Meta Financial Group, Inc. (R) Reports Results for the Quarter and the Fiscal Year...

Meta Financial Group, Inc. (R) Reports Results for the Quarter and the Fiscal
Year Ended September 30, 2007

STORM LAKE, Iowa, Dec. 7 /PRNewswire-FirstCall/ -- Meta Financial Group,
Inc. (Nasdaq: CASH) today reported net income of $1.2 million, or $0.45 per
diluted share, for its fiscal year ended September 30, 2007, compared to net
income of $3.7 million, or $1.46 per diluted share, for the prior fiscal year.
Earnings in fiscal year 2007 were impacted by a large provision for loan
losses related primarily to an impairment on a commercial loan relationship of
$5.0 million or $1.20 per diluted share and a gain on the sale of four
branches in northwest Iowa of $3.3 million or $0.81 per diluted share.
Earnings in fiscal year 2006 were impacted by non-recurring fee income
associated with a portfolio of purchased prepaid debit cards. Earnings for
the fourth quarter of 2007 were $576,000, or $0.22 per diluted share, compared
to $429,000, or $0.17 per diluted share, in the fourth quarter of 2006. A
more detailed discussion of these and other items is included below.
"We are pleased with our results for fiscal year 2007," said J. Tyler
Haahr, President and Chief Executive Officer. "We made important strides this
year not only in significantly growing revenues, but also in investing for
immediate and long term growth. We are delighted with our year over year
growth in revenues, as it demonstrates the underlying strength of our business
model, particularly of our Meta Payment Systems(R) (MPS) division.
Additionally, we continue to make significant investments in human capital,
technology, and card processing middleware to support the continuing growth of
our franchise, develop new products and services, solidify our delivery
infrastructure and create long term shareholder value."
Revenue
Total revenue for fiscal year 2007 was a record $62.1 million, an increase
of $7.8 million or 14 percent over fiscal year 2006. Fiscal year 2007
revenues include a $3.3 million pre-tax gain on the sale of four branches in
northwest Iowa, while 2006 includes $2.6 million in non-recurring pre-tax fee
income from a purchased portfolio of prepaid debit cards. Adjusting for these
items, total fiscal year 2007 revenues grew by 14 percent year over year. Net
of taxes, the branch sale gain increased earnings per diluted share by $0.81
in fiscal year 2007, and the non-recurring fee income increased earnings by
$0.65 in fiscal year 2006.
Net Interest Income
Net interest income for fiscal year 2007 was $21.7 million, up $2.1
million or 11 percent in fiscal year 2006. This growth is the result of a
continued widening of the Company's net interest margin. The widening margin
has allowed the Company to continue to grow net interest income while
executing its strategy to shrink wholesale assets and borrowings. The main
driver of the increase in margin has been the significant shift in the
Company's funding base away from higher cost certificates of deposit, public
funds deposits, and FHLB advances toward low- and no-cost checking and prepaid
card product deposits. As of September 30, 2007, these deposits represented
41 percent of total funding liabilities, compared to 25 percent one year
earlier. The bulk of this shift is due to the dramatic growth in deposits at
the MPS division.
Non-Interest Income
Non-interest income also exhibited dramatic growth in fiscal year 2007,
reaching a record $22.1 million. This represents an increase of $8.3 million
or 61 percent. Adjusting for the aforementioned non-recurring items, non-
interest income grew a remarkable 68 percent. MPS card fee income grew by
$4.6 million or 42 percent over 2006. Other fees also increased on a year
over year basis including $129,000 in loan fee income and $21,000 in deposit
fee income.
Credit Quality
The Company's credit quality continues to exhibit positive trends. Non-
performing loans at September 30, 2007 were $473,000, representing 0.13
percent of total loans compared to $4.1 million, or 1.03 percent of total
loans one year earlier. The Company has been thoughtful in extending credit
to new borrowers and has continued to actively manage risk profiles on
existing customers. The Company's underlying credit trends are very strong,
and the Company continues to foster a conservative credit culture. The
Company does not have any direct exposure to subprime mortgage loans.
Non-Interest Expense
Non-interest expense grew $10.2 million or 37 percent during fiscal year
2007 to $37.9 million from the prior year. The bulk of the increase occurred
in compensation and card processing expense primarily as a result of continued
growth in the MPS division.
Compensation expense was $18.6 million for fiscal year 2007 up $5.4
million from 2006. The increase represents the addition of executive level
management, client relations, compliance and operations support staff within
MPS, as well as software developers, IT support staff, and other
administrative support within the Company.
Card processing expense was $3.4 million higher than the previous year
due to growing card sales from our Simplexus(R) prepaid card sales product and
other prepaid card programs managed by MPS. Other card processing expense
increases are attributable to settlement functions for value loading, card
sales and other investments to support new product development and anticipated
growth of existing products.
The Company's occupancy and equipment expense also rose during fiscal year
2007, driven primarily by the addition of administrative office space in Sioux
Falls and Omaha, as well as investment in computer hardware and software,
primarily to support growth at the MPS division. Occupancy and equipment
expense for fiscal year 2007 was $4.2 million compared to $3.1 million in
fiscal year 2006.
Other general and administrative expenses remained largely flat from the
prior year.
Loans
Total loans, net of allowance for loan losses, fell $23.4 million or 6
percent during fiscal year 2007. This includes $2.2 million related to the
branch sales. However, during the fourth quarter of fiscal 2007 there was an
increase of $1.9 million. During the year, the Company experienced pay downs
and payoffs mainly in its originated and purchased commercial operating and
commercial real estate portfolios. Management believes this decrease is
driven in part by a decrease in the overall demand for credit and increased
competition from secondary market investors.
