What changed in this filing

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Item 1. Financial Statements

2022-05-09 compared with 2022-02-08 · 236 added, 135 removed, 1003 unchanged (27% of the section changed)

3 unchanged sentences

Condensed Consolidated Statements of Financial Condition

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

(Dollars in thousands, except per share data) March 31, 2022 September 30, 2021

ASSETS (Unaudited) (Audited)

21 unchanged sentences

STOCKHOLDERS’ EQUITY

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

Preferred stock, 3,000,000 shares authorized, no shares issued and no shares outstanding at March 31, 2022 and September 30, 2021, respectively

Common stock, $ 0.01 par value;

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

90,000,000 shares authorized, 29,443,911 and 31,686,483 shares issued, 29,362,844 and 31,669,952 shares outstanding at March 31, 2022 and September 30, 2021, respectively

Common stock, Nonvoting, $ 0.01 par value;

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

3,000,000 shares authorized, no shares issued, none outstanding at March 31, 2022 and September 30, 2021, respectively

Additional paid-in capital 612,917 604,484

Retained earnings 223,760 259,189

Accumulated other comprehensive income 724 7,599

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

Accumulated other comprehensive income (loss) ( 69,374 ) 7,599

Treasury stock, at cost, 81,067 and 16,531 common shares at March 31, 2022 and September 30, 2021, respectively

( 4,513 ) ( 860 )

7 unchanged sentences

Condensed Consolidated Statements of Operations (Unaudited)

Three Months Ended December 31,

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

(Dollars in thousands, except per share data) 2022 2021 2022 2021

7 unchanged sentences

FHLB advances and other borrowings 1,212 1,374 2,349 2,724

1,377 1,819 2,655 3,965

Net interest income 83,800 73,850 155,413 139,849

9 unchanged sentences

Gain on sale of trademarks — — 50,000 —

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

Gain (loss) on sale of other 626 2,133 ( 2,839 ) 4,981

Other income 3,881 4,218 5,542 11,532

Total noninterest income 109,766 113,453 196,357 158,908

Non-interest expense:

Noninterest expense:

Compensation and benefits 45,047 43,932 83,272 76,263

12 unchanged sentences

Net income before noncontrolling interest 50,102 59,909 111,408 89,167

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

Net income attributable to noncontrolling interest 851 843 833 2,064

Net income attributable to parent $ 49,251 $ 59,066 $ 110,575 $ 87,103

6 unchanged sentences

Condensed Consolidated Statements of Comprehensive Income (Unaudited)

Three Months Ended December 31,

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

(Dollars in thousands) 2022 2021 2022 2021

6 unchanged sentences

Deferred income tax effect ( 23,651 ) ( 2,493 ) ( 25,989 ) ( 1,779 )

Total other comprehensive income (loss) ( 6,875 ) 2,577

Total comprehensive income 54,431 31,834

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

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

Total other comprehensive (loss) ( 70,098 ) ( 7,310 ) ( 76,973 ) ( 4,733 )

Total comprehensive income (loss) ( 19,996 ) 52,599 34,435 84,434

Total comprehensive income attributable to noncontrolling interest 851 843 833 2,064

Comprehensive income (loss) attributable to parent $ ( 20,847 ) $ 51,756 $ 33,602 $ 82,370

See Notes to Condensed Consolidated Financial Statements.

3 unchanged sentences

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

Three Months Ended December 31, 2021 Common

Three Months Ended March 31, 2022 Common

Stock Additional

7 unchanged sentences

Stockholders’

Balance, December 31, 2021 $ 301 $ 610,816 $ 217,991 $ 724 $ ( 4,318 ) $ 825,514 $ 642 $ 826,156

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

— — ( 1,482 ) — — ( 1,482 ) — ( 1,482 )

Repurchases of common stock ( 7 ) 7 ( 42,000 ) — ( 195 ) ( 42,195 ) — ( 42,195 )

Stock compensation — 2,094 — — — 2,094 — 2,094

Total other comprehensive (loss) — — — ( 70,098 ) — ( 70,098 ) — ( 70,098 )

