What changed in this filing

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Item 9A. Controls and Procedures

2021-11-23 compared with 2020-11-30 · 71 added, 74 removed, 151 unchanged (49% of the section changed)

Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures.

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

Management, under the direction of its Chief Executive Officer and Chief Financial Officer, is responsible for maintaining disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “1934 Act”)) that are designed to ensure that information required to be disclosed in reports filed or submitted under the 1934 Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and that such information is accumulated and communicated to management, including the Company’s Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures.

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The evaluation was performed under the direction of the Company’s Chief Executive Officer and Chief Financial Officer to determine the effectiveness, as of September 30, 2021, of the design and operation of the Company’s disclosure controls and procedures.

Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, at September 30, 2020, the Company’s disclosure controls and procedures were effective in timely alerting them to material information relating to the Company required to be included in the Company’s periodic SEC filings.

As previously disclosed in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2019, the Company identified a material weakness in the control environment of the Crestmark division.

The material weakness resulted from the aggregation of control deficiencies at the Crestmark division relating to Information Technology ("IT") system access, program change controls and review procedures related to new loan accounts and client record maintenance changes.

The aggregation of these deficiencies did not result in a material misstatement to the Company's Consolidated Financial Statements.

(b) Remediation for Reported Material Weakness.

The Company worked through its remediation plan throughout fiscal year 2020 and was able to fully implement it during the fiscal fourth quarter ended September 30, 2020 to address the material weakness described above with respect to the internal controls environment of the Crestmark division.

The remediation plan included re-evaluating IT governance and controls, updating procedures related to access management, and training IT personnel.

Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, at September 30, 2021, the Company’s disclosure controls and procedures were not effective in timely alerting them to material information relating to the Company required to be included in the Company’s periodic SEC filings.

In the fiscal fourth quarter of 2021, the Company identified a material weakness in the control environment of the Crestmark Leasing division related to segregation of duties over lease disbursements.

More specifically, users were identified who had the ability to both initiate and approve lease disbursements subsequent to the implementation of a new leasing system in May 2021 and there was not a monitoring control in place to ensure segregation of those duties.

Additionally, the user entitlement review control, specific to this application, was determined to be not effective as it did not identify this segregation of duties issue.

Management determined the deficiencies represent a material weakness in internal controls over financial reporting on the basis that the deficiencies could result in a misstatement potentially impacting the Company's financial statement accounts and disclosures that would not be prevented or detected on a timely basis.

(b) Remediation Plan for Reported Material Weakness

Management performed testing of leasing related disbursements during the impacted period and did not identify any instances where the segregation of the disbursement initiation and approval duties was not maintained.

The Company has implemented a remediation plan to address the material weakness described above with respect to the internal control environment of the Crestmark Leasing division and is committed to maintaining a strong internal controls environment.

To address the material weakness, the Company implemented automated controls to ensure segregation of duties is maintained for disbursements performed within the leasing system and reperformed inspection of access rights within the Leasing Division system.

These immediate remediation steps were completed by October 15, 2021, and management is evaluating implementation of additional enhancements to the Leasing division system control environment.

INHERENT LIMITATIONS ON THE EFFECTIVENESS OF CONTROLS

Any control system, no matter how well designed and operated, can provide only reasonable (not absolute) assurance that its objectives will be met.

Furthermore, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected.

Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs.

Because of the inherent limitations in a cost-effective control system, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

Management conducted an evaluation of the Company’s internal control over financial reporting to determine whether any changes occurred during the three months ended September 30, 2021 that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.

Based on this evaluation, management concluded that, other than the aforementioned material weakness, as of the end of the period covered by this report, there were no changes in the Company’s internal controls over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the 1934 Act) during the fiscal fourth quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.

MANAGEMENT'S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

The Company’s management is responsible for establishing and maintaining effective internal control over financial reporting.

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and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company assets that could have a material effect on the financial statements.

Management assessed the effectiveness of the Company’s internal control over financial reporting as of September 30, 2020, based on the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in “Internal Control Integrated Framework (2013).” Based on this assessment, our management concluded that our internal control over financial reporting was effective as of September 30, 2020.

