What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2021-11-23 compared with 2020-11-30 · 624 added, 1025 removed, 1498 unchanged (52% of the section changed)

Financial Statements and Supplementary Data

Reports of Independent Registered Public Accounting Firm

Report of Independent Registered Public Accounting Firm

Consolidated Financial Statements

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We have audited the accompanying consolidated statement of financial condition of Meta Financial Group, Inc.

and Subsidiaries (the "Company") as of September 30, 2020 and 2019, the related consolidated statements of operations, comprehensive income, changes in stockholders’ equity, and cash flows for the years ended September 30, 2020 and 2019, and the related notes (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of September 30, 2020 and 2019, and the results of its operations and its cash flows for the years ended September 30, 2020 and 2019, in conformity with accounting principles generally accepted in the United States of America.

and Subsidiaries (the "Company") as of September 30, 2021 and 2020, the related consolidated statements of operations, comprehensive income, changes in stockholders’ equity, and cash flows for the years ended in the three-year period ended September 30, 2021, and the related notes (collectively referred to as the "financial statements").

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of September 30, 2021 and 2020, and the results of its operations and its cash flows for each of the years in the three-year period ended September 30, 2021, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of September 30, 2021, based on criteria established in Internal Control – Integrated Framework:

(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated November 30, 2020 expressed an unqualified opinion.

(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated November 23, 2021 expressed an adverse opinion.

Change in Accounting Principle

As discussed in Note 1 to the financial statements, the Company has changed its method of accounting for credit losses effective October 1, 2020 due to the adoption of Financial Accounting Standards Board’s Accounting Standards Codification No.

326, Financial Instruments – Credit Losses (ASC 326).

The Company adopted the new credit loss standard using the modified retrospective method such that prior period amounts are not adjusted and continue to be reported in accordance with previously applicable generally accepted accounting principles.

The adoption of the new credit loss standard and its subsequent application is also communicated as a critical audit matter below.

Basis for Opinion

These financial statements are the responsibility of the Company's management.

Our responsibility is to express an opinion on the Company's financial statements based on our audit.

Our responsibility is to express an opinion on the Company's financial statements based on our audits.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

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Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audit provides a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of a critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Allowance for Loan Losses - General Reserve Qualitative Adjustment

As described in Notes 1 and 5 to the consolidated financial statements, the Company’s allowance for loan losses is a valuation account that reflects the Company’s estimate of incurred losses in its loan portfolio to the extent they

are both probable and reasonable to estimate.

The allowance for loan losses was $56.2 million at September 30, 2020, which consists of two components:

the valuation allowance for loans individually evaluated for impairment (“specific reserves”), representing $5.1 million, and the valuation allowance for loans collectively evaluated for impairment (“general reserves”), representing $51.1 million.

The general reserve component is based on a quantitative and qualitative analysis.

The calculation of the allowance for loan losses involves significant and subjective assumptions which require a high degree of judgment relating to:

1) the general economic environment in the Company’s markets, including economic conditions throughout the Midwest, 2) the size and complexity of individual credits in relation to loan and lease structure, 3) existing loan and lease policies and the pace of portfolio growth, and 4) the expected impact of the disruption of the COVID-19 pandemic on the Company’s loan customers and the related impact on credit risk.

General reserves at September 30, 2020 include qualitative adjustments of $26.4 million attributed to the estimated impact of the disruption of the COVID-19 pandemic on the Company’s loan customers.

Changes in these assumptions could have a material effect on the Company’s financial results.

The qualitative adjustment for the general reserve includes consideration of:

changes in lending and leasing policies and procedures, changes in national and local economic and business conditions and developments, including the disruptive impact of the COVID-19 pandemic, changes in the nature and volume of the loan and lease portfolio, changes in lending and leasing management and staff, trends in past due, classified, nonaccrual, and other loan and lease categories, changes in the Company’s loan and lease review system and oversight, changes in collateral and residual values, credit concentration risk, and the regulatory and legal requirements and environment.

The qualitative adjustments contribute significantly to the general reserve component of the allowance for loan losses.

Management’s identification and analysis of these considerations and related adjustments requires significant judgment.

We identified the estimate of the qualitative adjustment of the general reserve for the commercial real estate segment in the community banking portfolio and the commercial finance segment in the national lending portfolio (“identified segments”) as a critical audit matter as they represent a significant portion of the total qualitative adjustment and because management’s estimate relies on a qualitative analysis to determine a quantitative adjustment which required especially subjective auditor judgment.

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Allowance for Credit Losses (ACL) – Qualitative Adjustments

As described in Notes 1 and 5 to the financial statements and referred to in the change in accounting principle explanatory paragraph above, the Company adopted ASC 326 as of October 1, 2020, which, among other things, required the Company to recognize expected credit losses over the contractual lives of financial assets carried at amortized cost, including loans receivable, utilizing the Current Expected Credit Losses (“CECL”) methodology.

Estimates of expected credit losses are based on relevant information about current conditions, past events, and reasonable and supportable forward-looking forecasts regarding collectability of the reported amounts.

For most of its loan segments, the Company utilized a cohort model which computes the historical life-of-loan loss rate for each identified loan segment (also referred to as the “quantitative loss rates”).

The quantitative loss rates are then adjusted, as deemed necessary, based on current economic forecasts over a twelve-month reasonable and supportable forecast period as well as for measurement date credit characteristics including problem loan and delinquency trends, portfolio growth and other factors (also referred to as the “qualitative adjustments”).

We have identified auditing the qualitative adjustments as a critical audit matter as management’s determination of the qualitative adjustments used in the ACL is subjective and involves significant management judgements;

and our audit procedures related to the qualitative adjustments involved a high degree of auditor judgment and required significant audit effort, including the need to involve more experienced audit personnel.

The primary procedures we performed to address this critical audit matter included:

• Testing the effectiveness of controls over the evaluation of the general reserve qualitative adjustments for the identified segments, including controls addressing:

◦ Management's review of the accuracy of data inputs used as the basis for the allowance allocations resulting from the qualitative adjustments.

◦ Management's review of the reasonableness of the judgments and assumptions used to develop the qualitative adjustments for the general reserve.

◦ Management's review of the mathematical accuracy of the allowance calculation.

• Substantively testing management’s process, including evaluating their judgments and assumptions, for developing the general reserve qualitative adjustments for the identified segments which included:

◦ Evaluation of the completeness and accuracy of data inputs used as a basis for the adjustments relating to qualitative general reserve factors.

◦ Evaluation of the reasonableness of management’s judgements related to the qualitative and quantitative assessment of the data used in the determination of the general reserve qualitative adjustments and the resulting allocation to the allowance.

Among other procedures, our evaluation considered, evidence from internal and external sources, loan portfolio performance and whether such assumptions were applied consistently period to period.

◦ Analytically evaluating the qualitative adjustment year over year for directional consistency and testing for reasonableness, including the qualitative adjustment attributed to the estimated impact of the disruption of the COVID-19 pandemic on the Company’s loan customers.

◦ Testing the mathematical accuracy of the allowance calculation, including the application of the qualitative adjustments.

• Testing the effectiveness of controls over the qualitative adjustments used in the ACL calculation including controls addressing:

◦ Testing the design and operating effectiveness of controls pertaining to the key assumptions and judgments applied in the development of the qualitative adjustments.

◦ Testing the design and operating effectiveness of the controls around the mathematical accuracy of the qualitative adjustments applied to the loan segments in the ACL calculation.

• Substantively testing management’s determination of the qualitative adjustments used in the ACL estimate, including evaluating their judgements and assumptions, including:

◦ Testing management’s process for developing the qualitative adjustments and assessing the reasonableness, relevance and reliability of data used to develop the adjustments, including evaluating their judgments and assumptions for reasonableness.

Among other procedures, our evaluation considered evidence from internal and external sources, loan portfolio performance and whether such assumptions were applied consistently from period to period.

◦ Analytically evaluating the qualitative adjustments for directional consistency, testing for reasonableness, and obtaining evidence for significant changes.

◦ Testing the mathematical accuracy of the qualitative adjustments applied to the loan segments in the ACL calculation.

/s/ Crowe LLP

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November 23, 2021

2500 Ruan Center

666 Grand Avenue

Des Moines, IA 50309

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors

META FINANCIAL GROUP, INC.

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated statements of operations, comprehensive income, changes in stockholders’ equity, and cash flows of Meta Financial Group, Inc.

and subsidiaries (the Company) for the year ended September 30, 2018, and the related notes (collectively, the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the results of operations of the Company and its cash flows for the year ended September 30, 2018, in conformity with U.S.

generally accepted accounting principles.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on these consolidated financial statements based on our audit.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audit provides a reasonable basis for our opinion.

We served as the Company’s auditor from 2008 to 2018.

Des Moines, Iowa

November 29, 2018

META FINANCIAL GROUP, INC.

AND SUBSIDIARIES

Consolidated Statements of Financial Condition

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

(Dollars in Thousands, Except Per Share Data)

ASSETS September 30, 2021 September 30, 2020

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Mortgage-backed securities available for sale, at fair value 1,017,029 453,607

Investment securities held to maturity, at cost 87,183 127,582

Mortgage-backed securities held to maturity, at cost 5,427 7,182

Investment securities held to maturity, at amortized cost (fair value $ 52,576 and $ 88,194 , respectively)

52,944 87,183

Mortgage-backed securities held to maturity, at amortized cost 3,725 5,427

Loans held for sale 56,194 183,577

Loans and leases 3,609,563 3,322,765

Allowance for loan and lease losses ( 56,188 ) ( 29,149 )

Federal Reserve Bank and Federal Home Loan Bank stocks, at cost 27,138 30,916

Allowance for credit losses ( 68,281 ) ( 56,188 )

Federal Reserve Bank and Federal Home Loan Bank Stock, at cost 28,400 27,138

Accrued interest receivable 16,254 16,628

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Total deposits 5,514,971 4,979,200

Short-term borrowings — 646,019

Long-term borrowings 92,834 98,224

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Retained earnings 259,189 234,927

Accumulated other comprehensive income 17,542 6,339

Accumulated other comprehensive income (loss) 7,599 17,542

Treasury stock, at cost, 16,531 and 118,274 common shares at September 30, 2021 and 2020, respectively

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Consolidated Statements of Operations

For the Fiscal Years Ended September 30,

(Dollars in Thousands, Except Share and Per Share Data) 2020 2019 2018

Fiscal Year Ended September 30,

(Dollars in Thousands, Except Per Share Data) 2021 2020 2019

Interest and dividend income:

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Net interest income 278,991 259,038 264,207

Provision for loan and lease losses 64,776 55,650 29,432

Net interest income after provision for loan and lease losses 194,262 208,557 101,117

Provision for credit losses 49,766 64,776 55,650

Net interest income after provision for credit losses 229,225 194,262 208,557

Noninterest income:

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Rental income 39,416 44,826 41,053

Gain (loss) on sale of securities available for sale, net (Includes $ 51 , $ 729 , and $( 8,177 ) reclassified from accumulated other comprehensive income (loss) for net gain (loss) on securities available for sale for the fiscal years ended September 30, 2020, 2019 and 2018, respectively)

51 729 ( 8,177 )

Net gain realized on investment securities 6 51 729

Gain on divestitures — 19,275 —

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Income before income tax expense 156,446 115,005 97,942

Income tax expense (benefit) (Includes $ 13 , $ 184 , and $( 2,330 ) reclassified from accumulated other comprehensive income (loss) for the fiscal years ended September 30, 2020, 2019 and 2018, respectively)

5,661 ( 3,374 ) 5,117

Income tax expense (benefit) 10,701 5,661 ( 3,374 )

Net income before noncontrolling interest 145,745 109,344 101,316

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Consolidated Statements of Comprehensive Income

For Fiscal Years Ended September 30,

Fiscal Year Ended September 30,

(Dollars in Thousands) 2021 2020 2019

2020 2019 2018

Net income before noncontrolling interest $ 145,745 $ 109,344 $ 101,316

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Change in net unrealized gain (loss) on debt securities ( 13,896 ) 15,164 53,739

(Gain) loss realized in net income ( 51 ) ( 729 ) 8,177

Net (gain) realized on investment securities ( 6 ) ( 51 ) ( 729 )

( 13,902 ) 15,113 53,010

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Consolidated Statements of Changes in Stockholders' Equity

For the Fiscal Years Ended September 30, 2018, 2019 and 2020

Meta Financial Group Stockholder's Equity

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

Meta Financial Group

(Dollars in Thousands, Except Per Share Data) Common

Stock Additional

Capital Retained

Earnings Accumulated

Comprehensive

Income (Loss),

Income (Loss) Treasury

Stock Total Meta

Stockholders’

Equity Non-controlling Interest Total Equity

Equity Non-controlling interest Total

Stockholders’

Balance, September 30, 2018 $ 393 $ 565,811 $ 213,048 $ ( 33,111 ) $ ( 1,989 ) $ 744,152 $ 3,574 $ 747,726

Adoption of Accounting Standards Update 2014-09, net of income taxes — — 1,502 — — 1,502 — 1,502

Adoption of Accounting Standards Update 2016-01, net of income taxes — — 475 ( 475 ) — — — —

Cash dividends declared on common stock ($ 0.20 per share)

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Issuance of common shares due to ESOP — 2,011 — — — 2,011 — 2,011

Issuance of common shares due to acquisition 99 295,667 — — — 295,766 — 295,766

Shares repurchased ( 18 ) 18 ( 46,500 ) — ( 3,412 ) ( 49,912 ) — ( 49,912 )

Retirement of treasury stock — — ( 4,956 ) — 4,956 — — —

Stock compensation — 12,942 — — — 12,942 — 12,942

Net change in unrealized losses on securities, net of income taxes — — — ( 42,277 ) — ( 42,277 ) — ( 42,277 )

Total other comprehensive income — — — 39,925 — 39,925 — 39,925

Net income — — 97,004 — — 97,004 4,312 101,316

Noncontrolling interests due to acquisition — — — — — — 3,167 3,167

Net investment by (distribution to) noncontrolling interests — — — — — — ( 3,839 ) ( 3,839 )

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Balance, September 30, 2019 $ 378 $ 580,826 $ 252,813 $ 6,339 $ ( 445 ) $ 839,911 $ 4,047 $ 843,958

Adoption of Accounting Standards Update 2014-09, net of income taxes — — 1,502 — — 1,502 — 1,502

Adoption of Accounting Standards Update 2016-01, net of income taxes — — 475 ( 475 ) — — — —

Cash dividends declared on common stock ($ 0.20 per share)

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Shares repurchased ( 38 ) 38 ( 115,506 ) — ( 3,232 ) ( 118,738 ) — ( 118,738 )

Retirement of treasury stock — — ( 4,956 ) — 4,956 — — —

Stock compensation — 10,221 — — — 10,221 — 10,221

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

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

Cash dividends declared on common stock ($ 0.20 per share)

— — ( 6,400 ) — — ( 6,400 ) — ( 6,400 )

Issuance of common shares due to exercise of stock options 1 265 — — — 266 — 266

Issuance of common shares due to restricted stock 2 — — — — 2 — 2

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

Shares repurchased ( 29 ) 29 ( 96,999 ) — ( 2,879 ) ( 99,878 ) — ( 99,878 )

Retirement of treasury stock — — ( 5,696 ) — 5,696 — — —

Stock compensation — 6,852 — — — 6,852 — 6,852

Total other comprehensive income — — — 11,203 — 11,203 — 11,203

Total other comprehensive loss — — — ( 9,943 ) — ( 9,943 ) — ( 9,943 )

Net income — — 141,708 — — 141,708 4,037 145,745

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Consolidated Statements of Cash Flows

For the Fiscal Years Ended September 30,

Fiscal Year Ended September 30,

(Dollars in Thousands) 2021 2020 2019

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Provision (recovery):

Loan and lease losses 64,776 55,650 29,432

Credit losses 49,766 64,776 55,650

Deferred taxes ( 1,639 ) ( 2,347 ) ( 14,301 )

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Loans held for sale ( 8,610 ) ( 5,389 ) ( 5,089 )

Lease receivable and equipment ( 4,335 ) ( 2,930 ) ( 526 )

Lease receivables and equipment ( 2,257 ) ( 4,335 ) ( 2,930 )

Other assets 825 1,524 ( 5,427 )

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Proceeds from divestitures — 3,498 —

Cash paid for acquisitions — — ( 6 )

Cash received upon acquisitions — — 58,858

Net cash (used in) investing activities ( 1,118,402 ) ( 206,316 ) ( 339,198 )

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Securities sold under agreements to repurchase — ( 4,019 ) 325

Short-term borrowings — — ( 11,642 )

Distribution to noncontrolling interests ( 5,068 ) ( 3,839 ) ( 266 )

Distribution to noncontrolling interest ( 4,033 ) ( 5,068 ) ( 3,839 )

Proceeds from other liabilities 80 1,633 7,916

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Shares repurchased ( 99,878 ) ( 118,738 ) ( 49,912 )

Redemption of long-term borrowings — — ( 258 )

Net cash provided by (used in) financing activities 40,019 174,876 ( 915,577 )

Net cash provided by financing activities 422,933 40,019 174,876

Effect of exchange rate changes on cash 476 ( 101 ) ( 122 )

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Cash and cash equivalents at beginning of fiscal year 427,367 126,545 99,977

Cash and cash equivalents at end of fiscal year $ 427,367 $ 126,545 $ 99,977

META FINANCIAL GROUP, INC.

AND SUBSIDIARIES

Consolidated Statements of Cash Flows (Cont'd.)

For the Fiscal Years Ended September 30,

Cash and cash equivalents at end of fiscal period $ 314,019 $ 427,367 $ 126,545

Fiscal Year Ended September 30,

(Dollars in Thousands) 2021 2020 2019

2020 2019 2018

Supplemental disclosure of cash flow information:

Cash paid (received) during the fiscal year for:

Cash paid during the period for:

Interest $ 8,207 $ 41,294 $ 59,902

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Supplemental schedule of non-cash investing activities:

Securities from held to maturity to available for sale — — 346,771

Loans and leases to foreclosed real estate and repossessed assets $ 9 $ 9,983 $ —

Loans and leases to rental equipment 28,604 2,134 —

Rental equipment to loans and leases 8,924 210 993

Rental equipment to loan and leases 24,324 8,924 210

Rental equipment to foreclosed real estate and repossessed assets 1,650 — —

Loans and leases to held for sale 188,638 542,101 99,992

Held for sale to loans and leases 36,919 — —

Other assets to held for sale — 7,858 —

Deposits to held for sale — 288,975 —

Recognition of operating lease ROU assets, net of remeasurements 28,666 — —

Stock issued for acquisitions — — 295,767

Purchases/sales of securities accrued, not settled

Purchases - available for sale — — 1,430

Short- and long-term borrowings transferred from other liabilities — 20,026 —

Recognition of operating lease ROU assets, net of measurements 12,954 28,666 —

Short and long term debt transferred from other liabilities — — 20,026

See Notes to Consolidated Financial Statements.

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The assets recognized as a result of consolidating the LLCs are the property of the LLCs and are not available for any other purpose.

(Dollars in Thousands) September 30, 2020

(Dollars in Thousands) At September 30, 2021

Cash and cash equivalents $ 1,776

Loans and leases 117,544

Allowance for loan and lease losses ( 557 )

Allowance for credit losses ( 4,971 )

Accrued interest receivable 261

Rental equipment, net —

Foreclosed real estate and repossessed assets 952

Foreclosed real estate and repossessed assets, net 258

Other assets 3,913

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Noncontrolling interest 1,155

Net assets less noncontrolling interest $ 125,739

Net assets less noncontrolling assets $ 115,750

Amounts for noncontrolling interests reflect the proportionate share of membership interest (equity) and net income attributable to the holders of minority membership interest in the following entities:

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One of the Company's primary sources of revenue relates to payment processing services for prepaid debit cards, ATM sponsorship, tax refund transfer and other money transfer systems and services.

Additionally, a significant source of revenue for the Company is interest from the purchase or origination of commercial finance loans, consumer finance loans, warehouse finance loans and community banking loans.

The Company accepts deposits from customers in the normal course of business on a national basis through its MPS and tax services divisions, and through wholesale funding.

Additionally, a significant source of revenue for the Company is interest from the purchase or origination of commercial finance loans, consumer finance loans, and warehouse finance loans.

The Company accepts deposits from customers in the normal course of business on a national basis through its Meta Payments and tax services divisions, and through wholesale funding.

