What changed in this filing

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Item 1. Financial Statements

2022-02-08 compared with 2021-08-09 · 333 added, 809 removed, 805 unchanged (59% of the section changed)

3 unchanged sentences

Condensed Consolidated Statements of Financial Condition

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

(Dollars in thousands, except per share data) December 31, 2021 September 30, 2021

ASSETS (Unaudited) (Audited)

Cash and cash equivalents $ 1,230,100 $ 314,019

Investment securities available for sale, at fair value 854,023 814,495

Mortgage-backed securities available for sale, at fair value 1,063,582 453,607

Investment securities held to maturity, at cost 60,228 87,183

Mortgage-backed securities held to maturity, at cost 4,019 5,427

Securities available for sale, at fair value 1,782,739 1,864,899

Securities held to maturity, at amortized cost (fair value $ 50,364 and $ 56,391 , respectively)

50,994 56,669

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

Loans held for sale 36,182 56,194

1 unchanged sentence

Allowance for credit losses ( 67,623 ) ( 68,281 )

Federal Reserve Bank and Federal Home Loan Bank stocks, at cost 28,433 27,138

Accrued interest receivable 17,240 16,254

1 unchanged sentence

Rental equipment, net 234,693 213,116

Bank-owned life insurance 94,142 92,315

Foreclosed real estate and repossessed assets.

net 1,204 9,957

Goodwill 309,505 309,505

Intangible assets 34,898 41,692

Foreclosed real estate and repossessed assets, net 298 2,077

Goodwill and intangible assets 341,166 342,653

Prepaid assets 17,007 10,513

Deferred taxes, net 20,072 17,723

Other assets 210,071 199,686

1 unchanged sentence

LIABILITIES AND STOCKHOLDERS’ EQUITY

Noninterest-bearing checking 5,385,569 4,356,630

Interest-bearing checking 255,509 157,571

Savings deposits 93,608 47,866

Money market deposits 63,920 48,494

Time certificates of deposit 11,425 20,223

Wholesale deposits 78,840 348,416

Total deposits 5,888,871 4,979,200

Short-term borrowings — —

Deposits $ 6,525,569 $ 5,514,971

Long-term borrowings 92,274 92,834

Accrued interest payable 1,853 1,923

Accrued expenses and other liabilities 165,658 210,961

1 unchanged sentence

STOCKHOLDERS’ EQUITY

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

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

Common stock, $ 0.01 par value;

90,000,000 shares authorized, 32,123,004 and 34,479,164 shares issued, 31,919,780 and 34,360,890 shares outstanding at June 30, 2021 and September 30, 2020, respectively

90,000,000 shares authorized, 30,158,420 and 31,686,483 shares issued, 30,080,717 and 31,669,952 shares outstanding at December 31, 2021 and September 30, 2021, respectively

Common stock, Nonvoting, $ 0.01 par value;

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

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

Additional paid-in capital 610,816 604,484

1 unchanged sentence

Accumulated other comprehensive income 724 7,599

Treasury stock, at cost, 203,224 and 118,274 common shares at June 30, 2021 and September 30, 2020, respectively

Treasury stock, at cost, 77,703 and 16,531 common shares at December 31, 2021 and September 30, 2021, respectively

( 4,318 ) ( 860 )

7 unchanged sentences

Condensed Consolidated Statements of Operations (Unaudited)

Three Months Ended June 30, Nine Months Ended June 30,

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

Three Months Ended December 31,

(Dollars in thousands, except per share data) 2021 2020

Interest and dividend income:

6 unchanged sentences

FHLB advances and other borrowings 1,137 1,350

1,508 5,269 5,474 29,909

Net interest income 71,613 65,999

4 unchanged sentences

Tax advance product fees 1,233 1,960

Payment card and deposit fees 29,203 21,302 81,641 65,957

Payments card and deposit fees 25,132 22,564

Other bank and deposit fees 237 237

Rental income 11,077 9,885

Net gain realized on investment securities — — 6 —

Gain on divestitures — — — 19,275

Gain (loss) on sale of other 5,955 1,214 10,935 969

Gain on sale of securities 137 —

Gain on sale of trademarks 50,000 —

(Loss) gain on sale of other ( 3,465 ) 2,847

Other income 1,661 7,315

Total noninterest income 86,591 45,455

Noninterest expense:

Non-interest expense:

Compensation and benefits 38,225 32,331

10 unchanged sentences

Income before income tax expense 75,582 32,790

Income tax expense (benefit) 4,934 ( 2,426 ) 9,600 3,870

Income tax expense 14,276 3,533

Net income before noncontrolling interest 61,306 29,257

Net income attributable to noncontrolling interest 1,158 1,087 3,221 3,573

Net income (loss) attributable to noncontrolling interest ( 18 ) 1,220

Net income attributable to parent $ 61,324 $ 28,037

6 unchanged sentences

Condensed Consolidated Statements of Comprehensive Income (Unaudited)

Three Months Ended June 30, Nine Months Ended June 30,

Three Months Ended December 31,

(Dollars in thousands) 2021 2020

4 unchanged sentences

( 9,277 ) 2,846

Unrealized gain (loss) on currency translation 121 295 692 ( 269 )

Unrealized gain on currency translation 66 445

Deferred income tax effect ( 2,336 ) 714

1 unchanged sentence

Total comprehensive income 54,431 31,834

Total comprehensive income attributable to noncontrolling interest 1,158 1,087 3,221 3,573

Total comprehensive income (loss) attributable to noncontrolling interest ( 18 ) 1,220

Comprehensive income attributable to parent $ 54,449 $ 30,614

3 unchanged sentences

Condensed Consolidated Statements of Changes in Stockholders' Equity (Unaudited)

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

Stockholders' Equity

Three Months Ended June 30, 2021

Earnings Accumulated

Comprehensive

Income (Loss), Net of Tax

Stock Total Meta Stockholders’

Equity Noncontrolling Interest Total Equity

Balance, March 31, 2021

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

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

— — ( 1,594 ) — — ( 1,594 ) — ( 1,594 )

Shares repurchased — — — — ( 41 ) ( 41 ) — ( 41 )

Stock compensation — 1,498 — — — 1,498 — 1,498

Total other comprehensive income — — — 2,413 — 2,413 — 2,413

Net income — — 38,701 — — 38,701 1,158 39,859

Net investment by (distribution to) noncontrolling interests — — — — — — ( 760 ) ( 760 )

Balance, June 30, 2021

$ 319 $ 602,720 $ 262,578 $ 15,222 $ ( 5,696 ) $ 875,143 $ 1,490 $ 876,633

Three Months Ended June 30, 2020

Balance, March 31, 2020 $ 346 $ 590,682 $ 212,027 $ 1,654 $ ( 3,397 ) $ 801,312 $ 3,762 $ 805,074

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

— — ( 1,717 ) — — ( 1,717 ) — ( 1,717 )

Issuance of common shares due to exercise of stock options — 88 — — — 88 — 88

Shares repurchased — — — — ( 15 ) ( 15 ) — ( 15 )

Stock compensation — 1,923 — — — 1,923 — 1,923

Total other comprehensive income — — — 6,341 — 6,341 — 6,341

Net income — — 18,190 — — 18,190 1,087 19,277

Net investment by (distribution to) noncontrolling interests — — — — — — ( 1,062 ) ( 1,062 )

Balance, June 30, 2020

$ 346 $ 592,693 $ 228,500 $ 7,995 $ ( 3,412 ) $ 826,122 $ 3,787 $ 829,909

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

Stockholders' Equity

Nine Months Ended June 30, 2021

(Dollars in thousands, except per share data) Meta Financial Group, Inc.

