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Item 8. Financial Statements and Supplementary Data

2022-11-22 compared with 2021-11-23 · 392 added, 573 removed, 1549 unchanged (38% of the section changed)

9 unchanged sentences

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Stockholders and the Board of Directors of Meta Financial Group, Inc.

Stockholders and the Board of Directors of Pathward Financial, Inc.

Sioux Falls, South Dakota

Opinion on the Financial Statements

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

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

We have audited the accompanying consolidated statements of financial condition of Pathward Financial, Inc.(formerly known as Meta Financial Group, Inc.) and Subsidiaries (the "Company") as of September 30, 2022 and 2021, the related consolidated statements of operations, comprehensive income (loss), changes in stockholders’ equity, and cash flows for each of the years in the three-year period ended September 30, 2022, and the related notes (collectively referred to as the "financial statements").

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of September 30, 2022 and 2021, and the results of its operations and its cash flows for each of the years in the three- year period ended September 30, 2022, in conformity with accounting principles generally accepted in the United States of America.

22 unchanged sentences

Allowance for Credit Losses (ACL) – Qualitative Adjustments

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

As described in Notes 1 and 4 to the financial statements, the Company adopted ASC 326 as of October 1, 2020, which, among other things, required the Company to recognize expected credit losses over the contractual lives of financial assets carried at amortized cost, including loans receivable, utilizing the Current Expected Credit Losses (“CECL”) methodology.

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

10 unchanged sentences

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

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

◦ Analytically evaluating the qualitative adjustments for directional consistency.

◦ Testing the qualitative adjustments for reasonableness, including evaluating significant changes.

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

1 unchanged sentence

We have served as the Company’s auditor since 2018.

Grand Rapids, Michigan

South Bend, Indiana

November 22, 2022

META FINANCIAL GROUP, INC.

PATHWARD FINANCIAL, INC.

AND SUBSIDIARIES

3 unchanged sentences

Cash and cash equivalents $ 388,038 $ 314,019

Investment securities available for sale, at fair value 847,870 814,495

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

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

Securities available for sale, at fair value 1,882,869 1,864,899

Securities held to maturity, at amortized cost (fair value $ 38,171 and $ 56,391 , respectively)

41,682 56,669

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

Federal Reserve Bank and Federal Home Loan Bank Stock, at cost 28,812 28,400

Loans held for sale 21,071 56,194

1 unchanged sentence

Allowance for credit losses ( 45,947 ) ( 68,281 )

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

Accrued interest receivable 17,979 16,254

1 unchanged sentence

Rental equipment, net 204,371 213,116

Bank-owned life insurance 94,749 92,315

Foreclosed real estate and repossessed assets, net 2,077 9,957

Goodwill 309,505 309,505

Intangible assets 33,148 41,692

Prepaid assets 10,513 8,328

Deferred taxes, net 25,173 17,723

Goodwill and intangible assets 335,196 342,653

Other assets 295,324 212,276

1 unchanged sentence

LIABILITIES AND STOCKHOLDERS’ EQUITY

Noninterest-bearing checking $ 5,018,233 $ 4,356,630

Interest-bearing checking 254,721 157,571

Savings deposits 86,356 47,866

Money market deposits 67,204 48,494

Time certificates of deposit 9,091 20,223

Wholesale deposits 79,366 348,416

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

Deposits $ 5,866,037 $ 5,514,971

Long-term borrowings 36,028 92,834

Accrued interest payable 579 1,923

Accrued expenses and other liabilities 200,205 210,961

16 unchanged sentences

See Notes to Consolidated Financial Statements.

META FINANCIAL GROUP, INC.

PATHWARD FINANCIAL, INC.

AND SUBSIDIARIES

16 unchanged sentences

Refund transfer product fees 39,809 37,967 36,061

Tax advance product fees 47,639 31,826 34,687

Payment card and deposit fees 107,182 87,379 87,130

Refund advance fee income 40,557 47,639 31,826

Payments card and deposit fees 104,684 107,182 87,379

Other bank and deposit fees 1,049 939 1,310

Rental income 46,558 39,416 44,826

Net gain realized on investment securities 6 51 729

Gain (loss) on sale of securities ( 1,287 ) 6 51

Gain on divestitures — — 19,275

Gain on sale of other 11,515 4,425 7,831

Gain on sale of trademarks 50,000 — —

Gain (loss) on sale of other ( 4,920 ) 11,515 4,425

Other income 17,357 26,240 14,641

3 unchanged sentences

Refund transfer product expense 8,908 11,861 7,644

Tax advance product expense 2,564 2,723 3,102

Refund advance expense 2,157 2,564 2,723

Card processing 38,785 27,201 25,956

7 unchanged sentences

Income before income tax expense 187,318 156,446 115,005

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

Income tax expense 27,964 10,701 5,661

Net income before noncontrolling interest 159,354 145,745 109,344

5 unchanged sentences

See Notes to Consolidated Financial Statements.

META FINANCIAL GROUP, INC.

PATHWARD FINANCIAL, INC.

AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income

Consolidated Statements of Comprehensive Income (Loss)

Fiscal Year Ended September 30,

3 unchanged sentences

Change in net unrealized gain (loss) on debt securities ( 293,952 ) ( 13,896 ) 15,164

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

Net loss (gain) realized on investment securities 1,287 ( 6 ) ( 51 )

( 292,665 ) ( 13,902 ) 15,113

2 unchanged sentences

Total other comprehensive income (loss) ( 220,679 ) ( 9,943 ) 11,203

Total comprehensive income 135,802 120,547 141,241

Total comprehensive income (loss) ( 61,325 ) 135,802 120,547

Total comprehensive income attributable to noncontrolling interest 2,968 4,037 4,624

Comprehensive income attributable to parent $ 131,765 $ 115,923 $ 136,929

Comprehensive income (loss) attributable to parent $ ( 64,293 ) $ 131,765 $ 115,923

See Notes to Consolidated Financial Statements.

META FINANCIAL GROUP, INC.

PATHWARD FINANCIAL, INC.

AND SUBSIDIARIES

Consolidated Statements of Changes in Stockholders' Equity

Meta Financial Group

Pathward Financial, Inc.

(Dollars in thousands, except per share data) Common

4 unchanged sentences

Income (Loss) Treasury

Stock Total Meta

Stock Total Pathward Financial

Stockholders’

Equity Non-controlling interest Total

Equity Noncontrolling interest Total

Stockholders’

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

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

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

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

— — ( 7,100 ) — — ( 7,100 ) — ( 7,100 )

Issuance of common shares due to exercise of stock options — 44 — — — 44 — 44

Issuance of common shares due to restricted stock 3 — — — — 3 — 3

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

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

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

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

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

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

Repurchases of common stock ( 38 ) 38 ( 115,506 ) — ( 3,232 ) ( 118,738 ) — ( 118,738 )

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

4 unchanged sentences

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

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

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

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

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

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

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

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

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

Repurchases of common stock ( 29 ) 29 ( 96,999 ) — ( 2,879 ) ( 99,878 ) — ( 99,878 )

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

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

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

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

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

2 unchanged sentences

Balance, September 30, 2021 $ 317 $ 604,484 $ 259,189 $ 7,599 $ ( 860 ) $ 870,729 $ 1,155 $ 871,884

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

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

— — ( 5,921 ) — — ( 5,921 ) — ( 5,921 )

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

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

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

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

Repurchases of common stock ( 30 ) 30 ( 164,260 ) — ( 3,975 ) ( 168,235 ) — ( 168,235 )

Stock compensation — 10,004 — — — 10,004 — 10,004

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

Total other comprehensive income (loss) — — — ( 220,679 ) — ( 220,679 ) — ( 220,679 )

Net income — — 156,386 — — 156,386 2,968 159,354

2 unchanged sentences

See Notes to Consolidated Financial Statements.

META FINANCIAL GROUP, INC.

PATHWARD FINANCIAL, INC.

AND SUBSIDIARIES

6 unchanged sentences

Depreciation, amortization and accretion, net 61,601 59,047 60,745

Stock compensation 6,852 10,221 12,942

Provision (recovery):

Credit losses 49,766 64,776 55,650

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

Loans held for sale:

Originations ( 601,481 ) ( 98,798 ) ( 171,260 )

Purchases — — ( 15,443 )

Proceeds from sales 890,340 319,123 125,357

Net change 588 22,855 31,819

Provision for credit losses 28,538 49,766 64,776

Provision (reversal of) for deferred taxes 17,587 ( 1,639 ) ( 2,347 )

Originations of loans held for sale ( 985,330 ) ( 601,481 ) ( 98,798 )

Proceeds from sales of loans held for sale 1,059,361 890,340 319,123

Net change in loans held for sale 12,819 588 22,855

Fair value adjustment of foreclosed real estate 301 591 568

Net realized (gain) loss:

Other assets 28 361 ( 89 )

Divestitures — ( 19,275 ) —

Foreclosed real estate and repossessed assets ( 4 ) 4,960 278

Securities available for sale, net ( 6 ) ( 51 ) ( 729 )

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

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

Other assets 825 1,524 ( 5,427 )

Deposits held for sale — 1,535 —

Accrued interest payable ( 1,344 ) ( 7,491 ) 1,620

Accrued expenses and other liabilities 45,264 8,643 16,623

Accrued interest receivable 374 2,050 1,616

Net realized (gain) on securities available for sale, net ( 154 ) ( 6 ) ( 51 )

Net realized (gain) loss on loans held for sale 3,694 ( 8,610 ) ( 5,389 )

Net realized loss on premise, furniture, and equipment 55 — —

Net realized (gain) on lease receivables and equipment ( 3,397 ) ( 2,257 ) ( 4,335 )