The Company operates in the banking industry, which accounts for the majority of its revenues and assets.

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Actual results could differ from those estimates.

Certain significant estimates include the valuation of residual values within lease receivables, allowance for loan and lease losses, the valuation of foreclosed real estate and repossessed assets, the valuation of goodwill and intangible assets and the fair values of securities and other financial instruments.

Certain significant estimates include the valuation of residual values within lease receivables, allowance for credit losses, the valuation of goodwill and intangible assets and the fair values of securities and other financial instruments.

These estimates are reviewed by management regularly;

however, they are particularly susceptible to significant changes in the future.

CASH AND CASH EQUIVALENTS AND FEDERAL FUNDS SOLD

CASH AND CASH EQUIVALENTS

For purposes of reporting cash flows, cash and cash equivalents is defined to include the Company’s cash on hand and due from financial institutions and short-term interest-bearing deposits in other financial institutions.

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The Bank is required to maintain reserve balances in cash or on deposit with the FRB, based on a percentage of deposits.

The total of those reserve balances was zero at September 30, 2020, and $ 33.9 million at September 30, 2019.

The total of those reserve balances was zero at September 30, 2021, and zero at September 30, 2020.

The Company at times maintains balances in excess of insured limits at various financial institutions including the FHLB, the FRB and other private institutions.

At September 30, 2021, the Company had $ 2.3 million interest-bearing deposits held at the FHLB and $ 184.7 million in interest-bearing deposits held at the FRB.

At September 30, 2020, the Company had no federal funds sold.

The Company does not believe these instruments carry a significant risk of loss, but cannot provide assurances that no losses could occur if these institutions were to become insolvent.

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Available for Sale (“AFS”), Held to Maturity (“HTM”) or trading.

AFS securities are carried at fair value on the Consolidated Statements of Financial Condition, and unrealized holding gains and losses are excluded from earnings and recognized as a separate component of equity in accumulated other comprehensive income (loss) (“AOCI”).

Fair Values of Financial Instruments for additional information on fair value of AFS securities.

AFS debt securities are carried at fair value on the Consolidated Statements of Financial Condition.

Unrealized holding gains and losses due to risk of credit loss are recognized in earnings while unrealized holding gains and losses due to market conditions and other non-credit risk factors are excluded from earnings and recognized as a separate component of equity in accumulated other comprehensive income (loss) (“AOCI”).

Fair Values of Financial Instruments for additional information on fair value of AFS debt securities.

HTM debt securities are measured at amortized cost.

The Company classifies the majority of its securities as AFS, which are those the Company may decide to sell if needed for liquidity, asset/liability management, or other reasons.

Both AFS and HTM are subject to review for other-than-temporary impairment.

The Company classifies the majority of its debt securities as AFS, which are those the Company may decide to sell if needed for liquidity, asset/liability management, or other reasons.

Both AFS and HTM are subject to an allowance for credit loss.

Meta did not hold trading securities at September 30, 2021 or 2020.

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For callable debt securities, any purchase premium is amortized to the first call date while any discount is accreted over the contractual life of the security.

Securities Impairment

Management continually monitors the investment securities portfolio for impairment on a security-by-security basis and has a process in place to identify securities that could potentially have a credit impairment that is other-than-temporary.

This process involves the consideration 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 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 the Company 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 the Company determines that a security is deemed to be other-than-temporarily impaired, an impairment loss is recognized.

If the Company intends to sell a security or it is more likely than not that the Company would be required to sell a security before the recovery of its amortized cost, the Company recognizes an other-than-temporary impairment for the difference between amortized cost and fair value.

If the Company does not expect to recover the amortized cost basis, does not plan to sell the security and if it is not more likely than not that the Company would be required to sell the security before the recovery of its amortized cost, the recognition of the other-than-temporary impairment is bifurcated.

For those securities, the Company separates the total impairment into a credit loss component recognized in net income, and the amount of the loss related to other factors is recognized in other comprehensive income, net of taxes.

The amount of the credit loss component of a debt security impairment is estimated as the difference between amortized cost and the present value of the expected cash flows of the security.

The present value is determined using the best estimate of cash flows discounted at the effective interest rate implicit to the security at the date of purchase or the current yield to accrete an asset-backed or floating rate security.

In fiscal 2020, 2019 and 2018, there was no other-than-temporary impairment recorded.

Debt Securities Credit Losses

The Company evaluates HTM debt securities for credit losses on a quarterly basis and records any such losses as a component of provision for credit losses in the Consolidated Statements of Operations.

The Company has concluded that its portfolio as of September 30, 2021 has a zero risk of credit loss due to the U.S.

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

The Company evaluates AFS debt securities for credit losses on a quarterly basis and records any such losses as a component of provision for credit losses in the Consolidated Statements of Operations.

The Company has concluded that any unrealized holding losses in its portfolio as of September 30, 2021 are not related to credit loss and as a result has not recorded an allowance for credit loss.

Securities for further information.

Equity Investments

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The Company also holds non-marketable equity investments that are included in Other Assets in the Company’s Consolidated Financial Statements.

The Company generally accounts for these investments under the equity method or the provisions of Accounting Standards Update ("ASU") 2016-01, Financial Instruments - Overall (Subtopic 825-10):

Recognition and Measurement of Financial Assets and Liabilities ("ASU 2016-01"), beginning October 1, 2018.

The Company generally accounts for these investments under the equity method or the provisions of Accounting Standards Codification ("ASC") 321.

Equity Securities.

Investments where the Company has significant influence, but not control, over the investee are accounted for under the equity method.

Investments where the Company cannot exercise significant influence over the investee are accounted for under ASU 2016-01, which requires such investments to be measured at fair value, with changes in fair value recognized in earnings, unless those investments have no readily determinable fair value.

Investments where the Company cannot exercise significant influence over the investee are measured at fair value, with changes in fair value recognized in earnings, unless those investments have no readily determinable fair value.

Investments without readily determinable fair value are measured under the measurement alternative, which reflects cost less impairment, with adjustments in value resulting from observable price changes arising from orderly transactions of the same or a similar security from the same issuer ("measurement alternative investments").

The Company reviews for impairment for equity method, fair value and measurement alternative investments and includes an analysis of the facts and circumstances for each investment, expectations of cash flows, capital needs, and viability of its business model.

For equity method and fair value investments, the asset carrying value is reduced when the decline in fair value is considered to be other than temporary.

The Company reviews for impairment for equity method and measurement alternative investments and includes an analysis of the facts and circumstances for each investment, expectations of cash flows, capital needs, and viability of its business model.

For equity method, the asset carrying value is reduced when the decline in fair value is considered to be other than temporary.

For measurement alternative investments, the asset carrying value is reduced when the fair value is less than the carrying value, without the consideration of recovery.

There was a $ 1.3 million impairment recognized on equity method, fair value or measurement alternative investments during the fiscal year ended September 30, 2020.

The Company held the following non-marketable equity investments:

• Equity Method - The Company held equity method investments of $ 11.0 million within other assets as of September 30, 2020.

• Equity Method - The Company held equity method investments of $ 3.1 million within other assets as of September 30, 2021 and $ 11.0 million at September 30, 2020.

The Company’s ownership of such investments typically ranges from 5 % - 25 % of the investee.

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The Company elected to classify distributions received from equity method investments using the cumulative earnings approach on the Consolidated Statements of Cash Flows.

• Fair Value Method - The Company held equity investments measured at net asset value (NAV) per share (or its equivalent) of $ 2.8 million as of September 30, 2020 where NAV is considered the fair value practical expedient.

• Fair Value Method - The Company held equity investments measured at net asset value (NAV) per share (or its equivalent) of $ 4.6 million at September 30, 2021 and $ 2.8 million at September 30, 2020 where NAV is considered the fair value practical expedient.

These investments are recorded within other assets on the Company’s Consolidated Financial Statements.

Fluctuations in fair value are recognized in earnings within noninterest Income.

• Measurement Alternative - The Company held equity investments measured using the measurement alternative under ASU 2016-01 of $ 12.0 million as of September 30, 2020 within other assets on the Company’s Consolidated Financial Statements.

The Company recognized an impairment loss of $ 1.3 million on such investments during the fiscal year ended September 30, 2020.

• Measurement Alternative - The Company held equity investments measured using the measurement alternative of $ 12.9 million as of September 30, 2021 and $ 12.0 million at September 30, 2020 within other assets on the Company’s Consolidated Financial Statements.

The Company recognized a fair value increase of $ 8.0 million and none during the fiscal years ended September 30, 2021 and 2020, respectively.

The Company recognized impairment losses of $ 2.6 million and $ 1.3 million on such investments during the fiscal years ended September 30, 2021 and 2020, respectively.

LOANS HELD FOR SALE ("LHFS")

LHFS include loans retained in the community bank portfolio and commercial loans originated under the guidelines of the SBA or USDA.

LHFS include commercial loans originated under the guidelines of the SBA or USDA, consumer loans, and loans retained in the community bank portfolio.

LHFS are held at the lower of cost or fair value.

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Loans are considered past due when contractually required principal or interest payments have not been made on the due dates.

Prior to the adoption of CECL, loans and leases on nonaccrual status were accounted for and disclosed as impaired loans and leases.

For commercial loans, the Company generally fully charges off or charges down to net realizable value (fair value of collateral, less estimated costs to sell) for loans secured by collateral when:

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

The Company generally considers a loan to be impaired when, based on current information and events, it determines that it will not be able to collect all amounts due according to the loan contract, including scheduled interest payments.

This evaluation is generally based on delinquency information, an assessment of the borrower’s financial condition and the adequacy of collateral, if any.

The Company's impaired loans predominantly include loans on nonaccrual status in the Commercial segment and loans modified in a troubled-debt-restructuring, whether on accrual or nonaccrual status.

The Company measures the amount of impairment, if any, based on the difference between the recorded investment in the loan (net of previous charge-offs, deferred loan fees or costs and unamortized premium or discount) and the present value of expected future cash flows, discounted at the loans effective interest rate.

When collateral is the sole source of repayment for the impaired loan, the Company charges down to net realizable value.

As part of the Company’s ongoing risk management practices, management generally attempts to work with borrowers when necessary to extend or modify loan terms to better align with their current ability to repay.

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The event of classifying the loan as a TDR due to a modification of terms may be independent from the determination of accruing interest on a loan.

Prior to the adoption of CECL, loans and leases designated as TDRs were accounted for and disclosed as impaired loans and leases.

Leases Receivable

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Operating lease rental income is recognized when it becomes due and is reflected as a component of noninterest income.

An allowance for lease losses is not provided on operating leases.

An ACL is not provided on operating leases.

LOAN SERVICING AND TRANSFERS OF FINANCIAL ASSETS

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Control over transferred assets is deemed to be surrendered when (1) the assets have been legally isolated from the Company, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and (3) the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity.

ALLOWANCE FOR LOAN AND LEASE LOSSES

The allowance for loan and lease losses ("ALLL") represents management’s estimate of probable loan and lease losses that have been incurred as of the date of the Consolidated Financial Statements.

The ALLL is increased by a provision for loan and lease losses charged to expense and decreased by charge-offs (net of recoveries).

Estimating the risk of loss and the amount of loss on any loan or lease is necessarily subjective.

Management’s periodic evaluation of the appropriateness of the ALLL is based on the Company’s and peer group’s past loan and lease loss experience, known and inherent risks in the portfolio, adverse situations that may affect the borrower’s ability to repay, the estimated value of any underlying collateral, and current economic conditions.

While management may periodically allocate portions of the ALLL for specific problem loan or lease situations, the entire ALLL is available for any loan or lease charge-offs that occur.

The ALLL consists of specific and general components.

The specific component of the ALLL relates to impaired loans and leases.

Loans are generally considered impaired if full principal or interest payments are not probable in accordance with the contractual loan terms.

Leases are generally considered impaired if collectability of the remaining minimum lease payments becomes uncertain.

Often this is associated with a delay or shortfall in payments of 90 days or more for community banking loans and leases.

Non-accrual loans and leases and all TDRs are considered impaired.

Impaired loans and leases, or portions thereof, are charged off when deemed uncollectible.

Impaired loans are carried at the present value of expected future cash flows discounted at the loan’s effective interest rate or at the fair value of the collateral if the loan is collateral dependent.

For such loans, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan.

The general reserve covers certain Community Bank and Commercial Finance loans and leases not considered impaired and is determined based upon both quantitative and qualitative analysis.

A separate general reserve analysis is performed for individual classified non-impaired loans and leases and for non-classified smaller-balance homogeneous loans.

The three main assumptions for the quantitative components for 2020 and 2019 are historical loss rates, the look back period (“LBP”) and the loss emergence period (“LEP”).

• The historical loss experience is determined by portfolio segment and is based on the actual loss history of the Company over a specified period of time.

The period of time varies by portfolio and ranges from three to seven years .

For the individual classified loans, historic charge-off rates for the Company’s classified loan population are utilized.

• A three to seven-year LBP is appropriate as it captures the Company’s ability to workout troubled loans or relationships while continuing to factor in the loss experience resulting from varying economic cycles and other factors.

• The weighted average LEP is an estimate of the average amount of time from the point the Company identifies a credit event of the borrower to the point the loss is confirmed by the Company weighted by the dollar value of the write off.

The LEP is only applied to the non-classified loan general reserve in the Company's Community Bank portfolio.

Qualitative adjustment considerations for the general reserve include considerations of changes in lending and leasing policies and procedures, changes in national and local economic and business conditions and developments, changes in the nature and volume of the loan and lease portfolio, changes in lending and leasing management and staff, trending in past due, classified, nonaccrual, and other loan and lease categories, changes in the Company’s loan and lease review system and oversight, changes in collateral and residual values, credit concentration risk, and the regulatory and legal requirements and environment.

Beginning in the fiscal 2020 second quarter, additional reserve levels were estimated by increasing qualitative factors due to the unprecedented uncertainty stemming from the COVID-19 pandemic.

The additional reserves were primarily estimated for loans and leases that were granted short-term payment deferrals related to financial stress stemming from the COVID-19 pandemic along with other loans and leases within certain industries that were considered higher risk for credit loss.

National Lending portfolios, outside of certain loans and leases in the Commercial Finance portfolio, primarily utilize a general reserve process that mostly uses historical factors related to the specific loan and lease portfolio, although other qualitative factors may be considered in the final loss rate used to calculate the reserve on these portfolios.

Loans in these portfolios are generally not placed on non-accrual status or impaired.

The balances are generally written off after a loan becomes past due greater than 210 days for insurance premium finance loans, 180 days for tax and other specialty lending loans, 120 days for consumer credit products and 90 days for other loans.

Loans and Leases, Net for further information on the ALLL.

ALLOWANCE FOR CREDIT LOSSES

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

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

Credit loss for all other loans and leases is evaluated collectively by various characteristics.

The collective evaluation of expected losses in all commercial finance portfolios is based on a cohort loss rate and adjustments for forward-looking information, including industry and macroeconomic forecasts.

The cohort loss rate is a life of loan loss rate that immediately reverts to historical loss information for the remaining maturity of the financial asset.

Management has elected to use a twelve-month reasonable and supportable forecast for forward-looking information.

Factors utilized in the determination of the allowance include historical loss experience, current economic forecasts and measurement date credit characteristics such as product type, delinquency, and industry.

The unfunded credit commitments depend on these same factors, as well as estimates of lines of credit usage.

The various quantitative and qualitative factors used in the methodologies are reviewed quarterly.

The collective evaluation of expected credit losses for certain consumer lending portfolios utilize different methodologies when estimating expected credit losses.

The Company’s student loan portfolio utilizes a roll-rate historical loss rate and adjustments for forward-looking information, including macroeconomic conditions.

Management has elected to use a twelve-month reasonable and supportable forecast with an immediate reversion to historical loss rates.

Factors utilized in the determination of the allowance include historical loss experience, current economic forecasts, and measurement date credit characteristics including delinquency.

Loans and leases are charged off to the extent they are deemed uncollectible.

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

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

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

The amount of ACL depends significantly on management’s estimates or key factors and assumptions affecting valuation, appraisals of collateral, evaluations of performance and status, the amounts and timing of future cash flows expected to be received, forecasts of future economic conditions and reversion periods.

Such estimates, appraisals, evaluations, cash flows and forecasts may be subject to frequent adjustments due to changing economic prospects of borrowers, lessees, properties or economic conditions.

These estimates are reviewed quarterly and adjustments, if necessary, are recorded in the provision for credit losses in the periods in which they become known.

Accrued interest receivable is presented separately on the Consolidated Statements of Financial Condition, and an ACL is not recorded for these balances.

Generally, when a loan or lease is placed on nonaccrual status, typically when the collection of interest or principal is 90 days or more past due, uncollected interest accrued in prior years is charged off against the ACL and interest accrued in the current year is reversed against interest income.

Management maintains a framework of controls over the estimation process for the ACL, including review of collective reserve methodologies for compliance with GAAP.

Management has a quarterly process to review the appropriateness of historical observation periods and loss assumptions and risk ratings assigned to loans and leases, if applicable.

Management reviews its qualitative framework and the effect on the collective reserve compared with relevant credit risk factors and consistency with credit trends.

Management also maintains controls over information systems, models and spreadsheets used in the quantitative components of the reserve estimate.

This includes the quality and accuracy of historical data used to derive loss rates, the inputs to industry and macroeconomic forecasts and the reversion periods utilized.

The results of this process are summarized and presented to management quarterly for their approval of the recorded allowance.

Loans and Leases, Net for further information.

The following are risk characteristics of the Company’s loan and lease portfolio:

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The Company entered 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.

Divestitures and Note 25.

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

EARNINGS PER COMMON SHARE (“EPS”)

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Buildings, furniture, fixtures, leasehold improvements and equipment are carried at cost, less accumulated depreciation and amortization.

Capital leases, where the Company is the lessee, are included in premises and equipment at the capitalized amount less accumulated amortization.

The Company primarily uses the straight-line method of depreciation over the estimated useful lives of the assets, which is 39 years for buildings, and range from two years to 15 years for leasehold improvements, and for furniture, fixtures and equipment.

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Earnings on the contracts are based on the earnings on the cash surrender value, less mortality costs.

FORECLOSED REAL ESTATE AND REPOSSESSED ASSETS

Real estate properties and repossessed assets acquired through, or in lieu of, loan foreclosure are initially recorded at fair value less selling costs at the date of foreclosure, establishing a new cost basis.

The fair value of the real estate owned is based on independent appraisals, real estate brokers’ price opinions, or automated valuation methods, less costs to sell.

The fair value of repossessed assets is based on available pricing guides, auction results or price opinions, less costs to sell.

Any reduction to fair value from the carrying value of the related loan at the time of acquisition is accounted for as a loan loss and charged against the allowance for loan and lease losses.

Subsequent valuations are periodically performed by management.

If the subsequent fair value, less costs to sell, declines to less than the carrying amount of the asset, the shortfall is recognized in the period it becomes known as an impairment in noninterest expense and a valuation allowance is recorded for the asset.

Operating expenses of properties are also recorded in noninterest expense.

Rental income of properties is recorded in noninterest income.

Goodwill represents the cost in excess of the fair value of net assets acquired (including identifiable intangibles) in transactions accounted for as business acquisitions.

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Goodwill and Intangible Assets for further information.

SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE

The Company enters into sales of securities under agreements to repurchase with primary dealers only, which provide for the repurchase of the same security.

Securities sold under agreements to repurchase identical securities are collateralized by assets which are held in safekeeping in the name of the Bank or by the dealers who arranged the transaction.

Securities sold under agreements to repurchase are treated as financings, and the obligations to repurchase such securities are reflected as a liability.

The securities underlying the agreements remain in the asset accounts of the Company.

Short-Term and Long-Term Borrowings for further information.

EMPLOYEE STOCK OWNERSHIP PLAN (“ESOP”)

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Employee Stock Ownership and Profit Sharing Plans for further information.

Effective September 30, 2021, the ESOP terminated, and all participant balances became immediately vested.

Subsequent Events for further information.

STOCK COMPENSATION

Compensation expense for share-based awards is recorded over the vesting period at the fair value of the award at the time of grant.

The exercise price of options or fair value of non-vested (restricted) shares granted under the Company’s incentive plans is equal to the fair market value of the underlying stock at the grant date.

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

The exercise price of options or fair value of non-vested (restricted) shares and performance share units granted under the Company’s incentive plans is equal to the fair market value of the underlying stock at the grant date, adjusted for dividends where applicable.

