831,170

(1) Certain tax services loans do not bear interest.

NON-PERFORMING ASSETS, OTHER LOANS AND LEASES OF CONCERN AND CLASSIFIED ASSETS

NONPERFORMING ASSETS, OTHER LOANS AND LEASES OF CONCERN AND CLASSIFIED ASSETS

The following table sets forth the Company’s loan and lease delinquencies by type, by amount and by percentage of type at September 30, 2021.

Loans and Leases Delinquent For:

30-59 Days 60-89 Days 90 Days and Over

Number Amount Percent

Category Number Amount Percent

(Dollars in Thousands)

Loans held for sale — $ — — % — $ — — % — $ — — %

National Lending

30-59 Days 60-89 Days > 89 Days Past Due

(Dollars in Thousands) Number of Loans Amount Percent of Category Number of Loans Amount Percent of Category Number of Loans Amount Percent of Category

Commercial finance 400 $ 18,269 91.6 % 259 $ 7,388 90.1 % 836 $ 15,439 62.7 %

2 unchanged sentences

— — — % — — — % — 7,962 32.3 %

Total National Lending 450 14,315 94.1 % 378 15,239 99.3 % 1,786 19,278 88.7 %

Community Banking

Commercial real estate and operating — — — — — — % 3 630 2.9 %

Consumer one-to-four family real estate and other 1 905 5.9 % 1 114 0.7 % 2 50 0.2 %

Agricultural real estate and operating — — — % — — — % 4 1,769 8.2 %

Total Community Banking 1 905 5.9 % 1 114 0.7 % 9 2,449 11.3 %

Total loans and leases held for investment 560 $ 19,945 100.0 % 443 $ 8,200 100.0 % 1,847 $ 24,637 100.0 %

7 unchanged sentences

Insurance premium finance loans, consumer finance and tax services loans are generally not placed on non-accrual status, but are instead written off when the collection of principal and interest become doubtful.

The table below sets forth the amounts and categories of the Company’s non-performing assets.

The table below sets forth the amounts and categories of the Company’s nonperforming assets.

At September 30,

(Dollars in Thousands) 2021 2020 2019 2018 2017

Non-performing loans and leases

Non-accruing loans and leases:

Nonperforming Loans and Leases

Nonaccruing loans and leases:

Commercial finance $ 19,330 $ 21,553 $ 14,378 $ 2,864 $ —

Total National Lending 21,553 14,378 2,864 — —

Commercial real estate and operating 580 — — 685 —

Consumer one-to-four family real estate and other 50 44 — — 83

Agricultural real estate and operating 1,769 — — — —

Total Community Banking 2,399 44 — 685 83

Total 23,952 14,422 2,864 685 83

Community banking 14,915 2,399 44 — 685

Total nonaccruing loans and leases 34,245 23,952 14,422 2,864 685

Accruing loans and leases delinquent 90 days or more:

Held for sale loans — 964 — — —

Loans held for sale — — 964 — —

Commercial finance 12,489 7,401 7,578 3,801 1,205

2 unchanged sentences

7,962 1,743 2,240 1,073 —

Total National Lending 10,016 11,135 7,258 2,592 965

Commercial real estate and operating 50 — — — —

Consumer one-to-four family real estate and other — — 79 19 53

Agricultural real estate and operating — — — 34,295 —

Total Community Banking 50 — 79 34,314 53

Total 10,066 12,099 7,337 36,906 1,018

Total non-performing loans and leases 34,018 26,521 10,201 37,591 1,101

Non-performing operating leases 4,045 457 — — —

Community banking — 50 — 79 34,314

Total accruing loans and leases delinquent 90 days or more 21,687 10,066 12,099 7,337 36,906

Total nonperforming loans and leases 55,932 34,018 26,521 10,201 37,591

Nonperforming operating leases 3,824 4,045 457 — —

Foreclosed and repossessed assets:

Commercial finance 2,077 9,957 1,372 1,626 —

Commercial real estate and operating — — — 62 76

Consumer one-to-four family real estate and other — — 90 230 —

Agricultural real estate and operating — 28,122 29,992 — —

Total 9,957 29,494 31,638 292 76

Community banking — — 28,122 30,082 292

Total foreclosed and repossessed assets 2,077 9,957 29,494 31,638 292

Total other assets 5,901 14,002 29,951 31,638 292

Total non-performing assets $ 48,020 $ 56,472 $ 41,839 $ 37,883 $ 1,177

Total nonperforming assets $ 61,833 $ 48,020 $ 56,472 $ 41,839 $ 37,883

Total as a percentage of total assets 0.92 % 0.79 % 0.91 % 0.72 % 0.72 %

(1) Certain tax services loans do not bear interest.

For the fiscal year ended September 30, 2020, gross interest income which would have been recorded had the non-accruing loans and leases been current in accordance with their original terms was insignificant, none of which was included in interest income.

Non-accruing Loans and Leases

At September 30, 2020, the Company had $24.0 million in non-accruing loans and leases, which constituted less than 0.7% of the Company's gross loan and lease portfolio and total assets.

At September 30, 2019, the Company had $14.4 million in non-accruing loans which also constituted 0.4% of its gross loans portfolio and total assets.

The fiscal 2020 increase in non-accruing loans and leases was primarily related to increases in the commercial finance and community bank portfolios.

For the fiscal year ended September 30, 2021, gross interest income, which would have been recorded had the nonaccruing loans and leases been current in accordance with their original terms was insignificant, none of which was included in interest income.

Nonaccruing Loans and Leases

At September 30, 2021, the Company had $34.2 million in nonaccruing loans and leases, which constituted 0.9% of the Company's gross loan and lease portfolio.

At September 30, 2020, the Company had $24.0 million in nonaccruing loans which also constituted 0.7% of its gross loan and lease portfolio.

The fiscal 2021 increase in nonaccruing loans and leases was primarily driven by one $14.9 million relationship in the community bank portfolio.

Accruing Loans and Leases Delinquent 90 Days or More

9 unchanged sentences

The Bank’s determinations as to the classification of its assets and the amount of its valuation allowances are subject to review by its regulatory authorities, which may order the establishment of additional general or specific loss allowances.

Meta has revised its credit administration policies and reviewed its loan portfolio to better align with OCC guidance for national banks, a process that began during the quarter ending June 30, 2021 and was completed as of September 30, 2021.

These credit policy revisions had an impact on our loan and lease risk ratings, resulting in downgrades of certain credits in several categories.

Our loan and collateral management practices have proven effective in managing losses during previous economic cycles;

and while we expect this process will result in setting a new baseline for portfolio metrics going forward, it does not indicate a deterioration in our portfolio's expected performance.

On the basis of management’s review of its classified assets, at September 30, 2021, the Company had classified loans and leases of $264.7 million as substandard, $12.1 million as doubtful and none as loss.

Further, at September 30, 2021, the Company owned real estate or other assets as a result of foreclosure of loans with a value of $2.1 million.

Allowance for Loan and Lease Losses

The allowance for loan and lease losses is established through a provision for loan and lease losses based on management’s evaluation of the risk inherent in its loan and lease portfolio and changes in the nature and volume of its loan and lease activity, including those loans and leases that are being specifically monitored by management.

Such evaluation, which includes a review of loans and leases for which full collectability may not be reasonably assured, includes consideration of, among other matters, the estimated fair value of the underlying collateral, economic conditions, historical loan and lease loss experience and other factors that warrant recognition in providing for an appropriate loan and lease loss allowance.

Each loan and lease segment is evaluated using both historical loss factors as well as other qualitative factors, in order to determine the amount of risk the Company believes exists within that segment.

The Bank’s average loss rates over the past three years were low relative to industry averages for such years.

The Bank does not believe it is likely that these low loss conditions will continue indefinitely.

Management closely monitors economic developments both regionally and nationwide, and considers these factors when assessing the appropriateness of its allowance for loan and lease losses.

The Company's allowance for loan and lease losses as a percentage of total loans and leases increased to 1.70% at September 30, 2020 from 0.80% at September 30, 2019.

This increase was primarily due to the commercial finance coverage ratio increasing as a result of the Company's continued assessment of the risks associated with the ongoing COVID-19 pandemic.

The increase in the total Company coverage ratio also increased due to an increase to the coverage ratio within the retained community bank portfolio due to identified risks impacting its movie theater relationships stemming from the ongoing COVID-19 pandemic.