Net realized (gain) on foreclosed real estate and repossessed assets — ( 4 ) 4,960

Net realized (gain) on divestitures — — ( 19,275 )

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

Net realized (gain) loss on other assets 1,441 28 361

Change in bank-owned life insurance value ( 2,434 ) ( 2,434 ) ( 2,488 )

Impairment on assets held for sale — 242 —

Impairment on rental equipment — — 447

Impairment of intangibles 670 — —

Impairment on assets held for sale — — 242

Net change in accrued interest receivable ( 1,725 ) 374 2,050

Net change in other assets ( 32,936 ) 825 1,524

Net change in deposits held for sale — — 1,535

Net change in accrued expenses and other liabilities ( 10,640 ) 43,920 1,152

Stock compensation 10,004 6,852 10,221

Net cash provided by operating activities 268,809 581,645 467,220

Cash flows from investing activities:

Securities available for sale:

Purchases ( 1,041,768 ) ( 229,326 ) ( 299,269 )

Proceeds from sales 50,468 4,904 755,616

Proceeds from maturities and principal repayments 371,898 237,254 164,044

Securities held to maturity:

Proceeds from maturities and principal repayments 34,268 40,017 35,025

Loans and leases:

Purchases ( 311,332 ) ( 151,435 ) ( 262,622 )

Proceeds from sales 13,850 9,991 13,838

Net change ( 196,356 ) ( 100,508 ) ( 591,785 )

Purchases of securities available for sale ( 907,361 ) ( 1,041,768 ) ( 229,326 )

Proceeds from sales of securities available for sale 265,951 50,468 4,904

Proceeds from maturities of and principal collected on securities available for sale 324,234 371,898 237,254

Proceeds from maturities of and principal collected on securities held to maturity 14,281 34,268 40,017

Purchases of Federal Reserve Bank and Federal Home Loan Bank stock ( 173,653 ) ( 1,296 ) ( 472,000 )

Redemption of Federal Reserve Bank and Federal Home Loan Bank stock 173,240 34 475,778

Purchases of loans and leases ( 115,353 ) ( 311,332 ) ( 151,435 )

Proceeds from sales of loans and leases 123,241 13,850 9,991

Net change in loans and leases 358,635 ( 196,356 ) ( 100,508 )

Purchases of premises, furniture, and equipment ( 8,177 ) ( 12,961 ) ( 12,266 )

Proceeds from sales of premises, furniture, and equipment 35 86 107

Purchases of rental equipment ( 424,919 ) ( 50,437 ) ( 53,637 )

Proceeds from sales of rental equipment 9,372 16,822 14,692

Net change in rental equipment ( 5,772 ) ( 630 ) 2,623

Proceeds from sales of foreclosed real estate and repossessed assets 1,824 8,952 23,992

Federal Reserve Bank and Federal Home Loan Bank stock:

Purchases ( 1,296 ) ( 472,000 ) ( 878,316 )

Redemption 34 475,778 870,800

Rental equipment:

Purchases ( 50,437 ) ( 53,637 ) ( 144,432 )

Proceeds from sales 16,822 14,692 8,301

Net change ( 630 ) 2,623 1,567

Premises, furniture, and equipment:

Purchases ( 12,961 ) ( 12,266 ) ( 13,971 )

Proceeds from sales 86 107 101

Proceeds from divestitures — — 3,498

Proceeds from sale of trademarks 50,000 — —

Proceeds from sale of other assets 3,550 — —

Net cash (used in) investing activities ( 310,872 ) ( 1,118,402 ) ( 206,316 )

Cash flows from financing activities:

Checking, savings, and money market deposits 815,953 2,229,075 48,897

Time certificates of deposit ( 11,132 ) ( 89,062 ) ( 167,044 )

Wholesale deposits ( 269,050 ) ( 1,208,885 ) 26,014

FHLB and other borrowings — ( 275,000 ) 275,000

Federal funds — ( 477,000 ) 55,000

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

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

Net change in deposits 351,066 535,771 931,128

Net change in short-term borrowings — — ( 756,019 )

Redemption of long-term borrowings ( 75,000 ) — —

Proceeds from long-term borrowings 20,000 — —

Principal payments on capital lease obligations ( 75 ) ( 32 ) ( 1,737 )

Principal payments on other liabilities ( 2,751 ) ( 5,611 ) ( 7,568 )

Proceeds from other liabilities — 80 1,633

Principal payments:

Other liabilities ( 5,611 ) ( 7,568 ) ( 11,691 )

Capital lease obligations ( 32 ) ( 1,737 ) ( 88 )

Cash dividends paid ( 6,400 ) ( 7,100 ) ( 7,760 )

Issuance of common stock due to ESOP 3,036 3,220 2,011

Dividends paid on common stock ( 5,921 ) ( 6,400 ) ( 7,100 )

Issuance of common stock due to exercise of stock options — — 266

Issuance of common stock due to restricted stock 1 — 2

Proceeds from exercise of stock options and issuance of common stock — 266 44

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

Issuance of common stock due to ESOP 2,886 3,036 3,220

Repurchases of common stock ( 168,235 ) ( 99,878 ) ( 118,738 )

Distributions to noncontrolling interest ( 4,153 ) ( 4,033 ) ( 5,068 )

Net cash provided by financing activities 117,818 422,933 40,019

12 unchanged sentences

Supplemental schedule of non-cash investing activities:

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

Held for sale to loans and leases 115,934 36,919 —

Loans and leases to held for sale 169,045 188,638 542,101

Loans and leases to rental equipment 3,893 28,604 2,134

Loans and leases to foreclosed real estate and repossessed assets $ 49 $ 9 $ 9,983

Rental equipment to loan and leases 400,148 24,324 8,924

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

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

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

Other assets to held for sale — — 7,858

1 unchanged sentence

Recognition of operating lease ROU assets, net of measurements 117 12,954 28,666

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

See Notes to Consolidated Financial Statements.

2 unchanged sentences

PRINCIPLES OF CONSOLIDATION

The Consolidated Financial Statements include the accounts of Meta Financial Group, Inc.

(the “Company”), a registered bank holding company located in Sioux Falls, South Dakota, and its wholly-owned subsidiaries.

The Company's subsidiaries include MetaBank (the “Bank”), a national bank whose primary federal regulator is the Office of the Comptroller of the Currency (the "OCC"), and Meta Capital, LLC, a wholly-owned service corporation subsidiary of MetaBank which invests in companies in the financial services industry.

The Consolidated Financial Statements include the accounts of Pathward Financial, Inc.

® ("Pathward Financial" or the “Company” or "us"), a registered bank holding company located in Sioux Falls, South Dakota, and its wholly-owned subsidiaries.

The Company's subsidiaries include Pathward TM , National Association ("Pathward, N.A." or "Pathward" or "the “Bank”), a national bank whose primary federal regulator is the Office of the Comptroller of the Currency (the "OCC"), and Pathward Venture Capital, LLC, a wholly-owned service corporation subsidiary of Pathward, N.A.

which invests in companies in the financial services industry.

All significant intercompany balances and transactions have been eliminated.

37 unchanged sentences

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

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

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

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

26 unchanged sentences

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

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

Pathward Financial did not hold trading securities at September 30, 2022 or 2021.

Gains and losses on the sale of securities are determined using the specific identification method based on amortized cost and are reflected in results of operations at the time of sale.

25 unchanged sentences

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

The Company recognized net earnings from these investments in the amount of $ 0.3 million within noninterest income for the fiscal year ended September 30, 2021.

The Company recognized net earnings from these investments in the amount of $ 12,863 within noninterest income for the fiscal year ended September 30, 2022.

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

3 unchanged sentences

• Measurement Alternative - The Company held equity investments measured using the measurement alternative of $ 15.3 million as of September 30, 2022 and $ 12.9 million at September 30, 2021 within other assets on the Company’s Consolidated Financial Statements.

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

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

The Company recognized a fair value decrease of $ 1.0 million and an increase of $ 8.0 million during the fiscal years ended September 30, 2022 and 2021, respectively.

The Company recognized impairment losses of zero and $ 2.6 million on such investments during the fiscal years ended September 30, 2022 and 2021, respectively.

LOANS HELD FOR SALE ("LHFS")

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

LHFS include commercial loans originated under the guidelines of the SBA or USDA and consumer loans.

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

Generally, LHFS are valued on an aggregate portfolio basis.

Any amount by which the cost exceeds fair value is initially recorded as a valuation allowance and subsequently reflected in the gain or loss on sale when sold.

9 unchanged sentences

Unearned income, deferred loan fees and costs, and discounts and premiums are amortized to interest income over the contractual life of the loan using the interest method.

The Company generally places Community Banking loans on nonaccrual status when:

the full and timely collection of interest or principal becomes uncertain;

they are 90 days past due for interest or principal, unless they are both well-secured and in the process of collection;

or part of the principal balance has been charged off.

The majority of the Company's National Lending loans follow the same nonaccrual policy as Community Banking loans with certain commercial finance, consumer finance and tax service loans not generally being placed on non-accrual status, but instead are charged off when the collection of principal and interest become doubtful.

The Company's business lines follow a nonaccrual policy with certain commercial finance, consumer finance and tax service loans not generally being placed on non-accrual status, but instead are charged off when the collection of principal and interest become doubtful.

When placed on nonaccrual status, the accrued unpaid interest receivable is reversed against interest income and any remaining amortizing of net deferred fees is suspended.

2 unchanged sentences

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

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

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

15 unchanged sentences

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

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

Leases Receivable

19 unchanged sentences

The estimation of the residual value involves judgments regarding product and technology changes, customer behavior, shifts in supply and demand, and other economic assumptions.