Three Months Ended December 31, 2021 Common

Stock Additional

Capital Retained

Earnings Accumulated

Comprehensive

Income (Loss)

Income (Loss) Treasury

Stock Total Meta

Stockholders’

Equity Noncontrolling Interest Total Equity

Equity Noncontrolling interest Total

Stockholders’

Balance, September 30, 2021

$ 317 $ 604,484 $ 259,189 $ 7,599 $ ( 860 ) $ 870,729 $ 1,155 $ 871,884

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 ($ 0.05 per share)

— — ( 1,521 ) — — ( 1,521 ) — ( 1,521 )

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

Shares repurchased ( 27 ) 27 ( 84,999 ) — ( 2,019 ) ( 87,018 ) — ( 87,018 )

Issuance of common stock due to ESOP 1 2,885 — — — 2,886 — 2,886

Repurchases of common stock ( 17 ) 17 ( 101,000 ) — ( 3,458 ) ( 104,458 ) — ( 104,458 )

Stock compensation — 3,430 — — — 3,430 — 3,430

2 unchanged sentences

Net investment by (distribution to) noncontrolling interests — — — — — — ( 495 ) ( 495 )

Balance, June 30, 2021

Balance, December 31, 2021

$ 301 $ 610,816 $ 217,992 $ 724 $ ( 4,318 ) $ 825,515 $ 642 $ 826,157

Nine Months Ended June 30, 2020

Three Months Ended December 31, 2020

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 ($ 0.05 per share)

— — ( 1,613 ) — — ( 1,613 ) — ( 1,613 )

Issuance of common shares due to exercise of stock options — 293 — — — 293 — 293

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

Issuance of common shares due to ESOP 1 3,219 — — — 3,220 — 3,220

Shares repurchased ( 35 ) 35 ( 110,505 ) — ( 2,967 ) ( 113,472 ) — ( 113,472 )

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

Repurchases of common stock ( 20 ) 20 ( 55,000 ) — ( 1,763 ) ( 56,763 ) — ( 56,763 )

Stock compensation — 1,046 — — — 1,046 — 1,046

2 unchanged sentences

Net investment by (distribution to) noncontrolling interests — — — — — — ( 835 ) ( 835 )

Balance, June 30, 2020

Balance, December 31, 2020

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

3 unchanged sentences

Condensed Consolidated Statements of Cash Flows (Unaudited)

Nine Months Ended June 30,

Three Months Ended December 31,

(Dollars in thousands) 2021 2020

3 unchanged sentences

Depreciation, amortization and accretion, net 15,322 14,068

Stock compensation 5,090 8,320

Provision (recovery):

Credit losses 40,991 55,796

Deferred taxes ( 1,360 ) 2,289

Loans held for sale:

Originations ( 472,935 ) ( 63,396 )

Proceeds from sales 694,063 168,814

Net change 2,495 22,612

Provision for credit losses 186 6,089

Provision (reversal of) for deferred taxes 8,015 ( 7,402 )

Originations of loans held for sale ( 385,558 ) ( 303,501 )

Proceeds from sales of loans held for sale 562,689 451,652

Net change in loans held for sale 8,805 5,425

Fair value adjustment of foreclosed real estate 120 123

Net realized (gain) loss):

Other assets 28 361

Divestitures — ( 19,275 )

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

Securities available for sale, net ( 6 ) —

Loans held for sale ( 9,804 ) ( 4,069 )

Lease receivables and equipment ( 1,076 ) ( 2,302 )

Other assets ( 3,742 ) ( 20,623 )

Deposits held for sale — 1,535

Accrued interest payable ( 70 ) ( 5,082 )

Accrued expenses and other liabilities 25,402 ( 10,218 )

Accrued interest receivable 398 1,738

Net realized (gain) on securities held to maturity, net ( 137 ) —

Net realized (gain) loss on loans held for sale 4,365 ( 3,492 )

Net realized (gain) on premise, furniture, and equipment ( 23 ) —

Net realized (gain) loss on lease receivables and equipment ( 924 ) 633

Net realized (gain) on trademarks ( 50,000 ) —

Change in bank-owned life insurance value ( 610 ) ( 621 )

Impairment on assets held for sale — 242

Net change in accrued interest receivable ( 987 ) ( 506 )

Net change in other assets ( 23,569 ) ( 2,075 )

Net change in accrued expenses and other liabilities ( 45,303 ) ( 20,588 )

Stock compensation 3,430 1,046

Net cash provided by operating activities 157,127 170,108

Cash flows from investing activities:

Securities available for sale:

Purchases ( 976,502 ) ( 60,024 )

Proceeds from sales 50,468 —

Proceeds from maturities and principal repayments 266,673 166,477

Securities held to maturity:

Proceeds from maturities and principal repayments 27,041 28,642

Loans and leases:

Purchases ( 145,639 ) ( 120,406 )

Proceeds from sales 13,822 3,099

Net change ( 177,944 ) ( 73,360 )

Purchases of securities available for sale ( 20,894 ) ( 23,963 )

Proceeds from maturities of and principal collected on securities available for sale 91,297 64,982

Proceeds from sales of securities held to maturity 200 —

Proceeds from maturities of and principal collected on securities held to maturity 5,409 10,755

Purchases of Federal Reserve Bank and Federal Home Loan Bank stock ( 800 ) —

Redemption of Federal Reserve Bank and Federal Home Loan Bank stock 800 —

Purchases of loans and leases ( 57,713 ) ( 64,930 )

Proceeds from sales of loans and leases 30,235 6,923

Net change in loans and leases ( 145,311 ) ( 170,684 )

Purchases of premises, furniture, and equipment ( 1,949 ) ( 582 )

Proceeds from sales of premises, furniture, and equipment 35 —

Purchases of rental equipment ( 103,643 ) ( 13,146 )

Proceeds from sales of rental equipment 4,999 5,609

Net change in rental equipment ( 1,841 ) —

Proceeds from sales of foreclosed real estate and repossessed assets 1,659 2,657

Federal Reserve Bank and Federal Home Loan Bank stock:

Purchases ( 1,295 ) ( 472,000 )

Redemption — 471,080

Rental equipment:

Purchases ( 36,800 ) ( 48,279 )

Proceeds from sales 11,744 13,262

Net change ( 2,303 ) 2,625

Premises, furniture, and equipment:

Purchases ( 9,448 ) ( 8,573 )

Proceeds from sales 86 —

Proceeds from divestitures — 3,498

Proceeds from sale of trademarks 50,000 —

Net cash (used in) investing activities ( 147,517 ) ( 182,379 )

Cash flows from financing activities:

Checking, savings, and money market deposits 1,188,046 4,440,032

Time certificates of deposit ( 8,798 ) ( 84,285 )

Wholesale deposits ( 269,576 ) ( 813,495 )

FHLB and other borrowings — ( 165,000 )

Federal funds — ( 477,000 )

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

Distribution to noncontrolling interest ( 2,882 ) ( 3,833 )

Proceeds from other liabilities 80 1,633

Principal payments:

Other liabilities ( 4,775 ) ( 5,977 )

Capital lease obligations ( 24 ) ( 1,729 )

Cash dividends paid ( 4,804 ) ( 5,370 )

Net change in deposits 1,010,598 1,228,591

Principal payments on capital lease obligations ( 7 ) ( 8 )

Principal payments on other liabilities ( 598 ) ( 1,498 )

Dividends paid on common stock ( 1,521 ) ( 1,613 )

Issuance of common stock due to ESOP 2,886 3,036

Issuance of common stock due to restricted stock — 2

Proceeds from exercise of stock options and issuance of common stock — 293

Shares repurchased ( 87,018 ) ( 113,472 )

Repurchases of common stock ( 104,458 ) ( 56,763 )

Distributions to noncontrolling interest ( 495 ) ( 835 )

Net cash provided by financing activities 906,405 1,170,910

3 unchanged sentences

Cash and cash equivalents at end of fiscal period $ 1,230,100 $ 1,586,451

Nine Months Ended June 30,

Three Months Ended December 31,

(Dollars in thousands) 2021 2020

6 unchanged sentences

Supplemental schedule of non-cash investing activities:

Loans and leases to foreclosed real estate and repossessed assets 9 5,983

Held for sale to loans and leases 12 —

Loans and leases to held for sale 168,426 100,442

Loans and leases to rental equipment 988 1,353

Loans and leases to foreclosed real estate and repossessed assets — 9

Rental equipment to loan and leases 72,267 37

Loans and leases to held for sale 118,037 325,092

Other assets to held for sale — 284

Deposits to held for sale — 288,975

Recognition of operating lease ROU assets, net of measurements 12,954 27,019

See Notes to Condensed Consolidated Financial Statements.

5 unchanged sentences

Such information reflects all adjustments (consisting of normal recurring adjustments) that are, in the opinion of management, necessary for a fair presentation of the financial position and results of operations for the periods presented.

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

The results of the three months ended December 31, 2021 are not necessarily indicative of the results expected for the fiscal year ending September 30, 2022.

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

1 unchanged sentence

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RECENTLY ADOPTED ACCOUNTING STANDARDS UPDATES ("ASU")

Significant accounting policies in effect and disclosed within the Company’s most recent audited consolidated financial statements as of September 30, 2020 remain substantially unchanged with the exception of the accounting policies for allowance for credit losses and securities impairment as a result of adopting ASU 2016-13, Financial Instruments – Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments, and related ASUs, as described below.

Allowance for Credit Losses ("ACL").

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 impairment.

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

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

Generally, the Company measures impairment 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, impairment is measured at the present value of expected future cash flows discounted at the loan or lease initial effective interest rate.

The impairment of 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 Condensed 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.

Securities Impairment.

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

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

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

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

Securities for further information.

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

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

Additional and modified disclosure requirements under CECL are included in Note 5.

Securities and Note 6.

Loans and Leases, Net.