Net income — — 49,251 — — 49,251 851 50,102

Net investment by (distribution to) noncontrolling interests — — — — — — ( 1,171 ) ( 1,171 )

Balance, March 31, 2022

$ 294 $ 612,917 $ 223,760 $ ( 69,374 ) $ ( 4,513 ) $ 763,084 $ 322 $ 763,406

Three Months Ended March 31, 2021

Balance, December 31, 2020 $ 326 $ 598,669 $ 198,000 $ 20,119 $ ( 5,440 ) $ 811,674 $ 1,536 $ 813,210

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

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

Repurchases of common stock ( 7 ) 7 ( 30,000 ) — ( 215 ) ( 30,215 ) — ( 30,215 )

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

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

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

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

Balance, March 31, 2021

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

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

Six Months Ended March 31, 2022 Common

Stock Additional

Capital Retained

Earnings Accumulated

Comprehensive

Income (Loss) Treasury

Stock Total Meta

Stockholders’

Equity Noncontrolling interest Total

Stockholders’

Balance, September 30, 2021

8 unchanged sentences

Net investment by (distribution to) noncontrolling interests — — — — — — ( 1,666 ) ( 1,666 )

Balance, December 31, 2021

Balance, March 31, 2022

$ 294 $ 612,917 $ 223,760 $ ( 69,374 ) $ ( 4,513 ) $ 763,084 $ 322 $ 763,406

Three Months Ended December 31, 2020

Six Months Ended March 31, 2021

Balance, September 30, 2020

6 unchanged sentences

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

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

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

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

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

Balance, December 31, 2020

Balance, March 31, 2021

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

3 unchanged sentences

Condensed Consolidated Statements of Cash Flows (Unaudited)

Three Months Ended December 31,

Six Months Ended March 31,

(Dollars in thousands) 2022 2021

9 unchanged sentences

Fair value adjustment of foreclosed real estate 250 466

Net realized (gain) on securities available for sale, net — ( 6 )

Net realized (gain) on securities held to maturity, net ( 397 ) —

Net realized (gain) loss on loans held for sale 4,065 ( 4,610 )

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

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

Net realized loss on premise, furniture, and equipment 43 —

Net realized (gain) on lease receivables and equipment ( 1,063 ) ( 360 )

Net realized (gain) on foreclosed real estate and repossessed assets — ( 4 )

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

7 unchanged sentences

Purchases of securities available for sale ( 470,067 ) ( 411,458 )

Proceeds from sales of securities available for sale — 50,468

Proceeds from maturities of and principal collected on securities available for sale 184,107 137,635

27 unchanged sentences

Cash and cash equivalents at end of fiscal period $ 237,680 $ 3,724,242

Three Months Ended December 31,

Six Months Ended March 31,

(Dollars in thousands) 2022 2021

11 unchanged sentences

Rental equipment to loan and leases 177,193 62

Other assets to held for sale — 284

Recognition of operating lease ROU assets, net of measurements — 12,681

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

The results of the three and six months ended March 31, 2022 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.

14 unchanged sentences

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.

On March 29, 2022, the Company announced it is changing its name to Pathward Financial, Inc.™ ("Pathward"), and its bank subsidiary MetaBank®, N.A.

is changing to Pathward™, N.A.

Certain changes will be made immediately, with a full transition to Pathward expected by the end of this calendar year, including the launch of a new brand identity and website.

The Company will continue to serve its customers under existing brand names during the transition.

The Company recognized $ 2.8 million of noninterest expense related to rebranding efforts during the second quarter of fiscal 2022.

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.

