PATHWARD FINANCIAL, INC. 10-Q

Item 1. Financial Statements. META FINANCIAL GROUP, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Financial Condition (Dollars in thousands, except per share data) March 31, 2022 September 30, 2021 ASSETS (Unaudited) (Audited) Cash and cash equivalents $ 237,680 $ 314,019 Securities available for sale, at fair value 2,043,478 1,864,899 Securities held to maturity, at amortized cost (fair value $ 45,436 and $ 56,391 , respectively) 47,287 56,669 Federal Reserve Bank and Federal Home Loan Bank Stock, at cost 28,812 28,400 Loans held for sale 31,410 56,194 Loans and leases 3,730,190 3,609,563 Allowance for credit losses ( 88,552 ) ( 68,281 ) Accrued interest receivable 19,115 16,254 Premises, furniture, and equipment, net 43,167 44,888 Rental equipment, net 213,033 213,116 Foreclosed real estate and repossessed assets, net 112 2,077 Goodwill and intangible assets 338,795 342,653 Prepaid assets 15,264 10,513 Other assets 227,448 199,686 Total assets $ 6,887,239 $ 6,690,650 LIABILITIES AND STOCKHOLDERS’ EQUITY LIABILITIES Deposits $ 5,829,886 $ 5,514,971 Long-term borrowings 91,386 92,834 Accrued expenses and other liabilities 202,561 210,961 Total liabilities 6,123,833 5,818,766 STOCKHOLDERS’ EQUITY 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, 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 294 317 Common stock, Nonvoting, $ 0.01 par value; 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 (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 ) Total equity attributable to parent 763,084 870,729 Noncontrolling interest 322 1,155 Total stockholders’ equity 763,406 871,884 Total liabilities and stockholders’ equity $ 6,887,239 $ 6,690,650 See Notes to Condensed Consolidated Financial Statements. 2 Table of Contents META FINANCIAL GROUP, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Operations (Unaudited) Three Months Ended March 31, Six Months Ended March 31, (Dollars in thousands, except per share data) 2022 2021 2022 2021 Interest and dividend income: Loans and leases, including fees $ 75,540 $ 68,472 $ 140,575 $ 130,128 Mortgage-backed securities 5,446 2,608 9,310 4,730 Other investments 4,191 4,589 8,183 8,956 85,177 75,669 158,068 143,814 Interest expense: Deposits 165 445 306 1,241 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 Provision for credit losses 32,302 30,290 32,488 36,379 Net interest income after provision for credit losses 51,498 43,560 122,925 103,470 Noninterest income: Refund transfer product fees 27,805 22,680 28,384 23,327 Tax advance product fees 39,299 44,562 40,532 46,522 Payments card and deposit fees 26,270 29,875 51,402 52,439 Other bank and deposit fees 250 133 487 370 Rental income 11,375 9,846 22,452 19,731 Gain on sale of securities 260 6 397 6 Gain on sale of trademarks — — 50,000 — 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 Noninterest expense: Compensation and benefits 45,047 43,932 83,272 76,263 Refund transfer product expense 6,260 6,146 6,398 6,207 Tax advance product expense 2,002 2,189 2,185 2,559 Card processing 7,457 7,212 14,629 13,329 Occupancy and equipment expense 8,500 6,748 16,849 13,636 Operating lease equipment depreciation 8,737 7,419 17,185 15,000 Legal and consulting 9,347 6,045 15,555 11,292 Intangible amortization 2,169 2,757 3,657 4,770 Impairment expense — 554 — 1,713 Other expense 13,641 12,969 25,866 23,777 Total noninterest expense 103,160 95,971 185,596 168,546 Income before income tax expense 58,104 61,042 133,686 93,832 Income tax expense 8,002 1,133 22,278 4,665 Net income before noncontrolling interest 50,102 59,909 111,408 89,167 Net income attributable to noncontrolling interest 851 843 833 2,064 Net income attributable to parent $ 49,251 $ 59,066 $ 110,575 $ 87,103 Earnings per common share: Basic $ 1.66 $ 1.84 $ 3.66 $ 2.66 Diluted $ 1.66 $ 1.84 $ 3.66 $ 2.65 See Notes to Condensed Consolidated Financial Statements. 3 Table of Contents META FINANCIAL GROUP, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Comprehensive Income (Unaudited) Three Months Ended March 31, Six Months Ended March 31, (Dollars in thousands) 2022 2021 2022 2021 Net income before noncontrolling interest $ 50,102 $ 59,909 $ 111,408 $ 89,167 Other comprehensive income (loss): Change in net unrealized gain (loss) on debt securities ( 93,632 ) ( 9,923 ) ( 102,774 ) ( 7,077 ) Net (gain) realized on investment securities ( 260 ) ( 6 ) ( 397 ) ( 6 ) ( 93,892 ) ( 9,929 ) ( 103,171 ) ( 7,083 ) Unrealized gain on currency translation 143 126 209 571 Deferred income tax effect ( 23,651 ) ( 2,493 ) ( 25,989 ) ( 1,779 ) 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. 4 Table of Contents META FINANCIAL GROUP, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Changes in Stockholders' Equity (Unaudited) (Dollars in thousands, except per share data) Meta Financial Group, Inc. Three Months Ended March 31, 2022 Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Treasury Stock Total Meta Stockholders’ Equity Noncontrolling interest Total Stockholders’ Equity 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 5 Table of Contents (Dollars in thousands, except per share data) Meta Financial Group, Inc. Six Months Ended March 31, 2022 Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Treasury Stock Total Meta Stockholders’ Equity Noncontrolling interest Total Stockholders’ Equity Balance, September 30, 2021 $ 317 $ 604,484 $ 259,189 $ 7,599 $ ( 860 ) $ 870,729 $ 1,155 $ 871,884 Cash dividends declared on common stock ($ 0.10 per share) — — ( 3,004 ) — — ( 3,004 ) — ( 3,004 ) Issuance of common stock due to ESOP 1 2,885 — — — 2,886 — 2,886 Repurchases of common stock ( 24 ) 24 ( 143,000 ) — ( 3,653 ) ( 146,653 ) — ( 146,653 ) Stock compensation — 5,524 — — — 5,524 — 5,524 Total other comprehensive (loss) — — — ( 76,973 ) — ( 76,973 ) — ( 76,973 ) Net income — — 110,575 — — 110,575 833 111,408 Net investment by (distribution to) noncontrolling interests — — — — — — ( 1,666 ) ( 1,666 ) Balance, March 31, 2022 $ 294 $ 612,917 $ 223,760 $ ( 69,374 ) $ ( 4,513 ) $ 763,084 $ 322 $ 763,406 Six Months Ended March 31, 2021 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 ($ 0.10 per share) — — ( 3,209 ) — — ( 3,209 ) — ( 3,209 ) Issuance of common stock due to ESOP 2 3,034 — — — 3,036 — 3,036 Repurchases of common stock ( 27 ) 27 ( 84,999 ) — ( 1,978 ) ( 86,977 ) — ( 86,977 ) Stock compensation — 3,592 — — — 3,592 — 3,592 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, March 31, 2021 $ 319 $ 601,222 $ 225,471 $ 12,809 $ ( 5,655 ) $ 834,166 $ 1,092 $ 835,258 See Notes to Condensed Consolidated Financial Statements. 