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

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

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

Significant accounting policies in effect and disclosed within the Company’s most recent audited consolidated financial statements as of September 30, 2021 remain substantially unchanged.

The following ASUs became effective for the Company on October 1, 2021, none of which had a material impact on the Company’s significant accounting policies or Condensed Consolidated Financial Statements:

– 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 after December 15, 2020.

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

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.

The amendments include a one-time sale or transfer election of held-to-maturity debt securities impacted by reference rate reform.

The amendments in this ASU are effective upon issuance through December 31, 2022.

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.

SIGNIFICANT EVENTS

COVID-19 Pandemic

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.

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.

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

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

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

It is the Company's understanding that loans funded through the PPP program are fully guaranteed by the U.S.

government and that a portion of these loans will ultimately be forgiven by the SBA in accordance with the terms of the program.

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

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 under the modification agreement.

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

As of the Period Ended

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

National Lending

Term lending $ 2,955 $ 5,460 $ 18,321

Asset based lending — — 1,124

Lease financing 275 379 1,637

Commercial finance 3,230 5,839 21,082

Consumer credit products 19 301 1,210

Other consumer finance 1,609 1,627 2,682

Consumer finance 1,628 1,928 3,892

Total National Lending 4,858 7,767 24,974

Community Banking

Commercial real estate and operating 36,632 58,707 60,319

Total Community Banking 36,632 58,707 60,319

Total loans and leases 41,490 66,474 85,293

Total COVID-19 related modifications $ 41,490 $ 66,474 $ 85,293

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 Condensed 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 $ 2.2 million and $ 1.4 million in servicing fee expense during the nine months ended June 30, 2021 and 2020, respectively, and $ 3.5 million for the fiscal year ended September 30, 2020.

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

The Company sold no additional loans from the retained Community Bank portfolio in the three months ended June 30, 2021 and 2020, and $ 233.0 million and none for the nine months ended June 30, 2021 and 2020, respectively.

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

As of June 30, 2021, the Company had $ 18.1 million of community bank loans classified as held for sale and expects to sell those loans in the upcoming fourth fiscal quarter.

Loans and Leases, Net for additional information.

On December 7, 2021, the Company executed a Purchase Agreement (the “Agreement”) with Beige Key, LLC (the “Assignee”) for the sale of all of the Company’s worldwide right, title and interest in and to company names and tradenames including Meta and other "Meta" formative names including MetaBank and Meta Financial Group, and the domain names, social media accounts and goodwill associated with the foregoing (collectively, the “Meta” tradenames) in exchange for $ 60.0 million in cash.

Subject to the terms and conditions set forth in the Agreement, the Company has one year from the Agreement execution date to phase out and cease all use of the Meta tradenames.

From the date of the Agreement until the date such phase out is completed (the “Phase Out Period”), Assignee has granted the Company a non-exclusive royalty free license in the United States and Canada to use the Meta tradenames in the manner in which they were used by the Company prior to the Agreement.

The Company received $ 50.0 million upon execution and delivery of the Agreement, at which time the Meta tradenames were assigned to the Assignee.

The Company has recognized the $ 50.0 million as noninterest income during the period ended December 31, 2021.

The remaining $ 10.0 million was paid by the Assignee and is being held in an escrow account by a third-party agent until the agreed upon activities within the Phase Out Period have been completed, at which time the funds will be released to the Company.

The Company’s receipt of the $ 10.0 million payment is contingent upon phase out activities that have not yet been completed and has not been recognized in the Company’s consolidated financial statements for the fiscal quarter ended December 31, 2021.

The Company has not incurred any material expenses related to rebranding efforts as of December 31, 2021;

however, the Company is expecting to incur $ 15.0 million to $ 20.0 million in rebranding expenses over the next fiscal year.

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.

Securities Available For Sale

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

At June 30, 2021

Debt Securities AFS

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

At December 31, 2021

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

SBA securities 146,639 4,200 — 150,839

5 unchanged sentences

At September 30, 2021

Debt securities AFS

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

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

4 unchanged sentences

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

Securities Held To Maturity

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

At June 30, 2021

Debt Securities HTM

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

At December 31, 2021

Non-bank qualified obligations of states and political subdivisions $ 47,751 $ 14 $ ( 679 ) $ 47,086

2 unchanged sentences

At September 30, 2021

Debt securities HTM

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

7 unchanged sentences

Value Gross Unrealized (Losses)

At June 30, 2021

Debt Securities AFS

At December 31, 2021

Non-bank qualified obligations of states and political subdivisions $ 110,535 $ ( 1,425 ) $ — $ — $ 110,535 $ ( 1,425 )

2 unchanged sentences

Total debt securities AFS $ 1,011,566 $ ( 12,228 ) $ 136,513 $ ( 2,789 ) $ 1,148,079 $ ( 15,017 )

LESS THAN 12 MONTHS OVER 12 MONTHS TOTAL

(Dollars in Thousands) Fair

Value Gross Unrealized (Losses) Fair

Value Gross Unrealized (Losses)

At September 30, 2021

Debt securities AFS

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

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

2 unchanged sentences

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 Gross Unrealized (Losses) Fair

Value Gross Unrealized (Losses)

At June 30, 2021

Debt Securities HTM

At December 31, 2021

Non-bank qualified obligations of states and political subdivisions $ 42,068 $ ( 679 ) $ — $ — $ 42,068 $ ( 679 )

Total debt securities HTM $ 42,068 $ ( 679 ) $ — $ — $ 42,068 $ ( 679 )

LESS THAN 12 MONTHS OVER 12 MONTHS TOTAL

(Dollars in Thousands) Fair

Value Gross Unrealized (Losses) Fair

Value Gross Unrealized (Losses)

At September 30, 2021

Debt securities HTM

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 )

The adoption of CECL was inconsequential to debt securities AFS.

At June 30, 2021, there were no ACL for debt securities AFS.

At June 30, 2021, there were 49 securities AFS in an unrealized loss position.

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

At December 31, 2021, there were 80 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 December 31, 2021, there was no ACL for debt securities AFS.

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

4 unchanged sentences

However, certain prepayment penalties may apply.

At June 30, 2021 At September 30, 2020

(Dollars in Thousands) Amortized Cost Fair

(Dollars in thousands) At December 31, 2021 At September 30, 2021

Securities AFS at Fair Value Amortized Cost Fair

Value Amortized Cost Fair

Securities AFS at Fair Value

Due in one year or less $ 810 $ 814 $ 810 $ 822

5 unchanged sentences

Total securities AFS, at fair value $ 1,782,201 $ 1,782,739 $ 1,855,084 $ 1,864,899

At June 30, 2021 At September 30, 2020

At December 31, 2021 At September 30, 2021

(Dollars in thousands) Amortized Cost Fair

5 unchanged sentences

Total securities HTM, at cost $ 50,994 $ 50,364 $ 56,669 $ 56,391

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

Equity Securities

Equity securities without a readily determinable fair value totaled $ 14.7 million at June 30, 2021 and $ 11.0 million at September 30, 2020.

The Company held $ 9.9 million at December 31, 2021 and $ 12.7 million at September 30, 2021 in marketable equity securities.

The Company recognized $ 2.3 million in unrealized loss in an investee during the three months ended December 31, 2021.

All other marketable equity securities and related activity were insignificant for the three months ended December 31, 2021 and 2020.

No marketable securities were sold during the first quarter of fiscal year 2022.

Non-marketable equity securities with a readily determinable fair value totaled $ 5.6 million at December 31, 2021 and $ 4.6 million at September 30, 2021.

The Company recognized $ 0.3 million in unrealized losses and $ 0.1 million in unrealized gains during the three months ended December 31, 2021 and 2020, respectively.

No such securities were sold during the first quarter of fiscal year 2022.

Non-marketable equity securities without readily determinable fair value totaled $ 15.9 million at December 31, 2021 and $ 16.0 million at September 30, 2021.

There was one security sold during the first quarter of fiscal year 2022 for a $ 0.1 million gain .

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 June 30, 2021 and September 30, 2020.

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

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

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.

The Company's borrowings from the FHLB are secured by specific investment securities.

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

2 unchanged sentences

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

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

The carrying value of the stock held at the FHLB was $ 8.7 million at December 31, 2021 and $ 8.7 million at September 30, 2021.

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.

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

Equity Security Impairment

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

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

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

The Company recognized $ 2.0 million in impairment recognized for such investments for the nine months ended June 30, 2021.

The Company recognized no impairment for such investments for the three months ended December 31, 2021.