The Company reviews residual assumptions at least annually and records impairment, if necessary, which is charged to non-interest expense in the period it becomes known.

The Company may purchase and sell minimum lease payments, primarily as a credit risk reduction tool, to third-party financial institutions at fixed rates on a non-recourse basis with its underlying equipment as collateral.

7 unchanged sentences

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

An ACL is not provided on operating leases.

The Company evaluates the carrying value of rental equipment for impairment whenever events or circumstances have occurred that would indicate the carrying amount may not be fully recoverable.

If the carrying amount is not fully recoverable, an impairment loss is recognized to reduce the carrying amount to fair value, where fair value is based on the condition of the rental equipment and the projected net cash flows from rental and sale adjusted for current market conditions.

No impairment expense was recognized for fiscal years ended September 30, 2022, 2021, and 2020.

LOAN SERVICING AND TRANSFERS OF FINANCIAL ASSETS

9 unchanged sentences

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

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

The Company individually evaluates loans and leases that do not share similar risk characteristics with other financial assets, which generally means loans and leases identified as troubled debt restructurings or loans and leases on nonaccrual status.

All other loans and leases are evaluated collectively for credit loss.

3 unchanged sentences

If an individually evaluated loan or lease is not collateral dependent, credit loss is measured at the present value of expected future cash flows discounted at the loan or lease initial effective interest rate.

Management has also identified certain structured finance credits for alternative energy projects in which a substantial cash collateral account has been established to mitigate credit risk.

Due to the nature of the transactions and significant cash collateral positions, these credits are evaluated individually.

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

6 unchanged sentences

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

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

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

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

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

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

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

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

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

12 unchanged sentences

Commercial Finance

The Company's commercial finance product lines include term lending, asset based lending, factoring, leasing, insurance premium finance, government guaranteed lending and other commercial finance products offered on a nationwide basis that are subject to adverse market conditions which may impact the borrower’s ability to make repayment on the loan or lease or could cause a decline in the value of the collateral that secures the loan or lease.

The Company's Commercial Finance business line offers a variety of products through its working capital, equipment finance, structured finance, and insurance premium finance lending solutions.

These products include term lending, asset based lending, factoring, lease financing, insurance premium finance, government guaranteed lending and other commercial finance products offered on a nationwide basis that are subject to adverse market conditions which may impact the borrower’s ability to make repayment on the loan or lease or could cause a decline in the value of the collateral that secures the loan or lease.

The loans or leases are primarily made based on the operating cash flows of the borrower and on the underlying collateral provided by the borrower.

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Consumer Finance

The Company's BaaS business line offers its consumer credit products and Emerald Advance products through its credit solution.

The Bank designs its credit program relationships with certain desired outcomes.

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The Bank designs its program credit protections in a manner so that the Bank earns a reasonable risk adjusted return, but is protected by certain layers of credit support, similar to what you would find in structured finance.

The Bank will hold a sizable portion of the originated asset on its own balance sheet, but retains the flexibility to sell a portion of the originated asset to other interested parties, thereby supporting program liquidity.

The Bank's tax services division provides short-term taxpayer advance loans.

Taxpayers are underwritten to determine eligibility for these unsecured loans.

Due to the nature of taxpayer advance loans, it typically takes no more than three e-file cycles (the period of time between scheduled IRS payments) from when the return is accepted by the IRS to collect from the borrower.

Certain loans are sold to third parties based on terms and conditions within the Program Agreement.

The Bank's BaaS business line also offers tax solutions, which includes short-term refund advance loans.

Through this product, taxpayers are underwritten to determine eligibility for these unsecured loans.

Due to the nature of refund advance loans, it typically takes no more than three e-file cycles (the period of time between scheduled IRS payments) from when the return is accepted by the IRS to collect from the borrower.

In the event of default, the Bank has no recourse against the tax consumer.

The Bank will charge off the balance of a taxpayer advance loan if there is a balance at the end of the calendar year, or when collection of principal becomes doubtful.

Through its tax services division, the Bank provides short-term electronic return originator ("ERO") advance loans on a nationwide basis.

The Bank will charge off the balance of a refund advance loan if there is a balance at the end of the calendar year, or when collection of principal becomes doubtful.

The Bank offers short-term electronic return originator ("ERO") advance loans on a nationwide basis.

These loans are typically utilized by tax preparers to purchase tax preparation software and to prepare tax office operations for the upcoming tax season.

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Warehouse Finance

The Bank participates in several asset-backed warehouse lines of credit whereby the Bank is in a senior, secured position as the first out participant.

The Bank participates in several collateral-based warehouse lines of credit whereby the Bank is in a senior, secured position as the first out participant.

These facilities are primarily collateralized by consumer receivables, with the Bank holding a senior collateral position enhanced by a subordinate party structure.

Community Banking

Effective on February 29, 2020 (the "Closing Date") of the Community Bank division sale to Central Bank, the Company substantially ceased originating loans within its Community Banking loan portfolio.

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

Divestitures and Note 25.

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

EARNINGS PER COMMON SHARE (“EPS”)

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Land is carried at cost.

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

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

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

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

Assets are reviewed for impairment when events indicate the carrying amount may not be recoverable.

Premises, Furniture and Equipment, Net for further information.

BANK-OWNED LIFE INSURANCE

Bank-owned life insurance represents the cash surrender value of investments in life insurance contracts.

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

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

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The Company performs its impairment evaluation as of September 30 of each fiscal year unless a triggering event occurs that would require an interim impairment evaluation.

The Company generally utilizes a qualitative approach during this annual assessment to determine whether it is more likely than not (i.e.

a likelihood of more than 50 percent) that the fair value of a reporting unit is less than its carrying value.

If we determine it is more likely than not that goodwill is impaired, then a quantitative assessment is performed to determine fair value of the reporting unit.

If the carrying amount of the reporting unit with goodwill exceeds its fair value, goodwill is considered impaired and is written down by the excess carrying value of the reporting unit.

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Goodwill and Intangible Assets for further information.

EMPLOYEE STOCK OWNERSHIP PLAN (“ESOP”)

The cost of shares issued to the ESOP, but not yet allocated to participants, are presented in the Consolidated Statements of Financial Condition as a reduction of stockholders’ equity.

Compensation expense is recorded based on the market price of the shares as they are committed to be released for allocation to participant accounts.

The difference between the market price and the cost of shares committed to be released is recorded as an adjustment to additional paid-in capital.

Dividends on allocated ESOP shares are recorded as a reduction of retained earnings.

Dividends on unallocated shares are used to reduce the accrued interest and principal amount of the ESOP’s loan payable to the Company.

At September 30, 2021 and 2020, all shares in the ESOP were allocated.

Employee Stock Ownership and Profit Sharing Plans for further information.

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

Subsequent Events for further information.

EMPLOYEE PROFIT SHARING PLAN

The Company has a profit sharing plan covering substantially all full-time employees.

Profit sharing expense included in compensation and benefits, for the fiscal years ended September 30, 2022, 2021 and 2020 was $ 0.1 million, $ 3.1 million and $ 3.1 million, respectively.

As of October 1, 2021, the Company modified its profit sharing plan to incorporate a Qualified Automatic Contribution Arrangement safe harbor provision, whereby employee contributions are matched at 100 % of the first 6 % of eligible compensation contributed.

STOCK COMPENSATION

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FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK

The Company, in the normal course of business, makes commitments to make loans which are not reflected in the Consolidated Financial Statements.

The Company, in the normal course of business, makes commitments to originate loans which are not reflected in the Consolidated Financial Statements.

The reserve for these unfunded commitments is included within Other Liabilities on the Consolidated Statements of Financial Condition.

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RECENTLY ADOPTED ACCOUNTING STANDARDS UPDATES ("ASU")

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

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

Measurement of Credit Losses on Financial Instruments, and related ASUs, (collectively “Topic 326”), which changes the impairment model for most financial assets, including trade and other receivables, debt securities held to maturity, loans, net investments in leases, purchased financial assets with credit deterioration, and off-balance sheet credit exposures.

ASU 2016-13 requires the use of a current expected credit loss (“CECL”) methodology to determine the allowance for credit losses for loans and debt securities held to maturity.

CECL requires loss estimates for the remaining estimated life of the assets to be measured using historical loss data, adjustments for current conditions, and adjustments for reasonable and supportable forecasts of future economic conditions.

The Company adopted CECL using the modified retrospective approach with a cumulative effect adjustment to Retained Earnings recorded on October 1, 2020.

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

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

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

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

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

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

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

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

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

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

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

Securities and Note 5.

Loans and Leases, Net.

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

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

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

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

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

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

Targeted Improvements to Related Party Guidance for Variable Interest Entities.

ASUs to be Adopted

The following ASUs were adopted by the Company during the fiscal year ended September 30, 2022, none of which had a material impact on the Company's Consolidated Financial Statements.

All became effective for the Company on October 1, 2021.

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

Simplifying the Accounting for Income Taxes.

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

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

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

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

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

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

Clarifying Interactions between Topics 321, 323 and 815.

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

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

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

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

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

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

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

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

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

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

This ASU simplifies accounting for income taxes by removing specific technical exceptions in ASC 740 related to the incremental approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period, and the recognition for deferred tax liabilities for outside basis differences.

All changes within ASU 2019-12 were applied on a prospective basis and did not have a material impact on the Company's Consolidated Financial Statements.

ASU 2020-08, Codification Improvements to Subtopic 310-20:

Receivables – Nonrefundable Fees and Other Costs.

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

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

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

The Company had previously amortized fees through the next call date and will continue to do so;

accordingly, there is no impact on the Company's Consolidated Financial Statements as a result of adopting this ASU.

ASU 2020-10, Codification Improvements.