6 Table of Contents META FINANCIAL GROUP, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows (Unaudited) Six Months Ended March 31, (Dollars in thousands) 2022 2021 Cash flows from operating activities: Net income before noncontrolling interest $ 111,408 $ 89,167 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation, amortization and accretion, net 30,753 28,414 Provision for credit losses 32,488 36,379 Provision (reversal of) for deferred taxes 14,091 ( 5,933 ) Originations of loans held for sale ( 555,397 ) ( 361,722 ) Proceeds from sales of loans held for sale 723,942 575,931 Net change in loans held for sale 8,834 5,500 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 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 ) — Change in bank-owned life insurance value ( 1,212 ) ( 1,227 ) Net change in accrued interest receivable ( 2,862 ) ( 801 ) Net change in other assets ( 20,718 ) ( 28,635 ) Net change in accrued expenses and other liabilities ( 8,400 ) 49,774 Stock compensation 5,524 3,592 Net cash provided by operating activities 291,349 385,925 Cash flows from investing activities: 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 Proceeds from sales of securities held to maturity 460 — Proceeds from maturities of and principal collected on securities held to maturity 8,937 19,536 Purchases of Federal Reserve Bank and Federal Home Loan Bank stock ( 103,573 ) ( 1,295 ) Redemption of Federal Reserve Bank and Federal Home Loan Bank stock 103,160 — Purchases of loans and leases ( 88,913 ) ( 99,083 ) Proceeds from sales of loans and leases 45,784 12,005 Net change in loans and leases ( 69,966 ) ( 353,781 ) Purchases of premises, furniture, and equipment ( 3,718 ) ( 4,254 ) Proceeds from sales of premises, furniture, and equipment 35 — Purchases of rental equipment ( 196,043 ) ( 26,212 ) Proceeds from sales of rental equipment 6,811 7,830 Net change in rental equipment ( 1,567 ) — Proceeds from sales of foreclosed real estate and repossessed assets 1,715 8,021 Proceeds from sale of trademarks 50,000 — Net cash (used in) investing activities ( 532,838 ) ( 660,588 ) Cash flows from financing activities: Net change in deposits 314,915 3,663,213 Principal payments on capital lease obligations ( 74 ) ( 16 ) Principal payments on other liabilities ( 1,463 ) ( 2,957 ) Dividends paid on common stock ( 3,004 ) ( 3,209 ) Issuance of common stock due to ESOP 2,886 3,036 Repurchases of common stock ( 146,653 ) ( 86,977 ) Distributions to noncontrolling interest ( 1,666 ) ( 2,123 ) Net cash provided by financing activities 164,941 3,570,967 Effect of exchange rate changes on cash 209 571 Net change in cash and cash equivalents ( 76,339 ) 3,296,875 Cash and cash equivalents at beginning of fiscal year 314,019 427,367 Cash and cash equivalents at end of fiscal period $ 237,680 $ 3,724,242 7 Table of Contents Six Months Ended March 31, (Dollars in thousands) 2022 2021 Supplemental disclosure of cash flow information: Cash paid during the period for: Interest $ 2,663 $ 3,063 Income taxes 9,381 3,176 Franchise taxes 100 100 Other taxes 432 591 Supplemental schedule of non-cash investing activities: Transfers Held for sale to loans and leases 14,731 — Loans and leases to held for sale 169,045 99,922 Loans and leases to rental equipment 2,634 2,378 Loans and leases to foreclosed real estate and repossessed assets — 9 Rental equipment to loan and leases 177,193 62 Recognition of operating lease ROU assets, net of measurements — 12,681 See Notes to Condensed Consolidated Financial Statements. 8 Table of Contents NOTE 1. BASIS OF PRESENTATION The interim unaudited Condensed Consolidated Financial Statements contained herein should be read in conjunction with the audited consolidated financial statements and accompanying notes to the consolidated financial statements for the fiscal year ended September 30, 2021 included in Meta Financial Group, Inc.’s (“Meta” or the “Company”) Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on November 23, 2021. Accordingly, footnote disclosures which would substantially duplicate the disclosures contained in the audited consolidated financial statements have been omitted. The financial information of the Company included herein has been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial reporting and has been prepared pursuant to the rules and regulations for reporting on Form 10-Q and Rule 10-01 of Regulation S-X. 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 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. These changes and reclassifications did not impact previously reported net income or comprehensive income. NOTE 2. 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, 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. – ASU 2020-08 , Codification Improvements to Subtopic 310-20, Receivables – Nonrefundable Fees and Other Costs. – ASU 2020-10, Codification Improvements. NOTE 3. SIGNIFICANT EVENTS Rebranding 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 March 31, 2022. 9 Table of Contents 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. NOTE 4. SECURITIES 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. Debt Securities AFS (Dollars in thousands) Amortized Cost Gross Unrealized Gains Gross Unrealized (Losses) Fair Value At March 31, 2022 Corporate securities $ 25,000 $ — $ ( 1,750 ) $ 23,250 SBA securities 137,330 1,429 ( 1,359 ) 137,400 Obligations of states and political subdivisions 2,777 1 ( 72 ) 2,706 Non-bank qualified obligations of states and political subdivisions 249,576 153 ( 9,306 ) 240,423 Asset-backed securities 361,408 1,636 ( 9,463 ) 353,581 Mortgage-backed securities 1,360,741 232 ( 74,855 ) 1,286,118 Total debt securities AFS $ 2,136,832 $ 3,451 $ ( 96,805 ) $ 2,043,478 At September 30, 2021 Corporate securities $ 25,000 $ — $ — $ 25,000 SBA securities 151,958 5,251 — 157,209 Obligations of states and political subdivisions 2,497 10 — 2,507 Non-bank qualified obligations of states and political subdivisions 266,048 3,347 ( 1,100 ) 268,295 Asset-backed securities 393,103 3,003 ( 1,247 ) 394,859 Mortgage-backed securities 1,016,478 9,728 ( 9,177 ) 1,017,029 Total debt securities AFS $ 1,855,084 $ 21,339 $ ( 11,524 ) $ 1,864,899 Debt Securities HTM (Dollars in thousands) Amortized Cost Gross Unrealized Gains Gross Unrealized (Losses) Fair Value At March 31, 2022 Non-bank qualified obligations of states and political subdivisions $ 44,369 $ — $ ( 1,768 ) $ 42,601 Mortgage-backed securities 2,918 — ( 83 ) 2,835 Total debt securities HTM $ 47,287 $ — $ ( 1,851 ) $ 45,436 At September 30, 2021 Non-bank qualified obligations of states and political subdivisions $ 52,944 $ 103 $ ( 471 ) $ 52,576 Mortgage-backed securities 3,725 90 — 3,815 Total debt securities HTM $ 56,669 $ 193 $ ( 471 ) $ 56,391 10 Table of Contents Gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous loss position, were as follows: LESS THAN 12 MONTHS OVER 12 MONTHS TOTAL (Dollars in thousands) Fair Value Gross Unrealized (Losses) Fair Value Gross Unrealized (Losses) Fair Value Gross Unrealized (Losses) Debt Securities AFS 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 ) Asset-backed securities 154,196 ( 4,375 ) 111,397 ( 5,088 ) 265,593 ( 9,463 ) Mortgage-backed securities 1,014,462 ( 58,435 ) 206,040 ( 16,420 ) 1,220,502 ( 74,855 ) Total debt securities AFS $ 