The Company has elected to record forfeitures as they occur.

Stock Compensation for further information.

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Revenue within the Consumer segment is recognized as services are performed and service charges are earned in accordance with the terms of the various programs.

The Company adopted Accounting Standards Update 2014-09, Revenue from Contracts with Customers, and related amendments on October 1, 2018 under the cumulative-effect method.

ASU 2014-09 modifies the guidance used to recognize revenue from contracts with customers for transfers of goods or services and transfers of non-financial assets, unless those contracts are within the scope of other guidance.

Upon adoption, the Company recorded a cumulative effect adjustment of $ 1.5 million to retained earnings, net of tax, due to changes in timing of revenue recognition from breakage of unregistered, unused prepaid cards in the Company’s MPS division.

Results for prior periods have not been adjusted and continue to be reported in accordance with the Company’s historical accounting policies.

Refer to Note 20.

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Comprehensive income (loss) consists of net income and other comprehensive income or loss.

Other comprehensive income or loss includes the change in net unrealized gains and losses on securities AFS, net of reclassification adjustments and tax effects.

Other comprehensive income or loss includes the change in net unrealized holding gains and losses due to market conditions and other non-credit risk factors on AFS debt securities, net of reclassification adjustments and tax effects.

Accumulated other comprehensive income (loss) is recognized as a separate component of stockholders’ equity.

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Summary of Significant Accounting Policies .

At September 30, 2020 and 2019, the Company had zero and $ 5.1 million, respectively, of loans outstanding with individuals deemed under Regulation O to be directors, executive officers and/or employees of the Company.

At September 30, 2021 and 2020, the Company had no loans outstanding with individuals deemed under Regulation O to be directors, executive officers and/or employees of the Company.

RECLASSIFICATION AND REVISION OF PRIOR PERIOD BALANCES

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The following ASUs were adopted by the Company during the fiscal year ended September 30, 2021:

ASU 2016-02, Leases (Topic 842) and subsequent related updates (collectively ASU 2016-02) on October 1, 2019, which requires lessees to recognize most leases on their balance sheet.

Lessor accounting is largely unchanged.

The ASU requires both quantitative and qualitative disclosures regarding key information about lease arrangements from both lessees and lessors.

The Company elected the effective date transition method utilizing the adoption date as the first date of application of the revised guidance.

As a result, prior period amounts have not been restated.

Upon adoption, the Company elected certain transitional practical expedients offered through the guidance, including the 'package of practical expedients' whereby it did not reassess (i) whether any expired or existing contracts contain leases, (ii) the lease classification of any expired or existing leases, and (iii) initial direct costs for any existing leases, which resulted in the Company not recognizing a cumulative effect adjustment to retained earnings.

Management evaluated Meta’s leasing contracts and activities and developed methodologies and processes to estimate and account for the right-of-use ("ROU") assets and lease liabilities for building leases based on the present value of future lease payments.

On October 1, 2019, the Company recorded ROU assets and lease liabilities totaling $ 27.4 million and $ 28.6 million, respectively.

The impact to capital ratios as a result of increased risk-weighted assets was immaterial.

The adoption of this guidance did not result in a material change to lessee expense recognition.

The changes to lessor accounting, as well as change in customer behavior driven by the adoption of these ASUs, impact the results of Meta’s lease financing businesses, including earlier recognition of expense due to a narrower definition of initial direct costs.

As a lessee, the Company enters into contracts to lease real estate, information technology equipment and other various types of equipment.

Leases that transfer substantially all of the benefits and risks of ownership to the Company are classified as finance leases, while all others are classified as operating leases.

At lease commencement for buildings, a lease liability and ROU asset are calculated and recognized on both types of leases.

The lease liability is equal to the present value of the future minimum lease payments.

The ROU asset is equal to the lease liability, plus any initial direct costs and prepaid lease payments, less any lessor incentives received.

Operating lease ROU assets are included in other assets and finance lease ROU assets are included in premises and equipment, net.

The Company uses the appropriate term Federal Home Loan Bank ("FHLB") rate to determine the discount rate for the present value calculation of future minimum lease payments when an implicit rate is not known for a given lease.

The lease term used in the calculation includes any options to extend that the Company is reasonably certain to exercise.

The Company has elected to not recognize assets or liabilities on its balance sheet related to short-term leases.

Subsequent to lease commencement, lease liabilities recorded for finance leases are measured using the effective interest rate method and the related ROU assets are amortized on a straight-line basis over the lease term.

Interest expense and amortization expense are recorded separately on the Consolidated Statements of Operations in interest expense on borrowings and occupancy and equipment noninterest expense, respectively.

At September 30, 2020, the Company had no finance lease ROU assets or lease liabilities.

For operating leases, total lease cost is comprised of lease expense, short-term lease cost, variable lease cost and sublease income.

Lease expense includes future minimum lease payments, which are recognized on a straight-line basis over the lease term, as well as common area maintenance charges, real estate taxes, insurance and other expenses, where applicable, which are expensed as incurred.

Total lease cost for operating leases is recorded in occupancy and equipment noninterest expense.

Operating Lease Right-of-Use Assets and Liabilities for further information.

The Company also adopted the following ASUs effective October 1, 2019, none of which had a material impact on the Company’s Consolidated Financial Statements:

– ASU 2018-02, Income Statement -- Reporting Comprehensive Income (Topic 220)):

Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.

The Company elected to not reclassify tax effects stranded in accumulated other comprehensive income.

– ASU 2018-09, Codification Improvements.

– ASU 2020-01, Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815):

Clarifying Interactions between Topics 321, 323 and 815.

– ASU 2020-03, Codification Improvements to Financial Instruments.

ASUs TO BE ADOPTED

ASU 2016-13, Financial Instruments – Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments.

This ASU, along with subsequent ASUs published as clarifications to Topic 326, requires entities to replace the incurred loss impairment methodology with a current expected loss (CECL) methodology to determine the allowance for credit losses for loans, net investments in leases, debt securities held at amortized cost, and certain off-balance sheet credit exposures.

CECL requires loss estimates for the remaining estimated life of the asset to be measuring using historical loss data as well as adjustments for current conditions and reasonable and supportable forecasts of future economic conditions.

The adoption of CECL will be reflected using a modified retrospective approach with a cumulative effect adjustment to Retained Earnings recorded as of October 1, 2020 in the Company’s Quarterly Report on Form 10-Q for the quarter-ending December 31, 2020.

The Company has established a governance structure to implement CECL and has developed methodologies to be used upon adoption.

At September 30, 2020, loan and lease portfolios totaled $ 3.32 billion with a corresponding allowance for loan and lease losses (ALLL) of $ 56.2 million under current GAAP.

Based on parallel runs of the CECL process that were performed in conjunction with the current ALLL process, the Company estimates that the adoption of CECL will result in an allowance for credit losses (ACL) that is larger than the current ALLL amount by $ 12.0 million to $ 13.0 million in total for all portfolios.

A portion of this increase is a result of new requirements to record ACL related to acquired loans and leases, regardless of any credit mark recorded.

Under current GAAP, credit marks are included in the determination of the fair value adjustments reflected as a discount to the carrying value of the loans, and an ALLL is not recorded on acquired loans and leases until there is evidence of credit deterioration post acquisition.

However, upon adoption of CECL, an ACL is recorded for all acquired loans and leases based on the lifetime loss concept.

The remaining credit and interest mark from acquisition accounting as of September 30, 2020 will continue to accrete over the life of the loan or lease but will no longer be considered when estimating the ACL for remaining acquired loans and leases upon CECL adoption.

The adoption of CECL will also result in an increase in the liability for off-balance sheet credit exposures between $ 0.8 million and $ 0.9 million.

For other assets within the scope of the standard such as debt securities held-to-maturity and other receivables, management expects the impact from CECL to be inconsequential.

The Company estimates a cumulative tax effected adjustment to record ACL and to increase the off-balance sheet credit exposure liability results in a reduction to retained earnings of $ 10.0 million to $ 11.0 million.

Management is finalizing its review of certain asset-specific risk characteristics.

Management is also evaluating financial statement and disclosure impacts as well as determining whether to elect to utilize the three-year phase-in period for regulatory impact of CECL.

As the Corporation finalizes the implementation of the standard in the first quarter of fiscal year 2021, final decisions by management will result in the specific October 1, 2020 ACL impact being established.

The initial increase to the Company’s ALLL and liability for off-balance sheet credit exposures will be recorded as an adjustment to beginning of the year retained earnings.

Measurement of Credit Losses on Financial Instruments, and related ASUs, (collectively “Topic 326”), which changes the impairment model 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 loss (“CECL”) methodology to determine the allowance for credit losses 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 Company adopted CECL using the modified retrospective approach with a cumulative effect adjustment to Retained Earnings recorded on October 1, 2020.

Our adoption resulted in an ACL as of October 1, 2020 that is larger than the allowance for loan and lease losses (“ALLL”) that would have been recorded under legacy guidance on the same date by $ 12.8 million in total for all portfolios.

A portion of this increase is a result of new requirements to record ACL on acquired loans and leases, regardless of any credit mark recorded.

Under legacy guidance, credit marks were included in the determination of fair value adjustments reflected as a discount to the carrying value of the loans and leases and an ALLL was not recorded on acquired loans and leases until evidence of credit deterioration existed post acquisition.

The remaining credit and interest mark will continue to accrete over the life of the loan or lease but will no longer be considered when estimating the ACL for acquired loans and leases under CECL.

The adoption of CECL also resulted in an increase in the liability of unfunded commitments of $ 0.8 million.

For other assets in scope of the standard such as held to maturity debt securities and trade and other receivables, the impact from this ASU was inconsequential.

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

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

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

Management has elected this five-year transition period consistent with such final rule.

Additional and modified disclosure requirements under CECL are included in Note 4.

Securities and Note 5.

Loans and Leases, Net.

The Company also adopted the following ASUs effective October 1, 2020, none of which had a material impact on the Company’s Consolidated Financial Statements:

– ASU 2018-13, Fair Value Measurement (Topic 820):

Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurements.

This ASU modifies the disclosure requirements on fair value measurements in Topic 820, including the removal, modification to, and addition of certain disclosure requirements.

This ASU will be effective for fiscal years beginning after December 15, 2019 with early adoption permitted.

The majority of the disclosure changes are to be applied on a prospective basis.

The Company will adopt this ASU effective October 1, 2020.

Although this ASU impacts the Company’s fair value disclosures, no additional impact to the Consolidated Financial Statements is expected.

ASU 2018-17, Consolidation (Topic 810) – Targeted Improvements to Related Party Guidance for Variable Interest Entities.

The relevant amendments in this ASU provide updated guidance when determining whether a decision-making fee is a variable interest and requires reporting entities to consider indirect interest held through related parties under common control on a proportional basis rather than as the equivalent of a direct interest in its entirety.

The result of these amendments is likely more decision makers not having a variable interest through their decision-making arrangements.

These amendments will also create alignment between determining whether a decision-making fee is a variable interest and determining whether a reporting entity within a related party group is the primary beneficiary of a VIE.

This ASU is effective for fiscal years beginning after December 15, 2019.

The Company does not expect a material impact on the Consolidated Financial Statements.

ASU 2019-12, Income Taxes (Topic 740) – Simplifying the Accounting for Income Taxes.

Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement.

– ASU 2018-15, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40):

Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract.

– ASU 2018-17, Consolidation (Topic 810):

Targeted Improvements to Related Party Guidance for Variable Interest Entities.

ASUs to be Adopted

ASU 2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes.

The amendments in this ASU are intended to simplify the accounting for income taxes by removing certain exceptions to the general rules found in Topic 740, Income Taxes .

The majority of the amendments are to be applied on a prospective basis.

This ASU is effective for fiscal years beginning December 15, 2021.

This ASU is effective for fiscal years beginning after December 15, 2020.

The Company is currently evaluating the impact of this guidance on the consolidated financial statements.

ASU 2020-04, Reference Rate Reform (Topic 848) – Facilitation of the Effects of Reference Rate Reform on Financial Reporting.

ASU 2020-01, Investments-Equity Securities (Topic 321):

Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815):

Clarifying Interactions between Topics 321, 323 and 815.

This ASU clarifies the interactions between Topic 321, Topic 323 and Topic 815, including accounting for the transition into and out of the equity method and measuring certain purchased options and forward contracts to acquire investments.

The amendments in this ASU are effective for fiscal years beginning after December 15, 2020.

Management is currently evaluating the impact of this guidance on the consolidated financial statements.

ASU 2020-04, Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting.

The amendments in this ASU provide optional expedients and exceptions to applying GAAP to contracts, hedging relationships and other transactions impacted by reference rate reform if certain criteria are met.

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The Company is currently evaluating the impact of this guidance on the consolidated financial statements.

ASU 2020-08 , Codification Improvements to Subtopic 310-20, Receivables – Nonrefundable Fees and Other Costs.

This ASU clarifies that an entity should amortize any premium, if applicable, to the next call date, which is the first date when a call option at a specified price becomes exercisable.

The amendments in this ASU are effective for fiscal years beginning after December 15, 2020.

Management is currently evaluating the impact of this guidance on the consolidated financial statements.

ASU 2020-10, Codification Improvements.

This ASU provides clarification, corrects unintended application of guidance, and makes minor improvements to various Topics that are not expected to have a significant impact on the Company’s current accounting policies and practices.

Amendments within this ASU are effective for fiscal years beginning after December 15, 2020.

ASU 2021-06, Presentation of Financial Statements (Topic 205), Financial Services – Depository and Lending (Topic 942), and Financial Services – Investment Companies (Topic 946) – Amendments to SEC Paragraphs, Amendments to Financial Disclosures, and Update of Statistical Disclosures.

This ASU amends and adds various SEC paragraphs pursuant to final SEC rules released 33-10786 and 33-10835.

Amendments within this ASU are effect for fiscal years ending after December 15, 2021 and are not expected to have a significant impact on the Company’s financial statement disclosures.

SIGNIFICANT EVENTS

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

and global economies in the first calendar quarter of 2020.

In March 2020, the U.S.

declared a national emergency and imposed travel restrictions, limitations of business operations in certain industries, and other efforts in order to impede the spread of COVID-19.

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

While the process of phased re-openings of the economies of many states began in May and June, COVID-19 continues to have a significant effect on individuals, businesses and the economy.

and global economies in the first calendar quarter of 2020, with significant deterioration of macroeconomic conditions and markets into 2021.

In response to the impacts of COVID-19, the U.S.

federal government enacted the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") on March 27, 2020.

The goal of the CARES Act is to prevent a severe economic downturn through various measures, including direct financial aid to American families and economic stimulus to significantly impacted industry sectors.

Accommodations to Borrowers

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

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

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

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Loans and Leases, Net for further information related to this program.

In response to the COVID-19 pandemic impact on customers, the Company is engaging in more frequent communication with borrowers to better understand their situation and challenges and has been offering credit-worthy borrowers experiencing temporary hardship certain loan and lease modifications ("COVID modifications"), such as payment deferrals, as a result of interagency guidance issued on March 22, 2020 encouraging companies to work with customers impacted by COVID-19.

In response to the COVID-19 pandemic impact on customers, the Company engaged and continues to engage in more frequent communication with borrowers to better understand their situation and challenges and offered credit-worthy borrowers experiencing temporary hardship certain loan and lease modifications ("COVID modifications"), such as payment deferrals, as a result of interagency guidance issued on March 22, 2020 encouraging companies to work with customers impacted by COVID-19.

The Company elected to treat COVID modifications on leases as part of the enforceable rights and obligations of the parties under the existing lease contract, resulting in these payment deferrals being treated as variable lease payments under the existing lease versus lease modifications.

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

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

As of September 30, 2020, $ 170.0 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 are 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.

The table below presents the outstanding balance of active COVID-19 related modifications by type and category.

September 30, 2020

(Dollars in Thousands) COVID-19 Related Payment Deferrals Other COVID-19 Related Modifications

National Lending

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

As of the Period Ended

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

Term lending $ 1,619 $ 2,955 $ 5,460 $ 26,559

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Consumer finance 1,113 1,628 1,928 5,797

Total National Lending 49,353 23,280

Community banking 36,296 36,632 58,707 120,695

Commercial real estate and operating 120,695 —

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

Total Community Banking 120,695 —

Total loans and leases 39,092 41,490 66,474 193,328

Rental equipment — —

Total COVID-19 related modifications $ 39,092 $ 41,490 $ 66,474 $ 193,328

Financial Impact

The Company recorded $ 9.0 million in provision expense during the three months ended September 30, 2020, compared to $ 4.1 million for the comparable period in the prior year.

The increase in provision was primarily within the retained community bank, tax services, and commercial finance portfolios, partially offset by a decrease in the consumer finance portfolio.

Provision increases in the community bank and commercial finance portfolios were primarily attributable to movie theater, hospitality, and small ticket equipment finance relationships that have experienced ongoing stress related to the COVID-19 pandemic.

Additional provisions were also applied to loans and leases that received short-term payment deferrals.

The Company’s approach to estimating the COVID-19 impact on credit quality is presented in Note 5.

Loans and Leases, Net.

The Company's interest and fee income could be reduced as a result of COVID-19.

While interest and fees will continue to accrue in accordance with GAAP, a decrease in loan demand could lead to slower loan growth or even a contraction in loan balances in the near term.

In addition, should eventual credit losses emerge, interest income and fees accrued may need to be reversed in future periods.

At this time, the Company is unable to project the materiality of such an impact.

No additional significant financial impacts directly related to COVID-19 were identified for the fiscal year ended September 30, 2020.

On the Closing Date, 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 all of the Community Bank division's deposits, branch locations, fixed assets and employees and a portion of the Community Bank division’s loan portfolio.

The Company has summarized the results of the transaction below.

(Dollars in Thousands) Fair Value at

February 29, 2020

Cash and cash equivalents $ 2,504

Loans 268,584

Premises, furniture and equipment 4,945

Other assets 1,250

Total assets $ 277,283

Deposits $ 290,493

Other liabilities 1,720

Total liabilities $ 292,213

Net assets $ ( 14,930 )

Purchase price 4,345

Gain on sale $ 19,275

The $ 19.3 million gain on sale (before tax) was recognized within noninterest income on the Company's Consolidated Statements of Operations for the fiscal year ended September 30, 2020.

In addition to what's reflected above, the Company also recognized $ 0.6 million, $ 0.2 million, $ 0.8 million, and $ 0.3 million in legal, IT, consulting, and nonrecurring compensation expenses related to the sale of the Community Bank division, respectively.

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 $ 290.5 million of deposits;

$ 268.6 million of loans;

$ 4.9 million of premises, furniture, and equipment;

and $ 1.3 million of other assets and closed February 29, 2020 (the "Closing Date").

The sale resulted in a gain of $ 19.3 million before tax that was recognized within noninterest income on the Company's Consolidated Statements of Operations.

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

The Company recognized $ 3.5 million in servicing fee expense during the fiscal year ended September 30, 2020.

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.

The Company recognized $ 3.3 million and $ 3.5 million for the fiscal years ended September 30, 2021 and 2020, respectively.

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.

As of September 30, 2021, the Company had no community bank loans classified as held for sale.

Loans and Leases, Net and Note 25.

Subsequent Events for additional information.

The Company has summarized the Community Bank division results for the three months and fiscal year ended September 30, 2020 below.

(Dollars in Thousands) Community Bank Sold (1)

Community Bank Retained (2)

Total Community Bank

Three Months Ended September 30, 2020

Net interest income $ — $ 9,045 $ 9,045

(Reversal) Provision for loan and lease losses ( 2,470 ) 4,370 1,900

Noninterest income — 5 5

Noninterest expense 327 2,646 2,973

Net income (loss) before income tax expense $ 2,143 $ 2,034 $ 4,177

Fiscal Year Ended September 30, 2020

Net interest income $ 2,512 $ 34,393 $ 36,905

(Reversal) Provision for loan and lease losses ( 4,711 ) 18,891 14,180

Noninterest income 19,694 ( 3,468 ) 16,226

Noninterest expense 5,282 7,759 13,041

Net income (loss) before income tax expense $ 21,635 $ 4,275 $ 25,910

(1) Reflects the activity of the assets and liabilities included in the disposal of the Community Bank division through September 30, 2020.

(2) Reflects the activity of the retained Community Bank loan portfolio as of September 30, 2020.