Allowance for Credit Losses

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

Measurement of Credit Losses on Financial Instruments , and subsequent related ASUs (collectively “Topic 326”), which measures credit loss for most financial assets, including trade and other receivables, debt securities held to maturity, loans, net investments in leases, purchased financial assets with credit deterioration, and off-balance sheet credit exposures.

ASU 2016-13 requires the use of a current expected credit losses ("CECL") methodology to determine the allowance for credit losses ("ACL") for loans and debt securities held to maturity.

CECL requires loss estimates for the remaining estimated life of the assets to be measured using historical loss data, adjustments for current conditions, and adjustments for reasonable and supportable forecasts of future economic conditions.

The ACL represents management's estimate of expected credit losses 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 credit loss, generally this means loans and leases identified as troubled debt restructurings or loans and leases on nonaccrual status.

All other loans and leases are evaluated collectively for credit loss.

A reserve for unfunded credit commitments such as letters of credit and binding unfunded loan commitments is recorded in other liabilities on the Consolidated Statements of Financial Condition.

Individually evaluated loans and leases are a key component of the ACL.

Generally, the Company measures credit loss on individually evaluated loans based on the fair value of the collateral less estimated selling costs, as the Company considers these financial assets to be collateral dependent.

If an individually evaluated loan or lease is not collateral dependent, credit loss is measured at the present value of expected future cash flows discounted at the loan or lease initial effective interest rate.

Management closely monitors economic developments and considers these factors when assessing the appropriateness of its ACL.

The Company's allowance for credit losses as a percentage of total loans and leases increased to 1.89% at September 30, 2021 from 1.70% at September 30, 2020.

The increase in the allowance at September 30, 2021 was driven primarily by the adoption of the CECL accounting standard noted above.

The CECL methodology requires loss estimates for the remaining estimated life of the assets to be measured using historical loss data, adjustments for current conditions, and adjustments for reasonable and supportable forecasts of future economic conditions, which led to the increase in the ACL as of the October 1, 2020 adoption date.

The Company expects to continue to diligently monitor the allowance for loan and lease losses and adjust as necessary in future periods to maintain an appropriate and supportable level.

Management believes that, based on a detailed review of the loan and lease portfolio, historic loan and lease losses, current economic conditions, the size of the loan and lease portfolio and other factors, the level of the allowance for loan and lease losses at September 30, 2020 reflected an appropriate allowance against probable incurred losses from the lending portfolio.

Although the Company maintains its allowance for loan and lease losses at a level it considers to be appropriate, 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 and lease losses will not be required in future periods.

In addition, the Company’s determination of the allowance for loan and lease losses is subject to review by the OCC, which can require the establishment of additional general or specific allowances.

Real estate properties acquired through foreclosure are recorded at fair value.

If fair value at the date of foreclosure is lower than the balance of the related loan, the difference will be charged to the allowance for loan and lease losses at the time of transfer.

Valuations are periodically updated by management and, if the value declines, a specific provision for losses on such property is established by a charge to operations.

The following table sets forth an analysis of the Company’s allowance for loan and lease losses.

September 30,

2020 2019 2018 2017 2016

Management believes that, based on a detailed review of the loan and lease portfolio, historic loan and lease losses, current economic conditions, the size of the loan and lease portfolio and other factors, the level of the ACL at September 30, 2021 reflected an appropriate allowance against expected credit losses from the lending portfolio.

Although the Company maintains its ACL at a level it considers to be appropriate, 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 and lease losses will not be required in future periods.

The following table sets forth an analysis of the Company’s allowance for credit losses.

At September 30,

(Dollars in Thousands) 2021 2020 2019 2018 2017

Balance at beginning of period $ 56,188 $ 29,149 $ 13,040 $ 7,534 $ 5,635

Impact of CECL Adoption:

Commercial finance 12,713 — — — —

1 unchanged sentence

Tax services — — — — —

Total National Lending charge-offs (41,761) (42,814) (25,888) (8,467) (1,703)

Commercial real estate and operating — — — (528) (385)

Consumer one-to-four family real estate and other — (40) (76) (2) (32)

Agricultural real estate and operating — — — — (3,252)

Total Community Banking charge-offs — (40) (76) (530) (3,669)

Warehouse finance (1) — — — —

Community banking (5,937) — — — —

Total Impact of CECL Adoption 12,773 — — — —

Commercial finance (19,451) (16,278) (11,373) (2,643) (626)

Consumer finance (3,324) (2,649) (6,346) (1,143) —

Tax services (34,354) (22,834) (25,095) (21,802) (7,841)

Warehouse finance — — — — —

Community banking (144) — (40) (76) (530)

Total charge-offs (57,273) (41,761) (42,854) (25,964) (8,997)

2 unchanged sentences

Tax services 1,078 830 222 453 229

Total National Lending recoveries 4,024 3,063 1,622 290 118

Commercial real estate and operating — — — 5 27

Consumer one-to-four family real estate and other — — 3 — —

Agricultural real estate and operating — 250 411 12 2

Total Community Banking recoveries — 250 414 17 29

Warehouse finance — — — — —

Community banking — — 250 414 17

Total recoveries 6,654 4,024 3,313 2,037 307

Net (charge-offs) recoveries (50,619) (37,737) (39,541) (23,927) (8,690)

Provision charged to expense 64,776 55,650 29,433 10,589 4,605

Provision for credit losses 49,939 64,776 55,650 29,433 10,589

Balance at end of period $ 68,281 $ 56,188 $ 29,149 $ 13,040 $ 7,534

Ratio of net charge-offs during the period to

average loans and leases outstanding during the period 1.00 % 1.12 % 1.31 % 0.73 % 0.64 %

Ratio of net charge-offs during the period to

average loans and leases outstanding during the period - Excluding tax services loans and tax service net charge-offs 0.43 % 0.43 % 0.15 % 0.09 % 0.62 %

Ratio of net charge-offs during the period to

non-performing assets at fiscal year end 78.59 % 70.02 % 57.19 % 22.94 % 443.84 %

Ratio of net charge-offs during the period to average loans outstanding during the period 1.36 % 1.00 % 1.12 % 1.31 % 0.73 %

Ratio of net charge-offs during the period to average loans outstanding during the period (excluding tax loans and tax net charge-offs) 0.50 % 0.43 % 0.43 % 0.15 % 0.09 %

Ratio of net charge offs during the period to nonperforming assets at year end 81.86 % 78.59 % 70.02 % 57.19 % 22.94 %

Allowance to total loans and leases 1.89 % 1.70 % 0.80 % 0.44 % 0.57 %

For more information on the Provision for Loan and Lease Losses, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” which is included in Item 7 of this Annual Report on Form 10-K.

The distribution of the Company’s allowance for losses on loans and leases at the dates indicated is summarized as follows:

For more information on the Provision for Credit Losses, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” which is included in Item 7 of this Annual Report on Form 10-K.

The distribution of the Company’s allowance for credit losses at the dates indicated is summarized as follows:

At September 30,

2021 2020 2019 2018 2017

Amount Percent of

Loans and Leases in

Loans and Leases Amount Percent of

Loans and Leases in

Loans and Leases Amount Percent of

Loans Amount Percent of

(Dollars in Thousands)

(Dollars in Thousands) Amount Percent of Loans and Leases in Each Category of Total Loans and Leases Amount Percent of Loans and Leases in Each Category of Total Loans and Leases Amount Percent of Loans and Leases in Each Category of Total Loans and Leases Amount Percent of Loans in Each Category of Total Loans Amount Percent of Loans in Each Category of Total Loans

Commercial finance $ 48,243 75.6 % $ 29,918 69.6 % $ 14,596 52.5 % $ 1,302 51.3 % $ 800 19.2 %

2 unchanged sentences

Warehouse finance 420 11.6 % 294 8.9 % 263 7.2 % 65 0.2 % — — %

Total National Lending 33,880 85.3 % 21,021 67.1 % 4,972 62.7 % 805 29.8 % 593 20.4 %

Commercial real estate and operating 21,867 13.8 % 6,208 24.2 % 6,220 26.8 % 2,820 46.4 % 2,310 48.8 %

Consumer one-to-four family real estate 298 0.5 % 1,053 7.1 % 632 8.5 % 809 16.5 % 705 20.0 %

Agricultural real estate and operating 143 0.4 % 867 1.6 % 1,216 2.0 % 2,574 7.2 % 1,474 10.9 %

Total Community Lending 22,308 14.7 % 8,128 32.9 % 8,068 37.3 % 6,203 70.2 % 4,489 79.6 %

Community banking 12,262 5.5 % 22,308 14.7 % 8,128 32.9 % 8,068 37.3 % 6,203 70.2 %

Unallocated — — % — — % — — % — — % 527 — %

1 unchanged sentence

As of September 30, 2021, $39.1 million of the loans and leases that were granted deferral payments by the Company were still in their deferment period.