1,458,161 $ ( 75,171 ) $ 318,751 $ ( 21,634 ) $ 1,776,912 $ ( 96,805 ) At September 30, 2021 Non-bank qualified obligations of states and political subdivisions $ 101,046 $ ( 1,100 ) $ — $ — $ 101,046 $ ( 1,100 ) Asset-backed securities 127,110 ( 283 ) 91,553 ( 964 ) 218,663 ( 1,247 ) Mortgage-backed securities 759,035 ( 7,418 ) 60,792 ( 1,759 ) 819,827 ( 9,177 ) Total debt securities AFS $ 987,191 $ ( 8,801 ) $ 152,345 $ ( 2,723 ) $ 1,139,536 $ ( 11,524 ) Debt Securities HTM 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 ) At September 30, 2021 Non-bank qualified obligations of states and political subdivisions $ 26,096 $ ( 471 ) $ — $ — $ 26,096 $ ( 471 ) Total debt securities HTM $ 26,096 $ ( 471 ) $ — $ — $ 26,096 $ ( 471 ) 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 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. Certain securities have call features that allow the issuer to call the security prior to maturity. Expected maturities may differ from contractual maturities in mortgage-backed securities ("MBS") because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Therefore, MBS are not included in the maturity categories in the following maturity summary. The expected maturities of certain SBA securities may differ from contractual maturities because the borrowers may have the right to prepay the obligation. However, certain prepayment penalties may apply. 11 Table of Contents (Dollars in thousands) At March 31, 2022 At September 30, 2021 Securities AFS at Fair Value Amortized Cost Fair Value Amortized Cost Fair Value Due in one year or less $ 240 $ 241 $ 810 $ 822 Due after one year through five years 11,029 10,855 13,026 13,378 Due after five years through ten years 74,314 71,056 50,785 52,357 Due after ten years 690,508 675,208 773,985 781,313 776,091 757,360 838,606 847,870 Mortgage-backed securities 1,360,741 1,286,118 1,016,478 1,017,029 Total securities AFS, at fair value $ 2,136,832 $ 2,043,478 $ 1,855,084 $ 1,864,899 At March 31, 2022 At September 30, 2021 (Dollars in thousands) Amortized Cost Fair Value Amortized Cost Fair Value Securities HTM at Fair Value Due after ten years $ 44,369 $ 42,601 $ 52,944 $ 52,576 44,369 42,601 52,944 52,576 Mortgage-backed securities 2,918 2,835 3,725 3,815 Total securities HTM, at cost $ 47,287 $ 45,436 $ 56,669 $ 56,391 Equity Securities 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 . FRB Stock 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 March 31, 2022 and September 30, 2021. These equity securities are 'restricted' in that they can only be owned by member banks. FHLB Stock 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. The investments in the FHLB stock are required investments related to the Company's membership in and current borrowings from the FHLB of Des Moines. The investments in the FHLB of Des Moines could be adversely impacted by the financial operations of the FHLB and actions of their regulator, the Federal Housing Finance Agency. 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 $ 9.1 million at March 31, 2022 and $ 8.7 million at September 30, 2021. 12 Table of Contents These equity securities are ‘restricted’ in that they can only be sold back to the respective institution from which they were acquired or another member institution at par. Therefore, FRB and FHLB stocks are less liquid than other marketable equity securities, and the fair value approximates cost. Equity Security Impairment The Company evaluates impairment for investments held at cost on at least an annual basis based on the ultimate recoverability of the par value. 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 six months ended March 31, 2022. NOTE 5. LOANS AND LEASES, NET Loans and leases consist of the following: (Dollars in thousands) March 31, 2022 September 30, 2021 Term lending $ 1,111,076 $ 961,019 Asset based lending 382,355 300,225 Factoring 394,865 363,670 Lease financing 235,397 266,050 Insurance premium finance 403,681 428,867 SBA/USDA 214,195 247,756 Other commercial finance 173,260 157,908 Commercial finance 2,914,829 2,725,495 Consumer credit products 171,847 129,251 Other consumer finance 111,922 123,606 Consumer finance 283,769 252,857 Tax services 85,999 10,405 Warehouse finance 441,496 419,926 Community banking — 199,132 Total loans and leases 3,726,093 3,607,815 Net deferred loan origination costs 4,097 1,748 Total gross loans and leases 3,730,190 3,609,563 Allowance for credit losses ( 88,552 ) ( 68,281 ) Total loans and leases, net $ 3,641,638 $ 3,541,282 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 $ 1.6 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. 13 Table of Contents 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 $ 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 March 31, Six Months Ended March 31, (Dollars in thousands) 2022 2021 2022 2021 Loans Purchased Loans held for investment: Commercial finance $ 1,378 $ — $ 3,098 $ — Warehouse finance 29,822 33,605 85,815 96,236 Community banking — 548 — 2,847 Total purchases $ 31,200 $ 34,153 $ 88,913 $ 99,083 Loans Sold Loans held for sale: Commercial finance $ 14,090 $ 4,591 $ 47,113 $ 34,915 Consumer finance 147,163 19,791 523,607 311,331 Community banking — — 153,222 129,788 Loans held for investment: Commercial finance 15,549 — 15,549 — Community banking — — 30,235 — Total sales $ 176,802 $ 24,382 $ 769,726 $ 476,034 Leasing Portfolio. The net investment in direct financing and sales-type leases was comprised of the following: (Dollars in thousands) March 31, 2022 September 30, 2021 Carrying amount $ 244,030 $ 278,341 Unguaranteed residual assets 13,009 14,393 Unamortized initial direct costs 406 490 Unearned income ( 21,642 ) ( 26,684 ) Total net investment in direct financing and sales-type leases $ 235,803 $ 266,540 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) Remaining in 2022 $ 52,751 2023 90,718 2024 59,489 2025 28,337 2026 9,087 Thereafter 3,648 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 six months ended March 31, 2022. 14 Table of Contents 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 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 March 31, 2022 (Dollars in thousands) Beginning Balance Provision (Reversal) Charge-offs Recoveries Ending Balance Allowance for credit losses: Term lending $ 26,722 $ 1,954 $ ( 1,822 ) $ 714 $ 27,568 Asset based lending 2,758 ( 175 ) — — 2,583 Factoring 15,242 823 ( 9,590 ) 51 6,526 Lease financing 6,857 ( 395 ) ( 95 ) 104 6,471 Insurance premium finance 1,044 59 ( 106 ) 60 1,057 SBA/USDA 2,996 ( 53 ) — — 2,943 Other commercial finance 1,349 ( 152 ) — — 1,197 Commercial finance 56,968 2,061 ( 11,613 ) 929 48,345 Consumer credit products 1,627 ( 6 ) — — 1,621 Other consumer finance 6,960 1,157 ( 802 ) 73 7,388 Consumer finance 8,587 1,151 ( 802 ) 73 9,009 Tax services 1,601 28,972 — 184 30,757 Warehouse finance 467 ( 26 ) — — 441 Community banking — ( 2 ) — 2 — Total loans and leases 67,623 32,156 ( 12,415 ) 1,188 88,552 Unfunded commitments (1) 405 146 — — 551 Total $ 68,028 $ 32,302 $ ( 12,415 ) $ 1,188 $ 89,103 (1) Reserve for unfunded commitments is recognized within other liabilities on the Condensed Consolidated Statements of Financial Condition. 