LOANS AND LEASES, NET

Loans and leases consist of the following:

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

National Lending

(Dollars in thousands) December 31, 2021 September 30, 2021

Term lending $ 1,038,378 $ 961,019

11 unchanged sentences

Warehouse finance 466,831 419,926

Total National Lending 3,191,255 2,828,576

Community banking — 199,132

Commercial real estate and operating 294,810 457,371

Consumer one-to-four family real estate and other 1,349 16,486

Agricultural real estate and operating 7,825 11,707

Total Community Banking 303,984 485,564

Total loans and leases 3,682,606 3,607,815

Net deferred loan origination costs (fees) 1,431 8,625

Net deferred loan origination costs 1,655 1,748

Total gross loans and leases 3,684,261 3,609,563

1 unchanged sentence

Total loans and leases, net $ 3,616,638 $ 3,541,282

During the nine months ended June 30, 2021, the Company transferred $ 118.0 million of Community Banking loans to held for sale.

During the nine months ended June 30, 2020, the Company transferred $ 325.1 million of Community Banking loans to held for sale.

During the nine months ended June 30, 2021 and 2020, the Company originated $ 472.9 million of other consumer finance, SBA/USDA, and consumer credit product loans as held for sale and $ 63.4 million of SBA/USDA and consumer credit product loans as held for sale, respectively.

The Company sold held for sale loans resulting in proceeds of $ 694.1 million and gains on sale of $ 9.8 million during the nine months ended June 30, 2021.

The Company sold held for sale loans resulting in proceeds of $ 440.5 million and gains on sale of $ 7.0 million during the nine months ended June 30, 2020.

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

Three Months Ended June 30, Nine Months Ended June 30,

During the three months ended December 31, 2021, the Company transferred $ 168.4 million of Community Banking loans to held for sale.

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

During the three months ended December 31, 2021 and 2020, the Company originated $ 385.6 million and $ 303.5 million of SBA/USDA, consumer credit product loans, and other consumer finance as held for sale, respectively.

The Company sold held for sale loans resulting in proceeds of $ 562.7 million and loss on sale of $ 4.4 million during the three months ended December 31, 2021.

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

In connection with the Company's sale of the Bank's Community Bank division to Central Bank, the Company entered into a servicing agreement with Central Bank for the retained Community Bank loan portfolio that became effective on February 29, 2020 (the "Closing Date").

The Company recognized $ 0.2 million and $ 1.1 million in servicing fee expense during the three months ended December 31, 2021 and 2020, respectively, and $ 3.3 million for the fiscal year ended September 30, 2021.

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

The Company sold additional loans from the retained Community Bank portfolio in the amount of $ 192.5 million and $ 129.8 million in the three months ended December 31, 2021 and 2020, respectively, and $ 308.1 million for the fiscal year ended September 30, 2021.

All loans from the retained Community Bank portfolio have been sold as of December 31, 2021.

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

Three Months Ended December 31,

(Dollars in thousands) 2021 2020

1 unchanged sentence

Loans held for investment:

Total National Lending $ 46,153 $ — $ 142,389 $ 103,888

Total Community Banking 403 2,728 3,250 16,518

Commercial finance $ 1,720 $ —

Warehouse finance 55,993 62,631

Community banking — 2,299

Total purchases $ 57,713 $ 64,930

Loans held for sale:

Total National Lending $ 118,132 $ 8,524 $ 464,378 $ 168,814

Total Community Banking — — 232,979 271,681

Commercial finance $ 33,023 $ 30,324

Consumer finance 376,444 291,540

Community banking 153,222 129,788

Loans held for investment:

Total Community Banking 1,816 — 13,822 3,099

Community banking 30,235 —

Total sales $ 592,924 $ 451,652

1 unchanged sentence

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

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

(Dollars in thousands) December 31, 2021 September 30, 2021

Carrying amount $ 255,907 $ 278,341

3 unchanged sentences

Total net investment in direct financing and sales-type leases $ 245,750 $ 266,540

The carrying amount of direct financing and sales-type leases subject to residual value guarantees was $ 5.0 million at June 30, 2021.

The carrying amount of direct financing and sales-type leases subject to residual value guarantees was $ 4.0 million at December 31, 2021.

The components of total lease income were as follows:

Three Months Ended June 30, Nine Months Ended June 30,

Three Months Ended December 31,

(Dollars in thousands) 2021 2020

3 unchanged sentences

Lease income from operating lease payments 11,086 10,041

Profit (loss) recorded on commencement date on sales-type leases 85 103 215 590

901 554 2,657 3,135

Profit recorded on commencement date on sales-type leases — 71

Total leasing and equipment finance noninterest income 12,411 10,181

1 unchanged sentence

(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) June 30, 2021

Undiscounted future minimum lease payments receivable for direct financing and sales-type leases, and a reconciliation to the carrying amount recorded at December 31, 2021 were as follows:

(Dollars in thousands)

Remaining in 2022 $ 78,421

Thereafter 2,918

Equipment under leases not yet commenced —

Total undiscounted future minimum lease payments receivable for direct financing and sales-type leases 255,908

Third-party residual value guarantees —

Total carrying amount of direct financing and sales-type lease $ 297,370

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

Total carrying amount of direct financing and sales-type leases $ 255,908

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

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 June 30, 2021 is reflected as such.

The historical information disclosed is in accordance with Topic 310.

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 remains 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 its estimate as more information becomes available.

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

Three Months Ended June 30, 2021

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

Charge-offs Recoveries Ending Balance

Three Months Ended December 31, 2021

(Dollars in thousands) Beginning Balance Provision (Reversal) Charge-offs Recoveries Ending Balance

Allowance for credit losses:

National Lending

Term lending $ 29,351 $ ( 858 ) $ ( 2,085 ) $ 314 $ 26,722

11 unchanged sentences

Warehouse finance 420 47 — — 467

Total National Lending 84,865 5,433 ( 14,865 ) 2,531 77,964

Community banking 12,262 ( 12,684 ) — 422 —

Commercial real estate and operating 13,965 ( 767 ) — — 13,198

Consumer one-to-four family real estate and other 17 ( 13 ) — — 4

Agricultural real estate and operating 45 ( 3 ) — — 42

Total Community Banking 14,027 ( 783 ) — — 13,244

Total loans and leases 68,281 471 ( 4,859 ) 3,730 67,623

3 unchanged sentences

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

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

Nine Months Ended June 30, 2021

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

Charge-offs Recoveries Ending Balance

Three Months Ended December 31, 2020

(Dollars in thousands) Beginning Balance Impact of CECL Adoption Provision (Reversal) Charge-offs Recoveries Ending Balance

Allowance for credit losses:

National Lending

Term lending $ 15,211 $ 9,999 $ 6,026 $ ( 3,312 ) $ 296 $ 28,220

11 unchanged sentences

Warehouse finance 294 ( 1 ) 26 — — 319

Total National Lending 33,880 18,710 44,096 ( 24,644 ) 5,922 77,964

Community banking 22,308 ( 5,937 ) ( 2,173 ) ( 11 ) — 14,187

Commercial real estate and operating 21,867 ( 5,616 ) ( 2,909 ) ( 144 ) — 13,198

Consumer one-to-four family real estate and other 298 ( 247 ) ( 47 ) — — 4

Agricultural real estate and operating 143 ( 74 ) ( 27 ) — — 42

Total Community Banking 22,308 ( 5,937 ) ( 2,983 ) ( 144 ) — 13,244

Total loans and leases 56,188 12,773 6,264 ( 5,674 ) 2,838 72,389

2 unchanged sentences

Total $ 56,220 $ 13,604 $ 6,089 $ ( 5,674 ) $ 2,838 $ 73,077

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

Three Months Ended June 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:

National Lending

Term lending $ 11,647 $ 5,672 $ ( 2,831 ) $ 25 $ 14,513

Asset based lending 2,826 ( 953 ) ( 42 ) — 1,831

Factoring 4,444 ( 1,997 ) ( 140 ) 362 2,669

Lease financing 2,683 4,293 ( 357 ) 91 6,710

Insurance premium finance 2,142 596 ( 736 ) 367 2,369

SBA/USDA 1,558 716 ( 1,134 ) — 1,140

Other commercial finance 552 ( 381 ) — — 171

Commercial finance 25,852 7,946 ( 5,240 ) 845 29,403

Consumer credit products 1,082 ( 111 ) — — 971

Other consumer finance 3,414 358 ( 567 ) 44 3,249

Consumer finance 4,496 247 ( 567 ) 44 4,220

Tax services 21,320 ( 100 ) ( 9,797 ) 14 11,437

Warehouse finance 334 ( 56 ) — — 278

Total National Lending 52,002 8,037 ( 15,604 ) 903 45,338

Community Banking

Commercial real estate and operating 10,069 6,688 — — 16,757

Consumer one-to-four family real estate and other 2,350 586 — — 2,936

Agricultural real estate and operating 934 ( 218 ) — — 716

Total Community Banking 13,353 7,056 — — 20,409

Total $ 65,355 $ 15,093 $ ( 15,604 ) $ 903 $ 65,747

Nine Months Ended June 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:

National Lending

Term lending $ 5,533 $ 14,753 $ ( 6,003 ) $ 230 $ 14,513

Asset based lending 2,437 ( 611 ) ( 42 ) 47 1,831

Factoring 3,261 ( 509 ) ( 875 ) 792 2,669

Lease financing 1,275 5,841 ( 725 ) 319 6,710

Insurance premium finance 1,024 2,671 ( 1,809 ) 483 2,369

SBA/USDA 383 2,007 ( 1,250 ) — 1,140

Other commercial finance 683 ( 512 ) — — 171

Commercial finance 14,596 23,640 ( 10,704 ) 1,871 29,403

Consumer credit products 1,044 ( 73 ) — — 971

Other consumer finance 5,118 ( 474 ) ( 2,208 ) 813 3,249

Consumer finance 6,162 ( 547 ) ( 2,208 ) 813 4,220

Tax services — 20,407 ( 9,797 ) 827 11,437

Warehouse finance 263 15 — — 278

Total National Lending 21,021 43,515 ( 22,709 ) 3,511 45,338

Community Banking

Commercial real estate and operating 6,208 10,549 — — 16,757

Consumer one-to-four family real estate and other 1,053 1,883 — — 2,936

Agricultural real estate and operating 867 ( 151 ) — — 716

Total Community Banking 8,128 12,281 — — 20,409

Total $ 29,149 $ 55,796 $ ( 22,709 ) $ 3,511 $ 65,747

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

Allowance Loans and Leases

(Dollars in Thousands) 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

Recorded Investment

National Lending

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

Asset based lending 355 1,051 1,406 5,317 177,102 182,419

Factoring 274 2,753 3,027 5,071 276,102 281,173

Lease financing 1,194 5,829 7,023 4,697 276,387 281,084

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

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

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

Commercial finance 4,978 24,940 29,918 42,606 2,265,378 2,307,984

Consumer credit products — 845 845 — 89,809 89,809

Other consumer finance — 2,821 2,821 1,987 132,355 134,342

Consumer finance — 3,666 3,666 1,987 222,164 224,151

Tax services — 2 2 — 3,066 3,066

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

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

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) June 30, 2021

National Lending

Term lending $ 25,994

Asset based lending —

Factoring 1,232

Lease financing 2,946

Commercial finance 30,772

Consumer credit products 2,197

Consumer finance 2,197

Total National Lending 32,969

Community Banking

Commercial real estate and operating 17,896

Consumer one-to-four family real estate and other 110

Agricultural real estate and operating 4,657

Total Community Banking 22,663

Total $ 55,632

Information on impaired loans and leases as of September 30, 2020 was as follows:

(Dollars in Thousands) Recorded

Balance Unpaid Principal

Balance Specific

Loans and leases without a specific valuation allowance

National Lending

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

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 December 31, 2021 At September 30, 2021

Term lending $ 68,838 $ 20,965

4 unchanged sentences

Commercial finance (1)

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

Term lending $ 8,736 $ 8,736 $ 3,155

Asset based lending 1,403 1,403 355

Factoring 1,179 1,191 274

Lease financing 2,900 2,900 1,194

Commercial finance 14,218 14,230 4,978

Total National Lending 14,218 14,230 4,978

105,384 26,115

Community banking — 14,915

Commercial real estate and operating 160 160 141

Total Community Banking Loans 160 160 141

Total $ 105,384 $ 41,030

(1) For commercial finance, collateral dependent financial assets have collateral in the form of cash, equipment, or other business assets.

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

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

As of June 30, 2021, $ 41.5 million of loan and lease balances that were granted deferral payments by the Company were still in their deferment period due to performing borrowers experiencing temporary hardship from COVID-19.

As of December 31, 2021, $ 0.4 million of loan and lease balances that were granted deferral payments by the Company were still in their deferment period.

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

1 unchanged sentence

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

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

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

Watch - A watch asset is generally a credit performing well under current terms and conditions but with identifiable weakness meriting additional scrutiny and corrective measures.

Watch is not a regulatory classification but can be used to designate assets that are exhibiting one or more weaknesses that deserve management’s attention.

These assets are of better quality than special mention assets.

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.

Special mention is a temporary status with aggressive credit management required to garner adequate progress and move to watch or higher.

The adverse classifications are as follows:

Substandard - A substandard asset is inadequately protected by the net worth and/or repayment ability or by a weak collateral position.

Assets so classified will have well-defined weaknesses creating a distinct possibility the Bank will sustain some loss if the weaknesses are not corrected.

Loss potential does not have to exist for an asset to be classified as substandard.

Doubtful - A doubtful asset has weaknesses similar to those classified substandard, with the degree of weakness causing the likely loss of some principal in any reasonable collection effort.

Due to pending factors, the asset’s classification as loss is not yet appropriate.

Loss - A loss asset is considered uncollectible and of such little value that the asset’s continuance on the Bank’s balance sheet is no longer warranted.

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

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

Typically, this is associated with a delay or shortfall in payments of 210 days or more for commercial insurance premium finance, 180 days or more for the purchased student loan portfolios, 120 days or more for consumer credit products and leases, and 90 days or more for community banking loans and commercial finance loans.

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.

Nonaccrual 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 allowable Allowance for Credit Losses.

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

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.

The outstanding balances of consumer finance loans and tax services loans were $ 227.8 million and $ 41.3 million at June 30, 2021, respectively, and $ 224.2 million and $ 3.1 million at September 30, 2020, respectively.

The outstanding balances of consumer finance loans and tax services loans were $ 317.8 million and $ 100.3 million at December 31, 2021, respectively, and $ 252.9 million and $ 10.4 million at September 30, 2021, respectively.

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

1 unchanged sentence

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

As of June 30, 2021 2021 2020 2019 2018 2017 Prior

At December 31, 2021 2022 2021 2020 2019 2018 Prior

Pass $ 145,763 $ 337,426 $ 175,447 $ 54,833 $ 37,328 $ 12,940 $ — $ 763,737

14 unchanged sentences

Substandard — — — — — — 19,425 19,425

Doubtful — — — — — — 15,314 15,314

Total — — — — — — 402,972 402,972

17 unchanged sentences

Substandard — — 17,732 9,502 8,177 2,455 — 37,866

Doubtful — — — — — 66 — 66

Total 2,851 77,090 63,532 25,640 25,673 14,735 — 209,521

2 unchanged sentences

Watch — 20,000 16,807 3,322 — — — 40,129

Special Mention — — — — 447 — — 447

Substandard — 10,255 — — 270 2,102 — 12,627

3 unchanged sentences

Total — — — — — — 466,831 466,831

Total National Lending

Total loans and leases

Pass 343,470 706,834 263,000 86,911 58,428 90,942 1,002,081 2,551,666

4 unchanged sentences

Total $ 360,219 $ 847,388 $ 473,550 $ 177,529 $ 88,734 $ 110,119 $ 1,207,040 $ 3,264,579

Commercial real estate and operating

Amortized Cost Basis

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

At September 30, 2021 2021 2020 2019 2018 2017 Prior

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

2 unchanged sentences

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

Consumer 1-4 family real estate and other

Asset based lending

Pass — — — — — — 185,432 185,432

Watch — — — — — — 52,072 52,072

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

Substandard — — — — — — 19,586 19,586

Total — — — — — — 300,225 300,225

Agricultural real estate and other

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

Total Community Bank

Lease financing

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

2 unchanged sentences

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

Doubtful — 6 2,402 38 1 — — 2,447

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

Total Loans and Leases

Insurance premium finance

Pass 428,131 144 9 — — — — 428,284

4 unchanged sentences

Total 428,577 281 9 — — — — 428,867

The recorded investment of loans and leases by asset classification was as follows:

Asset Classification Pass Watch Special Mention Substandard Doubtful Total

As of September 30, 2020 (Dollars in Thousands)

National Lending

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

Asset based lending 102,013 62,512 12,577 5,317 — 182,419

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

Lease financing 264,700 8,879 2,808 4,148 549 281,084

Insurance premium finance 336,364 284 222 701 369 337,940

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

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

Past due loans and leases were as follows:

At December 31, 2021

Accruing and Nonaccruing Loans and Leases Nonperforming Loans and Leases

(Dollars in Thousands) 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

As of June 30, 2021

(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 $ 9 $ 2 $ — $ 11 $ 36,171 $ 36,182 $ — $ — $ —

National Lending

Term lending 25,308 4,350 4,331 33,989 1,004,389 1,038,378 679 12,732 13,411

11 unchanged sentences

Warehouse finance — — — — 466,831 466,831 — — —

Total National Lending 22,960 52,617 9,369 84,946 3,106,309 3,191,255 4,819 17,315 22,134