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

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

At September 30, 2020

Debt Securities AFS

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

At September 30, 2021

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

SBA securities 151,958 5,251 — 157,209

Obligation of states and political subdivisions 825 16 — 841

Obligations of states and political subdivisions 2,497 10 — 2,507

Non-bank qualified obligations of states and political subdivisions 266,048 3,347 ( 1,100 ) 268,295

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Total debt securities AFS $ 1,855,084 $ 21,339 $ ( 11,524 ) $ 1,864,899

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

At September 30, 2020

Debt securities AFS

SBA securities $ 159,722 $ 5,391 $ ( 158 ) $ 164,955

Obligation of states and political subdivisions 858 16 — 874

Obligations of states and political subdivisions 825 16 — 841

Non-bank qualified obligations of states and political subdivisions 314,819 8,978 ( 23 ) 323,774

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

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

At September 30, 2020

Debt Securities HTM

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

At September 30, 2021

Non-bank qualified obligations of states and political subdivisions $ 52,944 $ 103 $ ( 471 ) $ 52,576

Mortgage-backed securities 3,725 90 — 3,815

Total HTM securities $ 92,610 $ 1,164 $ ( 29 ) $ 93,745

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

Total debt securities HTM $ 56,669 $ 193 $ ( 471 ) $ 56,391

At September 30, 2020

Debt securities HTM

Non-bank qualified obligations of states and political subdivisions $ 87,183 $ 1,040 $ ( 29 ) $ 88,194

Mortgage-backed securities 5,427 124 — 5,551

Total HTM securities $ 134,764 $ 122 $ ( 1,416 ) $ 133,470

Management has implemented processes to identify securities that could potentially have a credit impairment that is other-than-temporary.

This process can include, but is not limited to, evaluating the length of time and extent to which the fair value has been less than the amortized cost basis, reviewing available information regarding the financial position of the issuer, interest or dividend payment status, monitoring the rating of the security, monitoring changes in value, and projecting cash flows.

Management also determines whether the Company intends to sell a security or whether it is more likely than not the Company will be required to sell the security before the recovery of its amortized cost basis which, in some cases, may extend to maturity.

To the extent the Company determines 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 collection will occur for all principal and interest due on all investments with amortized cost in excess of fair value and considered only temporarily impaired.

GAAP requires that, at acquisition, an enterprise classify debt securities into one of three categories:

AFS, HTM or trading.

AFS securities are carried at fair value on the consolidated statements of financial condition, and unrealized holding gains and losses are excluded from earnings and recognized as a separate component of equity in accumulated other comprehensive income ("AOCI").

HTM debt securities are measured at amortized cost.

Both AFS and HTM are subject to review for other-than-temporary impairment.

The Company had no trading securities at September 30, 2020 or 2019.

Total debt securities HTM $ 92,610 $ 1,164 $ ( 29 ) $ 93,745

Gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in continuous unrealized loss position, were as follows:

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(Dollars in Thousands) Fair

Value Unrealized

(Losses) Fair

Value Unrealized

(Losses) Fair

Value Unrealized

At September 30, 2020

Value Gross Unrealized (Losses) Fair

Value Gross Unrealized (Losses)

Debt Securities AFS

SBA securities $ 32,257 $ ( 102 ) $ 9,875 $ ( 56 ) $ 42,132 $ ( 158 )

At September 30, 2021

Non-bank qualified obligations of states and political subdivisions $ 101,046 $ ( 1,100 ) $ — $ — $ 101,046 $ ( 1,100 )

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Total debt securities AFS $ 987,191 $ ( 8,801 ) $ 152,345 $ ( 2,723 ) $ 1,139,536 $ ( 11,524 )

LESS THAN 12 MONTHS OVER 12 MONTHS TOTAL

(Dollars in Thousands) Fair

Value Unrealized

(Losses) Fair

Value Unrealized

(Losses) Fair

Value Unrealized

At September 30, 2020

Debt securities AFS

SBA securities $ 32,257 $ ( 102 ) $ 9,875 $ ( 56 ) $ 42,132 $ ( 158 )

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

LESS THAN 12 MONTHS OVER 12 MONTHS TOTAL

(Dollars in Thousands) Fair

Value Unrealized

(Losses) Fair

Value Unrealized

(Losses) Fair

Value Unrealized

At September 30, 2020

Debt Securities HTM

At September 30, 2021

Non-bank qualified obligations of states and political subdivisions $ 26,096 $ ( 471 ) $ — $ — $ 26,096 $ ( 471 )

Total debt securities HTM $ 26,096 $ ( 471 ) $ — $ — $ 26,096 $ ( 471 )

LESS THAN 12 MONTHS OVER 12 MONTHS TOTAL

(Dollars in Thousands) Fair

Value Unrealized

(Losses) Fair

Value Unrealized

(Losses) Fair

Value Unrealized

At September 30, 2020

Debt securities HTM

Non-bank qualified obligations of states and political subdivisions $ 7,397 $ ( 9 ) $ 3,637 $ ( 20 ) $ 11,034 $ ( 29 )

Mortgage-backed securities 1,471 — 1,803 ( 13 ) 3,274 ( 13 )

Total debt securities HTM $ 7,397 $ ( 9 ) $ 3,637 $ ( 20 ) $ 11,034 $ ( 29 )

At September 30, 2020 and 2019, the Company's investment portfolio included securities with current unrealized losses that have existed for longer than one year.

All of these securities are considered to be acceptable credit risks.

Because (i) the declines in fair value were due to changes in market interest rates, not in estimated cash flows, (ii) the Company does not intend or has not made a decision to sell these securities and (iii) it is not more likely than not that the Company will be required to sell the securities before recovery of their amortized cost basis, which may occur at maturity, no other-than-temporary impairment was recorded at September 30, 2020 or 2019.

The adoption of CECL was inconsequential to debt securities AFS.

At September 30, 2021, there were 67 securities AFS in an unrealized loss position.

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

As part of that assessment, management evaluated and concluded that it is more-likely-than-not that the Company will not be required and does not intend to sell any of the securities prior to recovery of the amortized cost.

At September 30, 2021, there was no ACL for debt securities AFS.

The amortized cost and fair value of debt securities by contractual maturity are shown below.

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However, certain prepayment penalties may apply.

Securities AFS at Fair Value

(Dollars in Thousands) Amortized Cost Fair Value

At September 30,

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

Due after one year through five years 20,805 21,769

Due after five years through ten years 32,441 34,025

Due after ten years 749,874 757,303

804,505 814,495

Mortgage-backed securities 439,879 453,607

Total securities AFS, at fair value $ 1,244,384 $ 1,268,102

(Dollars in Thousands) Amortized Cost Fair Value

At September 30, 2019

(Dollars in Thousands) 2021 2020

Securities AFS at Fair Value Amortized Cost Fair

Value Amortized Cost Fair

Due in one year or less $ 810 $ 822 $ 1,385 $ 1,398

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Total securities AFS, at fair value $ 1,855,084 $ 1,864,899 $ 1,244,384 $ 1,268,102

Securities HTM at Fair Value

(Dollars in Thousands) Amortized Cost Fair Value

At September 30,

Due after ten years $ 87,183 $ 88,194

87,183 88,194

Mortgage-backed securities 5,427 5,551

Total securities HTM, at cost $ 92,610 $ 93,745

(Dollars in Thousands) Amortized Cost Fair Value

At September 30, 2019

(Dollars in Thousands) 2021 2020

Securities HTM at Fair Value Amortized Cost Fair

Value Amortized Cost Fair

Due after ten years $ 52,944 $ 52,576 $ 87,183 $ 88,194

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Activity related to the sale of securities available for sale is summarized below.

Fiscal Year ended 2020 2019 2018

Fiscal Year Ended September 30,

(Dollars in Thousands) 2021 2020 2019

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There was no activity related to the sale of securities held to maturity during the fiscal years ended September 30, 2021, 2020, and 2019.

Securities with fair values of zero and approximately $ 21.9 million at September 30, 2020 and 2019, respectively, were pledged as collateral for public funds on deposit.

Securities with fair values of zero and approximately $ 4.8 million at September 30, 2020, and 2019, respectively, were pledged as collateral for individual, trust and estate deposits.

Other investments, at cost, include equity securities without a readily determinable fair value, which are included in other assets on the consolidated statement of financial condition, and shares of stock in the Federal Reserve Bank ("FRB") of Minneapolis and the FHLB of Des Moines.

No securities were pledged as collateral for public funds on deposit at September 30, 2021 and 2020.

No securities were pledged as collateral for individual, trust and estate deposits at September 30, 2021 and 2020.

Equity Securities

Equity securities without a readily determinable fair value totaled $ 11.0 million at September 30, 2020 and $ 6.5 million at September 30, 2019.

The Company held $ 12.7 million and $ 3.0 million in marketable equity securities at September 30, 2021 and 2020, respectively.

The addition of marketable equity securities was a result of an investee becoming publicly traded in fiscal year ended September 30, 2021.

Upon becoming publicly traded, the Company recognized a fair value adjustment of $ 7.5 million to reflect the increase in value since the Company's initial investment in May 2018.

Subsequent fair value adjustments for this investee during fiscal year 2021 totaled $ 3.4 million in unrealized losses, or a net position of $ 4.1 million unrealized gain as of September 30, 2021.

All other marketable equity securities and related activity were insignificant for the fiscal years ended September 30, 2021 and 2020, respectively.

No marketable equity securities were sold during fiscal year 2021.

Non-marketable equity securities with a readily determinable fair value totaled $ 4.6 million and $ 2.8 million as of September 30, 2021 and 2020, respectively.

The Company’s recognized $ 0.6 million and zero in unrealized gains during the fiscal years ended September 30, 2021 and 2020, respectively.

No such securities were sold during fiscal year 2021.

Non-marketable equity securities without readily determinable fair value totaled $ 16.0 million and $ 23.0 million at September 30, 2021 and 2020, respectively.

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

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

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

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

At fiscal year-end 2021 and 2020, the Company pledged securities with fair values of approximately $ 236.1 million and $ 359.7 million against FRB advances, respectively.

Included in interest and dividend income from other investments is $ 1.5 million and $ 0.3 million related to dividend income on FRB stock for the fiscal years ended September 30, 2021 and 2020, respectively.

The Company’s borrowings from the FHLB are secured by a blanket collateral agreement with respect to a percentage of unencumbered loans and the pledge of specific investment securities.

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The carrying value of the stock held at the FHLB was $ 8.7 million and $ 7.5 million at September 30, 2021 and 2020, respectively.

At fiscal year end 2020 and 2019, the Company pledged securities with fair values of approximately $ 673.8 million to be used against FHLB advances as needed and $ 812.2 million against specific FHLB advances, respectively.

In addition, a combination of qualifying residential and other real estate loans of approximately $ 333.8 million and $ 928.8 million were pledged as collateral at September 30, 2020 and 2019, respectively.

At fiscal year-end 2021 and 2020, the Company pledged securities with fair values of approximately $ 644.7 million and $ 673.8 million, respectively, to be used against FHLB advances.

In addition, a combination of qualifying residential and other real estate loans of zero and approximately $ 333.8 million were pledged as collateral at September 30, 2021 and 2020, respectively.

Included in interest and dividend income from other investments is $ 0.2 million, $ 0.8 million and $ 1.0 million related to dividend income on FHLB stock for the fiscal years ended September 30, 2021, 2020 and 2019, respectively.

Upon conversion to a national bank on April 1, 2020, the Bank is required by federal law to subscribe to capital stock (divided into shares of $100 each) as a member of the FRB of Minneapolis with an amount equal to six per centum of the paid-up capital stock and surplus.

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

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

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

At fiscal year end 2020, the Company pledged securities with fair values of approximately $ 359.7 million against FRB advances.

Included in Interest and Dividend Income from other investments is $ 0.3 million related to dividend income on FRB stock for the fiscal year ended September 30, 2020.

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

Therefore, FRB and FHLB stocks are less liquid than other marketable equity securities, and the fair value approximates cost.

Equity Security Impairment

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

No impairment was recognized for such investments for the fiscal years ended September 30, 2020, 2019 or 2018.

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

The Company recognized $ 2.6 million and $ 1.3 million in impairment for such investments for the fiscal years ended September 30, 2021 and 2020, respectively, and zero for the fiscal year ended September 30, 2019.

LOANS AND LEASES, NET

Loans and Leases

Loans and leases consist of the following:

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

National Lending

At September 30,

(Dollars in Thousands) 2021 2020

Term lending $ 961,019 $ 805,323

$ 805,323 $ 641,742

Asset based lending 300,225 182,419

182,419 250,465

Factoring 363,670 281,173

Lease financing 266,050 281,084

281,084 177,915

Insurance premium finance 428,867 337,940

318,387 88,831

SBA/USDA 247,756 318,387

Other commercial finance 157,908 101,658

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Warehouse finance 419,926 293,375

Total National Lending 2,828,576 2,449,592

Community banking 199,132 485,564

Commercial real estate and operating 457,371 883,932

Consumer one-to-four family real estate and other 16,486 259,425

Agricultural real estate and operating 11,707 58,464

Total Community Banking 485,564 1,201,821

Total loans and leases 3,607,815 3,314,140

Net deferred loan origination fees 8,625 7,434

Net deferred loan origination costs 1,748 8,625

Total gross loans and leases 3,609,563 3,322,765

Allowance for loan and lease losses ( 56,188 ) ( 29,149 )

Allowance for credit losses ( 68,281 ) ( 56,188 )

Total loans and leases, net $ 3,541,282 $ 3,266,577

$ 3,266,577 $ 3,629,698

(1) The Company has updated the presentation of its loan and lease table beginning in the fiscal 2020 first quarter.

The new presentation includes a new category called term lending.

Certain balances previously included in the asset based lending and lease financing categories have been reclassified into the new term lending category during the fiscal 2020 first quarter.

Prior period balances have been conformed to the new presentation.

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

As of September 30, 2020, the Company had 689 loans outstanding with a total of $ 219.0 million in loan balances that were originated as part of the program.

(3) As of September 30, 2020, the remaining balance of acquired loans and leases from the acquisition of Crestmark Bancorp, Inc.

("Crestmark") and its bank subsidiary, Crestmark Bank (the "Crestmark Acquisition") was $ 149.1 million and the remaining balances of the credit and interest rate mark discounts related to the acquired loans and leases held for investment were $ 2.8 million and $ 2.3 million, respectively.

On August 1, 2018, the Company acquired loans and leases from the Crestmark Acquisition totaling $ 1.06 billion and recorded related credit and interest rate mark discounts of $ 12.3 million and $ 6.0 million, respectively.

During the fiscal year ended September 30, 2020, the Company transferred $ 542.1 million of Community Banking loans to held for sale.

During the fiscal year ended September 30, 2019, the Company transferred $ 100.0 million of consumer credit product loans to held for sale

During the fiscal years ended September 30, 2020 and 2019, the Company originated $ 98.8 million and $ 171.3 million, respectively, of SBA/USDA and consumer credit product loans as held for sale.

During the fiscal years ended September 30, 2021 and 2020, the Company transferred $ 188.6 million and $ 542.1 million, respectively, of community banking loans to held for sale.

During the fiscal year ended September 30, 2021, the Company originated $ 601.5 million of other consumer finance, SBA/USDA, and consumer credit product loans as held for sale.

During the fiscal year ended September 30, 2020, the Company originated $ 98.8 million of SBA/USDA and consumer credit product loans as held for sale.

The Company sold held for sale loans resulting in proceeds of $ 890.3 million and gains on sale of $ 8.6 million during the fiscal year ended September 30, 2021.

The Company sold held for sale loans resulting in proceeds of $ 590.8 million and gains on sale of $ 7.7 million during the fiscal year ended September 30, 2020.

Loans purchased and sold by portfolio segment, including participation interests, for the fiscal years ended September 30, 2020 and 2019 were as follows:

Fiscal Year Ended

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

Loans purchased and sold by portfolio segment, including participation interests, were as follows:

Fiscal Year Ended September 30,

(Dollars in Thousands) 2021 2020

Loans Purchased

Loans held for sale:

Total National Lending $ — $ 15,443

Loans held for investment:

Total National Lending 132,530 235,918

Total Community Banking 18,905 26,704

Commercial Finance — 2,400

Warehouse Finance 308,014 130,130

Community banking 3,318 18,905

Total purchases 311,332 151,435

Loans held for sale:

Total National Lending 183,508 121,071

Total Community Banking 407,296 —

Commercial Finance 89,276 60,114

Consumer Finance 494,585 123,394

Community banking 308,082 407,296

Loans held for investment:

Total Community Banking 9,991 13,069

Community banking 13,850 9,991

Total sales 905,793 600,795

Leasing Portfolio.

Effective October 1, 2019, the Company adopted ASU 2016-02, Leases (Topic 842) and related ASUs on a modified retrospective basis, electing the practical expedients and optional transition method.

As such, the following leasing disclosures include information at, or for the year ended September 30, 2020.

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

September 30, 2020 September 30, 2019

At September 30,

(Dollars in Thousands) 2021 2020

3 unchanged sentences

Unearned income ( 26,684 ) ( 35,606 )

Total investment in direct financing and sales-type leases $ 283,162 $ 179,705

Total net investment in direct financing and sales-type leases $ 266,540 $ 283,162

The carrying amount of direct financing and sales-type leases subject to residual value guarantees was $ 4.2 million at September 30, 2021.

The components of total lease income were as follows:

Fiscal Year Ended

(Dollars in Thousands) September 30, 2020

Fiscal Year Ended September 30,

(Dollars in Thousands) 2021 2020

Interest income - loans and leases

6 unchanged sentences

(1) Other leasing and equipment finance noninterest income consists of gains (losses) on sales of leased equipment, fees and service charges on leases and gains (losses) on sales of leases.

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

(Dollars in Thousands) As of September 30, 2020

Undiscounted future minimum lease payments receivable for direct financing and sales-type leases, and a reconciliation to the carrying amount recorded at September 30, 2021 were as follows:

(Dollars in Thousands)

2022 $ 109,680

Thereafter 2,543

Equipment under leases not yet commenced —

Total undiscounted future minimum lease payments receivable for direct financing and sales-type leases 278,341

Third-party residual value guarantees —

Total carrying amount of direct financing and sales-type leases $ 278,341

The Company did not record any contingent rental income from sales-type and direct financing leases in the fiscal year ended September 30, 2021.

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

Although the ultimate impact of the pandemic on the Company's loan and lease portfolio is difficult to predict, management performed an evaluation of the loan and lease portfolio in order to assess the impact on repayment sources and underlying collateral that could result in additional losses.

The framework for the analysis was based on the Company's then-current ALLL methodology with additional considerations.

From this impact assessment, additional reserve levels were estimated by increasing qualitative factors.

The additional reserves were estimated for loans that were granted short-term payment deferrals related to financial stress stemming from the COVID-19 pandemic along with other loans within certain industries that were considered higher risk for credit loss (e.g.

transportation, hospitality, travel, entertainment and retail).

Based on the Company's ongoing assessment of the COVID-19 pandemic, the Company recognized an additional provision for loan and lease losses of $ 26.4 million during the fiscal year ended September 30, 2020.

The Company will continue to assess the impact to their customers and businesses as a result of COVID-19 and refine their estimate as more information becomes available.

Annual activity in the allowance for loan and lease losses was as follows:

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

and global economies in the first calendar quarter of 2020, with significant deterioration of macroeconomic conditions and markets into 2021.

Although macroeconomic conditions and markets have improved since the beginning of 2021, the ultimate impact of this pandemic on the Company's loan and lease portfolio is difficult to predict.

Management continues to evaluate the loan and lease portfolio in order to assess the impact on repayment sources and underlying collateral that could result in additional losses and the impact to our customers and businesses as a result of COVID-19 and will refine our estimate as more information becomes available.

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

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

Financial information at and for the quarter ended September 30, 2021 is reflected as such.

The historical information disclosed is in accordance with ASC Topic 310, Receivables .