15 Table of Contents Three Months Ended March 31, 2021 (Dollars in thousands) Beginning Balance Provision (Reversal) (2) Charge-offs Recoveries Ending Balance Allowance for credit losses: Term lending $ 28,220 $ 1,396 $ ( 2,477 ) $ 176 $ 27,315 Asset based lending 1,809 539 ( 599 ) — 1,749 Factoring 3,719 ( 545 ) — 36 3,210 Lease financing 6,784 420 ( 471 ) 130 6,863 Insurance premium finance 1,285 103 ( 149 ) 87 1,326 SBA/USDA 3,164 136 — — 3,300 Other commercial finance 479 62 — — 541 Commercial finance 45,460 2,111 ( 3,696 ) 429 44,304 Consumer credit products 835 155 — — 990 Other consumer finance 10,176 266 ( 419 ) 70 10,093 Consumer finance 11,011 421 ( 419 ) 70 11,083 Tax services 1,412 27,680 — 54 29,146 Warehouse finance 319 13 — — 332 Community banking 14,187 ( 26 ) ( 134 ) — 14,027 Total loans and leases 72,389 30,199 ( 4,249 ) 553 98,892 Unfunded commitments (1) 688 91 — — 779 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. 16 Table of Contents 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. (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. 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 March 31, 2022 At September 30, 2021 Term lending $ 60,400 $ 20,965 Asset based lending 5,992 — Factoring 26,625 1,268 Lease financing 12,289 3,882 SBA/USDA 1,282 — Commercial finance (1) 106,588 26,115 Community banking — 14,915 Total $ 106,588 $ 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 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 . These modifications are in line with applicable regulatory guidelines and, therefore, they are not reported as troubled debt restructurings. Other than the loan modifications that are on nonaccrual status, the Company is accruing and recognizing interest income on these modifications during the payment deferral period. Federal regulations provide for the classification of loans and other assets such as debt and equity securities considered by the Bank's primary regulator, the 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: 17 Table of Contents 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 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 $ 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: 18 Table of Contents Amortized Cost Basis (Dollars in thousands) Term Loans and Leases by Origination Year Revolving Loans and Leases Total At March 31, 2022 2022 2021 2020 2019 2018 Prior Term lending Pass $ 258,394 $ 285,900 $ 158,324 $ 55,586 $ 37,818 $ 7,731 $ — $ 803,753 Watch 27,001 94,061 55,194 23,806 2,776 2,511 — 205,349 Special Mention 1,603 9,254 16,083 3,761 607 2,954 — 34,262 Substandard 6,423 15,352 23,760 14,961 2,181 3,201 — 65,878 Doubtful 198 346 545 676 69 — — 1,834 Total 293,619 404,913 253,906 98,790 43,451 16,397 — 1,111,076 Asset based lending Pass — — — — — — 234,134 234,134 Watch — — — — — — 83,379 83,379 Special Mention — — — — — — 49,695 49,695 Substandard — — — — — — 15,147 15,147 Total — — — — — — 382,355 382,355 Factoring Pass — — — — — — 298,546 298,546 Watch — — — — — — 46,702 46,702 Special Mention — — — — — — 25,300 25,300 Substandard — — — — — — 24,289 24,289 Doubtful — — — — — — 28 28 Total — — — — — — 394,865 394,865 Lease financing Pass 22,840 52,747 57,885 9,223 4,703 222 — 147,620 Watch 1,021 10,724 13,759 7,221 2,418 43 — 35,186 Special Mention 730 15,835 7,658 411 310 238 — 25,182 Substandard 15 5,561 11,160 7,700 1,210 22 — 25,668 Doubtful — 140 406 1,195 — — — 1,741 Total 24,606 85,007 90,868 25,750 8,641 525 — 235,397 Insurance premium finance Pass 337,078 65,850 24 2 — — — 402,954 Watch 110 133 — — — — — 243 Special Mention 4 268 — — — — — 272 Substandard — 148 — — — — — 148 Doubtful — 64 — — — — — 64 Total 337,192 66,463 24 2 — — — 403,681 SBA/USDA Pass 29,689 72,935 21,521 11,737 12,299 8,786 — 156,967 Watch 904 — 19,595 2,845 968 1,344 — 25,656 Special Mention — — 1,618 213 3,970 985 — 6,786 Substandard — — 6,109 7,554 7,975 2,811 — 24,449 Doubtful — 22 315 — — — — 337 Total 30,593 72,957 49,158 22,349 25,212 13,926 — 214,195 Other commercial finance Pass 20,122 28,761 799 9,017 2,134 66,399 — 127,232 Watch — 20,000 13,282 — 443 — — 33,725 Substandard 166 9,827 — — 267 2,043 — 12,303 Total 20,288 58,588 14,081 9,017 2,844 68,442 — 173,260 19 Table of Contents Warehouse finance Pass — — — — — — 441,496 441,496 Total — — — — — — 441,496 441,496 Total loans and leases Pass 668,123 506,193 238,553 85,565 56,954 83,138 974,176 2,612,702 Watch 29,036 124,918 101,830 33,872 6,605 3,898 130,081 430,240 Special Mention 2,337 25,357 25,359 4,385 4,887 4,177 74,995 141,497 Substandard 6,604 30,888 41,029 30,215 11,633 8,077 39,436 167,882 Doubtful 198 572 1,266 1,871 69 — 28 4,004 Total $ 706,298 $ 687,928 $ 408,037 $ 155,908 $ 80,148 $ 99,290 $ 1,218,716 $ 3,356,325 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 Term lending Pass $ 362,443 $ 192,305 $ 63,708 $ 34,381 $ 3,195 $ 1,236 $ — $ 657,268 Watch 63,046 71,701 32,941 21,419 76 3,628 — 192,811 Special Mention 6,422 26,673 4,821 932 70 633 — 39,551 Substandard 18,569 16,810 26,920 3,529 928 641 — 67,397 Doubtful 252 1,673 1,756 311 — — — 3,992 Total 450,732 309,162 130,146 60,572 4,269 6,138 — 961,019 Asset based lending 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 Factoring Pass — — — — — — 294,124 294,124 Watch — — — — — — 17,984 17,984 Special Mention — — — — — — 33,035 33,035 Substandard — — — — — — 18,527 18,527 Total — — — — — — 363,670 363,670 Lease financing Pass 54,434 73,629 17,153 7,511 1,857 203 — 154,787 Watch 22,061 20,455 9,274 2,739 1,454 — — 55,983 Special Mention 15,402 20,595 4,148 1,546 61 — — 41,752 Substandard 479 4,765 4,981 831 25 — — 11,081 Doubtful — 6 2,402 38 1 — — 2,447 Total 92,376 119,450 37,958 12,665 3,398 203 — 266,050 Insurance premium finance Pass 428,131 144 9 — — — — 428,284 Watch 262 5 — — — — — 267 Special Mention 58 5 — — — — — 63 Substandard 68 107 — — — — — 175 Doubtful 58 20 — — — — — 78 Total 428,577 281 9 — — — — 428,867 SBA/USDA 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 20 Table of Contents 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 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 Pass — — — — — — 419,926 419,926 Total — — — — — — 419,926 419,926 Community banking 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 March 31, 2022 Accruing and Nonaccruing Loans and Leases Nonperforming Loans and Leases (Dollars in thousands) 30-59 Days Past Due 60-89 Days Past Due > 89 Days Past Due Total Past Due Current Total Loans and Leases Receivable > 89 Days Past Due and Accruing Nonaccrual Balance Total Loans held for sale $ — $ — $ — $ — $ 31,410 $ 31,410 $ — $ — $ — Term lending 17,081 1,495 5,243 23,819 1,087,257 1,111,076 1,400 10,283 11,683 Asset based lending 7 — — 7 382,348 382,355 — 