In addition, the Company has made other COVID-19 related modifications, of which $23.3 million were still active as of September 30, 2020.

The majority of the other modifications were related to adjusting the type or amount of the customer's payments.

As of September 30, 2020, loans and leases totaling $170.0 million were within their deferment period.

For additional information regarding the Company’s COVID-19 related deferments and modifications, see Note 2 to the “Notes to Consolidated Financial Statements,” which is included in Part II, Item 8 “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K.

3 unchanged sentences

The Company closely monitors balances in these accounts and maintains a portfolio of highly liquid assets to fund potential deposit outflows or other liquidity needs.

To date, the Company has not experienced any significant outflows related to the MPS division deposits, though no assurance can be given that this will continue to be the case.

As of September 30, 2020, investment securities and MBS with fair values of approximately $673.8 million and $359.7 million were pledged as collateral for the Bank’s Federal Home Loan Bank of Des Moines (“FHLB”) advances and Federal Reserve Bank (“FRB”) advances, respectively.

To date, the Company has not experienced any significant outflows related to the Meta Payments division deposits, though no assurance can be given that this will continue to be the case.

As of September 30, 2021, investment securities and MBS with fair values of approximately $236.1 million and $644.7 million were pledged as collateral for the Bank’s Federal Reserve Bank (“FRB”) advances and Federal Home Loan Bank of Des Moines (“FHLB”) advances, respectively.

For additional information regarding the Company’s collateralization of borrowings, see Note 13 to the “Notes to Consolidated Financial Statements,” which is included in Part II, Item 8 “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K.

Investment Securities

It is the Company’s general policy to purchase investment securities which are U.S.

2 unchanged sentences

Government-related agency or instrumentality collateralized securities, state and local government obligations and overnight federal funds.

As of September 30, 2020, the Company had total investment securities, excluding MBS, with an amortized cost of $891.7 million compared to $1.01 billion as of September 30, 2019.

As of September 30, 2021, the Company had total investment securities, excluding MBS, with an amortized cost of $891.6 million compared to $891.7 million as of September 30, 2020.

At September 30, 2021, $546.9 million, or 61%, of the Company’s investment securities were pledged to secure various obligations of the Company.

5 unchanged sentences

Asset-backed securities $ 394,859 $ 324,925 $ 302,534

Small business administration securities 164,955 185,982 44,337

SBA securities 157,209 164,955 185,982

Obligations of states and political subdivisions 2,507 841 874

Non-bank qualified obligations of states and political subdivisions 268,295 323,774 400,557

Subtotal investment debt securities AFS 814,495 889,947 1,484,160

Subtotal debt securities AFS 847,870 814,495 889,947

Common equities and mutual funds (1)

3 unchanged sentences

52,944 87,183 127,582

Subtotal investment debt securities HTM 87,183 127,582 164,304

FHLB and FRB Stock 27,138 30,916 23,400

Total Investment Securities and FHLB and FRB Stock $ 928,816 $ 1,051,051 $ 1,675,664

Subtotal debt securities HTM 52,944 87,183 127,582

FRB and FHLB stock 28,400 27,138 30,916

Total investment securities and FRB and FHLB stock $ 929,214 $ 928,816 $ 1,051,051

Other Interest-Earning Assets

1 unchanged sentence

$ 184,729 $ 362,011 $ 11,261

(1) Equity securities at fair value are included within other assets on the consolidated statement of financial condition at September 30, 2020 and 2019.

(1) Equity securities at fair value are included within other assets on the consolidated statements of financial condition at September 30, 2021 and 2020.

(2) Includes no taxable obligations of states and political subdivisions.

2 unchanged sentences

At September 30, 2020, the Company had $9.5 million and $381.7 million in interest bearing deposits held at the FHLB and FRB, respectively.

Debt Securities

The composition and maturities of the Company’s available for sale ("AFS") and held to maturity ("HTM") investment debt securities portfolios at September 30, 2021, excluding equity securities and mutual funds, FHLB stock and MBS, are indicated in the following table.

The actual maturity of certain municipal housing related securities is typically less than its stated contractual maturity due to scheduled principal payments and prepayments of the underlying mortgages.

September 30, 2020

At September 30, 2021

1 Year or Less After 1 Year Through 5 Years After 5 Years Through 10 Years After 10 Years Total Investment Securities

(Dollars in Thousands) Carrying Value Carrying Value Carrying Value Carrying Value Amortized Cost Fair Value

(Dollars in Thousands) Carrying

Value Carrying

Value Amortized Cost Fair

Available for Sale

Corporate securities $ — $ — $ — $ 25,000 $ 25,000 $ 25,000

Asset-backed securities — — — 394,859 393,103 394,859

Small business administration securities — 17,081 32,397 115,477 159,722 164,955

SBA securities — 7,736 46,874 102,599 151,958 157,209

Obligations of states and political subdivisions 244 1,956 307 — 2,497 2,507

Non-bank qualified obligations of states and political subdivisions 578 3,686 5,176 258,855 266,048 268,295

Total Investment Securities AFS $ 1,397 $ 21,769 $ 34,026 $ 757,303 $ 804,505 $ 814,495

Total debt securities AFS $ 822 $ 13,378 $ 52,357 $ 781,313 $ 838,606 $ 847,870

Weighted average yield (1)

0.43 % 0.78 % 0.75 % 1.30 % 1.78 % 1.26 %

September 30, 2020

At September 30, 2021

1 Year or Less After 1 Year Through 5 Years After 5 Years Through 10 Years After 10 Years Total Investment Securities

(Dollars in Thousands) Carrying Value Carrying Value Carrying Value Carrying Value Amortized Cost Fair Value

(Dollars in Thousands) Carrying

Value Carrying

Value Amortized Cost Fair

Held to Maturity

Non-bank qualified obligations of states and political subdivisions $ — $ — $ — $ 52,944 $ 52,944 $ 52,576

Total Investment Securities HTM $ — $ — $ — $ 87,183 $ 87,183 $ 88,194

Total debt securities HTM $ — $ — $ — $ 52,944 $ 52,944 $ 52,576

Weighted average yield (1)

6 unchanged sentences

Government agencies or instrumentalities.

At September 30, 2020, the Company had a diverse portfolio of MBS with an amortized cost of $445.3 million.

The fair market value of the MBS at September 30, 2020 was $459.2 million.

At September 30, 2021, the Company had a diverse portfolio of MBS with an amortized cost of $1.02 billion.

The fair market value of the MBS at September 30, 2021 was $1.02 billion.

MBS generally increase the quality of the Company’s assets by virtue of the insurance or guarantees that back them, are more liquid than individual mortgage loans, and may be used to collateralize borrowings or other obligations of the Company.

11 unchanged sentences

Ginnie Mae 683,285 96,319 28,599

Total AFS $ 453,607 $ 382,546 $ 364,065

Total MBS AFS $ 1,017,029 $ 453,607 $ 382,546

At September 30,

2 unchanged sentences

Ginnie Mae 3,725 5,427 7,182

Total HTM $ 5,427 $ 7,182 $ 7,850

The following table sets forth the contractual maturities of the Company’s MBS at September 30, 2020.

Excluded from the table below is the effect of prepayments, periodic principal repayments and the adjustable-rate nature of these instruments, all of which typically lower the average life of these securities.

September 30, 2020

Total MBS HTM $ 3,725 $ 5,427 $ 7,182

The following tables set forth the contractual maturities of the Company’s MBS, excluding the effect of prepayments, periodic principal repayments and the adjustable-rate nature of these instruments, all of which typically lower the average life of these securities.