Activity in the allowance for credit losses was as follows:

Fiscal Year Ended September 30,

1 unchanged sentence

Beginning balance $ 56,188 $ 29,149 $ 13,040

Provision for loan and lease losses 64,776 55,650 29,433

Recoveries 4,024 3,313 2,037

Impact of CECL adoption 12,773 — —

Provision for credit losses 49,939 64,776 55,650

Charge-offs ( 57,273 ) ( 41,761 ) ( 42,854 )

Recoveries 6,654 4,024 3,313

Ending balance $ 68,281 $ 56,188 $ 29,149

Activity in the allowance for loan and lease losses and balances of loans and leases by portfolio segment for the fiscal years ended September 30, 2020 and 2019 were as follows:

Allowance for loan and lease losses:

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

Fiscal Year Ended September 30, 2020

National Lending (Dollars in Thousands)

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

At September 30, 2021

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

Charge-offs Recoveries Ending Balance

Allowance for credits losses:

Term lending $ 15,211 $ 9,999 $ 16,944 $ ( 14,090 ) $ 1,287 $ 29,351

11 unchanged sentences

Warehouse finance 294 ( 1 ) 127 — — 420

Total National Lending 21,021 50,596 ( 41,761 ) 4,024 33,880

Community banking 22,308 ( 5,937 ) ( 3,965 ) ( 144 ) — 12,262

Commercial real estate and operating 6,208 15,659 — — 21,867

Consumer one-to-four family real estate and other 1,053 ( 755 ) — — 298

Agricultural real estate and operating 867 ( 724 ) — — 143

Total Community Banking 8,128 14,180 — — 22,308

Total loans and leases 56,188 12,773 49,939 ( 57,273 ) 6,654 68,281

Unfunded commitments (1)

32 831 ( 173 ) — — 690

Total $ 56,220 $ 13,604 $ 49,766 $ ( 57,273 ) $ 6,654 $ 68,971

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

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

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

At September 30, 2020

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

Allowance for loan and lease losses:

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

Fiscal Year Ended September 30, 2019

National Lending (Dollars in Thousands)

Term lending $ 5,533 $ 19,796 $ ( 10,458 ) $ 340 $ 15,211

11 unchanged sentences

Warehouse finance 263 31 — — 294

Total National Lending 4,972 55,800 ( 42,814 ) 3,063 21,021

Community banking 8,128 14,180 — — 22,308

Commercial real estate and operating 6,220 ( 12 ) — — 6,208

Consumer one-to-four family real estate and other 632 461 ( 40 ) — 1,053

Agricultural real estate and operating 1,216 ( 599 ) — 250 867

Total Community Banking 8,068 ( 150 ) ( 40 ) 250 8,128

Total $ 13,040 $ 55,650 $ ( 42,854 ) $ 3,313 $ 29,149

The following tables provide details regarding the allowance for loan and lease losses and balances by type of allowance as of September 30, 2020 and 2019.

Total loans and leases $ 29,149 $ 64,776 $ ( 41,761 ) $ 4,024 $ 56,188

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

Allowance Loans and Leases

Recorded Investment Ending balance:

(Dollars in Thousands) Ending Balance:

Individually Evaluated for Impairment Ending Balance:

2 unchanged sentences

Collectively Evaluated for Impairment Total

Fiscal Year Ended September 30, 2020

National Lending (Dollars in Thousands)

Recorded investment:

Term lending $ 3,155 $ 12,056 $ 15,211 $ 26,085 $ 779,238 $ 805,323

3 unchanged sentences

Insurance premium finance — 2,129 2,129 — 337,940 337,940

— 940 940 1,436 316,951 318,387

SBA/USDA — 940 940 1,436 316,951 318,387

Other commercial finance — 182 182 — 101,658 101,658

5 unchanged sentences

Warehouse finance — 294 294 — 293,375 293,375

Total National Lending 4,978 28,902 33,880 44,593 2,783,983 2,828,576

Community banking 141 22,167 22,308 6,685 478,879 485,564

Commercial real estate and operating 141 21,726 21,867 160 457,211 457,371

Consumer one-to-four family real estate and other — 298 298 104 16,382 16,486

Agricultural real estate and operating — 143 143 6,421 5,286 11,707

Total Community Banking 141 22,167 22,308 6,685 478,879 485,564

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

(1) The ending balance collectively evaluated for impairment includes $ 219.0 million of loan balances that were originated as part of the Company's participation in the PPP.

No reserve was applied to these loan balances as of September 30, 2020 as the PPP is administered by the SBA and are fully guaranteed.

Allowance Loans and Leases

Recorded Investment Ending balance:

individually evaluated for impairment Ending balance:

collectively evaluated for impairment Total Ending balance:

individually evaluated for impairment Ending balance:

collectively evaluated for impairment Total

Fiscal Year Ended September 30, 2019

National Lending (Dollars in Thousands)

Information on loans and leases that are deemed to be collateral dependent and are evaluated individually for the ACL was as follows:

(Dollars in Thousands) At September 30, 2021

Term lending $ 20,965

Asset based lending — 2,437 2,437 378 250,087 250,465

Factoring 1,268

Lease financing 3,882

Insurance premium finance — 1,024 1,024 — 361,105 361,105

SBA/USDA 51 332 383 3,841 84,990 88,831

Other commercial finance — 683 683 — 99,665 99,665

Commercial finance 26,115

Consumer credit products — 1,044 1,044 — 106,794 106,794

Other consumer finance — 5,118 5,118 1,472 159,932 161,404

Consumer finance — 6,162 6,162 1,472 266,726 268,198

Tax services — — — — 2,240 2,240

Warehouse finance — 263 263 — 262,924 262,924

Total National Lending 1,875 19,146 21,021 30,296 2,419,296 2,449,592

Community banking 14,915

Commercial real estate and operating — 6,208 6,208 258 883,674 883,932

Consumer one-to-four family real estate and other — 1,053 1,053 100 259,325 259,425

Agricultural real estate and operating — 867 867 2,985 55,479 58,464

Total Community Banking — 8,128 8,128 3,343 1,198,478 1,201,821

Total $ 41,030

1 unchanged sentence

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

As of September 30, 2020, $ 170.0 million of loan and lease that were granted deferral payments by the Company were still in their deferment period.

As of September 30, 2021, $ 39.1 million of loan and lease that were granted deferral payments by the Company were still in their deferment period compared to $ 193.3 million as of September 30, 2020.

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

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

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.

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

Federal regulations provide for the classification of loans and other assets such as debt and equity securities considered by the Bank's regulator, the OCC, to be of lesser quality as “substandard,” “doubtful” or “loss.” The loan classification and risk rating definitions are as follows:

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

Federal regulations provide for the classification of loans and other assets such as debt and equity securities considered by the Bank's primary regulator, the OCC, to be of lesser quality as “substandard,” “doubtful” or “loss.” The loan classification and risk rating definitions are as follows:

Pass - A pass asset is of sufficient quality in terms of repayment, collateral and management to preclude a special mention or an adverse rating.

2 unchanged sentences

These assets are of better quality than special mention assets.

Special Mention- Special mention assets are a credit with potential weaknesses deserving management’s close attention and, if left uncorrected, may result in deterioration of the repayment prospects for the asset.

Special Mention - A special mention asset is a credit with potential weaknesses deserving management’s close attention and, if left uncorrected, may result in deterioration of the repayment prospects for the asset.

Special mention assets are not adversely classified and do not expose an institution to sufficient risk to warrant adverse classification.

8 unchanged sentences

This classification does not necessarily mean an asset has no recovery or salvage value leaving room for future collection efforts.

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.

Loans and leases, or portions thereof, are charged off when collection of principal becomes doubtful.

1 unchanged sentence

Action is taken to charge off ERO loans if such loans have not been collected by the end of June and taxpayer advance loans if such loans have not been collected by the end of the calendar year.

Non-accrual loans and troubled debt restructurings are generally considered impaired.

Non-accrual loans and troubled debt restructurings are generally individually evaluated for expected credit losses.

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

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

Beginning in the fiscal 2020 first quarter the Company implemented changes to the risk rating approach on certain commercial finance portfolios as part of a streamlining process to provide a more consistent risk rating approach across all of its lending portfolios.

Based upon a study of the Company's special mention commercial finance loans and leases, the Company determined that approximately $ 117.0 million of those loans and leases should be rated as watch under the new approach.

Prior to the fiscal 2020 first quarter, none of the Company's commercial finance loans and leases were rated as watch.

Based on Meta's allowance methodology, these changes in risk ratings did not have a direct impact on the allowance for loan and lease losses.

The aggregate balance of watch and special mention loans and leases within the commercial finance portfolio increased to $ 209.6 million at September 30, 2020, compared to $ 145.0 million at September 30, 2019.

The Company has various portfolios of consumer finance and tax services loans that present unique risks.

Due to the unique risks associated with these portfolios, the Company monitors other credit quality indicators in their evaluation of the appropriateness of the allowance for loan losses on these portfolios, and as such, these loans are not included in the asset classification table below, beginning in the fiscal 2020 first quarter.

The September 30, 2019 asset classification table has been conformed to the current presentation.

The Company has various portfolios of consumer finance and tax services loans that present unique risks that are statistically managed.

Due to the unique risks associated with these portfolios, the Company monitors other credit quality indicators in their evaluation of the appropriateness of the allowance for credit losses on these portfolios, and as such, these loans are not included in the asset classification table below, beginning in the fiscal 2020 first quarter.

The outstanding balances of consumer finance loans and tax services loans were $ 252.9 million and $ 10.4 million at September 30, 2021, respectively, and $ 224.2 million and $ 3.1 million at September 30, 2020, respectively.

The asset classification of loans and leases were as follows:

Asset Classification Pass Watch Special Mention Substandard Doubtful Total

Fiscal Year Ended September 30, 2020

National Lending (Dollars in Thousands)

Term lending $ 725,101 $ 29,637 $ 24,501 $ 21,249 $ 4,835 $ 805,323

The amortized cost basis of loans and leases by asset classification and year of origination as of September 30, 2021 was as follows:

Amortized Cost Basis

Term Loans and Leases by Origination Year Revolving Loans and Leases Total

(Dollars in Thousands) 2021 2020 2019 2018 2017 Prior

Pass $ 362,443 $ 192,305 $ 63,708 $ 34,381 $ 3,195 $ 1,236 $ — $ 657,268

Watch 63,046 71,701 32,941 21,419 76 3,628 — 192,811

Special Mention 6,422 26,673 4,821 932 70 633 — 39,551

Substandard 18,569 16,810 26,920 3,529 928 641 — 67,397

Doubtful 252 1,673 1,756 311 — — — 3,992

Total 450,732 309,162 130,146 60,572 4,269 6,138 — 961,019

Asset based lending

Factoring 217,245 45,200 13,657 5,071 — 281,173

Pass — — — — — — 185,432 185,432

Watch — — — — — — 52,072 52,072

Special Mention — — — — — — 43,135 43,135

Substandard — — — — — — 19,586 19,586

Doubtful — — — — — — — —

Total — — — — — — 300,225 300,225

Pass — — — — — — 294,124 294,124

Watch — — — — — — 17,984 17,984

Special Mention — — — — — — 33,035 33,035

Substandard — — — — — — 18,527 18,527

Total — — — — — — 363,670 363,670

Lease financing

Pass 54,434 73,629 17,153 7,511 1,857 203 — 154,787

Watch 22,061 20,455 9,274 2,739 1,454 — — 55,983

Special Mention 15,402 20,595 4,148 1,546 61 — — 41,752

Substandard 479 4,765 4,981 831 25 — — 11,081

Doubtful — 6 2,402 38 — 2,447

Total 92,376 119,450 37,958 12,665 3,398 203 — 266,050

Insurance premium finance

SBA/USDA 308,549 8,328 74 1,436 — 318,387

Pass 428,131 144 9 — — — — 428,284

Watch 262 5 — — — — — 267

Special Mention 58 5 — — — — — 63

Substandard 68 107 — — — — — 175

Doubtful 58 20 — — — — — 78

Total 428,577 281 9 — — — — 428,867

Pass 110,122 37,006 14,461 12,760 6,525 3,779 — 184,653

Watch — 20,431 1,996 1,670 1,394 298 — 25,789

Special Mention — 8,333 214 3,348 177 919 — 12,991

Substandard — 3,812 9,550 8,079 2,169 713 — 24,323

Total 110,122 69,582 26,221 25,857 10,265 5,709 — 247,756

Other commercial finance

Commercial finance 2,054,699 155,771 53,839 37,922 5,753 2,307,984

Pass 56,957 642 5,786 6,075 3,345 60,965 — 133,770

Watch — 17,404 3,409 451 — — — 21,264

Substandard 466 — — 273 837 1,299 — 2,875

Total 57,423 18,046 9,195 6,799 4,182 62,264 — 157,909

Warehouse finance

Total National Lending 2,348,074 155,771 53,839 37,922 5,753 2,601,359

Pass — — — — — — 419,926 419,926

Total — — — — — — 419,926 419,926

Community banking

Commercial real estate and operating 336,236 98,295 4,049 18,211 580 457,371

Consumer one-to-four family real estate and other 15,648 41 609 188 — 16,486

Agricultural real estate and operating 1,526 — 4,930 5,251 — 11,707

Total Community Banking 353,410 98,336 9,588 23,650 580 485,564

Pass — — 4,159 — 5,683 472 — 10,314

Watch — 10,134 — 10,854 6,133 — — 27,121

Special Mention — — 35,916 — — — — 35,916

Substandard — 119 49,449 50,626 13,933 6,110 — 120,237

Doubtful — 122 — 5,422 — — — 5,544

Total — 10,375 89,524 66,902 25,749 6,582 — 199,132

Total Loans and Leases

Pass 1,012,088 303,727 105,274 60,727 20,605 66,655 899,481 2,468,557

Watch 85,369 140,131 47,620 37,132 9,057 3,926 70,056 393,291

Special Mention 21,882 55,606 45,099 5,826 307 1,552 76,171 206,443

Substandard 19,584 25,613 90,900 63,338 17,891 8,762 38,113 264,201

Doubtful 310 1,822 4,158 5,770 1 — — 12,061

Total $ 1,139,233 $ 526,899 $ 293,051 $ 172,793 $ 47,861 $ 80,895 $ 1,083,821 $ 3,344,553

The recorded investment of loans and leases by asset classification was as follows:

(Dollars in Thousands) At September 30, 2020

Asset Classification Pass Watch Special Mention Substandard Doubtful Total

Fiscal Year Ended September 30, 2019

National Lending (Dollars in Thousands)

Term lending $ 725,101 $ 29,637 $ 24,501 $ 21,249 $ 4,835 $ 805,323

7 unchanged sentences

Warehouse finance 293,375 — — — — 293,375

Total National Lending 2,005,337 — 144,993 28,280 544 2,179,154

Community banking 353,410 98,336 9,588 23,650 580 485,564

Commercial real estate and operating 875,933 1,494 2,884 3,621 — 883,932

Consumer one-to-four family real estate and other 257,575 946 708 196 — 259,425

Agricultural real estate and operating 39,409 4,631 5,876 8,548 — 58,464

Total Community Banking 1,172,917 7,071 9,468 12,365 — 1,201,821

Total loans and leases $ 2,701,484 $ 254,107 $ 63,427 $ 61,572 $ 6,333 $ 3,086,923

Past due loans and leases were as follows :

Accruing and Non-accruing Loans and Leases Non-performing Loans and Leases

Fiscal Year Ended September 30, 2020 30-59 Days

Past Due 60-89 Days

89 Days Past Due Total Past

Due Current Total Loans and Leases

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

(Dollars in Thousands)

At September 30, 2021

Accruing and Nonaccruing Loans and Leases Nonperforming Loans and Leases

(Dollars in Thousands) 30-59 Days Past Due 60-89 Days Past Due > 89 Days Past Due Total Past Due Current Total Loans and Leases Receivable > 89 Days Past Due and Accruing Nonaccrual Balance Total

Loans held for sale $ — $ — $ — $ — $ 56,194 $ 56,194 $ — $ — $ —

National Lending

Term lending 11,879 2,703 5,452 20,034 940,985 961,019 2,558 14,904 17,462

11 unchanged sentences

Warehouse finance — — — — 419,926 419,926 — — —

Total National Lending 14,315 15,239 19,278 48,832 2,779,744 2,828,576 10,016 21,553 31,569

Community banking — — — — 199,132 199,132 — 14,915 14,915

Commercial real estate and operating — — 630 630 456,741 457,371 50 580 630

Consumer one-to-four family real estate and other 905 114 50 1,069 15,417 16,486 — 50 50

Agricultural real estate and operating — — 1,769 1,769 9,938 11,707 — 1,769 1,769

Total Community Banking 905 114 2,449 3,468 482,096 485,564 50 2,399 2,449

Total loans and leases held for investment 19,945 8,200 24,637 52,782 3,555,033 3,607,815 21,687 34,245 55,932

Total loans and leases $ 19,945 $ 8,200 $ 24,637 $ 52,782 $ 3,611,227 $ 3,664,009 $ 21,687 $ 34,245 $ 55,932

Accruing and Non-accruing Loans and Leases Non-performing Loans and Leases

Fiscal Year Ended September 30, 2019 30-59 Days

Past Due 60-89 Days

89 Days Past Due Total Past

Due Current Total Loans and Leases

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

(Dollars in Thousands)

At September 30, 2020

Accruing and Nonaccruing Loans and Leases Nonperforming Loans and Leases

(Dollars in Thousands) 30-59 Days Past Due 60-89 Days Past Due > 89 Days Past Due Total Past Due Current Total Loans and Leases Receivable > 89 Days Past Due and Accruing Nonaccrual Balance Total

Loans held for sale $ — $ — $ — $ — $ 183,577 $ 183,577 $ — $ — $ —

National Lending

Term lending 11,900 3,851 6,390 22,141 783,182 805,323 266 16,274 16,540

11 unchanged sentences

Warehouse finance — — — — 293,375 293,375 — — —

Total National Lending 6,963 6,487 23,453 36,903 2,412,689 2,449,592 11,135 14,378 25,513

Community banking 905 114 2,449 3,468 482,096 485,564 50 2,399 2,449

Commercial real estate and operating 565 — — 565 883,367 883,932 — — —

Consumer one-to-four family real estate and other 458 — 9 467 258,958 259,425 — 44 44

Agricultural real estate and operating 49 — — 49 58,415 58,464 — — —

Total Community Banking 1,072 — 9 1,081 1,200,740 1,201,821 — 44 44

Total loans and leases held for investment 15,220 15,353 21,727 52,300 3,261,840 3,314,140 10,066 23,952 34,018

Total loans and leases $ 15,220 $ 15,353 $ 21,727 $ 52,300 $ 3,445,417 $ 3,497,717 $ 10,066 $ 23,952 $ 34,018

Non-accruing loans and leases were $ 24.0 million and $ 14.4 million at September 30, 2020 and 2019, respectively.

There were $ 10.1 million and $ 12.1 million in accruing loans and leases delinquent 90 days or more at September 30, 2020 and 2019, respectively.

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.

Certain loans and leases 89 days or more past due as to interest or principal continue to accrue because they are (1) well-secured and in the process of collection or (2) one-to-four family real estate loans or consumer loans exempt under regulatory rules from being classified as non-accrual until later delinquency, usually 120 days past due.

When analysis of borrower operating results and financial condition indicates that underlying cash flows of the borrower’s business are not adequate to meet its debt service requirements, the loan is evaluated for impairment.

Often, this is associated with a delay or shortfall in scheduled payments, as described above.