1 unchanged sentence

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

At December 31, 2021

At March 31, 2022

Corporate securities $ 25,000 $ — $ ( 1,750 ) $ 23,250

15 unchanged sentences

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

At December 31, 2021

At March 31, 2022

Non-bank qualified obligations of states and political subdivisions $ 44,369 $ — $ ( 1,768 ) $ 42,601

12 unchanged sentences

Debt Securities AFS

At December 31, 2021

At March 31, 2022

Corporate securities $ 23,250 $ ( 1,750 ) $ — $ — $ 23,250 $ ( 1,750 )

SBA securities 50,022 ( 1,359 ) — — 50,022 ( 1,359 )

Obligations of state and political subdivisions 2,158 ( 72 ) — — 2,158 ( 72 )

Non-bank qualified obligations of states and political subdivisions 214,073 ( 9,180 ) 1,314 ( 126 ) 215,387 ( 9,306 )

8 unchanged sentences

Debt Securities HTM

At December 31, 2021

At March 31, 2022

Non-bank qualified obligations of states and political subdivisions $ 42,602 $ ( 1,768 ) $ — $ — $ 42,602 $ ( 1,768 )

Mortgage-backed securities 2,835 ( 83 ) — — 2,835 ( 83 )

Total debt securities HTM $ 45,437 $ ( 1,851 ) $ — $ — $ 45,437 $ ( 1,851 )

2 unchanged sentences

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

At December 31, 2021, there were 80 securities AFS in an unrealized loss position.

At March 31, 2022, 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.

At March 31, 2022, 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.

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

(Dollars in thousands) At March 31, 2022 At September 30, 2021

Securities AFS at Fair Value Amortized Cost Fair

7 unchanged sentences

Total securities AFS, at fair value $ 2,136,832 $ 2,043,478 $ 1,855,084 $ 1,864,899

At December 31, 2021 At September 30, 2021

At March 31, 2022 At September 30, 2021

(Dollars in thousands) Amortized Cost Fair

6 unchanged sentences

Equity Securities

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 Company held $ 3.9 million at March 31, 2022 and $ 12.7 million at September 30, 2021 in marketable equity securities.

The Company recognized $ 3.8 million and none in unrealized loss on marketable equity securities during the six months ended March 31, 2022 and 2021, respectively, which is attributable to an investee becoming publicly traded during fiscal year 2021.

All other marketable equity securities and related activity were insignificant for the six months ended March 31, 2022 and 2021.

There was one marketable security sold during the six months ended March 31, 2022 for a $ 0.3 million gain.

Non-marketable equity securities with a readily determinable fair value totaled $ 6.2 million at March 31, 2022 and $ 4.6 million at September 30, 2021.

The Company recognized $ 0.3 million in unrealized gains and $ 0.2 million in unrealized gains during the six months ended March 31, 2022 and 2021, respectively.

No such securities were sold during the six months ended March 31, 2022.

Non-marketable equity securities without readily determinable fair value totaled $ 20.9 million at March 31, 2022 and $ 16.0 million at September 30, 2021.

There was one security sold during the six months ended March 31, 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 December 31, 2021 and September 30, 2021.

FRB of Minneapolis stock held by the Bank totaled $ 19.7 million at March 31, 2022 and September 30, 2021.

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

4 unchanged sentences

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

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

The carrying value of the stock held at the FHLB was $ 9.1 million at March 31, 2022 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.

3 unchanged sentences

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

The Company recognized no impairment for such investments for the six months ended March 31, 2022.

LOANS AND LEASES, NET

Loans and leases consist of the following:

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

(Dollars in thousands) March 31, 2022 September 30, 2021

Term lending $ 1,111,076 $ 961,019

17 unchanged sentences

Total loans and leases, net $ 3,641,638 $ 3,541,282

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.

During the six months ended March 31, 2022, the Company transferred $ 169.0 million of Community Banking loans to held for sale.

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

During the six months ended March 31, 2022 and 2021, the Company originated $ 555.4 million and $ 361.7 million of consumer finance and SBA/USDA as held for sale, respectively.

The Company sold held for sale loans resulting in proceeds of $ 723.9 million and loss on sale of $ 4.1 million during the six months ended March 31, 2022.

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

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.

The Company recognized $ 0.2 million and $ 1.6 million in servicing fee expense during the six months ended March 31, 2022 and 2021, 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.