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

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

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

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

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

This ASU made minor improvements to various Topics that did not have a significant impact on the Company’s accounting policies and practices.

There were no material impacts to the Consolidated Financial Statements as a result of adopting this ASU.

33-10786, Amendments to Financial Disclosures about Acquired and Disposed Business, and No.

33-10835, Updated of Statistical Disclosures for Bank and Savings and Loan Registrants.

This ASU adds new quarterly disclosures and expands certain annual disclosures to quarterly reporting.

The additional disclosure requirements have been included within the Management Discussion & Analysis section.

The following ASUs have been issued and are considered applicable to the Company, but have not yet been adopted as of September 30, 2022.

ASU 2021-05, Leases (Topic 842):

Lessors – Certain Leases with Variable Lease Payments.

The amendments in this ASU require lessors to classify and account for leases with variable lease payments that do not depend on a reference index or rate as an operating lease if certain criteria are met.

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

The Company’s Equipment Finance division does not generally originate leases with variable lease payments that do not depend on a reference rate or index, so the impact of this ASU is not expected to be material to the consolidated financial statements.

ASU 2022-02, Financial Instruments – Credit Losses (Topic 326):

Troubled Debt Restructurings and Vintage Disclosures.

The amendments in this ASU eliminate accounting guidance for troubled-debt restructurings (TDRs) by creditors in Subtopic ASC 310-40, Receivables – Troubled Debt Restructurings by Creditors, and enhance disclosure requirements for certain loan refinancings and restructurings when a borrower is experiencing financial difficulty.

This ASU is effective for public companies for fiscal years beginning after December 15, 2022.

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

SIGNIFICANT EVENTS

COVID-19 Pandemic

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

As of the Period Ended

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

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

Asset based lending — — — 7,924

Factoring — — — 18,434

Lease financing 64 275 379 5,896

Insurance premium finance — — — 230

SBA/USDA — — — 7,724

Other commercial finance — — — 69

Commercial finance 1,683 3,230 5,839 66,836

Consumer credit products 133 19 301 1,574

Other consumer finance 980 1,609 1,627 4,223

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

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

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

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

During the fiscal year ended September 30, 2020, the Company sold the Bank's Community Bank division, a component of the Company's Corporate segment, to Central Bank, a state-chartered bank headquartered in Storm Lake, Iowa.

The sale included $ 290.5 million of deposits;

$ 268.6 million of loans;

$ 4.9 million of premises, furniture, and equipment;

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

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

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

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

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

The Company sold additional loans from the retained Community Bank portfolio in the amount of $ 308.1 million and $ 135.0 million for the fiscal years ended September 30, 2021 and 2020, respectively.

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

Loans and Leases, Net and Note 25.

Subsequent Events for additional information.

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 in the fiscal year ended September 30, 2022.

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 year ended September 30, 2022.

On July 13, 2022, the Company announced it changed its name to Pathward Financial, Inc.

TM , and its bank subsidiary MetaBank®, N.A.

changed to Pathward™, N.A.

("Pathward" or the "Bank").

The full transition to Pathward, including a new brand identity and website, is expected to be completed by the end of this calendar year.

The Company recognized $ 13.1 million of noninterest expense related to rebranding efforts in the fiscal year ended September 30, 2022.

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

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At September 30, 2021

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

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

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

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

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

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At September 30, 2022

Corporate securities $ — $ — $ 22,187 $ ( 2,813 ) $ 22,187 $ ( 2,813 )

SBA securities 97,767 ( 7,470 ) — — 97,767 ( 7,470 )

Obligations of state and political subdivisions 2,345 ( 125 ) — — 2,345 ( 125 )

Non-bank qualified obligations of states and political subdivisions 195,816 ( 19,743 ) 67,967 ( 7,228 ) 263,783 ( 26,971 )

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At September 30, 2021

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

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

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Non-bank qualified obligations of states and political subdivisions $ 3,984 $ ( 300 ) $ 31,919 $ ( 2,890 ) $ 35,903 $ ( 3,190 )

Mortgage-backed securities 2,268 ( 321 ) — — 2,268 ( 321 )

Total debt securities HTM $ 6,252 $ ( 621 ) $ 31,919 $ ( 2,890 ) $ 38,171 $ ( 3,511 )

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

The adoption of CECL was inconsequential to debt securities AFS.

At September 30, 2022, there were 195 securities AFS in an unrealized loss position.

All of the mortgage-backed securities ("MBS") in an unrealized loss position at September 30, 2022 were government guaranteed.

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.

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The Company held $ 2.9 million and $ 12.7 million in marketable equity securities at September 30, 2022 and 2021, respectively.

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

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

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

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

No marketable equity securities were sold during fiscal year 2021.

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

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

The Company recognized $ 3.8 million and $ 3.4 million in unrealized loss on marketable equity securities during the fiscal years ended September 30, 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 fiscal years ended September 30, 2022 and 2021.

There was one marketable equity security sold during fiscal year 2022 for a $ 0.3 million gain.

Non-marketable equity securities with a readily determinable fair value totaled $ 7.2 million and $ 4.6 million at September 30, 2022 and 2021, respectively.

The Company recognized $ 1.1 million and $ 0.6 million in unrealized gains during the fiscal years ended September 30, 2022 and 2021, respectively.

No such securities were sold during fiscal year 2022.

Non-marketable equity securities without readily determinable fair value totaled $ 18.2 million and $ 16.0 million at September 30, 2022 and 2021, respectively.

There were four securities sold during the fiscal year ended September 30, 2022 for a $ 1.7 million loss .

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.

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Included in interest and dividend income from other investments is $ 1.2 million and $ 1.5 million related to dividend income on FRB stock for the fiscal years ended September 30, 2022 and 2021, respectively.

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

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.

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At fiscal year-end 2022 and 2021, the Company pledged securities with fair values of approximately $ 804.0 million and $ 644.7 million, respectively, to be used against FHLB advances.

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

In addition, a combination of qualifying residential and other real estate loans of zero and zero were pledged as collateral at September 30, 2022 and 2021, respectively.

Included in interest and dividend income from other investments is $ 0.3 million, $ 0.2 million and $ 0.8 million related to dividend income on FHLB stock for the fiscal years ended September 30, 2022, 2021 and 2020, respectively.

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

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

The Company recognized zero , $ 2.6 million, and $ 1.3 million in impairment for such investments for the fiscal years ended September 30, 2022, 2021, and 2020, respectively.

LOANS AND LEASES, NET

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During the fiscal years ended September 30, 2022 and 2021, the Company transferred $ 169.0 million and $ 188.6 million, respectively, of Community Banking loans to held for sale.

During the fiscal years ended September 30, 2022, the Company originated $ 985.3 million of other consumer finance and SBA/USDA loans held for sale.

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

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

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

The Company sold held for sale loans resulting in proceeds of $ 1.06 billion and gains on sale of $ 3.7 million during the fiscal year ended September 30, 2022.

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

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 $ 3.3 million for the fiscal years ended September 30, 2022 and 2021, respectively.

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 $ 308.1 million for the fiscal years ended September 30, 2022 and 2021, respectively.

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:

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Loans Purchased

Loans held for investment:

Commercial finance $ 3,098 $ —

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Loans held for investment:

Commercial finance 15,549 —

Consumer finance 77,456 —

Community banking 30,235 13,850

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Total net investment in direct financing and sales-type leases $ 210,987 $ 266,540

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

The components of total lease income were as follows:

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Lease income from operating lease payments 46,017 39,553

Profit (loss) recorded on commencement date on sales-type leases 337 2,152

Profit recorded on commencement date on sales-type leases — 337

Total leasing and equipment finance noninterest income 51,999 44,876

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Total undiscounted future minimum lease payments receivable for direct financing and sales-type leases 216,880

Third-party residual value guarantees —

Total carrying amount of direct financing and sales-type leases $ 216,880

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

The Company did not record any contingent rental income from direct financing and sales-type leases in the fiscal year ended September 30, 2022.

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

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

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

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

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

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

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

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

Although macroeconomic conditions and markets have improved since the beginning of 2021, other factors have been affecting the economic environment in 2022 including geopolitical conflict, supply chain disruptions, inflation, and rising interest rates.

While the ultimate impact of the pandemic and these other factors 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 other factors impacting the economy and will refine its estimate as developments occur and more information becomes available.

Activity in the allowance for credit losses was as follows:

9 unchanged sentences

At September 30, 2022

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

Charge-offs Recoveries Ending Balance

Allowance for credits losses:

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

Allowance for credit losses:

Term lending $ 29,351 $ 4,850 $ ( 12,629 ) $ 3,049 $ 24,621

17 unchanged sentences

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

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

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

At September 30, 2021

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

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

Allowance for loan and lease losses:

14 unchanged sentences

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

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

Allowance Loans and Leases

(Dollars in Thousands) Ending Balance:

Individually Evaluated for Impairment Ending Balance:

Collectively Evaluated for Impairment Total Ending Balance:

Individually Evaluated for Impairment Ending Balance:

Collectively Evaluated for Impairment Total

Recorded investment:

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

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

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

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

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

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

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

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

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

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

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

Tax services — 2 2 — 3,066 3,066

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

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

Unfunded commitments (1)

32 831 ( 173 ) — — 690

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

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

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

(Dollars in Thousands) At September 30, 2021

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

Term lending $ 2,885 $ 20,965

1 unchanged sentence

Lease financing 2,787 3,882

SBA/USDA 1,199 —

Commercial finance (1)

1 unchanged sentence

Total $ 7,421 $ 41,030

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

Management has identified certain structured finance credits for alternative energy projects in which a substantial cash collateral account has been established to mitigate credit risk.

Due to the nature of the transactions and significant cash collateral positions, these credits are evaluated individually.