Impaired loans and leases at September 30, 2020 and 2019 were as follows:

September 30, 2020 Recorded

Balance Unpaid Principal

Balance Specific

Loans and leases without a specific valuation allowance

National Lending (Dollars in Thousands)

Term lending $ 17,349 $ 18,823 $ —

Asset based lending 3,914 3,914 —

Factoring 3,892 4,967 —

Lease financing 1,797 1,805 —

SBA/USDA 1,436 2,263 —

Commercial finance 28,388 31,772 —

Other consumer finance 1,987 2,104 —

Consumer finance 1,987 2,104 —

Total National Lending 30,375 33,876 —

Community Banking

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

Agricultural real estate and operating 6,421 6,421 —

Total Community Banking 6,525 6,525 —

Total $ 36,900 $ 40,401 $ —

Loans and leases with a specific valuation allowance

National Lending

Nonaccrual loans and leases by year of origination at September 30, 2021 were as follows:

Amortized Cost Basis

Term Loans and Leases by Origination Year Revolving Loans and Leases Total Nonaccrual with No ACL

(Dollars in Thousands) 2021 2020 2019 2018 2017 Prior

Term lending $ 131 $ 3,812 $ 10,072 $ 756 $ 133 $ — $ — $ 14,904 $ 12,103

Asset based lending 1,403 1,403 355

Factoring — — — — — — 1,268 1,268 1,268

1 unchanged sentence

Commercial finance 131 3,842 12,543 1,388 158 — 1,268 19,330 13,912

Total National Lending 14,218 14,230 4,978

Community Banking — 242 — 14,673 — — — 14,915 —

Commercial real estate and operating 160 160 141

Total Community Banking 160 160 141

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

September 30, 2019 Recorded

Balance Unpaid Principal

Balance Specific

Loans and leases without a specific valuation allowance

National Lending (Dollars in Thousands)

Total nonaccrual loans and leases $ 131 $ 4,084 $ 12,543 $ 16,061 $ 158 $ — $ 1,268 $ 34,245 $ 13,912

Loans and leases that are 90 days or more delinquent and accruing by year of origination at September 30, 2021 were as follows:

Amortized Cost Basis

Term Loans and Leases by Origination Year Revolving Loans and Leases Total

(Dollars in Thousands) 2021 2020 2019 2018 2017 Prior

Term lending $ 2,546 $ — $ 12 $ — $ — $ — $ — $ 2,558

Asset based lending 378 378 —

Factoring 1,563 2,638 —

Lease financing 429 7,558 224 99 31 4 — 8,345

Insurance premium finance 468 131 — — — — — 599

SBA/USDA — 987 — — — — — 987

Commercial finance 3,443 8,676 236 99 31 4 — 12,489

Consumer credit products 206 77 224 3 — — — 510

Other consumer finance — — — — — 725 — 725

Consumer finance 206 77 224 3 — 725 — 1,235

Total National Lending 19,714 22,156 —

Community Banking

Commercial real estate and operating 258 258 —

Consumer one-to-four family real estate and other 100 100 —

Agricultural real estate and operating 2,985 2,985 —

Total Community Banking 3,343 3,343 —

Total $ 23,057 $ 25,499 $ —

Loans and leases with a specific valuation allowance

National Lending

Tax services 7,962 — — — — — — 7,962

Total 90 days or more delinquent and accruing $ 11,611 $ 8,753 $ 460 $ 102 $ 31 $ 729 $ — $ 21,686

Certain loans and leases 90 days or more past due as to interest or principal continue to accrue because they are (1) well-secured and in the process of collection or (2) consumer loans exempt under regulatory rules from being classified as non-accrual until later delinquency, usually 120 days past due.

When analysis of borrower or lessee operating results and financial condition indicates that underlying cash flows of the borrower’s business are not adequate to meet its debt service requirements, the loan is evaluated for impairment.

Often, this is associated with a delay or shortfall in scheduled payments, as described above.

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

(Dollars in Thousands) Fiscal Year Ended September 30, 2021

Term lending $ 20,965

1 unchanged sentence

Lease financing 3,882

SBA/USDA 1,246 1,246 51

Commercial finance 26,115

Total National Lending 10,582 11,949 1,875

Total $ 10,582 $ 11,949 $ 1,875

The following table provides the average recorded investment in impaired loans and leases for the fiscal years ended:

Other consumer finance 2,294

Consumer finance 2,294

Community banking 14,915

Total loans and leases $ 43,324

The recognized interest income on the Company's nonaccrual loans and leases for the fiscal year ended September 30, 2021 was not significant.

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

Fiscal Year Ended September 30, 2020

(Dollars in Thousands) Average

Investment Recognized Interest Income Average

Investment Recognized Interest Income

National Lending

Term lending $ 26,126 $ 386

6 unchanged sentences

Consumer finance 1,860 143

Total National Lending 39,934 558 17,376 433

Community banking 3,529 ( 37 )

Commercial real estate and operating 466 27 269 14

Consumer one-to-four family real estate and other 114 10 172 6

Agricultural real estate and operating 2,949 ( 74 ) 1,483 107

Total Community Banking 3,529 ( 37 ) 1,924 127

Total loans and leases $ 43,463 $ 521

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

There were $ 9.5 million of National Lending loans and leases and $ 5.2 million of Community Banking loans that were modified in a TDR during the fiscal year ended September 30, 2020, all of which were modified to extend the term of the loan.

There were $ 2.9 million of National Lending loans and leases and $ 2.5 million of Community Banking loans that were modified in a TDR during the fiscal year ended September 30, 2019.

During the fiscal year ended September 30, 2020, the Company had $ 3.9 million of National Lending loans and $ 3.3 million of Community Banking loans that were modified in a TDR within the previous 12 months and for which there was a payment default.

During the fiscal year ended September 30, 2019, the Company had $ 0.9 million of Community Banking loans and $ 0.2 million of National Lending loans or leases that were modified in a TDR within the previous 12 months and for which there was a payment default.

TDR net charge-offs and the impact of TDRs on the Company's allowance for loan and lease losses were insignificant during the fiscal years ended September 30, 2020 and September 30, 2019.

There were $ 5.9 million of commercial finance loans, and $ 0.3 million of consumer finance loans that were modified in a TDR during the fiscal year ended September 30, 2021, all of which were modified to extend the term of the loan, and no community banking loans.

There were $ 8.7 million of commercial finance loans, and $ 0.8 million of consumer finance loans that were modified in a TDR during the fiscal year ended September 30, 2020 and $ 5.2 million community banking loans.

During the fiscal year ended September 30, 2021, the Company had $ 3.4 million of commercial finance loans, $ 0.3 million of consumer finance loans, and no community banking loans that were modified in a TDR within the previous 12 months and for which there was a payment default.

During the fiscal year ended September 30, 2020, the Company had $ 3.3 million of commercial finance loans, $ 0.6 million of consumer finance loans, and $ 3.3 million of community banking loans that were modified in a TDR within the previous 12 months and for which there was a payment default.

TDR net charge-offs and the impact of TDRs on the Company's allowance for credit losses were insignificant during the fiscal years ended September 30, 2021 and September 30, 2020.

EARNINGS PER COMMON SHARE

Earnings per common share is computed after deducting any preferred dividends, if applicable.

The Company has granted restricted share awards with dividend rights that are considered to be participating securities.

Accordingly, a portion of the Company’s earnings is allocated to those participating securities in the earnings per share calculation.

Basic earnings per common share is computed by dividing income available to common stockholders after the allocation of dividends and undistributed earnings to the participating securities by the weighted average number of common shares outstanding for the period.

Diluted earnings per common share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised, and is computed after giving consideration to the weighted average dilutive effect of the Company’s stock options and after the allocation of earnings to the participating securities.

Antidilutive options are disregarded in earnings per share calculations.

Accordingly, a portion of the Company’s earnings is allocated to those participating securities in the earnings per share calculation under the two-class method.

Basic earnings per common share is computed using the two-class method by dividing income available to common stockholders after the allocation of dividends and undistributed earnings to the participating securities by the weighted average number of common shares outstanding for the period.

Diluted earnings per common share is calculated using the more dilutive of the treasury stock method or the two-class method.

Diluted earnings per common share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised, and is computed after giving consideration to the weighted average dilutive effect of the Company’s stock options, performance share units, and nonvested restricted stock, where applicable.

Diluted EPS under the two-class method also considers the allocation of earnings to the participating securities.

Antidilutive securities are disregarded in earnings per share calculations.

Diluted EPS shown below reflects the two-class method, as diluted EPS under the two-class method was more dilutive than under the treasury stock method.

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

For the Fiscal Years Ended September 30,

(Dollars in Thousands, Except Share and Per Share Data) 2020 2019 2018

Fiscal Year Ended September 30,

(Dollars in Thousands, Except Per Share Data) 2021 2020 2019

Basic income per common share:

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$ 141,708 $ 104,720 $ 97,004

Weighted average common shares outstanding 35,651,709 38,880,919 30,737,499

Basic income per common share $ 2.94 $ 2.49 $ 1.68

Diluted income per common share:

Net income attributable to Meta Financial Group, Inc.

Dividends and undistributed earnings allocated to participating securities ( 2,698 ) ( 2,414 ) ( 2,378 )

Basic net earnings available to common stockholders 139,010 102,306 94,626

Undistributed earnings allocated to nonvested restricted stockholders 2,575 2,249 2,187

Reallocation of undistributed earnings to nonvested restricted stockholders ( 2,573 ) ( 2,249 ) ( 2,185 )

Diluted net earnings available to common stockholders $ 139,012 $ 102,306 $ 94,628

Total weighted-average basic common shares outstanding 31,729,596 34,829,971 37,927,734

Effect of dilutive securities (1)

Stock options — — 40,718

Performance share units 21,926 — —

Total effect of dilutive securities 21,926 — 40,718

Total weighted-average diluted common shares outstanding 31,751,522 34,829,971 37,968,452

Net earnings per common share:

Basic earnings per common share $ 4.38 $ 2.94 $ 2.49

Diluted earnings per common share (2)

$ 4.38 $ 2.94 $ 2.49

Weighted average common shares outstanding 35,651,709 38,880,919 30,737,499

Outstanding options - based upon the two-class method — 40,718 115,551

Weighted average diluted common shares outstanding 35,651,709 38,921,637 30,853,050

Diluted income per common share $ 2.94 $ 2.49 $ 1.67

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

(2) Excluded from the computation of diluted earnings per share for the fiscal years ended September 30, 2021, 2020, and 2019, respectively, were 615,811 , 821,738 , and 953,185 weighted average shares of nonvested restricted stock because their inclusion would be anti-dilutive.

PREMISES, FURNITURE, AND EQUIPMENT, NET

Fiscal year-end premises and equipment were as follows:

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

Premises, furniture, and equipment consists of the following:

At September 30,

(Dollars in Thousands) 2021 2020

Land $ 1,354 $ 1,354

7 unchanged sentences

Rental equipment consists of the following:

September 30, 2020 September 30, 2019

At September 30,

(Dollars in Thousands) 2021 2020

1 unchanged sentence

Motor vehicles and other 87,396 52,913

Other furniture and equipment 74,197 77,140

Office furniture and equipment 48,828 74,197

Solar panels and equipment 125,457 118,808

3 unchanged sentences

Net book value $ 213,116 $ 205,964

During fiscal year 2019, an impairment was recorded related to solar panels and equipment.

Goodwill and Intangible Assets for further information.

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

(Dollars in Thousands) September 30, 2020

Undiscounted future minimum lease payments expected to be received for operating leases at September 30, 2021 were as follows:

(Dollars in Thousands)

2022 $ 34,532

8 unchanged sentences

Write-downs 591 568

Net proceeds from sale 23,992 1,917

Sales 8,952 23,992

(Gain) loss on sale ( 4 ) 4,960

4 unchanged sentences

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

The sale occurred via public auction and consisted of 30-plus parcels of land.

The sale of 30-plus parcels closed in the fiscal 2020 first quarter.

The Company applied Subtopic ASC 610-20, Gains and Losses from the Derecognition of Nonfinancial Assets to record the sale.

The following table is a summary of the sale transaction, as reflected in the Company's financial statements:

September 30, 2020

(Dollars in Thousands)

Purchase price $ 23,083

Carrying value of OREO 28,122

Loss on sale ( 5,039 )

Deferred income recognized 1,096

Net impact $ ( 3,943 )

The Company recognized a $ 5.0 million loss from the sale of foreclosed property during the fiscal year ended September 30, 2020, which is included in the "Gain (loss) on sale of other" line on the Consolidated Statements of Operations.

The Company also recognized $ 1.1 million in deferred rental income and $ 0.2 million in OREO expenses related to these foreclosed properties during the fiscal year ended September 30, 2020.

The sale consisted of 30-plus parcels of land and the Company recognized a $ 5.0 million loss that was included in the "Gain (loss) on sale of other" line on the Consolidated Statements of Operations.

The Company also recognized $ 1.1 million in deferred rental income and $ 0.2 million in OREO expenses related to these foreclosed properties.

GOODWILL AND INTANGIBLE ASSETS

3 unchanged sentences

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

The Company has changed its basis of presentation for segments.

Segment Reporting for additional information on the Company's segment reporting.

The changes in the carrying amount of the Company’s goodwill and intangible assets for the fiscal years ended September 30, 2020 and 2019 were as follows:

(Dollars in Thousands) Payments Banking Corporate Services/Other Total

September 30, 2019 $ 87,145 $ 222,360 $ — $ 309,505

Acquisitions — — — —

Impairment — — — —

September 30, 2020 $ 87,145 $ 222,360 $ — $ 309,505

September 30, 2018 $ 87,145 $ 216,125 $ — $ 303,270

Acquisitions — — — —

Measurement Period Adjustments (1)

— 6,235 — 6,235

Impairment — — — —

September 30, 2019 $ 87,145 $ 222,360 $ — $ 309,505

(1) The Company recognized measurement period adjustments on provisional goodwill during fiscal year 2019 related to the Crestmark Acquisition.

Due to the ongoing economic impacts from the COVID-19 pandemic, the Company conducted a quantitative interim goodwill impairment assessment as of June 30, 2020.

The impairment assessment compared the fair value of each reporting unit with its carrying amount (including goodwill).

If the carrying amount of the reporting unit exceeds its fair value, an impairment loss is recognized in an amount equal to the excess.

The Company’s interim assessment estimated fair value for each reporting unit using an income approach that incorporated a discounted cash flow model that involves many management assumptions based upon future growth projections which include estimates of COVID-19 impacts on our various business lines.

Assumptions included estimates of future after-tax cash flows, growth rates, and discount rates based upon industry and competitor analyses.

Results of the interim assessment indicated no goodwill impairment for any of the reporting units as of June 30, 2020.

There have been no changes to the carrying amount of goodwill during the fiscal years ended September 30, 2021 and 2020.

The Company completed a qualitative goodwill impairment assessment as of September 30, 2021.

Based on the results, it was identified that it was more likely than not the fair value of goodwill recorded exceeded the current carrying value and concluded no impairment existed as of September 30, 2021.

The changes in the carrying amount of the Company's intangible assets were as follows:

(Dollars in Thousands) Trademark (1)

2 unchanged sentences

All Others (4)

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

Intangible Assets

At September 30, 2020 $ 10,901 $ 422 $ 24,333 $ 6,036 $ 41,692

Acquisitions during the period — — — 24 24

1 unchanged sentence

Write-offs during the period — — — ( 23 ) ( 23 )

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

At September 30, 2021 $ 9,823 $ 40 $ 17,868 $ 5,417 $ 33,148

Gross carrying amount $ 14,624 $ 2,481 $ 82,088 $ 10,142 $ 109,335

1 unchanged sentence

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

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

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

Amortized using the straight line and accelerated methods.

(2) Book amortization period of 3 - 5 years.

Amortized using the straight line method.

(3) Book amortization period of 10 - 30 years.

Amortized using the accelerated method.

(4) Book amortization period of 3 - 20 years.

Amortized using the straight line method.

(Dollars in Thousands) Trademark (1)

Non-Compete (2)

Customer Relationships (3)

All Others (4)

Balance as of September 30, 2018 $ 12,987 $ 1,297 $ 48,455 $ 7,980 $ 70,719

At September 30, 2021 $ 9,823 $ 40 $ 17,868 $ 5,417 $ 33,148

At September 30, 2019 $ 11,959 $ 827 $ 33,207 $ 6,817 $ 52,810

Acquisitions during the period — — — 35 35

1 unchanged sentence

Write-offs during the period — — — ( 156 ) ( 156 )

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

At September 30, 2020 $ 10,901 $ 422 $ 24,333 $ 6,036 $ 41,692

Gross carrying amount $ 14,624 $ 2,480 $ 82,088 $ 10,113 $ 109,305

1 unchanged sentence

Accumulated impairment — — ( 10,248 ) ( 190 ) ( 10,438 )

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

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

Amortized using the straight line and accelerated methods.

At September 30, 2020 $ 10,901 $ 422 $ 24,333 $ 6,036 $ 41,692

(1) Book amortization period of 5 - 15 years.Amortized using the straight line and accelerated methods.

(2) Book amortization period of 3 - 5 years.

4 unchanged sentences

Amortized using the straight line method.

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

There were no impairments to intangible assets for the fiscal year ended September 30, 2020.

There was $ 0.1 million in impairments to intangible assets for the fiscal year ended September 30, 2019.

Intangible impairment expense is recorded within the impairment expense line of the Consolidated Statements of Operations.

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

Estimated amortization expense of intangible assets in the subsequent fiscal years at September 30, 2021 was as follows:

Fiscal Year Ended Anticipated Amortization

(Dollars in Thousands)

1 unchanged sentence

Total anticipated intangible amortization $ 33,148

Measurement Period Adjustments and Impairment - DC Solar

The Company previously purchased a portfolio of mobile solar generators ("MSGs") from DC Solar Solutions, Inc.

and certain of its affiliates, a relationship in the Company's solar leasing business, and, in turn, leased the MSGs to DC Solar Distribution, Inc., an affiliate of DC Solar Solutions.

During 2019, the Company became aware that the DC Solar entities and their affiliates filed for bankruptcy and the entities, including their principals, are subjects of ongoing federal investigations involving allegations of fraudulent misconduct.

The Company had three separate operating leases with DC Solar - two of which were included in the acquired Crestmark balances on August 1, 2018.

The third transaction was originated in August 2018, after the closing of the Crestmark Acquisition.

The Company considered the bankruptcy filing and fraud allegations as new facts and circumstances and concluded the alleged fraud existed at the acquisition date for the acquired DC Solar transactions.

As a result, the identified impairment for the acquired DC Solar transactions and other related adjustments were recorded as measurement period adjustments to the acquired assets and liability amounts recognized and were offset through provisional goodwill.

The impairment and related adjustments for the DC Solar transaction originated post-acquisition have been reflected in fiscal year 2019 earnings.

No additional impairment or net financial impact has been recognized since fiscal year 2019.

As of September 30, 2020, the underlying assets are ready to be re-leased and are now part of normal business activities.

Measurement Period Adjustments - Other

The Company recorded additional measurement period adjustments in 2019 for provisional tax, compensation liabilities and other liabilities assumed through the Crestmark Acquisition.

The Company obtained additional information about facts and circumstances existing at the Crestmark Acquisition date that resulted in a net increase to liabilities and goodwill recognized of $ 3.8 million.

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

There were no impairments to intangible assets for the fiscal years ended September 30, 2021 and 2020.

Intangible impairment expense is recorded within the impairment expense line of the Consolidated Statements of Operations.

OPERATING LEASE RIGHT-OF-USE ASSETS AND LIABILITIES

Operating lease ROU assets, included in other assets , were $ 25.8 million at September 30, 2020.

Operating lease liabilities, included in accrued expenses and other liabilities, were $ 27.1 million at September 30, 2020.

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

Operating lease ROU assets, included in other assets , were $ 34.4 million and $ 25.8 million at September 30, 2021 and 2020, respectively.

Operating lease liabilities, included in accrued expenses and other liabilities , were $ 36.5 million and $ 27.1 million at September 30, 2021 and 2020, respectively.

Undiscounted future minimum operating lease payments and a reconciliation to the amount recorded as operating lease liabilities at September 30, 2021 were as follows:

(Dollars in Thousands)

3 unchanged sentences

Total operating lease liabilities $ 36,550

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

September 30, 2020

The weighted-average discount rate and remaining lease term for operating leases at September 30, 2021 were as follows:

Weighted-average discount rate 2.32 %

Weighted-average remaining lease term (years) 10.85

The components of total lease costs for operating leases, included in occupancy and equipment noninterest expense, were as follows:

(Dollars in Thousands) Fiscal Year Ended September 30, 2020

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

Fiscal Year Ended September 30,

(Dollars in Thousands) 2021 2020

Lease expense $ 4,310 $ 3,454

Short-term and variable lease cost 193 496

ROU asset impairment 224 —

Sublease income ( 591 ) ( 733 )

2 unchanged sentences

Time certificates of deposit in denominations of $ 250,000 or more were approximately $ 24.9 million and $ 231.0 million at September 30, 2021, and 2020, respectively.

At September 30, 2020, the scheduled maturities of time certificates of deposit were as follows for the fiscal years ending:

S cheduled maturities of time certificates of deposit at September 30, 2021 were as follows for the fiscal years ending:

(Dollars in Thousands)

1 unchanged sentence

(1) As of September 30, 2021, the Company had $ 23.4 million of certificates of deposit which were recorded in wholesale deposits on the Consolidated Statements of Financial Condition.

Under the Dodd-Frank Act, IRA and non-IRA deposit accounts are permanently insured up to $ 250,000 by the DIF under management of the FDIC.

Under the Dodd-Frank Act, IRA and non-IRA deposit accounts are insured up to $ 250,000 by the DIF under management of the FDIC.