Community banking — — — — — — — — —

Commercial real estate and operating 11 — — 11 294,799 294,810 — 17,896 17,896

Consumer one-to-four family real estate and other 51 — — 51 1,298 1,349 — 108 108

Agricultural real estate and operating — — 1,769 1,769 6,056 7,825 — 1,769 1,769

Total Community Banking 62 — 1,769 1,831 302,153 303,984 — 19,773 19,773

Total loans and leases held for investment 46,353 10,816 9,102 66,271 3,616,335 3,682,606 5,430 37,760 43,190

Total loans and leases $ 46,362 $ 10,818 $ 9,102 $ 66,282 $ 3,652,506 $ 3,718,788 $ 5,430 $ 37,760 $ 43,190

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

89 Days Past Due Total Past

Due Current Total Loans and Leases

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

As of September 30, 2020

(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

Nonaccrual loans and leases by year of origination were as follows:

Nonaccrual loans and leases by year of origination at December 31, 2021 were as follows:

Amortized Cost Basis

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

June 30, 2021 2021 2020 2019 2018 2017 Prior

National Lending

Term Loans and Leases by Origination Year Revolving Loans and Leases Total Nonaccrual with No ACL

(Dollars in thousands) 2022 2021 2020 2019 2018 Prior

Term lending $ — $ 765 $ 3,106 $ 8,123 $ 611 $ 127 $ — $ 12,732 $ 3,025

4 unchanged sentences

Commercial finance — 852 3,771 10,503 1,157 147 21,330 37,760 3,351

Total National Lending 20 2,754 8,394 3,141 756 2,250 — 17,315 9,019

Community Banking

Commercial real estate and operating — 300 700 16,896 — — — 17,896 —

Consumer one-to-four family real estate and other — — 108 — — — — 108 108

Agricultural real estate and operating — — — 1,263 — 506 — 1,769 1,769

Total Community Banking — 300 808 18,159 — 506 — 19,773 1,877

Total nonaccrual loans and leases $ — $ 852 $ 3,771 $ 10,503 $ 1,157 $ 147 $ 21,330 $ 37,760 $ 3,351

Loans and leases that are 90 days or more delinquent and accruing by year of origination were as follows:

Loans and leases that are 90 days or more delinquent and accruing by year of origination at December 31, 2021 were as follows:

Amortized Cost Basis

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

June 30, 2021 2021 2020 2019 2018 2017 Prior

National Lending

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

(Dollars in thousands) 2022 2021 2020 2019 2018 Prior

Term lending $ — $ 84 $ 595 $ — $ — $ — $ — $ 679

1 unchanged sentence

Insurance premium finance 19 702 — — — — — 721

SBA/USDA — — 647 — — 66 — 713

Commercial finance 151 1,759 1,321 380 126 159 — 3,896

Consumer credit products — 471 5 141 — — — 617

Other consumer finance — 7 — — — 910 — 917

Consumer finance — 478 5 141 — 910 — 1,534

— — — — — 383 — 383

Total National Lending 2,267 1,216 259 568 40 383 — 4,733

Total 90 days or more delinquent and accruing $ 151 $ 2,237 $ 1,326 $ 521 $ 126 $ 1,069 $ — $ 5,430

(1) Consumer credit products are not included in the table as they are evaluated under a separate methodology for allowance for credit loss purposes that considers the overall Program structure.

Refer to the Company’s most recent audited financial statements for additional information on these Programs.

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) 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.

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 nonaccrual 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 or lease is evaluated for impairment.

Often, this is associated with a delay or shortfall in scheduled payments, as described above.

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

Average Recorded Investment

(Dollars in Thousands) Three Months Ended June 30, 2021 Nine Months Ended June 30, 2021

National Lending

Term lending $ 14,964 $ 14,190

Asset based lending 127 591

Factoring 33 337

Lease financing 2,435 2,994

SBA/USDA 600 600

Commercial finance 18,159 18,712

Total National Lending 18,159 18,712

Community Banking

Commercial real estate and operating 17,896 14,235

Consumer one-to-four family real estate and other 136 140

Agricultural real estate and operating 1,769 1,769

Total Community Banking 19,801 16,144

Total loans and leases $ 37,960 $ 34,856

The recognized interest income on the Company's nonaccrual loans and leases for the three and nine months ended June 30, 2021 was not significant.

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

Three Months Ended June 30, 2020 Nine Months Ended June 30, 2020

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

National Lending

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

Three Months Ended December 31,

(Dollars in thousands) 2021 2020

Term lending $ 13,922 $ 14,876

4 unchanged sentences

Commercial finance 33,429 21,041

Other consumer finance 1,999 37 1,775 111

Consumer finance 1,999 37 1,775 111

Total National Lending 42,605 160 38,138 365

Community banking — 8,433

Commercial real estate and operating 405 1 511 27

Consumer one-to-four family real estate and other 131 — 101 9

Agricultural real estate and operating 2,437 10 2,677 ( 134 )

Total Community Banking 2,973 11 3,289 ( 98 )

Total loans and leases $ 33,429 $ 29,474

The recognized interest income on the Company's nonaccrual loans and leases for the three months ended December 31, 2021 and 2020 was not significant.

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 $ 3.9 million of national lending loans that were modified in a TDR during the three months ended June 30, 2021, all of which were modified to extend the term of the loan, and no community banking loans.

There were $ 1.4 million of national lending loans and leases that were modified in a TDR during the three months ended June 30, 2020 and no community banking loans.

During the nine months ended June 30, 2021, there were $ 6.0 million of national lending loans that were modified in a TDR, all of which were modified to extend the term of the loan, and no community bank loans.

There were $ 5.5 million of national lending loans and leases and $ 0.6 million of community banking loans that were modified in a TDR during the nine months ended June 30, 2020.

During the nine months ended June 30, 2021, the Company had $ 0.6 million of national lending loans and no community banking loans that were modified in a TDR within the previous 12 months and for which there was a payment default.

During the nine months ended June 30, 2020, the Company had $ 3.3 million of community banking loans and $ 1.3 million national lending loans that were modified in a TDR within the previous 12 months and for which there was a payment default.

TDR net charge-offs and the impact of TDRs on the Company's allowance for credit losses were insignificant during the quarters ended June 30, 2021 and June 30, 2020.

There were $ 10.1 million of commercial finance loans and $ 0.1 million of consumer finance loans that were modified in a TDR during the three months ended December 31, 2021, all of which were modified to extend the term of the loan.

There were $ 0.1 million of consumer finance loans that were modified in a TDR during the three months ended December 31, 2020 and no community banking loans.

During the three months ended December 31, 2021, the Company had $ 2.3 million of commercial finance loans and $ 0.5 million of consumer finance loans that were modified in a TDR within the previous 12 months and for which there was a payment default.

During the three months ended December 31, 2020, the Company had $ 0.3 million of commercial finance loans, $ 0.1 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.

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

EARNINGS PER COMMON SHARE ("EPS")

1 unchanged sentence

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.

Basic EPS 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 EPS is calculated using the more dilutive of the treasury stock method or the two-class method.

Diluted EPS 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.

2 unchanged sentences

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

Three Months Ended June 30, Nine Months Ended June 30,

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

Three Months Ended December 31,

(Dollars in thousands, except per share data) 2021 2020

Basic income per common share:

8 unchanged sentences

Effect of dilutive securities (1)

Stock options — 21,497 — 21,634

Performance share units 22,034 8,610

6 unchanged sentences

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

(2) Excluded from the computation of diluted earnings per share for the three months ended June 30, 2021 and 2020, respectively, were 601,693 and 821,884 weighted average shares of nonvested restricted stock because their inclusion would be anti-dilutive.

Excluded from the computation of diluted earnings per share for the nine months ended June 30, 2021 and 2020, respectively, were 622,954 and 824,809 weighted average shares of nonvested restricted stock because their inclusion would be anti-dilutive.

(2) Excluded from the computation of diluted earnings per share for the three months ended December 31, 2021 and 2020, respectively, were 477,488 and 660,659 weighted average shares of nonvested restricted stock because their inclusion would be anti-dilutive.

RENTAL EQUIPMENT, NET

Rental equipment consists of the following:

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

(Dollars in thousands) December 31, 2021 September 30, 2021

Computers and IT networking equipment $ 16,267 $ 17,683

6 unchanged sentences

Net book value $ 234,693 $ 213,116

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

(Dollars in Thousands) June 30, 2021

Undiscounted future minimum lease payments expected to be received for operating leases at December 31, 2021 were as follows:

(Dollars in thousands)

Remaining in 2022 $ 27,557

1 unchanged sentence

Total undiscounted future minimum lease payments receivable for operating leases $ 125,016

FORECLOSED REAL ESTATE AND REPOSSESSED ASSETS

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

Nine Months Ended June 30,

(Dollars in Thousands) 2021 2020

Balance, beginning of period $ 9,957 $ 29,494

Additions 9 5,983

Write-downs 481 568

Sales 8,285 23,086

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

Total reductions 8,762 28,693

Balance, ending of period $ 1,204 $ 6,784

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

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

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

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 Condensed 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

The Company held a total of $ 309.5 million of goodwill at June 30, 2021.