At September 30, 2022, the balance of these pass rated cash collateral loans totaled $ 120.7 million.

In response to the ongoing COVID-19 pandemic, the Company allowed modifications, such as payment deferrals and temporary forbearance, 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 September 30, 2021, $ 39.1 million of loan and lease that were granted deferral payments by the Company were still in their deferment period compared to $ 193.3 million as of September 30, 2020.

Up to January 1, 2022, when this relief ended, if all payments were less than 30 days past due prior to the onset of the pandemic effects, the loan or lease was not be reported as past due during the deferral or forbearance period.

As of September 30, 2022, the Company had no loans and leases that were in active deferment.

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 OCC, to be of lesser quality as “substandard,” “doubtful” or “loss.” The loan classification and risk rating definitions are as follows:

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

Meta has revised its credit administration policies and reviewed its loan portfolio to better align with OCC guidance for national banks, a process that began during the quarter ending June 30, 2021 and was completed as of September 30, 2021.

These credit policy revisions had an impact on our loan and lease risk ratings, resulting in downgrades of certain credits in several categories.

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

Generally, 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.

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

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 electronic return originator ("ERO") loans if such loans have not been collected by the end of June and refund 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.

1 unchanged sentence

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

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

The outstanding balances of consumer finance loans and tax services loans were $ 169.7 million and $ 9.1 million at September 30, 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 as of September 30, 2021 was as follows:

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

Amortized Cost Basis

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

(Dollars in Thousands) 2021 2020 2019 2018 2017 Prior

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

At September 30, 2022 2022 2021 2020 2019 2018 Prior

Pass $ 246,627 $ 240,018 $ 105,170 $ 60,417 $ 89,072 $ 61,229 $ — $ 802,533

9 unchanged sentences

Substandard — — — — — — 20,442 20,442

Doubtful — — — — — — — —

Total — — — — — — 351,696 351,696

25 unchanged sentences

Pass 5,886 13,607 26,040 20,458 23,098 40,782 — 129,871

Watch — 17,404 3,409 451 — — — 21,264

Substandard — 9,538 — — — 20,000 — 29,538

2 unchanged sentences

Pass — — — — — — 294,350 294,350

Special Mention — — — — — — 32,500 32,500

Total — — — — — — 326,850 326,850

Community banking

Total loans and leases

Pass 792,936 404,657 203,100 163,965 153,405 127,139 703,727 2,548,929

4 unchanged sentences

Total $ 873,673 $ 538,519 $ 306,740 $ 218,730 $ 193,876 $ 167,844 $ 1,051,141 $ 3,350,523

Total Loans and Leases

Amortized Cost Basis

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

At September 30, 2021 2021 2020 2019 2018 2017 Prior

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

4 unchanged sentences

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

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

(Dollars in Thousands) At September 30, 2020

Asset Classification Pass Watch Special Mention Substandard Doubtful Total

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

Asset based lending

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

Pass — — — — — — 185,432 185,432

Watch — — — — — — 52,072 52,072

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

Substandard — — — — — — 19,586 19,586

Total — — — — — — 300,225 300,225

Pass — — — — — — 294,124 294,124

Watch — — — — — — 17,984 17,984

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

Substandard — — — — — — 18,527 18,527

Total — — — — — — 363,670 363,670

Lease financing

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

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

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

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

Doubtful — 6 2,402 38 1 — — 2,447

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

Insurance premium finance

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

Pass 428,131 144 9 — — — — 428,284

Watch 262 5 — — — — — 267

Special Mention 58 5 — — — — — 63

Substandard 68 107 — — — — — 175

Doubtful 58 20 — — — — — 78

Total 428,577 281 9 — — — — 428,867

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

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

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

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

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

Other commercial finance

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

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

Watch — 17,404 3,409 451 — — — 21,264

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

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

Warehouse finance

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 :

16 unchanged sentences

Warehouse finance — — — — 326,850 326,850 — — —

Community banking — — — — 199,132 199,132 — 14,915 14,915

Total loans and leases held for investment 28,203 8,817 19,534 56,554 3,472,726 3,529,280 15,808 13,375 29,183

25 unchanged sentences

Term lending $ 251 $ 1,110 $ 1,964 $ 989 $ 3,096 $ 166 $ — $ 7,576 $ 2,885

Asset based lending — — — — — — 29 29 —

Factoring — — — — — — 569 569 550

Lease financing 977 310 2,442 13 8 — — 3,750 —

SBA/USDA — — 1,199 — — 252 — 1,451 1,199

Commercial finance 1,228 1,420 5,605 1,002 3,104 418 598 13,375 4,634

Total nonaccrual loans and leases $ 1,228 $ 1,420 $ 5,605 $ 1,002 $ 3,104 $ 418 $ 598 $ 13,375 $ 4,634

Nonaccrual loans and leases by year of origination at September 30, 2021 were as follows:

Amortized Cost Basis

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

(Dollars in thousands) 2021 2020 2019 2018 2017 Prior

Term lending $ 131 $ 3,812 $ 10,072 $ 756 $ 133 $ — $ — $ 14,904 $ 12,103

Asset based lending — — — — — — — — —

Factoring — — — — — — 1,268 1,268 1,268

Lease financing — 30 2,471 632 25 — — 3,158 541

Commercial finance 131 3,842 12,543 1,388 158 — 1,268 19,330 13,912

Community banking — 242 — 14,673 — — — 14,915 —

5 unchanged sentences

Term lending $ 207 $ 720 $ 716 $ 130 $ 70 $ 192 $ — $ 2,035

Asset based lending — — — — — — 39 39

Lease financing 8 158 98 131 45 — — 440

Insurance premium finance 1,513 110 5 — — — — 1,628

SBA/USDA — 987 — — — — — 987

Commercial finance 1,728 988 819 261 115 192 39 4,142

4 unchanged sentences

Total 90 days or more delinquent and accruing $ 12,724 $ 1,593 $ 861 $ 284 $ 115 $ 192 $ 39 $ 15,808

Certain loans and leases 90 days or more past due as to interest or principal continue to accrue because they are (1) well-secured and in the process of collection or (2) consumer loans exempt under regulatory rules from being classified as non-accrual until later delinquency, usually 120 days past due.

When analysis of borrower or lessee operating results and financial condition indicates that underlying cash flows of the borrower’s business are not adequate to meet its debt service requirements, the loan is evaluated for impairment.

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

Information on impaired loans and leases, all of which are deemed to be collateral dependent and are evaluated individually for the ACL was as follows:

(Dollars in Thousands) Fiscal Year Ended September 30, 2021

Loans and leases that are 90 days or more delinquent and accruing by year of origination at September 30, 2021 were as follows:

Amortized Cost Basis

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

(Dollars in thousands) 2021 2020 2019 2018 2017 Prior

Term lending $ 2,546 $ — $ 12 $ — $ — $ — $ — $ 2,558

Factoring 1,268

Lease financing 429 7,558 224 99 31 4 — 8,345

Insurance premium finance 468 131 — — — — — 599

SBA/USDA — 987 — — — — — 987

Commercial finance 3,443 8,676 236 99 31 4 — 12,489

Consumer credit products 206 77 224 3 — — — 510

Other consumer finance — — — — — 725 — 725

Consumer finance 206 77 224 3 — 725 — 1,235

Community banking 14,915

Total loans and leases $ 43,324

The recognized interest income on the Company's nonaccrual loans and leases for the fiscal year ended September 30, 2021 was not significant.

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

Tax services 7,962 — — — — — — 7,962

Total 90 days or more delinquent and accruing $ 11,611 $ 8,753 $ 460 $ 102 $ 31 $ 729 $ — $ 21,686

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

Fiscal Year Ended September 30,

(Dollars in Thousands) Average

Investment Recognized Interest Income

(Dollars in thousands) 2022 2021

Term lending $ 11,320 $ 14,623

4 unchanged sentences

Commercial finance 25,940 19,403

Other consumer finance 1,860 143

Consumer finance 1,860 143

Community banking — 16,231

Total loans and leases $ 25,940 $ 35,634

The recognized interest income on the Company's nonaccrual loans and leases for the fiscal years ended September 30, 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 $ 5.9 million of commercial finance loans, and $ 0.3 million of consumer finance loans that were modified in a TDR during the fiscal year ended September 30, 2021, all of which were modified to extend the term of the loan, and no community banking loans.

There were $ 8.7 million of commercial finance loans, and $ 0.8 million of consumer finance loans that were modified in a TDR during the fiscal year ended September 30, 2020 and $ 5.2 million community banking loans.

During the fiscal year ended September 30, 2021, the Company had $ 3.4 million of commercial finance loans, $ 0.3 million of consumer finance loans, and no community banking loans that were modified in a TDR within the previous 12 months and for which there was a payment default.

During the fiscal year ended September 30, 2020, the Company had $ 3.3 million of commercial finance loans, $ 0.6 million of consumer finance loans, and $ 3.3 million of community banking loans that were modified in a TDR within the previous 12 months and for which there was a payment default.

There were $ 10.5 million of commercial finance loans and $ 0.9 million of consumer finance loans that were modified in a TDR during the fiscal year ended September 30, 2022, all of which were modified to extend the term of the loan.

There were $ 5.9 million of commercial finance loans and $ 0.3 million of consumer finance loans that were modified in a TDR during the fiscal year ended September 30, 2021.

During the fiscal year ended September 30, 2022, the Company had $ 5.2 million of commercial finance loans and $ 1.1 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 fiscal year ended September 30, 2021, the Company had $ 3.4 million of commercial finance loans and $ 0.3 million of consumer finance loans that were modified in a TDR within the previous 12 months and for which there was a payment default.