SHORT-TERM AND LONG-TERM BORROWINGS

Short-Term Borrowings

September 30, 2020 2019

(Dollars in Thousands)

Overnight federal funds purchased $ — $ 642,000

Repurchase agreements — 4,019

Total $ — $ 646,019

The Company had no overnight federal funds purchased from the FHLB or from other financial institutions at September 30, 2020, as compared to $ 477.0 million of overnight federal funds purchased from the FHLB and $ 165.0 million from other financial institutions at September 30, 2019.

At September 30, 2020 and 2019, the Company had no short-term advances from the FHLB.

The Company had no short-term borrowing at September 30, 2021 and 2020.

The Bank has executed blanket pledge agreements whereby the Bank assigns, transfers, and pledges to the FHLB and grants to the FHLB a security interest in real estate and securities collateral.

1 unchanged sentence

Under the agreement, the Bank must maintain “eligible collateral” that has a “lending value” at least equal to the “required collateral amount,” all as defined by the agreement.

At fiscal year-end 2020 and 2019, the Bank pledged securities with fair values of approximately $ 673.8 million and $ 812.2 million, respectively, to be used against FHLB advances as needed.

In addition, qualifying real estate loans of approximately $ 333.8 million, and $ 928.8 million were pledged as collateral at September 30, 2020, and 2019, respectively.

The company had no securities sold under agreements to repurchase at September 30, 2020 and $ 4.0 million at September 30, 2019.

An analysis of securities sold under agreements to repurchase at September 30, 2020 and 2019 follows:

September 30, 2020 2019

At September 30, 2021 and 2020, the Bank pledged securities with fair values of approximately $ 644.7 million and $ 673.8 million, respectively, to be used against FHLB advances as needed.

In addition, no qualifying real estate loans were pledged as collateral at September 30, 2021 compared to approximately $ 333.8 million at September 30, 2020.

The Company had no securities sold under agreements to repurchase at September 30, 2021 and 2020.

An analysis of securities sold under agreements to repurchase follows:

At September 30,

(Dollars in Thousands) 2021 2020

3 unchanged sentences

Weighted average interest rate at fiscal year end — % — %

As of September 30, 2020, the Company did no t have any securities pledged as collateral for securities sold under agreements to repurchase.

There were $ 4.9 million of securities pledged as collateral for securities sold under agreements to repurchase at September 30, 2019.

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 Bank had not drawn on it.

At September 30, 2021 and 2020, the Company did not have any securities pledged as collateral for securities sold under agreements to repurchase.

Long-Term Borrowings

September 30, 2020 2019

At September 30,

(Dollars in Thousands) 2021 2020

Long-term FHLB advances $ — $ 110,000

Trust preferred securities 13,661 13,661

1 unchanged sentence

Other long-term borrowings (1)

10,756 18,533

Total $ 92,834 $ 98,224

( 1) Includes $ 10.6 million of discounted leases and $ 0.1 million of capital lease obligations at September 30, 2020.

( 1) Includes $ 5.1 million and $ 10.6 million of discounted leases and $ 0.1 million and $ 0.1 million of finance lease obligations at September 30, 2021 and 2020, respectively.

Management extinguished its remaining long-term FHLB advances in the fiscal 2020 fourth quarter.

1 unchanged sentence

The early extinguishment resulted in a pre-tax charge of $ 1.7 million to other expense in the fiscal 2020 fourth quarter.

At September 30, 2020, the scheduled maturities of the Company's long-term borrowings were as follows for the fiscal years ending:

September 30, Long-term FHLB advances Trust preferred securities Subordinated debentures Other long-term borrowings Total

(Dollars in Thousands)

2021 $ — $ — $ — $ 5,442 $ 5,442

Scheduled maturities of the Company's long-term borrowings at September 30, 2021 were as follows for the fiscal years ending:

(Dollars in Thousands) Trust preferred securities Subordinated debentures Other long-term borrowings Total

2022 $ — $ — $ 398 $ 398

29 unchanged sentences

Repurchase of Common Stock

During fiscal year 2020, the Company repurchased 3,669,597 shares of its common stock, at an average price of $ 33.04 per share, which exhausted the remaining shares available for repurchase by the Company under the March 26, 2019 share repurchase program.

The Company's Board of Directors authorized the November 20, 2019 share repurchase program to repurchase up to an additional 7,500,000 shares of the Company's outstanding common stock.

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

The Company suspended its share repurchase activity in March 2020 and resumed repurchase activity during September 2020.

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

On September 7, 2021, the Company's Board of Directors announced a new share repurchase program to repurchase up to an additional 6,000,000 shares of the Company's outstanding common stock.

This authorization is effective from September 3, 2021 through September 30, 2024.

During the fiscal years ended September 30, 2021 and 2020, the Company repurchased 2,833,755 and 3,669,597 shares, respectively, as part of the share repurchase programs.

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

The Company accounts for repurchased shares using the par value method under which the repurchase price is charged to paid-in capital up to the amount of the original proceeds of those shares.

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

As of September 30, 2020, the remaining number of shares available for repurchase under this program was 4,149,631 shares of common stock.

As of September 30, 2021, the remaining number of shares available for repurchase under the programs were 7,315,876 shares of common stock.

For the fiscal years ended September 30, 2021, and 2020, the Company also repurchased 101,481 and 103,830 shares, or $ 2.9 million and $ 3.2 million, of common stock, respectively, in settlement of employee tax withholding obligations due upon the vesting of restricted stock.

Repurchase of Treasury Stock

On June 25, 2019, Meta retired $ 5.0 million, or 114,558 shares, of common stock held in treasury.

The Company accounts for the retirement of repurchased shares, including treasury stock, using the par value method under which the repurchase price is charged to paid-in capital up to the amount of the original proceeds of those shares.

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

No shares of common stock held in treasury were retired during the fiscal year ended September 30, 2020.

The Company retired 203,224 and zero shares of common stock held in treasury during the fiscal years ended September 30, 2021 and 2020, respectively.

EMPLOYEE STOCK OWNERSHIP AND PROFIT SHARING PLANS

The Company maintains an Employee Stock Ownership Plan (“ESOP”) for eligible employees who have 1,000 hours of employment with the Bank, have worked at least one year at the Bank and who have attained age 21 .

Until September 30, 2021, the Company maintained an Employee Stock Ownership Plan (“ESOP”) for eligible employees who have 1,000 hours of employment with the Bank, have worked at least one year at the Bank and who have attained age 21.

ESOP expense of $ 3.1 million, $ 3.0 million and $ 2.9 million was recorded for the fiscal years ended September 30, 2021, 2020 and 2019, respectively.

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At September 30, 2021, 2020 and 2019, there were 4,192 , 5,662 and 5,336 shares purchased, respectively, for dividend reinvestment.

Fiscal year-end ESOP shares are as follows:

ESOP shares were as follows:

At September 30,

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Profit sharing expense included in compensation and benefits, for the fiscal years ended September 30, 2021, 2020 and 2019 was $ 3.1 million, $ 3.1 million and $ 3.0 million, respectively.

As of October 1, 2020, the Company modified its profit sharing plan to incorporate a Qualified Automatic Contribution Arrangement (QACA) safe harbor provision, whereby employee contributions are matched at 100 % of the first 4 % of eligible compensation contributed.

As of October 1, 2021, the Company modified its profit sharing plan to incorporate a Qualified Automatic Contribution Arrangement safe harbor provision, whereby employee contributions are matched at 100 % of the first 6 % of eligible compensation contributed.

STOCK COMPENSATION

The Company maintains the Meta Financial Group, Inc.

2002 Omnibus Incentive Plan, as amended and restated (the "2002 Omnibus Incentive Plan"), which, among other things, provides for the awarding of stock options and nonvested (restricted) shares to certain officers and directors of the Company.

2002 Omnibus Incentive Plan, as amended and restated (the "2002 Omnibus Incentive Plan"), which, among other things, provides for the awarding of stock options, nonvested (restricted) shares, and performance share units ("PSUs") to certain officers and directors of the Company.

Awards are granted by the Compensation Committee of the Board of Directors based on the performance of the award recipients or other relevant factors.

The following table shows the effect to income, net of tax benefits, of share-based expense recorded:

Fiscal Year Ended September 30, 2020 2019 2018

(Dollars in Thousands)

Total employee stock-based compensation expense recognized in income, net of tax effects of $ 2,567 , $ 3,230 , and $ 3,139 , respectively

$ 7,656 $ 9,716 $ 7,878

As of September 30, 2020, stock-based compensation expense not yet recognized in income totaled $ 7.5 million, which is expected to be recognized over a weighted-average remaining period of 2.52 years.

At grant date, the fair value of options awarded to recipients is estimated using a Black-Scholes valuation model.

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Options are issued for a period of 10 years with 100 % vesting generally occurring either at grant date or over a period of four years .

No options were granted during the fiscal years ended September 30, 2020, 2019 or 2018.

The intrinsic value of options exercised during the fiscal years ended September 30, 2020, 2019 and 2018 were $ 1.0 million, $ 1.8 million and $ 1.9 million, respectively.

There were no options granted during the fiscal years ended September 30, 2021, 2020 or 2019.

The intrinsic value of options exercised during the fiscal years ended September 30, 2021, 2020 and 2019 were zero , $ 1.0 million and $ 1.8 million, respectively.

Shares have previously been granted each year to executives and senior leadership members under the applicable Company incentive plan.

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The total fair value of director’s shares granted during the fiscal years ended September 30, 2021, 2020 and 2019 was $ 1.0 million, $ 0.8 million and $ 1.0 million, respectively.

Under its 2002 Omnibus Incentive Plan, the Company also grants selected executives and other key employees PSU awards.

The vesting of these awards is contingent on meeting company-wide performance goals, including but not limited to return on equity, earnings per share, and total shareholder return.

PSUs are generally granted at the market value of the underlying share on the date of grant, adjusted for dividends, as performance share units do not participate in dividends while unearned.

The awards contingently vest over a period of three years and have payout levels ranging from a threshold of 50% to a maximum of 200%.

Upon vesting, each performance share unit is converted into one share of common stock.

The fair value of the PSUs is determined by the dividend-adjusted fair value on the grant date for those awards subject to a performance condition.

For those PSUs subject to a market condition, a simulation valuation is performed.

In addition to the Company’s 2002 Omnibus Incentive Plan, the Company also maintains the 1995 Stock Option and Incentive Plan.

No new options were, or could have been, awarded under the 1995 plan during the fiscal years ended September 30, 2021, 2020 or 2019.

Furthermore, no options were outstanding during the year.

In addition, during the first and second quarters of fiscal 2017, shares were granted to certain executive officers of the Company in connection with their signing of employment agreements with the Company.

These stock awards vest in equal installments over eight years .

The following tables show the activity of options and share awards (including shares of restricted stock subject to vesting and fully-vested restricted stock) granted, exercised or forfeited under all of the Company’s option and incentive plans during the fiscal years ended September 30, 2020 and 2019.

Shares Weighted

Price Weighted

Term (Yrs) Aggregate

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

Options outstanding, September 30, 2019 59,835 $ 8.06 1.54 $ 1,469

Granted — — — —

Exercised ( 59,835 ) 8.06 1.00 1,011

Forfeited or expired — — — —

Options outstanding, September 30, 2020 — $ — 0 $ —

Options exercisable end of fiscal year — $ — 0 $ —

Shares Weighted

Price Weighted

Term (Yrs) Aggregate

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

T he following tables show the activity of options and share awards (including shares of restricted stock subject to vesting, fully-vested restricted stock, and PSUs) granted, exercised or forfeited under all of the Company’s option and incentive plans during the fiscal year ended September 30, 2021 and 2020.

There was no activity of options during the fiscal year ended September 30, 2021 and zero were outstanding or exercisable at September 30, 2021.

(Dollars in Thousands, Except Per Share Data) Number of Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Term (Yrs) Aggregate Intrinsic Value

Options outstanding, September 30, 2019 59,835 $ 8.06 1.54 $ 1,469

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Options outstanding, September 30, 2020 — $ — — $ —

Options exercisable end of fiscal year 59,835 $ 8.06 1.54 $ 1,469

Shares Weighted Average

Fair Value At Grant

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

Options exercisable, September 30, 2020 — $ — — $ —

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

Nonvested shares outstanding, September 30, 2020 790,083 $ 30.03

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Nonvested shares outstanding, September 30, 2021 547,063 $ 30.22

Shares Weighted Average

Fair Value At Grant

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

Nonvested shares outstanding, September 30, 2019 926,122 $ 29.54

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Nonvested shares outstanding, September 30, 2020 790,083 $ 30.03

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

Performance share units outstanding, September 30, 2020 — $ —

Forfeited or expired — —

Performance share units outstanding, September 30, 2021 60,984 $ 34.03

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

Compensation expense for share-based awards is recorded over the vesting period at the fair value of the award at the time of the grant.

The exercise price of options or fair value of nonvested (restricted) shares and PSUs granted under the Company’s 2002 Omnibus Incentive Plan is equal to the fair market value of the underlying stock at the grant date, adjusted for dividends where applicable.

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

The following table shows the effect to income, net of tax benefits, of share-based compensation expense recorded:

Fiscal Year Ended September 30,

(Dollars in Thousands) 2021 2020 2019

Total employee stock-based compensation expense recognized in income, net of tax effects of $ 1,562 , $ 2,567 , and $ 3,230 , respectively

$ 5,290 $ 7,656 $ 9,716

As of September 30, 2021, stock-based compensation expense not yet recognized in income totaled $ 5.5 million, which is expected to be recognized over a weighted-average remaining period of 2.02 years.

The Company and its subsidiaries file a consolidated federal income tax return on a fiscal year basis.

The provision for income taxes for the years presented below consisted of the following:

Fiscal Years Ended September 30,

The provision for income taxes were as follows:

Fiscal Year Ended September 30,

(Dollars in Thousands) 2021 2020 2019

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8,208 7,018 6,179

Income tax (benefit) expense $ 5,661 $ ( 3,374 ) $ 5,117

Income tax expense (benefit) $ 10,701 $ 5,661 $ ( 3,374 )

The tax effects of the Company's temporary differences that give rise to significant portions of its deferred tax assets and liabilities were:

September 30,

At September 30,

(Dollars in Thousands) 2021 2020

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Net unrealized gains on securities available for sale ( 2,471 ) ( 5,964 )

Deferred income — ( 179 )

Leased assets ( 46,355 ) ( 35,279 )

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(1) The general business credits are investment tax credits generated from qualified solar energy property placed in service during the fiscal years ended September 30, 2021 and 2020.

These credits expire on September 30, 2040.

These credits expire on September 30, 2041 and 2040, respectively.

As of September 30, 2021, the Company had a gross deferred tax asset of $ 2.7 million for separate company state cumulative net operating loss carryforwards, for which $ 2.7 million was reserved.

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The Company's effective tax rate is calculated by dividing income tax expense by income before income tax expense.

Fiscal Years Ended September 30,

Fiscal Year Ended September 30,

2021 2020 2019

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Tax exempt income ( 835 ) ( 0.5 ) % ( 1,212 ) ( 1.0 ) % ( 2,714 ) ( 2.8 ) %

Nondeductible acquisition costs — — % — — % 1,295 2.3 %

General business credits ( 26,945 ) ( 17.2 ) % ( 22,284 ) ( 19.4 ) % ( 27,126 ) ( 27.7 ) %

Tax reform — — % — — % 3,849 6.7 %

Amended Crestmark Bancorp historical tax return — — % — — % ( 4,644 ) ( 8.1 ) %

Other, net ( 1,511 ) ( 1.0 ) % ( 1,567 ) ( 1.4 ) % ( 1,879 ) ( 1.8 ) %

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A reconciliation of the beginning and ending balances for liabilities associated with unrecognized tax benefits follows:

September 30,

At September 30,

(Dollars in Thousands) 2021 2020

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The Company does not anticipate any significant change in the total amount of unrecognized tax benefits within the next 12 months.

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

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

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

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

The Company determined there were no stranded tax effects from the TCJA enactment and has not made any reclassification from AOCI to Retained Earnings upon adoption of this ASU.

CAPITAL REQUIREMENTS AND RESTRICTIONS ON RETAINED EARNINGS

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under the rule, non-advanced approach banking organizations were given a one-time option to exclude certain AOCI components.

The table below includes certain non-GAAP financial measures that are used by investors, analysts and bank regulatory agencies to assess the capital position of financial services companies.

The tables below include certain non-GAAP financial measures that are used by investors, analysts and bank regulatory agencies to assess the capital position of financial services companies.

Management reviews these measures along with other measures of capital as part of its financial analyses and has included this non-GAAP financial information, and the corresponding reconciliation to total equity.

Company Bank Minimum to be Adequately Capitalized Under Prompt Corrective Action Provisions Minimum to be Well Capitalized Under Prompt Corrective Action Provisions

September 30, 2020

Company Bank Minimum

to be Adequately Capitalized Under Prompt Corrective Action Provisions Minimum to be Well Capitalized Under Prompt Corrective Action Provisions

At September 30, 2021

Tier 1 leverage capital ratio 7.67 % 8.69 % 4.00 % 5.00 %

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Total capital ratio 15.45 15.38 8.00 10.00

September 30, 2019

At September 30, 2020

Tier 1 leverage capital ratio 6.58 % 7.56 % 4.00 % 5.00 %

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The following table provides a reconciliation of the amounts included in the table above for the Company.

Standardized Approach (1)

(Dollars in Thousands) Standardized Approach (1)

September 30, 2021

(Dollars in Thousands)

Total stockholders' equity $ 871,884

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Noncontrolling interest 1,155

Adoption of Accounting Standards Update 2016-13 8,202

Common Equity Tier 1 (1)

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Total Tier 1 capital 528,842

Allowance for loan and lease losses 49,343

Allowance for credit losses 53,159

Subordinated debentures (net of issuance costs) 73,980

Total capital $ 655,981

(1) Capital ratios were determined using the Capital Rules that became effective on January 1, 2015.

The Capital Rules revised the definition of capital, increased minimum capital ratios, and introduced a minimum common equity tier 1 capital ratio;

(1) Capital ratios were determined using the Basel III capital rules that became effective on January 1, 2015.

Basel III revised the definition of capital, increased minimum capital ratios, and introduced a minimum common equity tier 1 capital ratio;

those changes are being fully phased in through the end of 2021.

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Each of tangible common equity and tangible common equity excluding AOCI is a non-GAAP financial measure that is commonly used within the banking industry.

(Dollars in Thousands) September 30, 2020

(Dollars in Thousands) At September 30, 2021

Total stockholders' equity $ 871,884

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The required Common Equity Tier 1 risk-based, Tier 1 risk-based and total risk-based capital ratios with the buffer are currently 7.0 %, 8.5 % and 10.5 %, respectively.

Based on current and expected continued profitability and subject to continued access to capital markets, we believe that the Company and the Bank will continue to meet the capital conservation buffer of 2.5 % in addition to required minimum capital ratios.

COMMITMENTS AND CONTINGENCIES

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

At September 30, 2020 and 2019, unfunded loan commitments approximated $ 1.22 billion and $ 978.1 million, respectively, excluding undisbursed portions of loans in process.

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

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

Commitments, which are disbursed subject

to certain limitations, extend over various periods of time.

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

The Company had no commitments to purchase securities at September 30, 2020 or September 30, 2019.

The Company had no commitments to sell securities at September 30, 2020 or September 30, 2019.

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

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

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

The same credit policies and collateral requirements are used in making commitments and conditional obligations as are used for on-balance-sheet instruments.

At September 30, 2020 and 2019, the Company had an allowance for credit losses on off-balance sheet credit exposures of $ 0.1 million.

This amount is maintained as a separate liability account within other liabilities.

Since certain commitments to make loans and to fund lines of credit expire without being used, the amount does not necessarily represent future cash commitments.

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LEGAL PROCEEDINGS

The Bank was served, on October 14, 2016, with a lawsuit captioned Card Limited, LLC v.

MetaBank dba Meta Payment Systems, Civil No.

2:16-cv-00980 in the United States District Court for the District of Utah.

This action was initiated by a former prepaid program manager of the Bank, which was terminated by the Bank in fiscal year 2016.

Card Limited alleges that, after all of the programs were wound down, there were two accounts with positive balances to which Card Limited is entitled.

The Bank’s position is that Card Limited is not entitled to the funds contained in said accounts.

The total amount to which Card Limited claims it is entitled is $ 4.0 million.

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

Card Limited has the right to appeal.

The Bank intends to continue to vigorously defend this claim, if appealed.