At September 30, 2021

1 Year or Less After 1 Year Through 5 Years After 5 Years Through 10 Years After 10 Years Total Investment Securities

(Dollars in Thousands) Carrying Value Carrying Value Carrying Value Carrying Value Amortized Cost Fair Value

(Dollars in Thousands) Carrying

Value Carrying

Value Amortized

Available for Sale

4 unchanged sentences

Ginnie Mae — — — 683,285 688,709 683,285

Total Investment Securities $ — $ — $ 45,174 $ 408,433 $ 439,879 $ 453,607

Total MBS AFS $ — $ — $ 90,942 $ 926,087 $ 1,016,478 $ 1,017,029

Weighted average yield — % — % 1.06 % 1.54 % 1.85 % 1.49 %

September 30, 2020

At September 30, 2021

1 Year or Less After 1 Year Through 5 Years After 5 Years Through 10 Years After 10 Years Total Investment Securities

(Dollars in Thousands) Carrying Value Carrying Value Carrying Value Carrying Value Amortized Cost Fair Value

(Dollars in Thousands) Carrying

Value Carrying

Value Amortized

Held To Maturity

Ginnie Mae $ — $ — $ — $ 3,725 $ 3,725 $ 3,815

Total Investment Securities — — — 5,427 5,427 5,551

Total MBS HTM $ — $ — $ — $ 3,725 $ 3,725 $ 3,815

Weighted average yield — % — % — % 2.11 % 2.11 % 1.39 %

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During periods of rising interest rates, these prepayments tend to decelerate as the prevailing market interest rates for mortgage rates increase and prepayment incentives dissipate.

Management has implemented a process to identify securities with potential credit impairment that are other-than-temporary.

This process involves evaluation of the length of time and extent to which the fair value has been less than the amortized cost basis, review of available information regarding the financial position of the issuer, monitoring the rating, watch, and outlook of the security, monitoring changes in value, cash flow projections, and the Company’s intent to sell a security or whether it is more likely than not we will be required to sell the security before the recovery of its amortized cost which, in some cases, may extend to maturity.

To the extent we determine that a security is deemed to be other-than-temporarily impaired, an impairment loss is recognized.

For all securities considered temporarily impaired, the Company does not intend to sell these securities and it is not more likely than not that the Company will be required to sell the security before recovery of its amortized cost, which may occur at maturity.

The Company believes it will collect all principal and interest due on all investments with amortized cost in excess of fair value and considered only temporarily impaired.

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

Measurement of Credit Losses on Financial Instruments , and subsequent related ASUs (collectively “Topic 326”).

Under Topic 326, investment debt securities held to maturity are subject to an allowance for credit loss that reflects expected credit losses over the life of the financial asset, unless management concludes there is a zero risk of loss.

The Company’s held to maturity debt security portfolio is limited to investments with implicit and explicit guarantees by government agencies.

As a result, management has concluded a zero risk of loss associated with these securities and no provision for credit loss has been included in the Company’s Consolidated Statement of Operations.

Under Topic 326, investment debt securities available for sale continue to be recorded at fair value but are subject to an allowance for credit loss that reflects the portion of an unrealized loss position related to credit factors.

Any such credit loss is recorded in the Company’s Provision for Credit Loss on the Company’s Consolidated Statement of Operations.

Non-credit related losses are recorded in Other Comprehensive Income in the Company’s Consolidated Statement of Condition.

The adoption of CECL was inconsequential to debt securities available for sale.

Prior to adoption of ASU 2016-13, management identified securities with potential credit impairment that were other-than-temporary.

This process involved evaluation of the length of time and extent to which the fair value was less than the amortized cost basis, review of available information regarding the financial position of the issuer, monitoring the rating, watch, and outlook of the security, monitoring changes in value, cash flow projections, and the Company’s intent to sell a security or whether it is more likely than not we would be required to sell the security before the recovery of its amortized cost which, in some cases, extended to maturity.

To the extent we determined that a security was deemed to be other-than-temporarily impaired, an impairment loss was recognized.

In fiscal 2020 and 2019, there were no other-than-temporary impairments recorded.

Fannie Mae and Freddie Mac, which are both in conservatorship, generally provide the certificate holder a guarantee of timely payments of interest, whether or not collected.

Ginnie Mae’s guarantee to the holder is timely payments of principal and interest, backed by the full faith and credit of the U.S.

Equity Securities

The Company holds marketable equity securities, which have readily determinable fair values, and include common equity and mutual funds.

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Securities for additional information on marketable equity securities.

The Company also holds non-marketable equity investments and accounts for them under the equity method, fair value, or the measurement alternative method depending on the level of significant influence the Company can exercise and the availability of fair value.

All income or loss recognition or fair value adjustments, regardless of measurement methodology, are reflected in earnings as non-interest income.

Non-marketable equity investments measured under the equity method, or the measurement alternative method are reviewed for impairment each reporting period and is reported in earnings if applicable.

Funding Activities

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The Company’s deposits primarily consists of demand deposit accounts, savings accounts, money market savings accounts, and certificate accounts currently ranging in terms from three months to five years, many of which are related to prepaid cards.

In addition, the Company may periodically utilize brokered deposits to target strategic maturities related to its seasonal tax refund advance lending.

In addition, the Company may periodically utilize brokered or other wholesale deposits to target strategic maturities related to its seasonal tax refund advance lending.

The tax refund advance lending season typically lasts six weeks or less and it is generally more efficient to fund these short-term loans by using brokered deposits rather than by selling investment securities.

Other sources of brokered deposits may also be utilized periodically to take advantage of balance sheet funding opportunities.

Effective on the Closing Date of the Community Bank division sale to Central Bank, the Company sold $290.5 million of deposits.

Divestitures for further information.

Other sources of wholesale deposits may also be utilized periodically to take advantage of balance sheet funding opportunities.

The flow of deposits is influenced significantly by general economic conditions, changes in prevailing interest rates, and competition.

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However, the ability of the Company to attract and maintain certificates of deposit and the rates paid on these deposits has been and will continue to be significantly affected by market conditions.

On April 29, 2020, the Bank entered into an amendment of its existing agreement with the U.S.

Department of the Treasury’s Bureau of the Fiscal Service (“Fiscal Service”) to provide debit card services to support the distribution of a segment of the Economic Impact Payments ("EIPs") payable by the Internal Revenue Service under the CARES Act.

Under the EIP program, 3.6 million cards were delivered with a total load balance of $6.42 billion.

As a result of the program, the Company saw a quick influx of deposits to its balance sheet in mid-May 2020 with limited visibility into the duration of those deposits.

The total balances remaining on the EIP cards were $942.2 million as of September 30, 2020.

Beginning in fiscal year 2020, the Bank partnered with the U.S.

Department of the Treasury’s Bureau of the Fiscal Service (“Fiscal Service”) to disburse Economic Impact Payment (“EIP”) stimulus payments through the distribution of prepaid cards.

The Company’s Meta Payments division, in collaboration with Fiserv and Visa, is serving in an ongoing role to provide a safe and secure mechanism for individuals, including the underbanked, to receive their stimulus payments.

In 2020, the Bank dispensed approximately $6.42 billion of the first round of EIP payments under the Coronavirus Aid, Relief, and Economic Security Act through the distribution of 3.6 million Bank-issued prepaid cards, and in 2021 dispensed approximately $7.10 billion of the second round of EIP payments under the Consolidated Appropriations Act of 2021 through the distribution of 8.1 million Bank-issued prepaid cards.

On March 11, 2021, the U.S.

Congress, through the American Rescue Plan Act of 2021, directed the Internal Revenue Service (“IRS”), to distribute a third round of EIP via the U.S.

Treasury to persons in the U.S.

eligible to receive them.

Through this third round, the Bank disbursed approximately $10.64 billion of EIP payments through the distribution of 4.7 million Bank-issued prepaid cards.

Of the 16.5 million prepaid cards issued in conjunction with the three EIP stimulus programs, totaling approximately $24.15 billion, $1.64 billion were outstanding as of September 30, 2021, of which only $69.8 million of deposits was on Meta’s balance sheet with the remainder being held by other banks.

At September 30, 2021, $5.34 billion of the Company’s $5.51 billion deposit portfolio was attributable to the Consumer segment.

The majority of these deposits represent funds available to spend on prepaid debit cards and other stored value products, of which $5.00 billion are included with noninterest-bearing checking accounts and $339.4 million are included with interest-bearing checking and savings deposits on the Company’s Consolidated Statements of Financial Condition.

Generally, these deposits do not pay interest.

The Consumer segment originates debit card programs through outside sales agents and other financial institutions.

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If a major client or card program were to leave the Bank, deposit outflows could be more significant than if the Bank were to lose a more traditional customer, although it is considered unlikely that all deposits related to a program would leave the Bank without significant advance notification.