The Company sold additional loans from the retained Community Bank portfolio in the amount of $ 192.5 million and $ 233.0 million in the six months ended March 31, 2022 and 2021, 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,

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

(Dollars in thousands) 2022 2021 2022 2021

10 unchanged sentences

Loans held for investment:

Commercial finance 15,549 — 15,549 —

Community banking — — 30,235 —

2 unchanged sentences

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

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

(Dollars in thousands) March 31, 2022 September 30, 2021

Carrying amount $ 244,030 $ 278,341

3 unchanged sentences

Total net investment in direct financing and sales-type leases $ 235,803 $ 266,540

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 December 31,

(Dollars in thousands) 2021 2020

Interest income - loans and leases

Interest income on net investments in direct financing and sales-type leases $ 4,573 $ 5,319

Leasing and equipment finance noninterest income

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

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

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

Total lease income $ 16,984 $ 15,500

(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 at December 31, 2021 were as follows:

Undiscounted future minimum lease payments receivable for direct financing and sales-type leases, and a reconciliation to the carrying amount recorded at March 31, 2022 were as follows:

(Dollars in thousands)

2 unchanged sentences

Total undiscounted future minimum lease payments receivable for direct financing and sales-type leases 244,030

Third-party residual value guarantees —

Total carrying amount of direct financing and sales-type leases $ 244,030

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 Company did not record any contingent rental income from direct financing and sales-type leases in the six months ended March 31, 2022.

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

3 unchanged sentences

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

Three Months Ended December 31, 2021

Three Months Ended March 31, 2022

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

19 unchanged sentences

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

Three Months Ended December 31, 2020

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

Three Months Ended March 31, 2021

(Dollars in thousands) Beginning Balance Provision (Reversal) (2)

Charge-offs Recoveries Ending Balance

Allowance for credit losses:

17 unchanged sentences

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

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

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

Six Months Ended March 31, 2022

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

Allowance for credit losses:

Term lending $ 29,351 $ 1,095 $ ( 3,906 ) $ 1,028 $ 27,568

Asset based lending 1,726 736 ( 16 ) 137 2,583

Factoring 3,997 13,324 ( 10,864 ) 69 6,526

Lease financing 7,629 ( 1,217 ) ( 112 ) 171 6,471

Insurance premium finance 1,394 ( 211 ) ( 283 ) 157 1,057

SBA/USDA 2,978 180 ( 217 ) 2 2,943

Other commercial finance 1,168 29 — — 1,197

Commercial finance 48,243 13,936 ( 15,398 ) 1,564 48,345

Consumer credit products 1,242 379 — — 1,621

Other consumer finance 6,112 2,718 ( 1,622 ) 180 7,388

Consumer finance 7,354 3,097 ( 1,622 ) 180 9,009

Tax services 2 28,259 ( 254 ) 2,750 30,757

Warehouse finance 420 21 — — 441

Community banking 12,262 ( 12,686 ) — 424 —

Total loans and leases 68,281 32,627 ( 17,274 ) 4,918 88,552

Unfunded commitments (1)

690 ( 139 ) — — 551

Total $ 68,971 $ 32,488 $ ( 17,274 ) $ 4,918 $ 89,103

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

Six Months Ended March 31, 2021

(Dollars in thousands) Beginning Balance Impact of CECL Adoption Provision (Reversal) (2)

Charge-offs Recoveries Ending Balance

Allowance for credit losses:

Term lending $ 15,211 $ 9,999 $ 7,422 $ ( 5,789 ) $ 472 $ 27,315

Asset based lending 1,406 164 1,378 ( 1,199 ) — 1,749

Factoring 3,027 987 ( 1,961 ) ( 1 ) 1,158 3,210

Lease financing 7,023 ( 556 ) 1,532 ( 1,347 ) 211 6,863

Insurance premium finance 2,129 ( 965 ) 591 ( 805 ) 376 1,326

SBA/USDA 940 2,720 ( 361 ) — 1 3,300

Other commercial finance 182 364 ( 5 ) — — 541

Commercial finance 29,918 12,713 8,596 ( 9,141 ) 2,218 44,304

Consumer credit products 845 — 145 — — 990

Other consumer finance 2,821 5,998 1,748 ( 637 ) 163 10,093

Consumer finance 3,666 5,998 1,893 ( 637 ) 163 11,083

Tax services 2 — 28,134 — 1,010 29,146

Warehouse finance 294 ( 1 ) 39 — — 332

Community banking 22,308 ( 5,937 ) ( 2,199 ) ( 145 ) — 14,027

Total loans and leases 56,188 12,773 36,463 ( 9,923 ) 3,391 98,892

Unfunded commitments (1)