5,996 5,996 Factoring — — — — 394,865 394,865 — 3,961 3,961 Lease financing 4,932 — 4,199 9,131 226,266 235,397 3,346 3,064 6,410 Insurance premium finance 1,149 768 955 2,872 400,809 403,681 955 — 955 SBA/USDA 1,462 311 1,597 3,370 210,825 214,195 — 2,023 2,023 Other commercial finance — — — — 173,260 173,260 — — — Commercial finance 24,631 2,574 11,994 39,199 2,875,630 2,914,829 5,701 25,327 31,028 Consumer credit products 4,092 3,489 3,050 10,631 161,216 171,847 3,050 — 3,050 Other consumer finance 1,737 1,986 1,764 5,487 106,435 111,922 1,764 — 1,764 Consumer finance 5,829 5,475 4,814 16,118 267,651 283,769 4,814 — 4,814 Tax services 830 — — 830 85,169 85,999 — — — Warehouse finance — — — — 441,496 441,496 — — — Community banking — — — — — — — — — Total loans and leases held for investment 31,290 8,049 16,808 56,147 3,669,946 3,726,093 10,515 25,327 35,842 Total loans and leases $ 31,290 $ 8,049 $ 16,808 $ 56,147 $ 3,701,356 $ 3,757,503 $ 10,515 $ 25,327 $ 35,842 21 Table of Contents At September 30, 2021 Accruing and Nonaccruing Loans and Leases Nonperforming Loans and Leases (Dollars in thousands) 30-59 Days Past Due 60-89 Days Past Due > 89 Days Past Due Total Past Due Current Total Loans and Leases Receivable > 89 Days Past Due and Accruing Nonaccrual Balance Total Loans held for sale $ — $ — $ — $ — $ 56,194 $ 56,194 $ — $ — $ — Term lending 11,879 2,703 5,452 20,034 940,985 961,019 2,558 14,904 17,462 Asset based lending — — — — 300,225 300,225 — — — Factoring — — — — 363,670 363,670 — 1,268 1,268 Lease financing 4,909 3,336 8,401 16,646 249,404 266,050 8,345 3,158 11,503 Insurance premium finance 1,415 375 599 2,389 426,478 428,867 599 — 599 SBA/USDA 66 974 987 2,027 245,729 247,756 987 — 987 Other commercial finance — — — — 157,908 157,908 — — — Commercial finance 18,269 7,388 15,439 41,096 2,684,399 2,725,495 12,489 19,330 31,819 Consumer credit products 713 527 511 1,751 127,500 129,251 511 — 511 Other consumer finance 963 285 725 1,973 121,633 123,606 725 — 725 Consumer finance 1,676 812 1,236 3,724 249,133 252,857 1,236 — 1,236 Tax services — — 7,962 7,962 2,443 10,405 7,962 — 7,962 Warehouse finance — — — — 419,926 419,926 — — — Community banking — — — — 199,132 199,132 — 14,915 14,915 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 at March 31, 2022 were as follows: Amortized Cost Basis Term Loans and Leases by Origination Year Revolving Loans and Leases Total Nonaccrual with No ACL (Dollars in thousands) 2022 2021 2020 2019 2018 Prior Term lending $ 158 $ 688 $ 2,018 $ 6,851 $ 448 $ 120 $ — $ 10,283 $ 2,958 Asset based lending — — — — — — 5,996 5,996 — Factoring — — — — — — 3,961 3,961 3,525 Lease financing — — 420 2,190 440 14 — 3,064 — SBA/USDA — 22 1,690 — — 311 — 2,023 — Commercial finance 158 710 4,128 9,041 888 445 9,957 25,327 6,483 Total nonaccrual loans and leases $ 158 $ 710 $ 4,128 $ 9,041 $ 888 $ 445 $ 9,957 $ 25,327 $ 6,483 22 Table of Contents 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 Term Loans and Leases by Origination Year Revolving Loans and Leases Total (Dollars in thousands) 2022 2021 2020 2019 2018 Prior Term lending $ 421 $ 330 $ 549 $ 100 $ — $ — $ — $ 1,400 Lease financing 1,680 883 398 161 128 96 — 3,346 Insurance premium finance 188 762 5 — — — — 955 Commercial finance 2,289 1,975 952 261 128 96 — 5,701 Consumer credit products 119 2,781 39 91 20 — — 3,050 Other consumer finance 1,034 130 — — — 600 — 1,764 Consumer finance 1,153 2,911 39 91 20 600 — 4,814 Total 90 days or more delinquent and accruing $ 3,442 $ 4,886 $ 991 $ 352 $ 148 $ 696 $ — $ 10,515 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 nonaccrual loans and leases: Three Months Ended March 31, Six Months Ended March 31, (Dollars in thousands) 2022 2021 2022 2021 Term lending $ 10,688 $ 12,729 $ 12,305 $ 13,802 Asset based lending 5,993 572 5,002 823 Factoring 9,791 44 11,019 490 Lease financing 3,020 2,990 3,027 3,273 SBA/USDA 1,464 600 840 600 Commercial finance 30,956 16,935 32,193 18,988 Community banking — 20,199 — 14,316 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 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 $ 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. 23 Table of Contents 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. NOTE 6. EARNINGS PER COMMON SHARE ("EPS") The Company has granted restricted share awards with dividend rights that are considered to be participating securities. Accordingly, a portion of the Company’s earnings is allocated to those participating securities in the earnings per share calculation under the two-class method. 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. Antidilutive securities are disregarded in earnings per share calculations. Diluted EPS shown below reflects the two-class method, as diluted EPS under the two-class method was more dilutive than under the treasury stock method. A reconciliation of net income and common stock share amounts used in the computation of basic and diluted earnings per share is presented below. Three Months Ended March 31, Six Months Ended March 31, (Dollars in thousands, except per share data) 2022 2021 2022 2021 Basic income per common share: Net income attributable to Meta Financial Group, Inc. $ 49,251 $ 59,066 $ 110,575 $ 87,103 Dividends and undistributed earnings allocated to participating securities ( 815 ) ( 1,113 ) ( 1,773 ) ( 1,683 ) Basic net earnings available to common stockholders 48,436 57,953 108,802 85,420 Undistributed earnings allocated to nonvested restricted stockholders 791 1,083 1,724 1,620 Reallocation of undistributed earnings to nonvested restricted stockholders ( 791 ) ( 1,082 ) ( 1,723 ) ( 1,619 ) Diluted net earnings available to common stockholders $ 48,436 $ 57,954 $ 108,803 $ 85,421 Total weighted-average basic common shares outstanding 29,212,301 31,520,505 29,731,797 32,158,994 Effect of dilutive securities (1) Performance share units 12,061 14,517 17,035 16,490 Total effect of dilutive securities 12,061 14,517 17,035 16,490 Total weighted-average diluted common shares outstanding 29,224,362 31,535,022 29,748,832 32,175,484 Net earnings per common share: Basic earnings per common share $ 1.66 $ 1.84 $ 3.66 $ 2.66 Diluted earnings per common share (2) $ 1.66 $ 1.84 $ 3.66 $ 2.65 (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 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. 24 Table of Contents NOTE 7. RENTAL EQUIPMENT, NET Rental equipment consists of the following: (Dollars in thousands) March 31, 2022 September 30, 2021 Computers and IT networking equipment $ 21,125 $ 17,683 Motor vehicles and other 97,106 87,396 Office furniture and equipment 44,382 48,828 Solar panels and equipment 128,551 125,457 Total 291,164 279,364 Accumulated depreciation ( 79,579 ) ( 67,825 ) Unamortized initial direct costs 1,448 1,577 Net book value $ 213,033 $ 213,116 Undiscounted future minimum lease payments expected to be received for operating leases at March 31, 2022 were as follows: (Dollars in thousands) Remaining in 2022 $ 19,801 2023 34,172 2024 26,211 2025 18,884 2026 10,789 Thereafter 14,332 Total undiscounted future minimum lease payments receivable for operating leases $ 124,189 NOTE 8. GOODWILL AND INTANGIBLE ASSETS 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. 