TDR net charge-offs and the impact of TDRs on the Company's allowance for credit losses were insignificant during the fiscal years ended September 30, 2022 and September 30, 2021.

EARNINGS PER COMMON SHARE

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 earnings per common share is computed using the two-class method by dividing income available to common stockholders after the allocation of dividends and undistributed earnings to the participating securities by the weighted average number of common shares outstanding for the period.

Diluted earnings per common share is calculated using the more dilutive of the treasury stock method or the two-class method.

Diluted earnings per common share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised, and is computed after giving consideration to the weighted average dilutive effect of the Company’s stock options, performance share units, and nonvested restricted stock, where applicable.

Basic EPS is computed using the two-class method by dividing income available to common stockholders after the allocation of dividends and undistributed earnings to the participating securities by the weighted average number of common shares outstanding for the period.

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

Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised, and is computed after giving consideration to the weighted average dilutive effect of the Company’s stock options, performance share units, and nonvested restricted stock, where applicable.

Diluted EPS under the two-class method also considers the allocation of earnings to the participating securities.

5 unchanged sentences

Basic income per common share:

Net income attributable to Meta Financial Group, Inc.

Net income attributable to Pathward Financial, Inc.

$ 156,386 $ 141,708 $ 104,720

33 unchanged sentences

Motor vehicles and other 107,648 87,396

Office furniture and equipment 48,828 74,197

Other furniture and equipment 34,254 48,828

Solar panels and equipment 133,765 125,457

3 unchanged sentences

Net book value $ 204,371 $ 213,116

Undiscounted future minimum lease payments expected to be received for operating leases at September 30, 2021 were as follows:

F uture minimum lease payments expected to be received for operating leases at September 30, 2022 were as follows:

(Dollars in thousands)

1 unchanged sentence

Thereafter 9,704

Total undiscounted future minimum lease payments receivable for operating leases $ 123,277

FORECLOSED REAL ESTATE AND REPOSSESSED ASSETS

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

Fiscal Year Ended September 30,

(Dollars in Thousands) 2021 2020

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

Additions 1,659 9,983

Write-downs 591 568

Sales 8,952 23,992

(Gain) loss on sale ( 4 ) 4,960

Total reductions 9,539 29,520

Balance, ending of period $ 2,077 $ 9,957

At September 30, 2021 and 2020, the Company had established a valuation allowance of $ 1.1 million and $ 0.5 million for repossessed assets, respectively.

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

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

The sale consisted of 30-plus parcels of land and the Company recognized a $ 5.0 million loss that was included in the "Gain (loss) on sale of other" line on the Consolidated Statements of Operations.

The Company also recognized $ 1.1 million in deferred rental income and $ 0.2 million in OREO expenses related to these foreclosed properties.

Total $ 126,060

GOODWILL AND INTANGIBLE ASSETS

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

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

The recorded goodwill is a result of multiple business combinations that occurred from 2015 to 2018.

The Company did not enter into any business combinations in the fiscal year ended September 30, 2022.

There have been no changes to the carrying amount of goodwill during the fiscal years ended September 30, 2022 and 2021.

The Company completed a qualitative goodwill impairment assessment as of September 30, 2021.

Based on the results, it was identified that it was more likely than not the fair value of goodwill recorded exceeded the current carrying value and concluded no impairment existed as of September 30, 2021.

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

(Dollars in thousands) Trademark (1)

Non-Compete (2)

Customer Relationships (3)

Non-Compete Customer Relationships (2)

All Others (3)

20 unchanged sentences

(2) Book amortization period of 10 - 30 years.

Amortized using the straight line method.

(3) Book amortization period of 10 - 30 years.

Amortized using the accelerated method.

6 unchanged sentences

Total anticipated intangible amortization $ 25,691

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

There were no impairments to intangible assets for the fiscal years ended September 30, 2021 and 2020.

There was a $ 0.7 million impairment to intangible assets for the fiscal year ended September 30, 2022 and no impairment for the fiscal year ended September 30, 2021.

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

21 unchanged sentences

Time certificates of deposit in denominations of $ 250,000 or more were approximately $ 6.2 million and $ 24.9 million at September 30, 2022, and 2021, respectively.

S cheduled maturities of time certificates of deposit at September 30, 2021 were as follows for the fiscal years ending:

Scheduled maturities of time certificates of deposit at September 30, 2022 were as follows for the fiscal years ending:

(Dollars in thousands)

2022 $ 31,148

(1) As of September 30, 2022, the Company had $ 0.1 million of certificates of deposit which were recorded in wholesale deposits on the Consolidated Statements of Financial Condition.

7 unchanged sentences

At September 30, 2022 and 2021, the Bank pledged securities with fair values of approximately $ 804.0 million and $ 644.7 million, respectively, to be used against FHLB advances as needed.

In addition, no qualifying real estate loans were pledged as collateral at September 30, 2021 compared to approximately $ 333.8 million at September 30, 2020.

In addition, no qualifying real estate loans were pledged as collateral at September 30, 2022 and 2021.

The Company had no securities sold under agreements to repurchase at September 30, 2022 and 2021.

An analysis of securities sold under agreements to repurchase follows:

At September 30,

(Dollars in Thousands) 2021 2020

Highest month-end balance $ — $ 2,550

Average balance — 328

Weighted average interest rate for the fiscal year — % 2.00 %

Weighted average interest rate at fiscal year end — % — %

At September 30, 2022 and 2021, the Company did not have any securities pledged as collateral for securities sold under agreements to repurchase.

6 unchanged sentences

Total $ 36,028 $ 92,834

( 1) Includes $ 5.1 million and $ 10.6 million of discounted leases and $ 0.1 million and $ 0.1 million of finance lease obligations at September 30, 2021 and 2020, respectively.

Management extinguished its remaining long-term FHLB advances in the fiscal 2020 fourth quarter.

Prior to doing so, the advances had an outstanding balance of $ 110.0 million at a weighted average cost of 2.41 %.

The early extinguishment resulted in a pre-tax charge of $ 1.7 million to other expense in the fiscal 2020 fourth quarter.

( 1) Includes $ 2.4 million and $ 5.1 million of discounted leases and none and $ 0.1 million of finance lease obligations at September 30, 2022 and 2021, respectively.

Scheduled maturities of the Company's long-term borrowings at September 30, 2022 were as follows for the fiscal years ending:

2 unchanged sentences

2024 — — 1,764 1,764

2024 — — 2,871 2,871

2026 — 73,980 — 73,980

Thereafter 13,661 20,000 — 33,661

19 unchanged sentences

The Company has the option to defer interest payments on the subordinated debentures from time to time for a period not to exceed five consecutive years.

The Company completed the public offering of $ 75.0 million of 5.75 % fixed-to-floating rate subordinated debentures during fiscal year 2016.

These notes are due August 15, 2026.

The subordinated debentures were sold at par, resulting in net proceeds of approximately $ 73.9 million.

At September 30, 2021, the Company had $ 74.0 million in aggregate principal amount in subordinated debentures, net of issuance costs of $ 1.0 million.

The Company redeemed its $ 75.0 million of 5.75 % fixed-to-floating rate subordinated debentures on May 15, 2022 with payment of $ 75.0 million principal and approximately $ 1.0 million interest.

On September 23, 2022, the Company completed a private placement of $ 20.0 million of its 6.625 % fixed-to-floating rate subordinated debentures due 2032 to certain qualified institutional buyers and accredited investors.

These notes will mature on September 30, 2032, unless earlier redeemed.

Beginning on September 30, 2027, the notes may be redeemed, in whole or in part, at the Company's option subject to regulatory approval, on any scheduled interest payment date.

Prior to September 30, 2027, the notes may be redeemed, in whole but not in part, at any time upon certain other specified events.

At September 30, 2022, the Company had $ 20.0 million in aggregate principal amount in subordinated debentures remains outstanding.

STOCKHOLDERS' EQUITY

Repurchase of Common Stock

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

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

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

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.

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

On September 7, 2021, the Company's Board of Directors announced a 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.

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

As of September 30, 2021, the remaining number of shares available for repurchase under the programs were 7,315,876 shares of common stock.

As of September 30, 2022, 4,294,977 shares of common stock remained available for repurchase.

For the fiscal years ended September 30, 2022, and 2021, the Company also repurchased 73,522 and 101,481 shares, or $ 4.0 million and $ 2.9 million, of common stock, respectively, in settlement of employee tax withholding obligations due upon the vesting of restricted stock.

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

The Company retired 203,224 and zero shares of common stock held in treasury during the fiscal years ended September 30, 2021 and 2020, respectively.

EMPLOYEE STOCK OWNERSHIP AND PROFIT SHARING PLANS

Until September 30, 2021, the Company maintained an Employee Stock Ownership Plan (“ESOP”) for eligible employees who have 1,000 hours of employment with the Bank, have worked at least one year at the Bank and who have attained age 21.

ESOP expense of $ 3.1 million, $ 3.0 million and $ 2.9 million was recorded for the fiscal years ended September 30, 2021, 2020 and 2019, respectively.

Contributions to the ESOP and shares released from suspense are allocated among ESOP participants on the basis of compensation in the year of allocation.

Benefits generally become 100 % vested after seven years of credited service.

Prior to the completion of seven years of credited service, a participant who terminates employment for reasons other than death or disability receives a reduced benefit based on the ESOP’s vesting schedule.

Forfeitures are reallocated among remaining participating employees in the same proportion as contributions.

Benefits are payable in the form of stock upon termination of employment.

The Company’s contributions to the ESOP are not fixed, so benefits payable under the ESOP cannot be estimated.

For the fiscal years ended September 30, 2021, 2020 and 2019, 54,985 shares, 157,909 shares and 98,753 shares, from the suspense account, with a fair value of $ 52.48 , $ 19.22 and $ 32.61 per share, respectively, were released.