32 831 ( 84 ) — — 779

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

(1) Reserve for unfunded commitments is recognized within other liabilities on the Consolidated 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

(Dollars in thousands) At March 31, 2022 At September 30, 2021

Term lending $ 60,400 $ 20,965

10 unchanged sentences

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

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

As of March 31, 2022, $ 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 .

25 unchanged sentences

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 $ 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 outstanding balances of consumer finance loans and tax services loans were $ 283.8 million and $ 86.0 million at March 31, 2022, 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

At December 31, 2021 2022 2021 2020 2019 2018 Prior

At March 31, 2022 2022 2021 2020 2019 2018 Prior

Pass $ 258,394 $ 285,900 $ 158,324 $ 55,586 $ 37,818 $ 7,731 $ — $ 803,753

39 unchanged sentences

Watch — 20,000 13,282 — 443 — — 33,725

Special Mention — — — — 447 — — 447

Substandard 166 9,827 — — 267 2,043 — 12,303

72 unchanged sentences

Past due loans and leases were as follows:

At December 31, 2021

At March 31, 2022

Accruing and Nonaccruing Loans and Leases Nonperforming Loans and Leases

37 unchanged sentences

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 at December 31, 2021 were as follows:

Nonaccrual loans and leases by year of origination at March 31, 2022 were as follows:

Amortized Cost Basis

8 unchanged sentences

Total nonaccrual loans and leases $ 158 $ 710 $ 4,128 $ 9,041 $ 888 $ 445 $ 9,957 $ 25,327 $ 6,483

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

Loans and leases that are 90 days or more delinquent and accruing by year of origination at March 31, 2022 were as follows:

Amortized Cost Basis

4 unchanged sentences

Insurance premium finance 188 762 5 — — — — 955

SBA/USDA — — 647 — — 66 — 713

Commercial finance 2,289 1,975 952 261 128 96 — 5,701

7 unchanged sentences

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

Three Months Ended December 31,

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

(Dollars in thousands) 2022 2021 2022 2021

7 unchanged sentences

Total loans and leases $ 30,956 $ 37,134 $ 32,193 $ 33,304

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 recognized interest income on the Company's nonaccrual loans and leases for the three and six months ended March 31, 2022 and 2021 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 $ 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.

There were $ 0.2 million of commercial finance loans and $ 0.2 million of consumer finance loans that were modified in a TDR during the three months ended March 31, 2022, all of which were modified to extend the term of the loan.

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

During the six months ended March 31, 2022, there were $ 10.3 million of commercial finance loans and $ 0.2 million of consumer finance loans that were modified in a TDR, all of which were modified to extend the term of the loan.

There were $ 2.1 million of commercial finance loans and $ 0.1 million of consumer finance loans that were modified in a TDR during the six months ended March 31, 2021 and no community banking loans.

During the six months ended March 31, 2022, the Company had $ 2.6 million of commercial finance loans and $ 0.8 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 six months ended March 31, 2021, the Company had $ 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 six months ended March 31, 2022 and March 31, 2021.

EARNINGS PER COMMON SHARE ("EPS")

8 unchanged sentences

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

Three Months Ended December 31,

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

(Dollars in thousands, except per share data) 2022 2021 2022 2021

17 unchanged sentences

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

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

(2) Excluded from the computation of diluted earnings per share for the three months ended March 31, 2022 and 2021, respectively, were 491,621 and 605,459 weighted average shares of nonvested restricted stock because their inclusion would be anti-dilutive.

Excluded from the computation of diluted earnings per share for the six months ended March 31, 2022 and 2021, respectively, were 484,457 and 633,553 weighted average shares of nonvested restricted stock because their inclusion would be anti-dilutive.