Management assessed the effectiveness of the Company’s internal control over financial reporting as of September 30, 2021, based on the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in “Internal Control Integrated Framework (2013).” Based on this assessment, our management concluded that our internal control over financial reporting was not effective as of September 30, 2021.

The effectiveness of the Company’s internal control over financial reporting as of September 30, 2021, has been audited by Crowe LLP, the independent registered public accounting firm that also has audited the Company’s Consolidated Financial Statements included in this Annual Report on Form 10-K.

Crowe LLP’s attestation report on the Company’s internal controls over financial reporting appears below.

(d) Changes in Internal Control over Financial Reporting.

Except as disclosed above, there were no changes in the Company's internal control over financial reporting that occurred during the fiscal fourth quarter ended September 30, 2020 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

(e) Inherent Limitations on the Effectiveness of Controls.

Any control system, no matter how well designed and operated, can provide only reasonable (not absolute) assurance that its objectives will be met.

Furthermore, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected.

Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs.

Other Information

On November 30, 2020, the Company and the Bank entered into employment agreements (collectively, the “Employment Agreements”) with Bradley C.

Hanson, Chief Executive Officer and President of the Company and Chief Executive Officer and Co-President of and the Bank, and Glen W.

Herrick, Executive Vice President and Chief Financial Officer of the Company and the Bank (each, an “Executive Officer” and collectively, the “Executive Officers”).

The Employment Agreements are effective as of October 1, 2020.

The Employment Agreements supersede and replace the prior employment agreements between the Executive Officers and the Bank each dated as of October 1, 2016 (collectively, the “Prior Employment Agreements”).

The terms of the Employment Agreements commenced on October 1, 2020 and continue until the applicable Executive Officer’s employment is terminated as provided in the applicable Employment Agreement.

Hanson’s Employment Agreement entitles him to the payment of an annual base salary of $841,500, and Mr.

Herrick’s Employment Agreement entitles him to the payment of an annual base salary of $474,300, in each case subject to increase at any time and subject to decrease after September 30, 2021 if and in a manner proportionate to any decrease in base salary the Company in its discretion implements for other executive officers of the Company.

As of November 2, 2020, Mr.

Hanson’s annual base salary has been so increased to $866,745, and Mr.

Herrick’s annual base salary has been so increased to $488,520.

The Employment Agreements also provide for performance-based annual incentive compensation opportunities under the Company’s Annual Incentive Plan (“AIP”) having target payouts of 100% of base salary in the case of Mr.

Hanson and 75% of base salary in the case of Mr.

Herrick, in each case payable in cash unless otherwise determined by the Compensation Committee (the “Compensation Committee”) of the Company’s Board of Directors.

The Employment Agreements also provide for long-term incentive award opportunities under the Company’s 2002 Omnibus Incentive Plan (“LTIP”) based on the achievement of performance goals and/or service vesting requirements specified in the applicable award agreements and having target opportunities of 200% of base salary in the case of Mr.

Hanson and 125% of base salary in the case of Mr.

Herrick, in each case with performance or vesting periods spanning three years.

Such long-term incentive award opportunities will be payable in cash or shares of the Company’s common stock or a combination thereof as provided in the applicable award agreement.

Under the Employment Agreements, the Executive Officers are eligible to participate in all Company-sponsored employee benefit plans and programs available to executive level employees at the Bank during the term of the Employment Agreements, subject to all eligibility requirements and rules applicable to such plans and programs.

Each Executive Officer is also entitled to reimbursement of all reasonable, out-of-pocket business expenses incurred in the performance of such Executive Officer’s duties on behalf of the Company.

In the event an Executive Officer’s employment is terminated due to his death or Disability (as defined in the Employment Agreements), such Executive Officer (or his beneficiaries, as the case may be) will be entitled to receive (i) his base salary through the termination date, (ii) any business expenses due and payable, (iii) any accrued but unpaid compensation under the AIP due to such Executive Officer for any completed fiscal year and (iv) any vested benefits in such Executive Officer’s account through the Bank’s 401(k) retirement plan (the “Accrued Amounts”).

In addition, such Executive Officer will be entitled to continued vesting of his Performance-Based Restricted Stock Awards (as defined in the Prior Employment Agreements) and prorated compensation under the AIP and prorated awards under the LTIP as determined by the Compensation Committee based upon the number of months of employment during the applicable performance period completed by such Executive Officer prior to termination.