As such, and as historical results indicate, the Company believes that its deposit portfolio attributable to the Consumer segment is stable.

As such, and as

historical results indicate, the Company believes that its deposit portfolio attributable to the Consumer segment is stable.

The increase in deposits arising from the payments division has allowed the Bank to reduce its reliance on wholesale deposits, certificates of deposit and public funds, which typically have relatively higher costs.

The Company may hold negative balances associated with cardholder programs in the payments division that are included within noninterest-bearing deposits on the Company's consolidated statement of financial condition.

The Company may hold negative balances associated with cardholder programs in the payments division that are included within noninterest-bearing deposits on the Company's Consolidated Statements of Financial Condition.

Negative balances can relate to any of the following payments functions:

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The following table summarizes the Company's negative deposit balances within the payments division:

(Dollars in Thousands) September 30, 2020 September 30, 2019

At September 30,

(Dollars in Thousands) 2021 2020

Noninterest-bearing deposits $ 5,492,646 $ 4,960,276

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The following table sets forth the deposit flows at the Company during the periods indicated.

September 30,

2020 2019 2018

Fiscal Year Ended September 30,

(Dollars in Thousands) 2021 2020 2019

Opening balance $ 4,979,200 $ 4,337,005 $ 4,430,987

Acquired — — 1,120,666

Deposits 1,041,660,076 598,897,734 494,050,148

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The following table sets forth the dollar amount of deposits in the various types of deposit programs offered by the Company for the periods indicated.

September 30,

At September 30,

2021 2020 2019

(Dollars in Thousands) Amount Percent of

Total Amount Percent of

(Dollars in Thousands) Amount Percent of Total Amount Percent of Total Amount Percent of Total

Transactions and Savings Deposits:

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(2) As of September 30, 2021, total time certificates of deposit included $23.4 million of wholesale certificates of deposit.

The following table shows rate and maturity information for the Company’s certificates of deposit as of September 30, 2020.

(Dollars in Thousands) 0.00- 0.99% 1.00 - 1.99% 2.00 - 2.99% Total Percent of

The following table shows rate and maturity information for the Company’s certificates of deposit at September 30, 2021.

(Dollars in Thousands) 0.00 - 0.99% 1.00 - 1.99% 2.00 - 2.99% Total Percent of Total

Certificate accounts maturing in quarter ending:

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December 31, 2022 — 344 99 443 1.4 %

March 31, 2022 19,246 887 1,617 21,750 7.9 %

June 30, 2022 — 1,377 891 2,268 0.8 %

September 30, 2023 464 — — 464 1.4 %

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The following table indicates the amount of the Company’s certificates of deposit and other deposits by time remaining until maturity as of September 30, 2021.

Less After 3 to 6

Months After 6 to 12

Months After 12 Months Total

(Dollars in Thousands)

(Dollars in Thousands) 3 Months or Less After 3 to 6 Months After 6 to 12 Months After 12 Months Total

Certificates of deposit less than $250,000 $ 1,697 $ 573 $ 4,301 $ 983 $ 7,554

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Such advances can be made pursuant to several different credit programs, each of which has its own interest rate and range of maturities.

At September 30, 2020, the Bank had no overnight borrowings or term advances, but did have the ability to borrow up to an approximate additional $1.01 billion from the FHLB.

At September 30, 2021, the Bank had no overnight borrowings or term advances, but did have the ability to borrow up to an approximate additional $727.7 million from the FHLB.

The Company completed the public offering of $75.0 million of 5.75% fixed-to-floating rate subordinated debentures during fiscal year 2016.

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On July 16, 2001, the Company issued all of the 10,310 authorized shares of Company Obligated Mandatorily Redeemable Preferred Securities of First Midwest Financial Capital Trust I (preferred securities of subsidiary trust) holding solely trust preferred securities.

Distributions are paid semi‑annually.

Distributions are paid semiannually.

Cumulative cash distributions are calculated at a variable rate LIBOR plus 3.75%, not to exceed 12.5%.

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The capital securities are required to be redeemed on July 25, 2031;

however, the Company has a semi‑annual option to shorten the maturity date.

however, the Company has a semiannual option to shorten the maturity date.

The option has not been exercised as of the date of this filing.

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The subsidiary has the option to defer interest payments on the subordinated debentures from time to time for a period not to exceed five consecutive years.

The Bank has a line of credit with another financial institution for $25.0 million as of September 30, 2020.

This line of credit has no fee, and, as of September 30, 2020, the Company has not drawn on it.

The Company previously offered retail repurchase agreements to its customers.

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Other borrowings 7,888 14,422 21,606

The following table sets forth certain information as to the Company’s FHLB advances, retail and reverse repurchase agreements, trust preferred securities, subordinated debentures, and overnight fed funds purchased at the dates indicated.

September 30,

2020 2019 2018

At .September 30,

(Dollars in Thousands) 2021 2020 2019

FHLB advances $ — $ 110,000 $ —

FHLB and FRB advances $ — $ — $ 110,000

Repurchase agreements — — 4,019

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Total borrowings $ 92,834 $ 98,224 $ 861,857

Weighted average interest rate of FHLB advances — % 2.41 % — %

Weighted average interest rate of FHLB and FRB advances — % — % 2.41 %

Weighted average interest rate of repurchase agreements — % — % 2.83 %

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Payments Activities

The Company, through its MPS division, is focused on innovation in the finserv and fintech industries by providing solid banking infrastructure, proven tech resource partners, and high-energy collaboration that enables its partners to deliver banking programs that meet their customers' demands.

MPS offers a complement of payments related products and services that are marketed to consumers nationwide through financial institutions and other commercial entities.

The Company, through its Meta Payments division, is focused on innovation in the finserv and fintech industries by providing solid banking infrastructure, proven tech resource partners, and high-energy collaboration that enables its partners to deliver banking programs that meet their customers' demands.

The Meta Payments division offers a complement of payments related products and services that are marketed to consumers nationwide through financial institutions and other commercial entities.

Other solutions, such as merchant acquiring and transactional payments facilitate the movement of funds between an entity and the audience they serve, typically a consumer.

Overall, the products and services offered by MPS are generally designed to facilitate the processing and settlement of authorized electronic transactions involving the movement of funds.

While the Company has adopted policies and procedures to manage and monitor the risks attendant to this line of business, and the executives who manage the Company’s program have years of experience in this area of the Company's business, no guarantee can be made that the Company will not experience losses in the MPS division.

MPS has signed agreements with terms extending through the next few years with several of its largest sales agents/program managers, which the Company expects will help mitigate this risk.

Each line of MPS' business is discussed generally below with examples to illustrate use cases.

The Company cross-utilizes personnel and resources across these lines of business (for example, MPS may develop products for both prepaid and consumer banking solutions needs pursuant to a client's request).

Overall, the products and services offered by the Company are generally designed to facilitate the processing and settlement of authorized electronic transactions involving the movement of funds.

The Company has signed agreements with terms extending through the next few years with several of its largest sales agents/program managers, which the Company expects will help mitigate this risk.

Each line of the Meta Payments division is discussed generally below with examples to illustrate use cases.

The Company cross-utilizes personnel and resources across these lines of business (for example, the Meta Payments division may develop products for both prepaid and consumer banking solutions needs pursuant to a client's request).

Prepaid Solutions

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The cards may work in a closed loop (e.g., the card will only work at one particular merchant and will not work anywhere else), a "Restricted Access Network" (e.g., the card will only work at a specific set of merchants such as a shopping mall), or in an open loop by way of a Visa or MasterCard branded debit card that will work wherever such cards are accepted for payment.

Most of MPS' prepaid cards are open loop.

Most of the Company's prepaid cards are open loop.

Meta is among the top 3 prepaid card issuers in the United States.

The MPS prepaid card business can generally be divided into two program categories:

The prepaid card business can generally be divided into two program categories:

Consumer Use and Business or Commercial Use products.

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Meta is a Nacha Top 50 bank for receiving and originating payments.

As of November 2020, Meta typically processes $1 billion per day in ACH and wire services, which supports that Meta has earned the confidence of its partners by providing safe and efficient movement of money, unprecedented service, and operational success.

As of November 2021, Meta typically processes a combined $2.5 billion per day in Automated Clearing House ("ACH") and wire services, which supports that Meta has earned the confidence of its partners by providing safe and efficient movement of money, unprecedented service, and operational success.