For the fiscal years ended September 30, 2021, 2020 and 2019, allocated shares and total ESOP shares reflect 22,960 shares, 59,865 shares and 79,926 shares, respectively, withdrawn from the ESOP by participants who were no longer with the Company or by participants diversifying their holdings.

At September 30, 2021, 2020 and 2019, there were 4,192 , 5,662 and 5,336 shares purchased, respectively, for dividend reinvestment.

ESOP shares were as follows:

At September 30,

(Dollars in Thousands) 2021 2020 2019

Allocated shares 787,299 809,116 778,088

Unearned shares — — —

Total ESOP shares 787,299 809,116 778,088

Fair value of unearned shares $ — $ — $ —

The Company also has a profit sharing plan covering substantially all full-time employees.

Profit sharing expense included in compensation and benefits, for the fiscal years ended September 30, 2021, 2020 and 2019 was $ 3.1 million, $ 3.1 million and $ 3.0 million, respectively.

The Company retired zero and 203,224 shares of common stock held in treasury during the fiscal years ended September 30, 2022 and 2021, respectively.

STOCK COMPENSATION

The Company maintains the Meta Financial Group, Inc.

The Company maintains the Pathward Financial, 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.

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There were no options granted during the fiscal years ended September 30, 2022, 2021 or 2020.

The intrinsic value of options exercised during the fiscal years ended September 30, 2021, 2020 and 2019 were zero , $ 1.0 million and $ 1.8 million, respectively.

The intrinsic value of options exercised during the fiscal years ended September 30, 2022, 2021 and 2020 were zero , zero and $ 1.0 million, respectively.

Shares have previously been granted each year to executives and senior leadership members under the applicable Company incentive plan.

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These stock awards vest in equal installments over eight years .

T he following tables show the activity of options and share awards (including shares of restricted stock subject to vesting, fully-vested restricted stock, and PSUs) granted, exercised or forfeited under all of the Company’s option and incentive plans during the fiscal year ended September 30, 2021 and 2020.

There was no activity of options during the fiscal year ended September 30, 2021 and zero were outstanding or exercisable at September 30, 2021.

(Dollars in Thousands, Except Per Share Data) Number of Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Term (Yrs) Aggregate Intrinsic Value

Options outstanding, September 30, 2019 59,835 $ 8.06 1.54 $ 1,469

Granted — — — —

Exercised ( 59,835 ) 8.06 1.00 1,011

Forfeited or expired — — — —

Options outstanding, September 30, 2020 — $ — — $ —

Options exercisable, September 30, 2020 — $ — — $ —

The following tables show the activity of options and share awards (including shares of restricted stock subject to vesting, fully-vested restricted stock, and PSUs) granted, exercised or forfeited under all of the Company’s option and incentive plans during the fiscal year ended September 30, 2022 and 2021.

There was no activity of options during the fiscal years ended September 30, 2022 and 2021 and zero were outstanding or exercisable at September 30, 2022 and 2021.

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

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Performance share units outstanding, September 30, 2022 96,689 $ 42.59

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

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

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

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Lease liability 8,074 9,206

Net unrealized losses on securities available for sale 71,336 —

Other assets 2,662 4,253

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Other, net ( 956 ) ( 0.3 ) % ( 1,511 ) ( 1.0 ) % ( 1,567 ) ( 1.4 ) %

Income tax expense (benefit) $ 10,701 6.8 % $ 5,661 4.9 % $ ( 3,374 ) ( 3.4 ) %

The provisions of ASC 740, Income Taxes, address the determination of how tax benefits claimed or expected to be claimed on a tax return should be recorded in the Consolidated Financial Statements.

Under ASC 740, the Company recognizes the tax benefits from an uncertain tax position only if it is more likely than not that the tax position will be sustained upon examination, with a tax examination being presumed to occur, including the resolution of any related appeals or litigation.

The tax benefits recognized in the Consolidated Financial Statements from such a position are measured as the largest benefit that has a greater than 50% likelihood of being realized upon ultimate resolution.

Income tax expense $ 27,964 15.2 % $ 10,701 6.8 % $ 5,661 4.9 %

The Company uses the flow through method of accounting for investment tax credits under which the credits are recognized as a reduction to income tax expense in the period in which the credit arises.

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The Capital Rules require the Company and the Bank to maintain minimum ratios (set forth in the table below) of total risk-based capital and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined), and a leverage ratio consisting of Tier 1 capital (as defined) to average assets (as defined).

At September 30, 2021, both the Bank and the Company exceeded federal regulatory minimum capital requirements to be classified as well-capitalized under the prompt corrective action requirements.

The Company and the Bank took the accumulated other comprehensive income (“AOCI”) opt-out election;

At September 30, 2022, the Company and the Bank exceeded federal regulatory minimum capital requirements to be classified as well-capitalized under the prompt corrective action requirements.

The Company and the Bank made the accumulated other comprehensive income (“AOCI”) opt-out election;

under the rule, non-advanced approach banking organizations were given a one-time option to exclude certain AOCI components.

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Tangible common equity 309,944

AOCI ( 213,080 )

Tangible common equity excluding AOCI $ 523,024

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Based on current and expected continued profitability and subject to continued access to capital markets, we believe that the Company and the Bank will continue to meet the capital conservation buffer of 2.5 % in addition to required minimum capital ratios.

COMMITMENTS AND CONTINGENCIES

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

At September 30, 2021 and 2020, unfunded loan and lease commitments approximated $ 1.22 billion and $ 1.22 billion, respectively, excluding undisbursed portions of loans in process.

Commitments, which are disbursed subject

to certain limitations, extend over various periods of time.

Generally, unused commitments are canceled upon expiration of the commitment term as outlined in each individual contract.

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

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

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

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

Since certain commitments to make loans and to fund lines of credit expire without being used, the amount does not necessarily represent future cash commitments.

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

LEGAL PROCEEDINGS

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

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

While management currently believes that the ultimate outcome of these proceedings will not have a material adverse effect on the Company’s financial position or its results of operations, legal proceedings are inherently uncertain and unfavorable resolution of some or all of these matters could, individually or in the aggregate, have a material adverse effect on the Company’s and its subsidiaries’ respective businesses, financial condition or results of operations.

REVENUE FROM CONTRACTS WITH CUSTOMERS

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Refund transfer product fees 39,809 37,967 — — — — 39,809 37,967

Tax advance product fees (1)

Refund advance fee income (1)

40,557 47,639 — — — — 40,557 47,639

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— 18 46,023 39,398 535 — 46,558 39,416

Net gain realized on investment securities (1)

Gain (loss) on sale of securities (1)

— — — — ( 1,287 ) 6 ( 1,287 ) 6

Gain on divestitures (1)

Gain on trademarks (1)

— — — — 50,000 — 50,000 —

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

Refund transfer fees are specific to the Tax Services division and reflect product fees offered by the Company through third-party tax preparers and tax preparation software providers where the Company acts as the partnering financial institution.

A refund transfer allows a taxpayer to pay tax preparation and filing fees directly from their federal or state government tax refund, with the remainder of the refund being disbursed in accordance with the terms and conditions of the taxpayer agreement, which may include satisfaction of other disbursement obligations before going directly to the taxpayer via check, direct deposit, or prepaid card.

Refund transfer fees are recognized by the Company immediately after the taxpayer's refund has been disbursed in accordance with the contract and is based on standalone pricing included within the terms and conditions.

Certain expenses to tax preparation software providers are netted with refund transfer fee income as the Company is considered the agent in these contractual relationships.

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

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

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

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 division and reported in payments card and deposit fees.

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

Card fees relate to Payments and Tax Services divisions and consists of income from prepaid cards and merchant services, including interchange fees from prepaid cards processed through card association networks, merchant services and other card related services.

Interchange rates are generally set by card association networks based on transaction volume and other factors.

Since interchange fees are generated by cardholder activity, the Company recognizes the income as transactions occur.

Fee income for merchant services and other card related services reflect account management and transaction fees charged to merchants for processing card association network transactions.

The associated income is recognized as transactions occur or as services are performed.

For the Company's internally managed prepaid card programs, fees are based on standalone pricing within the terms and conditions of the cardholder agreement.

The Company is considered the principal of these relationships resulting in all fee income being presented on a gross basis within the Consolidated Statement of Operations.

For the Company's sponsorship prepaid card programs where a third-party is considered the Program Manager, the fees are based on standalone pricing within the terms and conditions of the Program Agreement.

For these relationships, the Company is considered the agent and certain expenses with the Program Manager, networks and associations are netted with card fee revenue.

All card fee income is included in the Consumer reporting segment.

Bank and Deposit Fees.

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

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

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 division.

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

Principal vs Agent.

The Consumer reporting segment includes principal/agent relationships.

Within this segment, the Meta Payments division relationships are recorded on a gross basis within the Consolidated Statements of Operations, as Meta is the principal in the contract, with the exception of association/network contracts and partner/processor contracts for prepaid cards, which are recorded on a net basis within the Consolidated Statements of Operations as Meta is the agent in these contracts.

Also within this segment, Tax Service relationships are recorded on a gross basis within the Consolidated Statements of Operations, as Meta is the principal in the contract, with the exception of contracts with software providers and merchants, which are recorded on a net basis within the Consolidated Statements of Operations as Meta is the agent in these contracts.

Bank and deposit fees relate to Payments and Commercial Finance divisions and consist of income from banking and deposit-related services, including account services, overdraft protection, and wire transfers.

Fee income for account services is recognized over the course of the month as the performance obligation is satisfied.

Fee income for overdraft protection and wire transfers is recognized point in time when such event occurs.