In the event an Executive Officer’s employment is terminated by the Bank for Cause (as defined in the Employment Agreements) or by such Executive Officer without Good Reason (as defined in the Employment Agreements), such Executive Officer will be entitled to the Accrued Amounts but will not be entitled to any other payments or benefits following the termination date.

(i) a severance payment equal to the sum of two times such Executive Officer’s base salary (as in effect as of the termination date), (ii) an amount equal to two times the compensation under the AIP such Executive Officer would have earned for the measurement period in which the termination date occurs based on achievement of the applicable performance goals for such measurement period (the “AIP Bonus Payment”), payable in cash, stock or a combination thereof, notwithstanding any service requirement, (iii) except with respect to the AIP Bonus Payment, vesting of all unvested stock options and stock appreciation rights granted by the Company to such Executive Officer, including such Executive Officer’s Performance-Based Restricted Stock Award, (iv) except with respect to the AIP Bonus Payment, (a) accelerated vesting of any outstanding pre-October 1, 2020 LTIP awards, and (b) pro-rata vesting of post-September 30, 2020 LTIP awards with performance periods that have at least 6 months of completion prior to the termination date, in each case other than stock options and stock appreciation rights that were granted by the Company to such Executive Officer, and (v) a lump sum cash payment of an amount equal to 24 times the monthly premium required to be paid by such Executive Officer to continue such Executive Officer’s group health care coverage under the Company’s group health plan following such Executive Officer’s termination date under the applicable provisions of the Consolidated Omnibus Budget Reconciliation Act (“COBRA”), based upon the Company’s monthly COBRA premium in effect as of the termination date, less applicable withholdings.

Subject to the execution of a release of claims the Executive Officer may have against the Company and continued compliance with the surviving provisions of the Employment Agreements, in the event an Executive Officer’s employment is terminated by the Company without Cause or by such Executive Officer for Good Reason within 90 days prior to or within 24 months following the consummation of a Change of Control, such Executive Officer will be eligible to receive the Severance Package, and any and all then unvested AIP and LTIP awards granted to such Executive Officer by the Company will immediately vest and be paid at the greater of target level of performance or actual level of performance (if actual level of performance is then determinable) on the termination date.

If an Executive Officer has a termination of employment under the Employment Agreement for any reason other than for Cause after satisfying the requirements for Retirement (as defined below), and such Executive Officer is not otherwise eligible for the Severance Package, if the termination date occurs on or after 6 months following commencement of the Company’s fiscal year, such Executive Officer is entitled to receive, except as otherwise provided in an applicable award agreement, the AIP and the LTIP awards, if any, that such Executive Officer would have earned for the measurement/performance periods in which the termination date occurs based on achievement of the applicable performance goals for such measurement/performance periods as determined at the end of the respective measurement/performance period, payable in cash, stock or a combination thereof, notwithstanding any service requirement.

Such Executive Officer will also receive continued vesting of such Executive Officer’s Performance-Based Restricted Stock Award.

For purposes of the Employment Agreements, “Retirement” means retirement from employment with the Company or an entity within the Company and its subsidiaries and affiliates as an employee, director, director emeritus or advisory director thereof, where either (i) such Executive Officer has reached the age of 65 or (ii) the sum of such Executive Officer’s age and length of service (as an employee, director, director emeritus or advisory director) is greater than or equal to 70.

The Employment Agreements provide for suspension or termination of the Company’s obligations under the Employment Agreements in connection with certain regulatory actions and provide for clawback of compensation paid to the Executive Officers under certain circumstances.

In addition, the Employment Agreements provide for a 24-month non-solicitation period (covering both employees and business relationships) and a 24-month non-compete requirement in addition to other restrictive covenants.

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Not applicable.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of September 30, 2020, based on criteria established in Internal Control – Integrated Framework:

In our opinion, because of the effects of the material weakness discussed in the following paragraph, the Company has not maintained, in all material respects, effective internal control over financial reporting as of September 30, 2021, based on criteria established in Internal Control – Integrated Framework:

(2013) issued by COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated statements of financial condition of 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") and our report dated November 30, 2020 expressed an unqualified opinion.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company's annual or interim financial statements will not be prevented or detected on a timely basis.