ATM Sponsorship

MPS sponsors ATM independent sales organizations (“ISOs”) into various networks and provides associated sponsorships of encryption support organizations and third-party processors in support of the financial institutions and the ATM ISO sponsorships.

The Company sponsors ATM independent sales organizations (“ISOs”) into various networks and provides associated sponsorships of encryption support organizations and third-party processors in support of the financial institutions and the ATM ISO sponsorships.

Sponsorship consists of the review and oversight of entities participating in debit and credit networks.

In certain instances, MPS also has certain leasehold interests in certain ATMs which require bank ownership and registration for compliance with applicable state law.

Meta currently provides financial processing services for 70% of freestanding ATMs nationwide providing consumers with access to funds at ATMs frequently founds in malls, retail chains, convenience stores, events, fairs and other small business locations across the U.S.

In certain instances, Meta also has certain leasehold interests in certain ATMs which require bank ownership and registration for compliance with applicable state law.

Meta currently provides financial processing services for approximately 65% of freestanding ATMs nationwide providing consumers with access to funds at ATMs frequently founds in malls, retail chains, convenience stores, events, fairs and other small business locations across the U.S.

Acquiring Solutions

Acquiring solutions include the acceptance, processing and settlement of credit card and debit card payments by an acquiring bank on behalf of merchants.

Meta acts as an acquiring bank to sponsor acquiring activity on behalf of merchant clients by leveraging partnerships with partners who act as merchant processors, third-party service providers, ISOs, and/or payment facilitators to identify, onboard and support merchant clients.

Regulation and Supervision

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In June 2020, the Paycheck Protection Program Flexibility Act was enacted, which among other things, gave borrowers additional time and flexibility to use PPP loan proceeds.

Shortly thereafter, and due to the evolving impact of the COVID-19 pandemic, additional legislation was enacted authorizing the SBA to resume accepting PPP applications on July 6, 2020 and extending the PPP application deadline to August 8, 2020.

It is anticipated that additional revisions to the SBA’s interim final rules on forgiveness and loan review procedures will be forthcoming to address these and related changes.

As a participating lender in the PPP, the Bank continues to monitor legislative, regulatory, and supervisory developments related thereto.

After previously being extended by Congress, the application deadline for PPP loans expired on May 31, 2021.

As a participating lender in the PPP, the Bank continues to monitor legislative, regulatory, and supervisory developments related thereto, including updates to guidance on loan forgiveness.

Troubled Debt Restructuring and Loan Modifications for Affected Borrowers.

The CARES Act permits banks to suspend requirements under GAAP for loan modifications to borrowers affected by COVID-19 that would otherwise be characterized as TDRs and suspend any determination related thereto if (i) the loan modification is made between March 1, 2020 and the earlier of December 31, 2020 or 60 days after the end of the COVID-19 emergency declaration and (ii) the applicable loan was not more than 30 days past due as of December 31, 2019.

The CARES Act (as amended by the Consolidated Appropriations Act of 2021) permits banks to suspend requirements under GAAP for loan modifications to borrowers affected by COVID-19 that would otherwise be characterized as TDRs and suspend any determination related thereto if (i) the loan modification is made between March 1, 2020 and the earlier of January 1, 2022 or 60 days after the end of the national COVID-19 emergency declaration and (ii) the applicable loan was not more than 30 days past due as of December 31, 2019.

The federal banking agencies also issued guidance to encourage banks to make loan modifications for borrowers affected by COVID-19 and to assure banks that they will not be criticized by examiners for doing so.

The Company is applying this guidance to qualifying loan modifications.

The Company has applied this guidance to qualifying loan modifications.

See Note 5 to the “Notes to Consolidated Financial Statements,” which is included in Part II, Item 8 “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K for further information about the COVID-19-related loan modifications completed by the company.

Temporary Community Bank Leverage Ratio Relief.

Pursuant to the CARES Act, the federal banking agencies authorities adopted an interim rule, effective until the earlier of the termination of the coronavirus emergency declaration and December 31, 2020, to (i) reduce the minimum Community Bank Leverage Ratio from 9% to 8% percent and (ii) give community banks two-quarter grace period to satisfy such ratio if such ratio falls out of compliance by no more than 1%.

Federal Reserve Programs and Other Recent Initiatives Related to COVID-19

Main Street Lending Program.

The CARES Act encouraged the Federal Reserve, in coordination with the Secretary of the Treasury, to establish or implement various programs to help midsize businesses, nonprofits, and municipalities.

On April 9, 2020, the Federal Reserve proposed the creation of the Main Street Lending Program (“MSLP”) to implement certain of these recommendations.

On June 15, 2020, the Federal Reserve Bank of Boston opened the MSLP for lender registration.

The MSLP supports lending to small and medium-sized businesses that were in sound financial condition before the onset of the COVID-19 pandemic.

The MSLP operates through five facilities:

the Main Street New Loan Facility, the Main Street Priority Loan Facility, the Main Street Expanded Loan Facility, the Nonprofit Organization New Loan Facility, and the Nonprofit Organization Expanded Loan Facility.

The Federal Reserve Bank of Boston maintains the necessary legal forms and agreements for eligible borrowers and eligible lenders to participate in the MSLP, and is working to refine the MSLP’s operational infrastructure and facilities.

The Bank continues to monitor developments related thereto.

Temporary Regulatory Capital Relief Related to Impact of CECL

Concurrent with enactment of the CARES Act, federal banking agencies issued an interim final rule that delays the estimated impact on regulatory capital resulting from the adoption of CECL.

The interim final rule provides banking organizations that implement CECL before the end of 2020 the option to delay for two years the estimated impact of CECL on regulatory capital relative to regulatory capital determined under the prior incurred loss methodology, followed by a three-year transition period to phase out the aggregate amount of capital benefit provided during the initial two-year delay.

The federal banking agencies have since issued a final rule that makes certain technical changes to the interim final rule.

The changes in the final rule apply only to those banking organizations that elect the CECL transition relief provided under the rule.

The Company will elect this option.

Concurrently with enactment of the CARES Act, federal banking agencies issued an interim final rule that delayed the estimated impact on regulatory capital resulting from the adoption of CECL.

The interim final rule provided banking organizations that implemented CECL before the end of 2020 the option to delay for two years the estimated impact of CECL on regulatory capital relative to regulatory capital determined under the prior incurred loss methodology, followed by a three-year transition period to phase out the aggregate amount of capital benefit provided during the initial two-year delay.

Thereafter, the federal banking agencies issued a final rule that made certain technical changes to the interim final rule.

The changes in the final rule apply only to those banking organizations that elected the CECL transition relief provided under the interim rule.

The Company has elected this option.

Bank Regulation and Supervision

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If the condition of the Bank were to deteriorate, the level of such assessments could increase significantly, having a material adverse effect on the Company’s financial condition and results of operations.

Regulatory authorities have been granted extensive discretion in connection with their supervisory and enforcement activities which are intended to strengthen the financial condition of the banking industry, including, but not limited to, the imposition of restrictions on the operation of an institution, the classification of assets by the institution, and the adequacy of an institution’s allowance for loan and lease losses.

Typically, these actions are undertaken due to violations of laws or regulations or conduct of operations in an unsafe or unsound manner.

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At September 30, 2021, the Bank was in compliance with the combined general limit.

The OCC announced on October 1, 2020 that its supervisory strategies for 2021 will focus on the following:

(a) credit risk management, commercial and residential real estate concentration risk management, allowances for loan and lease losses, and allowances for credit losses;

(b) cybersecurity and operational resiliency;

(d) compliance risk management associated with 2020 pandemic-related bank activities;

(e) Community Reinvestment Act performance;

(f) fair lending examinations and risk assessments;

(g) the impact of a low-rate environment and preparation for the phase-out of the London Interbank Offering Rate (“LIBOR”);

(h) proper oversight of significant third-party relationships;

(i) change management over significant operational changes;

and (j) payment systems products and services.

The OCC announced on October 15, 2021 that its supervisory strategies for 2022 will focus on:

(a) strategic and operational planning to ensure banks maintain stable financial positions;

(b) credit risk management, allowances for loan and lease losses, and allowances for credit losses;

(d) oversight of third parties and related concentrations;

(e) Bank Secrecy Act/anti-money laundering (“BSA/AML”) compliance management;

(f) consumer compliance management systems and fair lending risk;

(g) Community Reinvestment Act performance;

(h) the impact of a low-rate environment and the transition to alternative reference rates given the cessation of London Interbank Offering Rate (“LIBOR”);

(i) payment systems products and services;

(j) fintech partnerships for potential cryptocurrency-related activities and other services;

and (k) climate change risk management.