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. See Note 14. Segment Reporting for additional information on the Company's segment reporting. There have been no changes to the carrying amount of goodwill during the six months ended March 31, 2022. 25 Table of Contents The changes in the carrying amount of the Company’s intangible assets were as follows: (Dollars in thousands) Trademark (1) Non-Compete (2) Customer Relationships (3) All Others (4) Total 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 ( 526 ) ( 40 ) ( 2,829 ) ( 262 ) ( 3,657 ) 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 Accumulated amortization ( 5,327 ) ( 2,481 ) ( 56,801 ) ( 4,768 ) ( 69,377 ) Accumulated impairment — — ( 10,248 ) ( 218 ) ( 10,466 ) 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 Acquisitions during the period — — — 5 5 Amortization during the period ( 544 ) ( 191 ) ( 3,716 ) ( 319 ) ( 4,770 ) Write-offs during the period — — — ( 24 ) ( 24 ) 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 Accumulated amortization ( 4,267 ) ( 2,250 ) ( 51,223 ) ( 4,207 ) ( 61,947 ) Accumulated impairment — — ( 10,248 ) ( 218 ) ( 10,466 ) At March 31, 2021 $ 10,357 $ 231 $ 20,617 $ 5,698 $ 36,903 (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. 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 six months of fiscal 2022 and subsequent fiscal years was as follows: (Dollars in thousands) Remaining in 2022 $ 2,763 2023 5,101 2024 4,383 2025 3,826 2026 3,252 Thereafter 9,965 Total anticipated intangible amortization $ 29,290 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 six months ended March 31, 2022 and 2021. Intangible expense is recorded within the impairment expense line of the Condensed Consolidated Statements of Operations. 26 Table of Contents NOTE 9. OPERATING LEASE RIGHT-OF-USE ASSETS AND LIABILITIES 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) Remaining in 2022 $ 2,192 2023 3,892 2024 3,854 2025 3,718 2026 3,195 Thereafter 21,732 Total undiscounted future minimum lease payments 38,583 Discount ( 4,938 ) Total operating lease liabilities $ 33,645 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 % Weighted-average remaining lease term (years) 10.75 The components of total lease costs for operating leases were as follows: Three Months Ended March 31, Six Months Ended March 31, (Dollars in thousands) 2022 2021 2022 2021 Lease expense $ 1,119 $ 991 $ 2,256 $ 1,945 Short-term and variable lease cost 40 69 75 132 ROU asset impairment — — — 224 Sublease income ( 355 ) ( 177 ) ( 531 ) ( 285 ) Total lease cost for operating leases $ 804 $ 883 $ 1,800 $ 2,016 NOTE 10. STOCKHOLDERS' EQUITY Repurchase of Common Stock 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. 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 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. 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 March 31, 2022, 4,868,177 shares of common stock remained available for repurchase. 27 Table of Contents 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. NOTE 11. STOCK COMPENSATION The Company maintains the Meta Financial Group, Inc. 2002 Omnibus Incentive Plan, as amended and restated (the "2002 Omnibus Incentive Plan"), which, among other things, provides for the awarding of stock options, nonvested (restricted) shares, and performance share units ("PSUs") to certain officers and directors of the Company. Awards are granted by the Compensation Committee of the Board of Directors based on the performance of the award recipients or other relevant factors. 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 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 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 Nonvested shares outstanding, September 30, 2021 547,063 $ 30.22 Granted 161,930 57.37 Vested ( 197,423 ) 34.29 Forfeited or expired ( 11,788 ) 42.19 Nonvested shares outstanding, March 31, 2022 499,782 $ 37.13 (Dollars in thousands, except per share data) Number of Units Weighted Average Fair Value at Grant Performance share units outstanding, September 30, 2021 60,984 $ 34.03 Granted (1) 35,705 57.20 Vested — — Forfeited or expired — — 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 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. NOTE 12. INCOME TAXES 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. statutory rate of 21% primarily because of the anticipated effect of investment tax credits during fiscal year 2022. The Company’s effective tax rate in the future will depend in part on actual investment tax credits earned as part of its financing of solar energy projects. 28 Table of Contents The table below compares the income tax expense components for the periods presented. Six Months Ended March 31, (Dollars in thousands) 2022 2021 Provision at statutory rate $ 27,899 $ 19,271 Tax-exempt income ( 362 ) ( 486 ) State income taxes 5,543 4,135 Interim period effective rate adjustment ( 3,870 ) ( 3,116 ) Tax credit investments, net - federal ( 5,978 ) ( 15,464 ) Research tax credit ( 355 ) ( 323 ) IRC 162(m) nondeductible compensation 505 487 Other, net ( 1,104 ) 161 Income tax expense $ 22,278 $ 4,665 Effective tax rate 16.66 % 4.97 % NOTE 13. REVENUE FROM CONTRACTS WITH CUSTOMERS Topic 606 applies to all contracts with customers unless such revenue is specifically addressed under existing guidance. The table below presents the Company’s revenue by operating segment. For additional descriptions of the Company’s operating segments, including additional financial information and the underlying management accounting process, see Note 14. Segment Reporting to the Condensed Consolidated Financial Statements. 