RENTAL EQUIPMENT, NET

Rental equipment consists of the following:

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

(Dollars in thousands) March 31, 2022 September 30, 2021

Computers and IT networking equipment $ 21,125 $ 17,683

6 unchanged sentences

Net book value $ 213,033 $ 213,116

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

Undiscounted future minimum lease payments expected to be received for operating leases at March 31, 2022 were as follows:

(Dollars in thousands)

3 unchanged sentences

GOODWILL AND INTANGIBLE ASSETS

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

The Company held a total of $ 309.5 million of goodwill at March 31, 2022.

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.

2 unchanged sentences

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.

There have been no changes to the carrying amount of goodwill during the six months ended March 31, 2022.

The changes in the carrying amount of the Company’s intangible assets were as follows:

7 unchanged sentences

Amortization during the period ( 526 ) ( 40 ) ( 2,829 ) ( 262 ) ( 3,657 )

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

Write-offs during the period — — — ( 202 ) ( 202 )

At March 31, 2022 $ 9,297 $ — $ 15,039 $ 4,954 $ 29,290

Gross carrying amount $ 14,624 $ 2,481 $ 82,088 $ 9,940 $ 109,133

1 unchanged sentence

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

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

At March 31, 2022 $ 9,297 $ — $ 15,039 $ 4,954 $ 29,290

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

2 unchanged sentences

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

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

At March 31, 2021 $ 10,357 $ 231 $ 20,617 $ 5,698 $ 36,903

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

1 unchanged sentence

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

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

At March 31, 2021 $ 10,357 $ 231 $ 20,617 $ 5,698 $ 36,903

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

7 unchanged sentences

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

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

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

(Dollars in thousands)

3 unchanged sentences

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

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

There were no impairments to intangible assets during the six months ended March 31, 2022 and 2021.

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 $ 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:

Operating lease ROU assets, included in other assets , were $ 31.8 million and $ 36.1 million at March 31, 2022 and 2021, respectively.

Operating lease liabilities, included in accrued expenses and other liabilities , were $ 33.6 million and $ 38.1 million at March 31, 2022 and 2021, respectively.

Undiscounted future minimum operating lease payments and a reconciliation to the amount recorded as operating lease liabilities at March 31, 2022 were as follows:

(Dollars in thousands)

4 unchanged sentences

Total operating lease liabilities $ 33,645

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

The weighted-average discount rate and remaining lease term for operating leases at March 31, 2022 were as follows:

Weighted-average discount rate 2.34 %

1 unchanged sentence

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

Three Months Ended December 31,

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

(Dollars in thousands) 2022 2021 2022 2021

11 unchanged sentences

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.

During the six months ended March 31, 2022, and 2021, the Company repurchased 2,447,699 and 2,599,458 shares, respectively, as part of the share repurchase programs.

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

1 unchanged sentence

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

As of December 31, 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.

As of March 31, 2022, 4,868,177 shares of common stock remained available for repurchase.

For the six months ended March 31, 2022, and 2021, the Company also repurchased 64,536 and 84,121 shares, or $ 3.7 million and $ 1.9 million of common stock, respectively, in settlement of employee tax withholding obligations due upon the vesting of restricted stock.

STOCK COMPENSATION

5 unchanged sentences

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

The following tables show the activity of nonvested (restricted) shares and PSUs granted, 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.

The following tables show the activity of nonvested (restricted) shares and PSUs granted, vested, or forfeited under the 2002 Omnibus Incentive Plan for the six months ended March 31, 2022.

There were no options granted, exercised, or forfeited under this plan during the six months ended March 31, 2022.

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

4 unchanged sentences

Forfeited or expired ( 11,788 ) 42.19

Nonvested shares outstanding, December 31, 2021

Nonvested shares outstanding, March 31, 2022

499,782 $ 37.13

3 unchanged sentences

Forfeited or expired — —

Performance share units outstanding, December 31, 2021

Performance share units outstanding, March 31, 2022

96,689 $ 42.59

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

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.