The OCC’s 2022 supervisory plan provides the foundation for policy initiatives and for supervisory strategies as applied to national banks as well as their technology service providers.

OCC staff members use the supervisory plan to guide their supervisory priorities, planning, and resource allocations.

The OCC typically provides periodic updates about supervisory priorities through the Semiannual Risk Perspective process in the fall and spring of each year.

Insurance of Deposit Accounts and Regulation by the FDIC

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As such, institutions that are less than well capitalized that are permitted to accept, renew or rollover brokered deposits via FDIC waiver generally may not pay an interest rate in excess of the national rate plus 75 basis points on such brokered deposits.

As of September 30, 2020, the Bank categorized $2.13 billion, or 43% of its deposit liabilities, as brokered deposits.

The FDIC has previously published industry guidance in the form of Frequently Asked Questions with respect to the categorization of deposit liabilities as brokered deposits.

The FDIC published a proposed rule to modify the “national rate” definition that would apply to insured depository institutions that are less than well-capitalized in August 2019.

In addition, in December 2019 and in connection with the Regulatory Relief Act, the FDIC published proposed revisions to its regulations relating to the brokered deposits restrictions.

Specifically, the FDIC proposed to (i) revise the definition of the "facilitation" prong of the "deposit broker" definition;

(ii) provide that a wholly-owned operating subsidiary be eligible for the insured depository institution exception to the deposit broker definition under certain circumstances;

and (iii) amend the "primary purpose" exception.

As of the date of the filing of this Annual Report on Form 10-K, no final rules on either the August 2019 proposal nor the December 2019 proposals have been issued.

]Consequently, it is not possible to determine whether a final rule regarding a revised regulatory treatment of brokered deposits will be adopted or, if adopted, whether such final related regulation will have a material adverse effect on the Bank.

As of September 30, 2021, the Bank categorized $420.7 million, or 8% of its deposit liabilities, as brokered deposits.

On December 15, 2020, the FDIC issued a final rule establishing a new framework for analyzing whether bank deposits obtained through third-party arrangements are brokered deposits pursuant to Section 29 of the Federal Deposit Insurance Act.

Generally, a person is a "deposit broker" if it is "engaged in the business of placing deposits, or facilitating the placement of deposits, of third parties with insured depository institutions or the business of placing deposits with insured depository institutions for the purpose of selling interests in those deposits to third parties." The final rule clarifies what it means to be in the business of placing deposits and facilitating the placement of deposits for purpose of the deposit broker definition.

In Section 29 and provides, in particular, that a person with an exclusive deposit placement arrangement with one insured depository institution will not be considered a deposit broker because it is not in the business of placing deposits or facilitating the placement of deposits.

The final rule also clarifies application of the “primary purpose exception” to Section 29 by identifying a number of common business relationships described as “designated exceptions” as meeting the primary purpose exception.

Many of these designated exceptions are arrangements previously addressed in advisory opinions and include:

certain investment-related deposits;

property management service deposits;

deposits for cross-border clearing services;

deposits related to real estate and mortgage servicing activities;

retirement and 529 deposits;

deposits related to employee benefits programs;

deposits held to secure credit card loans;

and deposits placed by agencies to disburse government benefits.

The final rule became effective April 1, 2021, with full compliance extended to January 1, 2022.

As a result of this final rule, the Company's deposits that were classified as brokered deposits reduced significantly beginning with the June 30, 2021 reporting period.

Branching by National Banks

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Consequently, the Bank's only banking office open to the public is its home office in Sioux Falls, South Dakota, where it accepts deposits.

No Qualified Thrift Lender Test

As a national bank, the Bank is no longer required to be a qualified thrift lender (a “QTL”) or satisfy any element of the QTL test applicable to federal savings associations.

Consumer Mortgage Lending

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Similar to guidance published by the OCC in 2013, this guidance generally requires that financial institutions, including the Bank, ensure that risks related to such third-party lending relationships are evaluated, including the type of lending activity, the complexity of the lending program, the projected and realized volume created by the relationship, and the number of third-party lending relationships the institution has in place.

On July 19, 2021, the OCC, Federal Reserve, and FDIC issued an interagency notice seeking comment on proposed risk management guidance of third-party relationships, including third party lending relationships.

The proposed interagency guidance is based on the OCC’s existing third-party risk management guidance from 2013 and seeks to, among other things, promote consistency in third-party risk management and provide sound risk management guidance for third-party relationships commensurate with a bank’s risk profile and complexity as well as the criticality of the activity.

The public comment period ended on September 17, 2021.

When finalized, the proposed interagency guidance will replace each agency’s existing guidance on this topic and will be directed to all banking organizations supervised by the OCC, Federal Reserve, and FDIC.

The Company continues to monitor developments related to the proposed guidance to determinate what affect, if any, it will have on the Bank and its third-party relationships.

Unclaimed Property Laws

63 unchanged sentences

This calculation is performed on a rolling basis as described in the OCC’s earnings limitation regulations.

The Bank paid cash dividends in the amount of $118.0 million to the Company during fiscal 2020, to be used to fund share repurchases under the common stock share repurchase program that was authorized by the Company's Board of Directors during the fiscal 2020 first quarter.

The Bank paid cash dividends in the amount of $104.0 million to the Company during fiscal 2021, to be used to fund share repurchases under the common stock share repurchase programs that were authorized by the Company's Board of Directors.

The program authorized the Company to repurchase up to 7,500,000 shares of the Company's outstanding common stock through December 31, 2022.

Effective in March 2020, the Company suspended its share repurchase activity due to the COVID-19 pandemic and related economic uncertainty.

The Company resumed its share repurchase activity in September 2020.

On September 3, 2021, the Company's Board of Directors authorized a new stock repurchase program pursuant to which the Company may repurchase up to an additional 6,000,000 shares of the Company's outstanding common stock on or before September 30, 2024.

As part of its capital planning, the Company will continue to regularly assess its needs for dividends from the Bank in order to fund future share repurchases and dividends to the Company's stockholders as needed.

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In August 2017, the Federal Reserve published proposed guidance related to supervisory expectations for boards of directors of BHCs.

The proposal seeks to clarify supervisory expectations of boards and distinguish the roles held by senior management to allow boards to focus on fulfilling their core responsibilities.

As of the date of the filing of this Annual Report on Form 10-K, no final guidance has yet been published.

The proposal sought to clarify supervisory expectations of boards and distinguish the roles held by senior management to allow boards to focus on fulfilling their core responsibilities.

On February 26, 2021, the Federal Reserve issued a Supervision and Regulation letter (SR 21-3/CA 21-1) containing its final supervisory guidance on the effectiveness of a banking institution's board of directors.

Although the guidance only applies to bank holding companies and savings-and-loan holding companies with total consolidated assets of $100 billion or more, the Company continues to monitor the Federal Reserve's evolving supervisory and regulatory approach to board and senior management effectiveness.

Additional Regulatory Matters

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Competitors include a wide range of regional and national banks and financial services companies located both in the Company's market areas and across the nation.

The Company’s payments division serves customers nationally and also faces strong competition from large commercial banks and specialty providers of electronic payments processing and servicing, including prepaid, debit and credit card issuers, Automated Clearing House (“ACH”) processors and ATM network sponsors.

Many of these national players are aggressive competitors, leveraging relationships and economies of scale.

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Human Capital Resources

In order to continue to deliver on our mission of financial inclusion for all, it is crucial that we attract and retain talent who desire to enable financial equality through delivery of capable solutions, thoughtful innovation and equitable consumer options in the markets that we serve.

To facilitate talent attraction and retention, we strive to make MetaBank an inclusive, safe and healthy workplace, with opportunities for our employees to grow and develop in their careers, supported by strong compensation, benefits, health and welfare programs.

Employee Profile

As of September 30, 2020, we had approximately 1,015 full time equivalent employees in locations across the United States.

This represents a decrease of 171 employees or 14.42% from September 30, 2019 due primarily to the sale of the Community Bank division in February of 2020 in which employees aligned with our community bank operations and support transitioned to the acquirer of the Community Bank division, Central Bank.