For Payments, the fees for account services and overdraft protection are based on standalone pricing within the terms and conditions of the Program Agreement with the sponsorship partner.

For these relationships, the

Company is considered the agent and certain expenses with the partner are netted with deposit fee revenue.

For Commercial Finance, fees for wire transfers are based on standalone pricing within the terms and conditions of the customer deposit agreement.

Bank and deposit fees for the Payments and Commercial Finance divisions are included in the Consumer and Commercial reporting segments, respectively.

SEGMENT REPORTING

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Operating segments are aggregated into reportable segments if certain criteria are met.

In the Annual Report on Form 10-K for the fiscal year ended September 30, 2019, the Company reported its results of operations through three business segments:

Payments, Banking, and Corporate Services/Other.

Beginning October 1, 2019, segments are now aligned with the new management operating structure implemented by the

Company for fiscal year 2020.

The Company accordingly has changed its basis of presentation for segments, and following such change, reports its results of operations through the following three business segments:

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, formerly reported in the Payments segment, are now included in the Consumer segment.

The Consumer Credit Products and ClearBalance business lines, previously reported in the Banking segment, are now included in the Consumer segment.

The Crestmark and AFS divisions, formerly reported in the Banking segment, are now included in the Commercial segment.

The Community Bank division and Student Loan lending portfolio, previously reported in the Banking segment, are now included in the Corporate Services/Other segment.

The Corporate Services/Other segment also includes certain shared services as well as treasury related functions such as the investment portfolio, warehouse finance, wholesale deposits and borrowings.

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

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

The BaaS business line is reported in the Consumer segment.

The Commercial Finance business line is reported in the Commercial segment.

The Corporate Services/Other segment includes certain shared services as well as treasury related functions such as the investment portfolio, warehouse finance, wholesale deposits and borrowings.

The following tables present segment data for the Company:

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Net interest income $ 98,366 $ 187,209 $ 21,749 $ 307,324

Provision (recovery) for credit losses 35,765 19,791 ( 5,790 ) 49,766

Provision (reversal of) for credit losses 30,680 14,674 ( 16,816 ) 28,538

Noninterest income 189,252 68,412 36,143 293,807

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Net interest income $ 91,489 $ 173,969 $ 13,533 $ 278,991

Provision for loan and lease losses 21,807 29,296 13,673 64,776

Provision (reversal of) for credit losses 35,765 19,791 ( 5,790 ) 49,766

Noninterest income 195,708 61,813 13,383 270,904

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Noninterest expense 76,533 107,790 134,728 319,051

Income (loss) before income tax expense (benefit) 129,274 57,855 ( 89,187 ) 97,942

Income (loss) before income tax expense 152,306 74,714 ( 112,015 ) 115,005

Total assets 276,998 2,854,088 2,960,988 6,092,074

2 unchanged sentences

PARENT COMPANY FINANCIAL STATEMENTS

Presented below are the condensed financial statements for the parent company, Meta.

Presented below are the condensed financial statements for the parent company, Pathward Financial.

Condensed Statements of Financial Condition

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Equity in undistributed net income of subsidiaries ( 159,652 ) ( 147,895 ) ( 107,476 )

Stock compensation 6,852 10,221 12,942

Other assets 3,030 ( 3,149 ) ( 35 )

Accrued expenses and other liabilities ( 2,698 ) ( 2,660 ) ( 6,468 )

Net change in accrued interest receivable ( 15 ) — —

Net change in other assets ( 636 ) 3,030 ( 3,149 )

Net change in accrued expenses and other liabilities 3,163 ( 2,698 ) ( 2,660 )

Cash dividend received 229,200 104,000 118,000

Stock compensation 10,004 6,852 10,221

Net cash provided by operating activities 239,470 105,170 119,819

3 unchanged sentences

Cash flows from financing activities:

Cash dividends paid ( 6,400 ) ( 7,100 ) ( 7,760 )

Purchase of shares by ESOP 3,036 3,220 2,011

Proceeds from:

Exercise of stock options and issuance of common stock — 266 44

Issuance of restricted stock — 2 3

Net increase in investment in subsidiaries — — ( 90 )

Shares repurchased for tax withholding on stock compensation ( 99,878 ) ( 118,738 ) ( 49,912 )

Redemption of long-term borrowings ( 75,000 ) — —

Proceeds from long-term borrowings 20,000 — —

Dividends paid on common stock ( 5,921 ) ( 6,400 ) ( 7,100 )

Issuance of common stock due to exercise of stock options — — 266

Issuance of common stock due to restricted stock 1 — 2

Issuance of common stock due to ESOP 2,886 3,036 3,220

Repurchases of common stock ( 168,235 ) ( 99,878 ) ( 118,738 )

Net cash (used in) financing activities ( 226,269 ) ( 103,242 ) ( 122,350 )

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Net interest income 71,613 83,800 72,151 79,760

Provision for credit losses 6,089 30,290 4,612 8,775

Provision (reversal of) for credit losses 186 32,302 ( 1,302 ) ( 2,648 )

Noninterest income 86,591 109,766 53,994 43,456

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Debt securities AFS

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

SBA securities 157,209 — 157,209 —

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(1) Equity securities at fair value are included within other assets on the consolidated statement of financial condition at September 30, 2021.

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

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.

(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.

Loans and Leases.

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Commercial finance $ 1,575 $ — $ — $ 1,575

Community Banking 9,371 — — 9,371

Total loans and leases, net individually evaluated

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DEBT SECURITIES AVAILABLE FOR SALE AND EQUITY SECURITIES

Debt securities available for sale and equity securities are recorded at fair value on a recurring basis.

Fair values for these investment securities are based on obtaining quoted prices on nationally recognized securities exchanges, or matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities, but rather by relying on the securities’ relationship to other benchmark quoted securities.

Fair values for debt securities available for sale are based on quoted prices of similar securities on nationally recognized securities exchanges, or matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities, but rather by relying on the securities’ relationship to other benchmark quoted securities.

Fair values for marketable equity securities are based on unadjusted quoted prices from active markets in which the security is traded.

Non-marketable equity securities are measured at fair value using NAV per share (or its equivalent) as a practical expedient.

LOANS HELD FOR SALE

The carrying amount of loans held for sale is assumed to approximate the fair value.

Loans held for sale are carried at the lower of amortized cost or fair value, where fair value reflects the amount a willing market participant would pay for the loan.

The Company classifies SBA/USDA loans held for sale as Level 2 in the fair value hierarchy as there is an active secondary market in which these loans are exchanged.

Consumer loans held for sale are classified as Level 3 in the fair value hierarchy as the price at which these loans are sold are dictated by terms of the Program Agreements with consumer lending partners .

LOANS AND LEASES, NET

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The carrying amount of accrued interest receivable is assumed to approximate the fair value.

The carrying values of noninterest-bearing checking deposits, interest-bearing checking deposits, savings, money markets, and wholesale non-maturing deposits are assumed to approximate fair value since deposits are immediately withdrawable without penalty.

With the exception of time certificate deposits and wholesale deposits, the carrying values of deposits are assumed to approximate fair value since deposits are immediately withdrawable without penalty.

The fair value of time certificate deposits and wholesale certificate of deposits are estimated using a discounted cash flows calculation that applies the FHLB Des Moines curve to aggregated expected maturities of time deposits.

In accordance with Subtopic 825-10, Financial Instruments , no value has been assigned to the Company’s long-term relationships with its deposit customers (core value of deposits intangible) as such intangibles are not financial instruments as defined under Subtopic 825-10.

OVERNIGHT FEDERAL FUNDS PURCHASED

The carrying amount of federal funds purchased is assumed to approximate the fair value.

FEDERAL HOME LOAN BANK ADVANCES

The fair value of such advances was estimated by discounting the expected future cash flows using current interest rates for advances with similar terms and remaining maturities.

SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE, SUBORDINATED DEBENTURES AND OTHER BORROWINGS

SUBORDINATED DEBENTURES AND OTHER BORROWINGS

The fair value of these instruments was estimated by discounting the expected future cash flows using derived interest rates approximating market over the contractual maturity of such borrowings.

11 unchanged sentences

During this period, up to the filing date of this Annual Report on Form 10-K, management identified the following subsequent events:

• Beginning in November 2021, all participants with shares held in the ESOP can elect their preferred distribution method due to the ESOP terminating effective September 30, 2021.

Concurrent with the termination of the ESOP, the Company also increased its employee contribution match from 4 % to 6 % in the profit sharing plan.

• Subsequent to September 30, 2021, a n additional 1,252,145 shares were repurchased by the Company through Novembe r 18, 2021.

• On October 19, 2021, the Company executed a loan sale agreement for approximately $ 170.0 million of the retained Community Bank loan portfolio with a third party.

The sale is expected to close before December 31, 2021.

The overall net impact of the transaction on the Company's Consolidated Statements of Operations is not known at this time.

• On October 13, 2021, the Company sold an additional $ 30.2 million of the retained Community Bank loan portfolio to Central Bank.

The sale did not result in any material gain to the Company.

The loans included in the sale were not classified as held for sale at September 30, 2021.

Management estimates $ 1.0 million in allowance for credit losses at September 30, 2021 relates to this loan sale.

• On October 27, 2022, the Company announced that Sonja Theisen, currently Executive Vice President of Governance, Risk and Compliance, was appointed to succeed Glen Herrick as the Chief Financial Officer effective April 30, 2023.

Ms.Theisen, who joined Pathward in 2013, has held leaderships roles across the organization including Chief Accounting Officer, Chief of Staff, and EVP of Governance, Risk and Compliance.

• On October 4, 2022, the Company launched its new brand identity and website as part of its rebranding efforts and overall transition to Pathward Financial, Inc.

Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data