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

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

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

Goodwill is assessed for impairment at least annually or more often if conditions indicate a possible impairment.

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

There have been no changes to the carrying amount of goodwill during the nine months ended June 30, 2021.

The changes in the carrying amount of the Company’s intangible assets for the nine months ended June 30, 2021 and 2020 were as follows:

Segment Reporting for additional information on the Company's segment reporting.

There have been no changes to the carrying amount of goodwill during the three months ended December 31, 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, 2020 $ 10,901 $ 422 $ 24,333 $ 6,036 $ 41,692

Intangible Assets

At September 30, 2021 $ 9,823 $ 40 $ 17,868 $ 5,417 $ 33,148

Acquisitions during the period — — — 1 1

Amortization during the period ( 263 ) ( 39 ) ( 1,054 ) ( 132 ) ( 1,488 )

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

Balance as of June 30, 2021 $ 10,085 $ 136 $ 19,131 $ 5,546 $ 34,898

At December 31, 2021 $ 9,560 $ 1 $ 16,814 $ 5,286 $ 31,661

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 June 30, 2021 $ 10,085 $ 136 $ 19,131 $ 5,546 $ 34,898

(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, 2019 $ 11,959 $ 827 $ 33,207 $ 6,817 $ 52,810

At December 31, 2021 $ 9,560 $ 1 $ 16,814 $ 5,286 $ 31,661

At September 30, 2020 $ 10,901 $ 422 $ 24,333 $ 6,036 $ 41,692

Acquisitions during the period — — — 5 5

1 unchanged sentence

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

Balance as of June 30, 2020 $ 11,166 $ 517 $ 26,095 $ 6,196 $ 43,974

At December 31, 2020 $ 10,629 $ 327 $ 22,847 $ 5,857 $ 39,660

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

1 unchanged sentence

Accumulated impairment — — ( 10,248 ) ( 219 ) ( 10,467 )

Balance as of June 30, 2020 $ 11,166 $ 517 $ 26,095 $ 6,196 $ 43,974

At December 31, 2020 $ 10,629 $ 327 $ 22,847 $ 5,857 $ 39,660

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

7 unchanged sentences

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

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

(Dollars in Thousands) June 30, 2021

Estimated amortization expense of intangible assets in the remaining nine months of fiscal 2022 and subsequent fiscal years was as follows:

(Dollars in thousands)

Remaining in 2022 $ 4,933

2 unchanged sentences

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

There were no impairments to intangible assets during the nine months ended June 30, 2021 and 2020.

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

Intangible expense is recorded within the impairment expense line of the Condensed Consolidated Statements of Operations.

OPERATING LEASE RIGHT-OF-USE ASSETS AND LIABILITIES

Operating lease ROU assets, included in other assets, were $ 35.4 million at June 30, 2021.

Operating lease liabilities, included in accrued expenses and other liabilities, were $ 37.6 million at June 30, 2021.

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

(Dollars in Thousands) June 30, 2021

Operating lease ROU assets, included in other assets , were $ 32.7 million and $ 25.2 million at December 31, 2021 and 2020, respectively.

Operating lease liabilities, included in accrued expenses and other liabilities , were $ 34.5 million and $ 26.7 million at December 31, 2021 and 2020, respectively.

Undiscounted future minimum operating lease payments and a reconciliation to the amount recorded as operating lease liabilities at December 31, 2021 were as follows:

(Dollars in thousands)

Remaining in 2022 $ 3,301

3 unchanged sentences

Total operating lease liabilities $ 34,525

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

June 30, 2021

The weighted-average discount rate and remaining lease term for operating leases at December 31, 2021 were as follows:

Weighted-average discount rate 2.33 %

1 unchanged sentence

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

Three Months Ended June 30, Nine Months Ended June 30,

Three Months Ended December 31,

(Dollars in thousands) 2021 2020

7 unchanged sentences

The Company's Board of Directors authorized the November 20, 2019 share repurchase program to repurchase up to 7,500,000 shares of the Company's outstanding common stock.

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

During the nine months ended June 30, 2021, and 2020, the Company repurchased 2,684,408 and 3,498,394 shares, respectively, as part of the share repurchase program.

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

All remaining shares available for repurchase under this program were repurchased during the fiscal 2022 first quarter.

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

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 three months ended December 31, 2021, and 2020, the Company repurchased 1,711,501 and 1,864,474 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 June 30, 2021, the remaining number of shares available for repurchase under this program was 1,550,173 shares of common stock.

For the nine months ended June 30, 2021, and 2020, the Company also repurchased 84,950 and 89,613 shares, or $ 2.0 million and $ 3.0 million of common stock, respectively, in settlement of employee tax withholding obligations due upon the vesting of restricted stock.

As of December 31, 2021, 5,604,375 shares of common stock remained available for repurchase.

For the three months ended December 31, 2021, and 2020, the Company also repurchased 61,172 and 79,101 shares, or $ 3.4 million and $ 1.8 million of common stock, respectively, in settlement of employee tax withholding obligations due upon the vesting of restricted stock.

STOCK COMPENSATION

3 unchanged sentences

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 performance share units granted under the Company’s incentive plan is equal to the fair market value of the underlying stock at the grant date, adjusted for dividends where applicable.

The exercise price of options or fair value of nonvested (restricted) shares and performance share units 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 tables show the activity of nonvested (restricted) shares and PSUs granted, vested, or forfeited under the 2002 Omnibus Incentive Plan for the nine months ended June 30, 2021.

There were no options granted, exercised, or forfeited under this plan during the nine months ended June 30, 2021.

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

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

(Dollars in thousands, except per share data) Number of Shares Weighted Average Fair Value at Grant

4 unchanged sentences

Forfeited or expired ( 8,430 ) 42.59

Nonvested shares outstanding, June 30, 2021

Nonvested shares outstanding, December 31, 2021

488,318 $ 36.17

1 unchanged sentence

Performance share units outstanding, September 30, 2021

60,894 $ 34.03

Forfeited or expired — —

Performance share units outstanding, June 30, 2021

Performance share units outstanding, December 31, 2021

95,219 $ 42.30

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

At June 30, 2021, stock-based compensation expense not yet recognized in income totaled $ 7.2 million, which is expected to be recognized over a weighted average remaining period of 2.01 years.

The Company recorded an income tax expense of $ 9.6 million for the nine months ended June 30, 2021, resulting in an effective tax rate of 6.92 %, compared to an income tax expense of $ 3.9 million, or an effective tax rate of 3.91 %, for the nine months ended June 30, 2020.

At December 31, 2021, stock-based compensation expense not yet recognized in income totaled $ 11.6 million, which is expected to be recognized over a weighted average remaining period of 1.88 years.

The Company recorded an income tax expense of $ 14.3 million for the three months ended December 31, 2021, resulting in an effective tax rate of 18.89 %, compared to an income tax expense of $ 3.5 million, or an effective tax rate of 10.77 %, for the three months ended December 31, 2020.

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

2 unchanged sentences

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

Nine Months Ended June 30,

Three Months Ended December 31,

(Dollars in thousands) 2021 2020

9 unchanged sentences

Effective tax rate 18.89 % 10.77 %

COMMITMENTS AND CONTINGENCIES

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

At June 30, 2021 and September 30, 2020, unfunded loan commitments approximated $ 1.32 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 June 30, 2021 or September 30, 2020.

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

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

The same credit policies and collateral requirements are used in making commitments and conditional obligations as are used for on-balance-sheet instruments.

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.

In addition, commitments used to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract.

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

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

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

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.

Following the trial court granting a Motion for Summary Judgment filed by the Bank, the parties have agreed to a formal settlement of this matter on terms acceptable to the Bank.

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

Accruals have been recorded when the outcome is probable and can be reasonably estimated.

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.