29 Table of Contents (Dollars in thousands) Consumer Commercial Corporate Services/Other Consolidated Company Three Months Ended March 31, 2022 2021 2022 2021 2022 2021 2022 2021 Net interest income (1) $ 30,156 $ 25,085 $ 44,879 $ 42,404 $ 8,765 $ 6,361 $ 83,800 $ 73,850 Noninterest income: Refund transfer product fees 27,805 22,680 — — — — 27,805 22,680 Tax advance product fees (1) 39,299 44,562 — — — — 39,299 44,562 Payment card and deposit fees 26,270 29,875 — — — — 26,270 29,875 Other bank and deposit fees — — 244 126 6 7 250 133 Rental income (1) — 5 11,225 9,841 150 — 11,375 9,846 Net gain realized on investment securities (1) — — — — 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 — Gain (loss) on sale of other (1) — — 6,093 4,216 ( 8,932 ) 765 ( 2,839 ) 4,981 Other income (1) 2,152 1,078 5,624 4,809 ( 2,234 ) 5,645 5,542 11,532 Total noninterest income 122,470 123,376 34,494 29,106 39,393 6,426 196,357 158,908 Revenue $ 178,897 $ 170,808 $ 124,299 $ 113,358 $ 48,574 $ 14,591 $ 351,770 $ 298,757 (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. Following is a discussion of key revenues within the scope of Topic 606. The Company provides services to customers that have related performance obligations that must be completed to recognize revenue. Revenues are generally recognized immediately upon the completion of the service or over time as services are performed. Any services performed over time generally require that the Company renders services each period; therefore, the Company measures progress in completing these services based upon the passage of time. Revenue from contracts with customers did not generate significant contract assets and liabilities. Refund Transfer Product Fees. Refund transfer fees are specific to the tax products offered by Refund Advantage and EPS. These fees are for products, services such as payment processing, and product referral commissions. Software partner fees paid and/or incurred are recorded on a net basis. The Company’s obligation for product fees and commissions is satisfied at the time of the product delivery and obligation for payment processing is satisfied at the time of processing. The transaction price for such activity is based upon stand-alone fees within the terms and conditions. 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. 30 Table of Contents Card Fees. 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. The Company earns these fees based upon the underlying terms and conditions with each cardholder over the contract term. Agreements with the Company’s cardholders are considered daily service contracts as they are not fixed in duration. The Company’s obligation for card activation and product support fees is satisfied at the time of product delivery, while the obligation for processing and servicing is satisfied over the course of each month. The transaction price for such activity is based upon the stand-alone fees within the terms and conditions of the cardholder agreements. Card fee revenue also includes income from sponsorships, associations and networks, and interchange income. Sponsorship income relates to fees charged to the Company’s ATM sponsorship partners, where the obligation is satisfied over the course of each month. Association and network income reflect incentives, performance bonuses and rebates with MasterCard and Visa. The obligation for such income is satisfied at the time when certain thresholds of transaction volume have been met. Interchange income is generated by cardholder activity, and therefore the Company’s obligations are satisfied as activity occurs. The transaction price for such activity is based on underlying rates and activity thresholds within the terms and conditions of the applicable agreements. Card fee revenue also includes breakage revenue. Breakage represents the estimated amount that will not be redeemed by the holder of unregistered, unused prepaid cards for goods or services. Breakage revenue is recognized ratably over the expected customer usage period and is an estimate based on cardholder behavior and breakage rates. Breakage is also impacted by escheatment laws. 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 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, 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. The Company’s obligation for overdraft services is satisfied at the time of overdraft. The transaction price for such activity is based upon stand-alone fees within the terms and conditions of the deposit agreements. 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. Principal vs Agent. The Consumer reporting segment includes principal/agent relationships. 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. NOTE 14. SEGMENT REPORTING An operating segment is generally defined as a component of a business for which discrete financial information is available and whose results are reviewed by the chief operating decision-maker. Operating segments are aggregated into reportable segments if certain criteria are met. The Company reports its results of operations through the following three business segments: Consumer, Commercial, and Corporate Services/Other. 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 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. 31 Table of Contents The following tables present segment data for the Company: (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 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 Noninterest expense 29,892 30,189 31,457 27,829 41,811 37,953 103,160 95,971 Income (loss) before income tax expense 65,340 64,917 26,754 26,312 ( 33,990 ) ( 30,187 ) 58,104 61,042 Total assets 456,335 531,305 3,355,196 3,030,088 3,075,708 6,228,730 6,887,239 9,790,123 Total goodwill 87,145 87,145 222,360 222,360 — — 309,505 309,505 Total deposits 5,693,063 8,447,910 6,882 12,177 129,941 182,326 5,829,886 8,642,413 Six Months Ended March 31, Net interest income $ 56,427 $ 47,432 $ 89,805 $ 84,252 $ 9,181 $ 8,165 $ 155,413 $ 139,849 Provision (reversal of) for credit losses 30,946 30,386 13,797 8,670 ( 12,255 ) ( 2,677 ) 32,488 36,379 Noninterest income 122,470 123,376 34,494 29,106 39,393 6,426 196,357 158,908 Noninterest expense 49,553 48,351 64,504 54,997 71,539 65,198 185,596 168,546 Income (loss) before income tax expense 98,398 92,071 45,998 49,691 ( 10,710 ) ( 47,930 ) 133,686 93,832 Total assets 456,335 531,305 3,355,196 3,030,088 3,075,708 6,228,730 6,887,239 9,790,123 Total goodwill 87,145 87,145 222,360 222,360 — — 309,505 309,505 Total deposits 5,693,063 8,447,910 6,882 12,177 129,941 182,326 5,829,886 8,642,413 NOTE 15. FAIR VALUES OF FINANCIAL INSTRUMENTS ASC 820, Fair Value Measurements defines fair value, establishes a framework for measuring the fair value of assets and liabilities using a hierarchy system and requires disclosures about fair value measurement. It clarifies that fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the market in which the reporting entity transacts. The fair value hierarchy is as follows: Level 1 Inputs - Valuation is based upon quoted prices for identical instruments traded in active markets that the Company has the ability to access at measurement date. Level 2 Inputs - Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques for which significant assumptions are observable in the market. Level 3 Inputs - Valuation is generated from model-based techniques that use significant assumptions not observable in the market and are used only to the extent that observable inputs are not available. These unobservable assumptions reflect the Company’s own estimates of assumptions that market participants would use in pricing the asset or liability. Debt Securities Available for Sale and Held to Maturity . Debt securities available for sale are recorded at fair value on a recurring basis and debt securities held to maturity are carried at amortized cost. The fair 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 services for unusual fluctuations and compares to current market trading activity. 