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

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

Aegis Managing Agency Limited ("AMA"), Aegis Syndicate 1225 (together with AMA, the "Aegis defendants"), CRC Insurance Services, Inc.

("CRC"), and Transportation Underwriters, Inc.

The suit was filed against commercial insurance underwriters and brokers that facilitated the issuance of commercial insurance policies to Red Hook Construction Group-II, LLC (“Red Hook”).

The Bank’s position is that both CRC and Transportation Underwriters represented to the Bank that, upon cancellation of the insurance policies prior to their stated terms, any unearned premiums would be refunded.

The Bank then provided insurance premium financing to Red Hook, and Red Hook executed a written premium finance agreement pursuant to which Red Hook assigned its rights to any unearned premiums to the Bank.

After the policies were cancelled, the Aegis defendants failed to return the unearned insurance premiums totaling just over $ 1.6 million owed to the Bank under the insurance policies and the premium finance agreement.

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

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

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While management currently believes that the ultimate outcome of these proceedings will not have a material adverse effect on the Company’s financial position or its results of operations, legal proceedings are inherently uncertain and unfavorable resolution of some or all of these matters could, individually or in the aggregate, have a material adverse effect on the Company’s and its subsidiaries’ respective businesses, financial condition or results of operations.

LEASE COMMITMENTS

The Company has leased property under various non-cancelable operating lease agreements which expire at various times through 2036, and require annual rentals ranging from $ 2,000 to $ 867,000 plus the payment of property taxes, normal maintenance, and insurance on certain properties.

The Company is also a party to capital lease agreements for building and equipment that expire at various times through fiscal year 2035.

Interest expense for these capital lease obligations was $ 0.1 million for the fiscal year ended September 30, 2019, and is included in interest expense.

Depreciation expense for the capital lease assets was $ 0.1 million for the fiscal year ended September 30, 2019 and is included in noninterest expense.

The Company adopted ASC 842, Leasing, effective October 1, 2019.

Refer to Note 1.

Summary of Significant Accounting Policies for additional information on adoption impact and Note 11.

Operating Lease Right-of-Use Assets and Liabilities for additional information on current period lease commitments.

The following table shows the total minimum rental commitment for the Company's operating and capital leases for each of the fiscal years presented below as of September 30 and thereafter.

Fiscal Year Ended September 30,

(Dollars in Thousands) Operating

Leases Capital

2020 $ 3,709 $ 216

2021 3,429 216

2022 2,955 216

2023 2,561 216

2024 2,457 194

Thereafter 18,971 1,876

Total leases commitments $ 34,082 $ 2,934

Amounts representing interest $ 986

Present value of net minimum lease payments 1,948

REVENUE FROM CONTRACTS WITH CUSTOMERS

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

Year Ended September 30, 2020 2019 2020 2019 2020 2019 2020 2019

Fiscal Year Ended September 30, 2021 2020 2021 2020 2021 2020 2021 2020

Net interest income (1)

8 unchanged sentences

18 19 39,398 43,493 — 1,314 39,416 44,826

Gain on sale of securities available-for-sale, net (1)

Net gain realized on investment securities (1)

— — — — 6 51 6 51

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— — — — — 19,275 — 19,275

(Loss) gain on sale of other (1)

Gain (loss) on sale of other (1)

— ( 19 ) 12,622 9,587 ( 1,107 ) ( 5,143 ) 11,515 4,425

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

Card fees relate to MPS, Community Bank, Refund Advantage and EPS products.

Card fees relate to Meta Payments, Community Bank, Refund Advantage and EPS products.

These fees are for products and services such as card activation, product support, processing, and servicing.

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The Consumer reporting segment includes principal/agent relationships.

Within this segment, MPS relationships are recorded on a gross basis within the Consolidated Statements of Operations, as Meta is the principal in the contract, with the exception of association/network contracts and partner/processor contracts for prepaid cards, which are recorded on a net basis within the Consolidated Statements of Operations as Meta is the agent in these contracts.

Within this segment, the Meta Payments division relationships are recorded on a gross basis within the Consolidated Statements of Operations, as Meta is the principal in the contract, with the exception of association/network contracts and partner/processor contracts for prepaid cards, which are recorded on a net basis within the Consolidated Statements of Operations as Meta is the agent in these contracts.

Also within this segment, Tax Service relationships are recorded on a gross basis within the Consolidated Statements of Operations, as Meta is the principal in the contract, with the exception of contracts with software providers and merchants, which are recorded on a net basis within the Consolidated Statements of Operations as Meta is the agent in these contracts.

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Payments, Banking, and Corporate Services/Other.

Beginning October 1, 2019, segments are now aligned with the new management operating structure implemented by the Company for fiscal year 2020.

Beginning October 1, 2019, segments are now aligned with the new management operating structure implemented by the

Company for fiscal year 2020.

The Company accordingly has changed its basis of presentation for segments, and following such change, reports its results of operations through the following three business segments:

Consumer, Commercial, and Corporate Services/Other.

The Meta Payment Systems and Tax Services divisions, formerly reported in the Payments segment, are now included in the Consumer segment.

The Warehouse Finance, Consumer Credit Products and ClearBalance business lines, previously reported in the Banking segment, are now included in the Consumer segment.

The Meta Payments and Tax Services divisions, formerly reported in the Payments segment, are now included in the Consumer segment.

The Consumer Credit Products and ClearBalance business lines, previously reported in the Banking segment, are now included in the Consumer segment.

The Crestmark and AFS divisions, formerly reported in the Banking segment, are now included in the Commercial segment.

The Community Bank division and Student Loan lending portfolio, previously reported in the Banking segment, are now included in the Corporate Services/Other segment.

The Corporate Services/Other segment also includes certain shared services as well as treasury related functions such as the investment portfolio, wholesale deposits and borrowings.

The Corporate Services/Other segment also includes certain shared services as well as treasury related functions such as the investment portfolio, warehouse finance, wholesale deposits and borrowings.

Prior periods have been reclassified to conform to the current period presentation.

The Company does not report indirect general and administrative expenses in the Consumer and Commercial segments.

The following tables present segment data for the Company for the fiscal years ended September 30, 2020, 2019 and 2018, respectively.

Consumer Commercial Corporate Services/Other Total

The following tables present segment data for the Company:

Fiscal Year Ended September 30, 2021

(Dollars in Thousands) Consumer Commercial Corporate Services/Other Total

Net interest income $ 92,133 $ 173,325 $ 13,533 $ 278,991

Provision for loan and lease losses 21,838 29,296 13,642 64,776

Provision (recovery) for credit losses 35,765 19,791 ( 5,790 ) 49,766

Noninterest income 195,708 61,813 13,383 270,904

Noninterest expense 90,800 114,917 137,966 343,683

Income (loss) before income tax expense (benefit) 167,907 73,819 ( 126,721 ) 115,005

Income (loss) before income tax expense 161,276 100,430 ( 105,260 ) 156,446

Total assets 372,115 3,191,215 3,127,320 6,690,650

1 unchanged sentence

Total deposits 5,342,192 6,625 166,154 5,514,971

Consumer Commercial Corporate Services/Other Total

Fiscal Year Ended September 30, 2020

(Dollars in Thousands) Consumer Commercial Corporate Services/Other Total

Net interest income $ 93,245 $ 150,766 $ 15,027 $ 259,038

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Noninterest expense 76,521 107,802 134,728 319,051

Income (loss) before income tax expense (benefit) 138,733 57,855 ( 98,646 ) 97,942

Income (loss) before income tax expense 153,201 73,819 ( 112,015 ) 115,005

Total assets 294,937 2,836,149 2,960,988 6,092,074

1 unchanged sentence

Total deposits 4,555,999 6,226 416,975 4,979,200

Consumer Commercial Corporate Services/Other Total

Fiscal Year Ended September 30, 2019

(Dollars in Thousands) Consumer Commercial Corporate Services/Other Total

Net interest income $ 69,131 $ 152,565 $ 42,511 $ 264,207

Provision for loan losses 22,202 1,968 5,262 29,432

Noninterest income (expense) 176,257 11,955 ( 3,687 ) 184,525

Provision for loan and lease losses 25,138 21,901 8,611 55,650

Noninterest income 162,212 54,224 6,109 222,545

Noninterest expense 76,931 127,033 129,196 333,160

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PARENT COMPANY FINANCIAL STATEMENTS

Presented below are condensed financial statements for the parent company, Meta, at the dates and for the fiscal years presented below.

Presented below are the condensed financial statements for the parent company, Meta.

Condensed Statements of Financial Condition

September 30, 2020 2019

(Dollars in Thousands)

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

Cash and cash equivalents $ 3,296 $ 4,783

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LIABILITIES AND STOCKHOLDERS' EQUITY

Long-term borrowings $ 87,468 $ 87,305

Subordinated debentures $ 87,641 $ 87,468

Other liabilities 5,256 7,954

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Total equity attributable to parent 870,729 843,705

Noncontrolling interest 3,603 4,047

Non-controlling interest 1,155 3,603

Total stockholders' equity 871,884 847,308

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Condensed Statements of Cash Flows

For the Fiscal Years Ended September 30, 2020 2019 2018

Fiscal Year Ended September 30,

(Dollars in Thousands) 2021 2020 2019

1 unchanged sentence

Net income attributable to parent $ 141,708 $ 104,720 $ 97,004

Adjustments to reconcile net income to net cash provided by operating activities:

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

Depreciation, amortization and accretion, net 173 163 153

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Cash flows from investing activities:

Held to maturity:

Proceeds from maturities and principal repayments — — 8

Capital contributions to subsidiaries — — ( 20,322 )

Alternative investments ( 3,415 ) ( 797 ) —

2 unchanged sentences

Cash dividends paid ( 6,400 ) ( 7,100 ) ( 7,760 )

Short-term borrowings — — ( 11,642 )

Long-term borrowings — — ( 258 )

Purchase of shares by ESOP 3,036 3,220 2,011

Proceeds/(payment):

Exercise of stock options & issuance of common stock 266 44 148

Proceeds from:

Exercise of stock options and issuance of common stock — 266 44

Issuance of restricted stock — 2 3

Issuance of commons shares due to acquisitions — — 295,767

Cash acquired due to acquisitions — — 697

Net increase in investment in subsidiaries — — ( 90 )

Shares repurchased for tax withholdings on stock compensation ( 118,738 ) ( 49,912 ) ( 2,598 )

Net cash provided by (used in) financing activities ( 122,350 ) ( 55,704 ) ( 17,779 )

Shares repurchased for tax withholding on stock compensation ( 99,878 ) ( 118,738 ) ( 49,912 )

Net cash (used in) financing activities ( 103,242 ) ( 122,350 ) ( 55,704 )

Net change in cash and cash equivalents ( 1,487 ) ( 3,328 ) ( 20,098 )

CASH AND CASH EQUIVALENTS

Beginning of fiscal year 8,111 28,209 14,569

End of fiscal year $ 4,783 $ 8,111 $ 28,209

Cash and cash equivalents at beginning of fiscal year 4,783 8,111 28,209

Cash and cash equivalents at end of fiscal year $ 3,296 $ 4,783 $ 8,111

The extent to which the Company may pay cash dividends to stockholders will depend on the cash currently available at the Company, as well as the ability of the Bank to pay dividends to the Company.

7 unchanged sentences

Net interest income 65,999 73,850 68,475 70,667

Provision for loan and lease losses 3,407 37,296 15,093 8,980

Provision for credit losses 6,089 30,290 4,612 8,775

Noninterest income 45,455 113,453 62,453 49,542

19 unchanged sentences

Net interest income 60,272 71,350 66,968 65,617

Provision (recovery) for loan losses 1,068 18,343 5,315 4,706

Provision for loan and lease losses 9,099 33,318 9,112 4,121

Noninterest income 37,751 105,025 43,790 35,980

12 unchanged sentences

These unobservable assumptions reflect the Company’s own estimates of assumptions that market participants would use in pricing the asset or liability.

Valuation techniques include use of option pricing models, discounted cash flow models and similar techniques.

There were no transfers between levels of the fair value hierarchy for the fiscal years ended September 30, 2021 or 2020.

1 unchanged sentence

Debt securities available for sale are recorded at fair value on a recurring basis and debt securities held to maturity are carried at amortized cost.

The fair values of available for sale debt securities are determined by obtaining quoted prices on nationally recognized securities exchanges (Level 1 inputs), or valuation based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model‑based valuation techniques for which significant assumptions are observable in the market (Level 2 inputs).

The Company considers these valuations supplied by a third-party provider which utilizes several sources for valuing fixed-income securities.

These sources include Interactive Data Corporation, Reuters, Standard and Poor’s, Bloomberg Financial Markets, Street Software Technology and the third‑party provider’s own matrix and desk pricing.

The Company, no less than annually, reviews the third-party provider's methods and source’s methodology for reasonableness and to ensure an understanding of inputs utilized in determining fair value.

Sources utilized by the third-party provider include but are not limited to pricing models that vary based on asset class and include available trade, bid, and other market information.

This methodology includes but is not limited to broker quotes, proprietary models, descriptive terms and conditions databases, as well as extensive quality control programs.

Monthly, the Company receives and compares prices provided by multiple securities dealers and pricing providers to validate the accuracy and reasonableness of prices received from the third-party provider;

and our Investment Committee reviews mark-to-market changes in the securities portfolio for reasonableness.

The fair values of debt securities available for sale, categorized primarily as Level 2, is recorded using prices obtained from independent asset pricing services that are based on observable transactions, but not quoted markets.

Management reviews the prices obtained from independent asset pricing services for unusual fluctuations and compares to current market trading activity.

Equity Securities.

5 unchanged sentences

Debt securities AFS

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

SBA securities 157,209 — 157,209 —

8 unchanged sentences

$ 4,560 $ — $ — $ —

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

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

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

12 unchanged sentences

$ 2,784 $ — $ — $ —

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

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

4 unchanged sentences

The Company does not record loans and leases at fair value on a recurring basis.

However, if a loan or lease is considered impaired, an allowance for loan and lease losses is established.

Once a loan or lease is identified as individually impaired, management measures impairment in accordance with ASC 310, Receivables .

Loans and Leases, Net for further information.

However, if a loan or lease is individually evaluated for risk of credit loss and repayment is expected to be solely provided by the values underlying collateral, the Company measures fair value on a nonrecurring bases.

Fair value is determined by the fair value of the underlying collateral less estimated costs to sell.

The fair value of the collateral is determined based on the internal estimates and/or assessment provided by third-party appraisers and the valuation relies on discount rates ranging from 4 % to 90 %.

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

1 unchanged sentence

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

Impaired loans and leases, net

Loans and leases, net individually evaluated for credit loss

Commercial finance $ 3,404 $ — $ — $ 3,404

Total National Lending 9,240 — — 9,240

Commercial real estate and operating 20 — — 20

Total Community Banking 20 — — 20

Total impaired loans and leases, net 9,260 — — 9,260

Community Banking 9,371 — — 9,371

Total loans and leases, net individually evaluated

for credit loss 12,775 — — 12,775

Foreclosed assets, net 2,077 — — 2,077

4 unchanged sentences

Commercial finance $ 9,240 $ — $ — $ 9,240

Total National Lending 8,707 — — 8,707

Community Banking 20 — — 20

Total impaired loans and leases, net 9,260 — — 9,260

2 unchanged sentences

Quantitative Information About Level 3 Fair Value Measurements

(Dollars in Thousands) Fair Value at

September 30, 2020 Fair Value at

September 30, 2019 Valuation

(Dollars in Thousands) Fair Value at September 30, 2021 Fair Value at September 30, 2020 Valuation

Technique Unobservable Input Range of Inputs

Impaired loans and leases, net $ 9,260 8,707 Market approach Appraised values (1)

Loans and leases, net individually evaluated for credit loss $ 12,775 9,260 Market approach Appraised values (1)

Foreclosed assets, net $ 2,077 9,957 Market approach Appraised values (1)

1 unchanged sentence

Management reduced the appraised value by estimated selling costs and other inputs in a range of 4 % to 90 %.

The following tables disclose the Company’s estimated fair value amounts of its financial instruments at the dates set forth below.

It is management’s belief that the fair values presented below are reasonable based on the valuation techniques and data available to the Company as of September 30, 2020 and 2019, as more fully described below.

The operations of the Company are managed from a going concern basis and not a liquidation basis.

As a result, the ultimate value realized for the financial instruments presented could be substantially different when actually recognized over time through the normal course of operations.

Additionally, a substantial portion of the Company’s inherent value is the Bank’s capitalization and franchise value.

Neither of these components have been given consideration in the presentation of fair values below.

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

September 30, 2020

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

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

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

However, since there is no active market for certain financial instruments of the Company, the estimates of fair value are subjective in nature, involve uncertainties, and include matters of significant judgment.

Changes in assumptions as well as tax considerations could significantly affect the estimated values.

Accordingly, the aggregate fair value estimates are not intended to represent the underlying value of the Company, on either a going concern or a liquidation basis.

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

At September 30, 2021

(Dollars in Thousands) Carrying

10 unchanged sentences

Loans held for sale 56,194 56,194 — 56,194 —

Loans and leases receivable 3,314,140 3,307,037 — — 3,307,037

Loans and leases 3,607,815 3,616,646 — — 3,616,646

Federal Reserve Bank and Federal Home Loan Bank stocks 28,400 28,400 — 28,400 —

2 unchanged sentences

Deposits 5,514,971 5,515,035 5,482,471 32,564 —

Overnight federal funds purchased — — — — —

Federal Home Loan Bank advances — — — — —

Other short- and long-term borrowings 92,834 93,938 — 93,938 —

Accrued interest payable 579 579 579 — —

(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 statement of financial condition at September 30, 2021.

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

September 30, 2019

At September 30, 2020

(Dollars in Thousands) Carrying

10 unchanged sentences

Loans held for sale 183,577 183,577 — 183,577 —

Loans and leases receivable 3,651,413 3,622,597 — — 3,622,597

Federal Home Loan Bank stock 30,916 30,916 — 30,916 —

Loans and leases 3,314,140 3,307,037 — — 3,307,037

Federal Reserve Bank and Federal Home Loan Bank stocks 27,138 27,138 — 27,138 —

Accrued interest receivable 16,628 16,628 16,628 — —

1 unchanged sentence

Deposits 4,979,200 4,980,073 4,705,028 275,045 —

Overnight federal funds purchased 642,000 642,000 642,000 — —

Federal Home Loan Bank advances 110,000 110,691 — 110,691 —

Other short- and long-term borrowings 98,224 100,185 — 100,185 —

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

(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 statement of financial condition at September 30, 2020.

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

36 unchanged sentences

Management has evaluated subsequent events that occurred after September 30, 2021.

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

• On November 24, 2020, W.

David Tull, a member of the Boards of Directors of the Company and the Bank, notified the Company and the Bank of his resignation from the Boards of Directors of the Company and the Bank effective November 24, 2020.

• On November 18, 2020, the Company sold an additional $ 129.8 million of the retained Community Bank loan portfolio to Central Bank.

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

• Beginning in November 2021, all participants with shares held in the ESOP can elect their preferred distribution method due to the ESOP terminating effective September 30, 2021.

Concurrent with the termination of the ESOP, the Company also increased its employee contribution match from 4 % to 6 % in the profit sharing plan.

• Subsequent to September 30, 2021, a n additional 1,252,145 shares were repurchased by the Company through Novembe r 18, 2021.

• On October 19, 2021, the Company executed a loan sale agreement for approximately $ 170.0 million of the retained Community Bank loan portfolio with a third party.

The sale is expected to close before December 31, 2021.

The overall net impact of the transaction on the Company's Consolidated Statements of Operations is not known at this time.

• On October 13, 2021, the Company sold an additional $ 30.2 million of the retained Community Bank loan portfolio to Central Bank.

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

The loans included in the sale were classified as held for sale at September 30, 2020.

• On November 13, 2020, Michael K.

Goik, Executive Vice President and Group Head of the Commercial Finance division of the Bank, notified the Bank of his decision to resign from the Bank effective on or before December 13, 2020.

Goik’s resignation was not due to a dispute or disagreement with the Bank or the Company.

Upon the effectiveness of his resignation, Mr.

Goik’s duties will be assumed by Brett L.

Pharr, Co-President and Chief Operating Officer of the Bank.

The loans included in the sale were not classified as held for sale at September 30, 2021.

Management estimates $ 1.0 million in allowance for credit losses at September 30, 2021 relates to this loan sale.

Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

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 8. Financial Statements and Supplementary Data