At March 31, 2022, stock-based compensation expense not yet recognized in income totaled $ 10.8 million, which is expected to be recognized over a weighted average remaining period of 1.63 years.

The Company recorded an income tax expense of $ 22.3 million for the six months ended March 31, 2022, resulting in an effective tax rate of 16.66 %, compared to an income tax expense of $ 4.7 million, or an effective tax rate of 4.97 %, for the six months ended March 31, 2021.

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

2 unchanged sentences

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

Three Months Ended December 31,

Six Months Ended March 31,

(Dollars in thousands) 2022 2021

15 unchanged sentences

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

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

Three Months Ended March 31, 2022 2021 2022 2021 2022 2021 2022 2021

Net interest income (1)

10 unchanged sentences

— — — — 260 6 260 6

Gain (loss) on sale of other (1)

— — 1,229 1,624 ( 603 ) 509 626 2,133

Other income (1)

1,387 919 2,839 2,349 ( 345 ) 950 3,881 4,218

Total noninterest income 94,761 98,041 15,537 13,940 ( 532 ) 1,472 109,766 113,453

Revenue $ 124,917 $ 123,126 $ 60,416 $ 56,344 $ 8,233 $ 7,833 $ 193,566 $ 187,303

Six Months Ended March 31,

Net interest income (1)

$ 56,427 $ 47,432 $ 89,805 $ 84,252 $ 9,181 $ 8,165 $ 155,413 $ 139,849

Noninterest income:

Refund transfer product fees 28,384 23,327 — — — — 28,384 23,327

Tax advance product fees (1)

40,532 46,522 — — — — 40,532 46,522

Payment card and deposit fees 51,402 52,439 — — — — 51,402 52,439

Other bank and deposit fees — — 475 360 12 10 487 370

Rental income (1)

— 10 22,302 19,721 150 — 22,452 19,731

Net gain realized on investment securities (1)

— — — — 397 6 397 6

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

20 unchanged sentences

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

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.

At March 31, 2022 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.

39 unchanged sentences

The following tables present segment data for the Company:

Three Months Ended December 31, 2021

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

Three Months Ended March 31, 2022 2021 2022 2021 2022 2021 2022 2021

Net interest income $ 30,156 $ 25,085 $ 44,879 $ 42,404 $ 8,765 $ 6,361 $ 83,800 $ 73,850

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

Provision for credit losses 29,685 28,020 2,205 2,203 412 67 32,302 30,290

Noninterest income 94,761 98,041 15,537 13,940 ( 532 ) 1,472 109,766 113,453

4 unchanged sentences

Total deposits 5,693,063 8,447,910 6,882 12,177 129,941 182,326 5,829,886 8,642,413

Three Months Ended December 31, 2020

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

Six Months Ended March 31,

Net interest income $ 56,427 $ 47,432 $ 89,805 $ 84,252 $ 9,181 $ 8,165 $ 155,413 $ 139,849

22 unchanged sentences

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

Fair Value At December 31, 2021

Fair Value At March 31, 2022

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

11 unchanged sentences

$ 6,165 $ — $ — $ —

(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.

(1) Equity securities at fair value are included within other assets on the Condensed Consolidated Statements of Financial Condition at March 31, 2022 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.

13 unchanged sentences

$ 4,560 $ — $ — $ —

(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.

(1) Equity securities at fair value are included within other assets on the Condensed Consolidated Statements of Financial Condition at March 31, 2022 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 December 31, 2021

Fair Value At March 31, 2022

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

16 unchanged sentences

(Dollars in thousands) Fair Value at

December 31, 2021

March 31, 2022

Fair Value at

6 unchanged sentences

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

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

These fair value estimates were made at March 31, 2022 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:

At December 31, 2021

At March 31, 2022

(Dollars in thousands) Carrying

17 unchanged sentences

Accrued interest payable 571 571 571 — —

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

(1) Equity securities at fair value are included within other assets on the Condensed Consolidated Statements of Financial Condition at March 31, 2022.

(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.

22 unchanged sentences

SUBSEQUENT EVENTS

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

Management has evaluated subsequent events that occurred after March 31, 2022.

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