Deposits and Other Liabilities
The Company continues to grow its low- and no-cost deposit portfolio as a
result primarily from the growth at MPS. For the year, prepaid card and
checking deposits are up $79.8 million, or 49 percent. Excluding the branch
sales total deposits increased 4 percent from 2006.
The Company's favorable liability trends continued in the 2007 fourth
fiscal quarter as wholesale funding maturities further decreased the Company's
reliance on non-retail funding sources. Wholesale borrowings now represent
less than 12 percent of total funding liabilities. Deposits from prepaid card
sales rose $12.0 million while total deposits increased $25.9 million over the
quarter to $547.6 million.
Business Segment Performance
As a result of the dramatic growth of the MPS division during fiscal year
2007, management elected to make adjustments in MPS deposit valuation and how
expenses are allocated between the Traditional Banking Segment, the Holding
Company, and MPS. The primary result of this review was to increase the
earnings credit paid by the bank for deposits originated within the MPS
division and also to allocate a higher portion of expenses to MPS based on
expenditure growth in departments which provide administrative support to MPS.
The following discussion incorporates the new methodology.
Meta Payment Systems(R)
MPS recorded net income of $3.3 million, or $1.27 per diluted share, for
fiscal year 2007. This compares to $3.5 million, or $1.41 per diluted share
for Fiscal Year 2006. Total MPS segment revenue was $26.3 million, a $12.5 or
90 percent increase over fiscal year 2006, excluding the non-recurring item in
the prior year. Expenses allocated from the Traditional Banking segment were
$6.1 million for fiscal 2007 compared to $3.4 during 2006. Fiscal Year 2006
included non-recurring fee income of $0.65 per diluted share. Adjusting for
this non-recurring income, MPS generated earnings per diluted share growth of
67 percent. Both revenues and expenses grew significantly at MPS as business
volumes increased, management and administrative expenses grew, and additional
investments in technology were made to support future growth and product
development.
Traditional Banking
The Traditional Banking segment recorded a net loss of $1.4 million, or
$0.52 per diluted share, for fiscal year 2007. This compares to net income of
$513,000, or $0.20 per diluted share, for fiscal year 2006. Fiscal year 2007
included a loss of $1.20 per diluted share related to a commercial loan
impairment and a gain of $0.81 per diluted share related to the sale of four
branches in northwest Iowa.
Other Information
Please see the Meta Financial Group, Inc. press release issued on November
29, 2007 regarding the sale of its MetaBank West Central subsidiary. This
transaction, which involves the sale of the stock of MetaBank West Central for
approximately $8.3 million, is anticipated to close on or before March 30,
2008, subject to regulatory approval and the satisfaction of routine
contractual terms. As of November 30, 2007, MetaBank West Central had total
assets of approximately $43.1 million.
Meta Financial Group, MetaBank, and MetaBank West Central continue to meet
regulatory requirements for classification as well-capitalized institutions.
This press release and other important information about the Company are
available at http://www.metacash.com.
Corporate Profile: Meta Financial Group, Inc. (doing business as Meta
Financial Group) is the holding company for MetaBank, MetaBank West Central,
and Meta Trust Company(R). MetaBank is a federally-chartered savings bank
with four market areas: Northwest Iowa Market, Brookings Market, Central Iowa
Market, Sioux Empire Market; and the Meta Payment Systems(R) prepaid debit
card division. MetaBank West Central is a state-chartered commercial bank in
the West Central Iowa Market. Sixteen banking offices support customers
throughout northwest and central Iowa, and in Brookings and Sioux Falls, South
Dakota.
The Company, and its wholly-owned subsidiaries, MetaBank, MetaBank WC, and
Meta Trust Company(R) may from time to time make written or oral
"forward-looking statements," including statements contained in this release
and in its filings with the Securities and Exchange Commission, in its reports
to shareholders, and in other communications by the Company, which are made in
good faith by the Company pursuant to the "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995.
These forward-looking statements include statements with respect to the
Company's beliefs, expectations, estimates and intentions that are subject to
significant risks and uncertainties, and are subject to change based on
various factors, some of which are beyond the Company's control. Such
statements address the following subjects: future operating results; customer
growth and retention; loan and other product demand; earnings growth and
expectations; new products and services, such as those offered by the Meta
Payment Systems(R) division; credit quality and adequacy of reserves;
technology; and our employees. The following factors, among others, could
cause the Company's financial performance to differ materially from the
expectations, estimates, and intentions expressed in such forward-looking
statements: the strength of the United States economy in general and the
strength of the local economies in which the Company conducts operations; the
effects of, and changes in, trade, monetary, and fiscal policies and laws,
including interest rate policies of the Federal Reserve Board; inflation,
interest rate, market, and monetary fluctuations; the timely development of
and acceptance of new products and services of the Company and the perceived
overall value of these products and services by users; the impact of changes
in financial services laws and regulations; technological changes;
acquisitions; litigation; changes in consumer spending and saving habits; and
the success of the Company at managing and collecting assets of borrowers in
default and managing the risks involved in the foregoing.
The foregoing list of factors is not exclusive. Additional discussion of
factors affecting the Company's business and prospects is contained in the
Company's periodic filings with the SEC. The Company does not undertake, and
expressly disclaims any intent or obligation, to update any forward-looking
statement, whether written or oral, that may be made from time to time by or
on behalf of the Company.