REVENUE FROM CONTRACTS WITH CUSTOMERS

4 unchanged sentences

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

Three Months Ended June 30, 2021 2020 2021 2020 2021 2020 2021 2020

Net interest income (1)

$ 23,254 $ 25,754 $ 44,728 $ 36,104 $ 493 $ 279 $ 68,475 $ 62,137

Noninterest income:

Refund transfer product fees 12,073 4,595 — — — — 12,073 4,595

Tax advance product fees (1)

891 28 — — — — 891 28

Payment card and deposit fees 29,203 21,302 — — — — 29,203 21,302

Other bank and deposit fees — — 334 213 4 1 338 214

Rental income (1)

6 5 9,970 11,226 — — 9,976 11,231

Gain (loss) on sale of other (1)

— — 5,982 1,214 ( 27 ) — 5,955 1,214

Other income (1)

1,056 324 1,702 1,267 1,259 873 4,017 2,464

Total noninterest income 43,229 26,254 17,988 13,920 1,236 874 62,453 41,048

Revenue $ 66,483 $ 52,008 $ 62,716 $ 50,024 $ 1,729 $ 1,153 $ 130,928 $ 103,185

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

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

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

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

Nine Months Ended June 30, 2021 2020 2021 2020 2021 2020 2021 2020

Three Months Ended December 31, 2021 2020 2021 2020 2021 2020 2021 2020

Net interest income (1)

10 unchanged sentences

— — — — 137 — 137 —

Gain on divestitures (1)

— — — — — 19,275 — 19,275

Gain on sale of trademarks — — — — 50,000 — 50,000 —

Gain (loss) on sale of other (1)

19 unchanged sentences

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

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

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

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

Card fees relate to MPS, Community Bank, Refund Advantage and EPS products.

Card fees relate to Meta Payments, Refund Advantage, and EPS products.

These fees are for products and services such as card activation, product support, processing, and servicing.

14 unchanged sentences

Card fees are recorded within both the Consumer and Commercial reporting segments, the substantial majority of which is derived from the Company's payments divisions and reported in payments card and deposit fees.

Card fees related to the Community Bank are reported within other bank and deposit fees.

Card fees not related to the Company's payments divisions are reported within other bank and deposit fees.

Bank and Deposit Fees.

Fees are earned on depository accounts for consumer and commercial customers and include fees for account services, overdraft services, safety deposit box rentals, and event-driven services (i.e.

returned checks, ATM surcharge, card replacement, wire transfers, and stop pays).

Fees are earned on depository accounts for consumer and commercial customers and include fees for account services, overdraft services, and event-driven services (i.e.

returned checks, ATM surcharge, card replacement, and wire transfers).

The Company’s obligation for event-driven services is satisfied at the time of the event when the service is delivered, while its obligation for account services is satisfied over the course of each month.

2 unchanged sentences

Bank and deposit fees are recorded within both the Consumer and Commercial reporting segments, the majority of which are derived from the Company's payments divisions.

Bank and deposit fees related to the Community Bank are reported within other bank and deposit fees.

Principal vs Agent.

The Consumer reporting segment includes principal/agent relationships.

Within this segment, MPS relationships are recorded on a gross basis within the Condensed 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 Condensed Consolidated Statements of Operations as Meta is the agent in these contracts.

Within this segment, Meta Payments division relationships are recorded on a gross basis within the Condensed 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 Condensed 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 Condensed 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 Condensed Consolidated Statements of Operations as Meta is the agent in these contracts.

4 unchanged sentences

Consumer, Commercial, and Corporate Services/Other.

The Meta Payment Systems and Tax Services divisions, as well as the Consumer Credit Products and ClearBalance business lines, are reported in the Consumer segment .

The Meta Payments and Tax Services divisions, as well as the Consumer Credit Products and ClearBalance business lines, are reported in the Consumer segment .

The Crestmark and AFS divisions are reported in the Commercial segment.

The Community Bank division, Warehouse Finance, and Student Loan lending portfolio are 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 Community Bank division and Student Loan lending portfolio are 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, warehouse finance, wholesale deposits and borrowings.

The Company does not report indirect general and administrative expenses in the Consumer and Commercial segments.

Beginning October 1, 2020, Warehouse Finance, formerly reported in the Consumer segment, is now included in the Corporate Services/Other segment.

Prior periods have been reclassified to conform to the current presentation.

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 of 2017 ("TCJA").

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

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.

The following tables present segment data for the Company:

Three Months Ended June 30, 2021

(Dollars in Thousands) Consumer Commercial Corporate

Services/Other Total

Net interest income $ 23,254 $ 44,728 $ 493 $ 68,475

Provision (recovery) for credit losses 4,507 870 ( 765 ) 4,612

Noninterest income 43,229 17,988 1,236 62,453

Noninterest expense 20,561 28,604 32,358 81,523

Income (loss) before income tax expense 41,415 33,242 ( 29,864 ) 44,793

Total assets 337,438 3,086,556 3,627,818 7,051,812

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

Total deposits 5,715,197 8,941 164,733 5,888,871

Three Months Ended June 30, 2020

(Dollars in Thousands) Consumer Commercial Corporate

Services/Other Total

Net interest income $ 25,754 $ 36,104 $ 279 $ 62,137

Provision (recovery) for loan and lease losses ( 210 ) 7,946 7,357 15,093

Noninterest income 26,254 13,920 874 41,048

Noninterest expense 15,282 26,729 29,230 71,241

Income (loss) before income tax expense 36,936 15,349 ( 35,434 ) 16,851

Total assets 372,549 2,690,719 5,715,758 8,779,026

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

Total deposits 6,767,516 9,243 813,566 7,590,325

Nine Months Ended June 30, 2021

(Dollars in Thousands) Consumer Commercial Corporate

Services/Other Total

Three Months Ended December 31, 2021

(Dollars in thousands) Consumer Commercial Corporate Services/Other Total

Net interest income $ 26,271 $ 44,926 $ 416 $ 71,613

Provision (recovery) for credit losses 34,893 9,540 ( 3,442 ) 40,991

Provision (reversal of) for credit losses 1,262 11,591 ( 12,667 ) 186

Noninterest income 27,709 18,957 39,925 86,591

4 unchanged sentences

Total deposits 6,325,193 6,840 193,536 6,525,569

Nine Months Ended June 30, 2020

(Dollars in Thousands) Consumer Commercial Corporate

Services/Other Total

Three Months Ended December 31, 2020

(Dollars in thousands) Consumer Commercial Corporate Services/Other Total

Net interest income $ 22,347 $ 41,848 $ 1,804 $ 65,999

Provision for loan and lease losses 20,334 23,641 11,821 55,796

Provision (reversal of) for credit losses 2,366 6,467 ( 2,744 ) 6,089

Noninterest income 25,335 15,166 4,954 45,455

15 unchanged sentences

The fair value 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 servicing for unusual fluctuations and comparison to current market trading activity.

Management reviews the prices obtained from independent asset pricing services for unusual fluctuations and compares to current market trading activity.

Equity Securities.

2 unchanged sentences

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

Fair Value At June 30, 2021

Fair Value At December 31, 2021

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

Debt securities AFS

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

SBA securities 150,839 — 150,839 —

8 unchanged sentences

$ 5,618 $ — $ — $ —

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

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

2 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 Condensed Consolidated Statements of Financial Condition at June 30, 2021 and September 30, 2020.

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

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

8 unchanged sentences

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

Fair Value At June 30, 2021

Fair Value At December 31, 2021

(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 $ 13,095 $ — $ — $ 13,095

Total National Lending 4,312 — — 4,312

Commercial real estate and operating 9,029 — — 9,029

Total Community Banking 9,029 — — 9,029

Total impaired loans and leases, net 13,341 — — 13,341

Total loans and leases, net individually evaluated

for credit loss 13,095 — — 13,095

Foreclosed assets, net 298 — — 298

2 unchanged sentences

(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

2 unchanged sentences

(Dollars in thousands) Fair Value at

June 30, 2021

December 31, 2021

Fair Value at

1 unchanged sentence

Technique Unobservable Input Range of Inputs

Impaired loans and leases, net $ 13,341 9,260 Market approach Appraised values (1)

Loans and leases, net individually evaluated for credit loss $ 13,095 12,775 Market approach Appraised values (1)

Foreclosed assets, net $ 298 2,077 Market approach Appraised values (1)

2 unchanged sentences

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

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

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

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

3 unchanged sentences

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

June 30, 2021

At December 31, 2021

(Dollars in thousands) Carrying

10 unchanged sentences

Loans held for sale 36,182 36,182 — 36,182 —

Loans and leases receivable 3,495,239 3,498,673 — — 3,498,673

Loans and leases 3,682,606 3,624,832 — — 3,624,832

Federal Reserve Bank and Federal Home Loan Bank stocks 28,400 28,400 — 28,400 —

4 unchanged sentences

Accrued interest payable 661 661 661 — —

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

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

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 —

7 unchanged sentences

SUBSEQUENT EVENTS

Management has evaluated subsequent events that occurred after June 30, 2021.

During this period, up to the filing date of this Quarterly Report on Form 10-Q, management did not identify any material subsequent events that would require recognition or disclosure in our Condensed Consolidated Financial Statements as of or for the quarter ended June 30, 2021.

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

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

What changed 10-Q

Item 1. Financial Statements