The following material weakness has been identified and included in management's report:

A material weakness in the control environment of the Crestmark Leasing division resulting from the identification of users who had the ability to both initiate and approve lease disbursements, subsequent to the implementation of a new leasing system in May 2021.

Additionally, the user entitlement review completed did not identify this segregation of duties issue.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated statements of financial condition of 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 each of the years in the three year period ended September 30, 2021, and the related notes (collectively referred to as the "financial statements") and our report dated November 23, 2021 expressed an unqualified opinion.

We considered the material weakness identified above in determining the nature, timing, and extent of audit procedures applied in our audit of the 2021 financial statements, and this report on Internal Control over Financial Reporting does not affect such report on the financial statements.

Basis for Opinion

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A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,

accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

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Directors, Executive Officers and Corporate Governance

Information concerning directors of the Company required by this item will be included under the captions “Election of Directors,” “Communicating with Our Directors,” "Meetings and Committees" and “Stockholder Proposals For The Fiscal Year 2021 Annual Meeting” in the Company’s definitive Proxy Statement for the Annual Meeting of Stockholders to be held on February 23, 2021 (the “2020 Proxy Statement”), a copy of which will be filed not later than 120 days after September 30, 2020, and is incorporated herein by reference.

Information concerning directors of the Company required by this item will be included under the captions “Election of Directors,” “Communicating with Our Directors,” "Meetings and Committees" and “Stockholder Proposals For The Fiscal Year 2022 Annual Meeting” in the Company’s definitive Proxy Statement for the Annual Meeting of Stockholders to be held on February 22, 2022, a copy of which will be filed no later than 120 days after September 30, 2021 (the “2022 Proxy Statement”), and is incorporated herein by reference.

Executive Officers

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Information, if applicable, required by this item regarding compliance with Section 16(a) of the Exchange Act will be included under the caption “Delinquent Section 16(a) Reports” in the Company’s 2022 Proxy Statement and is incorporated herein by reference.

Audit Committee Financial Expert

Audit Committee and Audit Committee Financial Expert

Information regarding the audit committee of the Company’s Board of Directors will be included under the captions “Meetings and Committees” and “Election of Directors” in the Company’s 2022 Proxy Statement and is incorporated herein by reference.

Code of Ethics

Information regarding the Company’s Code of Ethics will be included under the caption “Corporate Governance” in the Company’s 2020 Proxy Statement and is incorporated herein by reference.

Code of Business Conduct

Information regarding the Company’s Code of Business Conduct will be included under the caption “Corporate Governance” in the Company’s 2022 Proxy Statement and is incorporated herein by reference.

Executive Compensation

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The plan was amended and restated effective November 24, 2014 and currently authorizes 4,800,000 shares to be issued under the plan.

The Company also has unexercised options outstanding under a previous stock option plan.

The following table provides information about the Company’s common stock that may be issued under the Company’s omnibus incentive plans.

The Company no longer has unexercised options, warrants or rights outstanding under any stock option or other incentive plan.

The following table provides information about the Company’s common stock that may be issued under the Company’s omnibus incentive plans as of September 30, 2021.

Plan Category Number of securities

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(b) Exhibits:

Registrant’s Certificate of Incorporation, as amended, filed on August 8, 2018 as an exhibit to the Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2018, is incorporated herein by reference.

Registrant’s Restated Certificate of Incorporation.

Registrant’s Second Amended and Restated By-laws, filed on June 24, 2020 as an exhibit to the Registrant’s Current Report on Form 8-K, is incorporated herein by reference.

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2002 Omnibus Incentive Plan Restricted Stock Agreement, filed on August 2, 2016 as an exhibit to the Registrant’s Quarterly Report on Form 10-Q, is incorporated herein by reference.

Employment Agreement between MetaBank and Michael Goik, dated as of January 9, 2018, filed on April 20, 2018 as an exhibit to the Registrant's registration statement on Form S-4 (Commission File No.

333-223769), is incorporated herein by reference.

Employment Agreement, effective as of October 1, 2020, among MetaBank, Meta Financial Group, Inc.