Financial Highlights

Consolidated Statement of Financial Condition
September 30, September 30,
Assets 2007 2006
(Restated)
Cash and cash equivalents $95,903 $109,353
Investments and mortgage-backed
securities 170,359 192,067
Loans receivable, net 365,211 388,580
Other assets 54,607 50,921
Total assets $686,080 $740,921

Liabilities
Deposits $547,588 $565,389
Other borrowings 84,834 125,054
Other liabilities 5,560 5,379
Total liabilities $637,982 $695,822

Shareholders' equity $48,098 $45,099
Total liabilities and
shareholders' equity $686,080 $740,921

Consolidated Statements of Income
For the 3 Months For the Years
Ended September 30: Ended September 30:
(Dollars In Thousands, Except 2007 2006 2007 2006
Per Share Data) (Restated) (Restated)
Interest income $9,615 $9,892 $39,995 $40,578
Interest expense 4,150 5,089 18,272 20,942
Net interest income 5,465 4,803 21,723 19,636
Provision for loan losses (200) 545 3,795 235

Net interest income after
provision for loan losses 5,665 4,258 17,928 19,401
Non-interest income 5,466 3,950 22,074 13,728
Non-interest expense 10,107 7,710 37,857 27,626
Net income before income tax
expense 1,024 498 2,145 5,503
Income tax expense 448 69 974 1,815
Net income $576 $429 $1,171 $3,688

Earnings per common share
Basic $0.22 $0.17 $0.46 $1.48
Diluted $0.22 $0.17 $0.45 $1.46

Selected Financial Information
For the Years Ended September 30, 2007 2006
(Restated)
Return on average assets 0.17% 0.49%
Return on average equity 2.77% 8.55%
Average shares outstanding
for diluted earnings per
share 2,617,896 2,521,857

At Period Ended: September 30, September 30,
2007 2006
(Restated)
Equity to total assets 7.01% 6.09%
Book value per common share
outstanding $18.57 $17.79
Tangible book value per
common share outstanding $17.26 $16.45
Common shares outstanding 2,589,717 2,534,367
Non-performing assets to
total assets 0.07% 0.56%

SOURCE Meta Financial Group, Inc.

Investor Relations of Meta Financial Group, Inc., +1-712-732-4117