32 Table of Contents Equity Securities. Marketable equity securities and certain non-marketable equity securities are recorded at fair value on a recurring basis. The fair values of marketable equity securities are determined by obtaining quoted prices on nationally recognized securities exchanges (Level 1 inputs). 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 March 31, 2022 (Dollars in thousands) Total Level 1 Level 2 Level 3 Debt securities AFS Corporate securities $ 23,250 $ — $ 23,250 $ — SBA securities 137,400 — 137,400 — Obligations of states and political subdivisions 2,706 — 2,706 — Non-bank qualified obligations of states and political subdivisions 240,423 — 240,423 — Asset-backed securities 353,581 — 353,581 — Mortgage-backed securities 1,286,118 — 1,286,118 — Total debt securities AFS $ 2,043,478 $ — $ 2,043,478 $ — Common equities and mutual funds (1) $ 3,853 $ 3,853 $ — $ — Non-marketable equity securities (2) $ 6,165 $ — $ — $ — (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. Fair Value At September 30, 2021 (Dollars in thousands) Total Level 1 Level 2 Level 3 Debt securities AFS Corporate securities $ 25,000 $ — $ 25,000 $ — SBA securities 157,209 — 157,209 — Obligations of states and political subdivisions 2,507 — 2,507 — Non-bank qualified obligations of states and political subdivisions 268,295 — 268,295 — Asset-backed securities 394,859 — 394,859 — Mortgage-backed securities 1,017,029 — 1,017,029 — Total debt securities AFS $ 1,864,899 $ — $ 1,864,899 $ — Common equities and mutual funds (1) $ 12,668 $ 12,668 $ — $ — Non-marketable equity securities (2) $ 4,560 $ — $ — $ — (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. Foreclosed Real Estate and Repossessed Assets. Real estate properties and repossessed assets are initially recorded at the fair value less selling costs at the date of foreclosure, establishing a new cost basis. The carrying amount represents the lower of the new cost basis or the fair value less selling costs of foreclosed assets that were measured at fair value subsequent to their initial classification as foreclosed assets. Loans and Leases. The Company does not record loans and leases at fair value on a recurring basis. However, if a loan or lease is individually evaluated for risk of credit loss and repayment is expected to be solely provided by the values of the underlying collateral, the Company measures fair value on a nonrecurring basis. Fair value is determined by the fair value of the underlying collateral less estimated costs to sell. The fair value of the collateral is determined based on internal estimates and/or assessments provided by third-party appraisers and the valuation relies on discount rates ranging from 4 % to 35 %. 33 Table of Contents 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 March 31, 2022 (Dollars in thousands) Total Level 1 Level 2 Level 3 Loans and leases, net individually evaluated for credit loss Commercial finance $ 8,006 $ — $ — $ 8,006 Total loans and leases, net individually evaluated for credit loss 8,006 — — 8,006 Foreclosed assets, net 112 — — 112 Total $ 8,118 $ — $ — $ 8,118 Fair Value At September 30, 2021 (Dollars in thousands) Total Level 1 Level 2 Level 3 Loans and leases, net individually evaluated for credit loss Commercial finance $ 3,404 $ — $ — $ 3,404 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 Total $ 14,852 $ — $ — $ 14,852 Quantitative Information About Level 3 Fair Value Measurements (Dollars in thousands) Fair Value at March 31, 2022 Fair Value at September 30, 2021 Valuation Technique Unobservable Input Range of Inputs Loans and leases, net individually evaluated for credit loss $ 8,006 12,775 Market approach Appraised values (1) 4 % - 35 % Foreclosed assets, net $ 112 2,077 Market approach Appraised values (1) 9 % - 20 % (1) The Company generally relies on external appraisers to develop this information. Management reduced the appraised value by estimating selling costs and other inputs in a range of 4 % to 35 %. 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 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. However, since there is no active market for certain financial instruments of the Company, the estimates of fair value are subjective in nature, involve uncertainties, and include matters of significant judgment. Changes in assumptions as well as tax considerations could significantly affect the estimated values. Accordingly, the aggregate fair value estimates are not intended to represent the underlying value of the Company, on either a going concern or a liquidation basis. 34 Table of Contents The following tables present the carrying amount and estimated fair value of the financial instruments held by the Company: At March 31, 2022 (Dollars in thousands) Carrying Amount Estimated Fair Value Level 1 Level 2 Level 3 Financial assets Cash and cash equivalents $ 237,680 $ 237,680 $ 237,680 $ — $ — Debt securities available for sale 2,043,478 2,043,478 — 2,043,478 — Debt securities held to maturity 47,287 45,436 — 45,436 — Common equities and mutual funds (1) 3,853 3,853 3,853 — — Non-marketable equity securities (1)(2) 24,114 24,114 — 17,949 — Loans held for sale 31,410 31,410 — 31,410 — Loans and leases 3,726,093 3,642,987 — — 3,642,987 Federal Reserve Bank and Federal Home Loan Bank stocks 28,812 28,812 — 28,812 — Accrued interest receivable 19,115 19,115 19,115 — — Financial liabilities Deposits 5,829,886 5,829,791 5,818,128 11,663 — Other short- and long-term borrowings 91,386 92,216 — 92,216 — 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 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. At September 30, 2021 (Dollars in thousands) Carrying Amount Estimated Fair Value Level 1 Level 2 Level 3 Financial assets Cash and cash equivalents $ 314,019 $ 314,019 $ 314,019 $ — $ — Debt securities available for sale 1,864,899 1,864,899 — 1,864,899 — Debt securities held to maturity 56,669 56,391 — 56,391 — Common equities and mutual funds( 1) 12,668 12,668 12,668 — — Non-marketable equity securities (1)(2) 17,509 17,509 — 12,949 — Loans held for sale 56,194 56,194 — 56,194 — 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 — Accrued interest receivable 16,254 16,254 16,254 — — Financial liabilities Deposits 5,514,971 5,515,035 5,482,471 32,564 — Other short- and long-term borrowings 92,834 93,938 — 93,938 — Accrued interest payable 579 579 579 — — (1) Equity securities at fair value are included within other assets on the Condensed Consolidated Statements of Financial Condition at September 30, 2021. (2) Includes certain non-marketable equity securities that are measured at fair value using NAV per share (or its equivalent) as a practical expedient and are excluded from the fair value hierarchy. NOTE 16. SUBSEQUENT EVENTS Management has evaluated subsequent events that occurred after March 31, 2022. 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 March 31, 2022. 35 Table of Contents