Employment Agreement among MetaBank, Meta Financial Group, Inc.

and Bradley C.

Hanson is filed herewith.

Employment Agreement, effective as of October 1, 2020, among MetaBank, Meta Financial Group, Inc.

Herrick is filed herewith.

Form of Performance Share Unit Award Agreement is filed herewith.

Form of Performance-Based Restricted Stock Award Agreement is filed herewith.

Hanson, effective as of October 1, 2020, filed on November 30, 2020 as an exhibit to the Registrant's Annual Report on Form 10-K, is incorporated herein by reference.

Employment Agreement among MetaBank, Meta Financial Group, Inc.

Herrick, effective as of October 1, 2020, filed on November 30, 2020 as an exhibit to the Registrant's Annual Report on Form 10-K, is incorporated herein by reference.

Form of Performance Share Unit Award Agreement, filed on November 23, 2021 as an exhibit to the Registrant's Annual Report on Form 10-K, is incorporated herein by reference.

Form of Performance-Based Restricted Stock Award Agreement, filed on November 23, 2021 as an exhibit to the Registrant's Annual Report on Form 10-K, is incorporated herein by reference.

Severance and General Release Agreement by and between MetaBank, N.A.

and Sheree S.

Thornsberry, effective as of April 30, 2021, filed on May 3, 2021 as an exhibit to the Registrant’s Current Report on Form 8-K, is incorporated herein by reference.

Executive Nonqualified Deferred Compensation Plan Adoption Agreement by MetaBank, National Association, effective as of July 1, 2021, filed on May 20, 2021 as an exhibit to the Registrant’s Current Report on Form 8-K, is incorporated herein by reference.

Executive Nonqualified Deferred Compensation Plan, effective as of July 1, 2021, filed on May 20, 2021 as an exhibit to the Registrant’s Current Report on Form 8-K, is incorporated herein by reference.

First Amendment to the MetaBank, National Association Amended and Restated Supplemental Employees’ Investment Plan for Salaried Employees, effective as of June 30, 2021, filed on May 20, 2021 as an exhibit to the Registrant’s Current Report on Form 8-K, is incorporated herein by reference.

Transition and General Release Agreement by and among Meta Financial Group, Inc., MetaBank, National Associate and Bradley C.

Hanson, dated as of September 1, 2021, filed on September 7, 2021 as an exhibit to the Registrant’s Current Report on Form 8-K, is incorporated herein by reference.

Executive Severance Pay Policy, effective as of November 1, 2021, filed on November 2, 2021 as an exhibit to the Registrant’s Current Report on Form 8-K, is incorporated herein by reference.

Termination Agreement by and among Meta Financial Group, Inc., MetaBank, National Associate and Glen W.

Herrick, effective as of November 1, 2021, filed on November 2, 2021 as an exhibit to the Registrant’s Current Report on Form 8-K, is incorporated herein by reference.

Subsidiaries of the Registrant is filed herewith.

Consent of Independent Registered Public Accounting Firm of Crowe LLP is filed herewith.

Consent of Independent Registered Public Accounting Firm of KPMG LLP is filed herewith.

Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes‑Oxley Act of 2002 is filed herewith.

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META FINANCIAL GROUP, INC.

November 30, 2020 By:

/s/ Bradley C.

President, Chief Executive Officer, and Director

November 23, 2021

Chief Executive Officer and Director

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

/s/ Bradley C.

November 23, 2021

Hanson, President, Chief Executive Officer, and

Pharr, Chief Executive Officer and Director

(Principal Executive Officer)

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Hajek, Director

/s/ Bradley C.

November 23, 2021

Hanson, Director

/s/ Elizabeth G.

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Kramer, Director

/s/ Ronald D.

November 23, 2021

McCray, Director

/s/ Frederick V.

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Stork, Director

/s/ Lizabeth H.

Zlatkus Date:

November 23, 2021

Zlatkus, Director

Herrick Date:

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(Principal Financial Officer)

Theisen Date:

/s/ Jennifer W.

November 23, 2021

Theisen, Senior Vice President

Warren, Senior Vice President

and Chief Accounting Officer

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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 9A. Controls and Procedures