As of September 30, 2020, approximately 56.6% of our current workforce is female, 43.4% male, and our average tenure is 6.07 years, an increase of 5.93% from an average tenure of 5.73 years as of September 30, 2019.

Our mission of Financial Inclusion for All® is foundational to our ability to attract and retain top talent who desire to have impact working with innovators to enable financial availability, choice, and opportunity for consumers and businesses in underserved niche markets.

Our people are our number one asset and the source of our ability to deliver on our mission.

We hope to empower them by providing opportunities to grow and develop in their careers, supported by strong compensation, benefits, and health and well-being programs.

We strive to live our mission and provide a diverse, inclusive, safe, and healthy workplace for all.

The following table describes the composition of our workforce as of September 30, 2021:

Employee Type 9/30/2020 9/30/2021 Change

Full-time 1,015 1,121 10.5%

All Other Types 11 13 18.1%

Total Employees 1,026 1,134 10.5%

Minorities 18%

Diversity, Equity and Inclusion ("DEI")

We place immense value on the diversity of our employees, and we are proud of our commitment to treating our employees with dignity and respect through an inclusive work environment.

We believe that diversity of backgrounds, thoughts and experiences in our organization leads to more innovative solutions for our customers and partners as we seek to understand the unique needs in the niche markets that we serve.

All employees are expected to contribute to a culture of mutual respect and inclusion, and we encourage a workplace culture that is free from discrimination, harassment, or any other form of abuse.

We approach the components of DEI as follows:

We prioritize cultivating a culture that promotes, supports, and respects diversity among our employees, customers, partners, and community, honoring their unique perspectives that enrich their experience with us.

We prioritize designing a workplace experience that meets people’s individual needs by facilitating equitable access and advancement aligned with their professional goals.

For our customers and partners, we commit to identifying ways we can work with people to increase their economic mobility.

We prioritize creating a culture where our employees, customers and partners have a sense of belonging and feel valued in the ways that most resonate with them.

We oversee our DEI efforts through our Environmental, Social and Governance (ESG) structure, which includes Board and executive management oversight, as well as a DEI Steering Committee that supports the implementation of our DEI strategy which is both internally and externally focused.

Our people are dedicated to a spirit of stewardship and service to the clients and communities that we serve.

By growing and promoting a diversity of perspectives within our employee base that reflects our diverse customer base, we can better understand their challenges and deliver on the solutions that they need.

Talent Acquisition

A core tenet of our talent system is to both develop talent from within and enrich our talent pool with external hires to support a continuous improvement mindset.

One of our most important new initiatives is our “Talent Anywhere” recruitment strategy.

Historically, our organization has been centered in and around Sioux Falls, SD and Troy, MI and our talent pool was similarly local.

We reimagined our recruiting strategy to expand our reach beyond local candidates as a remote-enabled employer of choice.

As part of our DEI strategy, we started work on training our internal recruiters on how to mitigate unconscious bias in the hiring process and how to assemble diverse candidate slates for open positions.

Our in-house recruiting team have measurable diversity goals.

We continue to leverage technology and best-in-class processes to evolve and scale our recruiting function.

Talent Assessment and Development

Assessing talent and leadership development are also critical areas to our talent growth and retention strategy.

We have been piloting an enterprise talent assessment framework, which began with our IT department.

Our plan is for this framework to be used throughout the company.

The aim is to better equip each department to have a clear line of sight on their teams’ strengths or opportunities in terms of skills, diversity or leadership potential.

At a senior level, we introduced a nine-month leadership development program for high-potential, high-performance employees.

Participants are paired with executive coaches and work on a curriculum that includes strategy setting, being an inclusive leader, and managing diverse perspectives.

For staff at all other levels, we transformed our training format from traditional classroom-based methods to a more progressive model—using micro learning methods, encouraging department leaders to be coaches for their staff, creating stretch assignments and soft skill workshops.

Our performance management program is an interactive practice that engages our employees through performance reviews, goal setting and managers providing on-going feedback to their team members.

We offer a variety of trainings to help team members and managers establish and meet personalized development goals, take on new roles and become better leaders.

Employee Engagement

We recognize that team members who are involved in, enthusiastic about and committed to their work and workplace contribute meaningfully to the success of the company.

In mid-2021, we completed our enterprise-wide engagement survey that is also a recurring annual best practice.

The results of this survey are reviewed with the executive management team and are used to prioritize employee programs, initiatives, and communications.

Total Rewards

As part of our compensation philosophy, we believe that we must offer and maintain market competitive total rewards programs for our employees in order to attract and retain superior talent.

In addition to healthy base wages, additional programs include annual bonus opportunities, a Company augmented Employee Stock Ownership Plan, Company matched 401(k) Plan, healthcare and insurance benefits, health savings and flexible spending accounts, paid time off, family leave, family care resources, flexible work schedules, adoption assistance, and employee assistance programs.

As part of our total rewards strategy, we aspire to offer and maintain market competitive total rewards programs for our employees and that attract and retain superior talent.

In addition to healthy base wages, we offer other variable pay including annual bonus and commission plans for our sales employees.

We offer a 401(k) plan with a highly competitive company match.

Our healthcare, insurance benefits, health savings and flexible spending accounts are equally competitive with low-cost share for the employee We understand how important it is that our employees have time to away from work.

To allow employees a time to recharge, we offer paid time off, family leave, family care resources, flexible work schedules, adoption assistance, employee assistance programs, and other rest and family related benefits.

We want our employees to be healthy and be able to bring their whole selves to the workplace.

We are fortunate in that no layoffs, furloughs or salary adjustments have been imposed due to COVID-19.

Health and Safety

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Accordingly, we are committed to the health, safety, and wellness of our employees.

We provide our employees and their families with access to a variety of flexible and convenient health and welfare programs, including benefits that support their physical and mental health by providing tools and resources to help them improve or maintain their health status;

and that offer choice where possible so they can customize their benefits to meet their needs and the needs of their families.

In response to the COVID-19 pandemic, we implemented significant operating environment changes that we determined were in the best interest of our employees, as well as the communities in which we operate, and which comply with government regulations.

This includes having the vast majority of our employees work from home, while implementing additional safety measures for employees continuing critical on-site work.

A core tenet of our talent system is to both develop talent from within and supplement with external hires.

This approach has yielded loyalty and commitment in our employee base which in turn grows our business, our products, and our customers, while adding new employees and external ideas supports a continuous improvement mindset and our goals of a diverse and inclusive workforce.

We believe that our average tenure — 6.07 years as of the end of the fiscal year 2020 — reflects the engagement of our employees in this core talent system tenet.

Our talent acquisition team uses internal and external resources to recruit highly skilled and talented workers across the US, and we encourage employee referrals for open positions.

Our Performance Management framework includes monthly business and functional reviews and one on one, quarterly, forward looking, goal and employee development discussions, followed by annual opportunities for pay differentiation via overall performance distinction.

We strive to promote inclusion through our stated Company values and behaviors.

With the support of our Board of Directors, we continue to explore additional diversity, equity, inclusion and belonging efforts via our three pillars of inclusion:

candidates, employees, and marketplace.

Our ongoing diversity and inclusion initiatives support our goal that everyone throughout the Company is engaged in creating an inclusive workplace, and we are focused on sourcing and hiring with fairness and equitable approaches, creating an environment where all of our employees can develop and thrive, and engaging and influencing suppliers, partners and associations in our marketplace.

We are a remote-enabled employer and instituted a work-from-home program allowing hybrid access to our offices while imposing safety protocols.

We purchased laptops and related hardware for home-based employees who previously worked on desktop computers;

we also provided employees with a stipend to enhance their at-home work experience.

Our employees and their families were also supported with access to a variety of flexible and convenient health and welfare programs, including benefits that support their physical and mental health.

We are also monitoring local, state and federal regulations, including the recent emergency temporary order on vaccination and testing in the workplace issued by the Occupational Safety and Health Administration and are prepared to timely implement any applicable requirements.

Available Information

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The Company also will provide copies of its Annual Report on Form 10-K, free of charge, upon written request to Brittany Kelley Elsasser, Director of Investor Relations, at the Company’s address.

Also posted on the Company's website, among other things, are the charters of committees of the Board of Directors, as well as the Company's and the Bank's Codes of Ethics.

Also posted on the Company's website, among other things, are the Environmental, Social and Governance Report, the charters of committees of the Board of Directors, as well as the Company's Code of Business Conduct.

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-K

Item 1. Business