UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
x |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2009
o |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number: 0-22140
META FINANCIAL GROUP, INC. ®
(Exact name of registrant as specified in its charter)
Delaware |
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42-1406262 |
(State or other jurisdiction of |
|
(I.R.S. Employer Identification No.) |
incorporation or organization) |
|
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121 East Fifth Street, Storm Lake, Iowa 50588
(Address of principal executive offices)
(712) 732-4117
(Registrants telephone number, including area code)
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter periods that the registrant was required to submit ans post such files.) Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of large accelerated filer, accelerated filer and smaller reporting company in Rule 12-b2 of the Exchange Act. (Check one):
Large accelerated filer o |
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Accelerated filer o |
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Non-accelerated filer o |
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Smaller reporting company x |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the latest practicable date.
Class: |
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Outstanding at June 26, 2009: |
Common Stock, $.01 par value |
|
2,602,655 Common Shares |
META FINANCIAL GROUP, INC.
FORM 10-Q/A
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Page No. |
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Item 1. |
Financial Statements (Unaudited): |
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Condensed Consolidated Statements of Financial Condition as of March 31, 2009 and September 30, 2008 |
1 |
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2 |
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3 |
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4 |
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5 |
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6 |
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Managements Discussion and Analysis of Financial Condition and Results of Operations |
23 |
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38 |
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40 |
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41 |
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41 |
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41 |
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41 |
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41 |
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41 |
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41 |
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42 |
i
META FINANCIAL GROUP, INC.
EXPLANATORY NOTE RESTATEMENT OF FINANCIAL INFORMATION
For the reasons stated by the Registrant in its Form 8-K filed on June 26, 2009, this Quarterly Report on Form 10-Q/A as of and for the three and six months ended March 31, 2009, includes a restated consolidated statement of operations, consolidated statement of comprehensive income (loss) for the three and six months ended March 31, 2008; a restated consolidated statement of shareholders equity and consolidated statement of cash flows for the six months ended March 31, 2008; a restated consolidated statement of financial condition and consolidated statement of shareholders equity for the six months ended March 31, 2009; a restated consolidated statement of financial condition for the fiscal year ended September 30, 2008. Earnings per share and segment have also been restated for all periods present. For more information concerning these restatements, see Note 11 to the Notes to Condensed Consolidated Financial Statements, which is included in Part I, Item 1 Financial Statements of this Quarterly Report on Form 10-Q/A. This Quarterly Report on Form 10-Q/A should be read in conjunction with the Companys Annual Report on Form 10-K/A for the year ended September 30, 2008.
ii
META FINANCIAL GROUP, INC.
AND SUBSIDIARIES
Condensed Consolidated Statements of Financial Condition (Unaudited)
(Dollars in Thousands, Except Share and Per Share Data)
|
|
March 31, 2009 |
|
September 30, 2008 |
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(As Restated) |
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(As Restated) |
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ASSETS |
|
|
|
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||
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|
|
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|
|
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Cash and due from banks |
|
$ |
1,644 |
|
$ |
2,963 |
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Interest-bearing deposits in other financial institutions |
|
15,081 |
|
|
|
||
Total cash and cash equivalents |
|
16,725 |
|
2,963 |
|
||
Federal funds sold |
|
216 |
|
5,188 |
|
||
Investment securities available for sale |
|
14,482 |
|
19,711 |
|
||
Mortgage-backed securities available for sale |
|
321,057 |
|
184,123 |
|
||
Loans receivable - net of allowance for loan losses of $11,224 at March 31, 2009 and $5,732 at September 30, 2008 |
|
419,275 |
|
427,928 |
|
||
Federal Home Loan Bank Stock, at cost |
|
6,787 |
|
8,092 |
|
||
Accrued interest receivable |
|
4,089 |
|
4,497 |
|
||
Bond insurance receivable |
|
4,143 |
|
6,098 |
|
||
Premises and equipment, net |
|
22,605 |
|
21,992 |
|
||
Bank-owned life insurance |
|
13,016 |
|
12,758 |
|
||
Foreclosed real estate and repossessed assets |
|
3,755 |
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|
|
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Goodwill and intangible assets |
|
2,449 |
|
2,206 |
|
||
MPS accounts receivable |
|
49,603 |
|
50,046 |
|
||
Other assets |
|
11,445 |
|
10,802 |
|
||
|
|
|
|
|
|
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Total assets |
|
$ |
889,647 |
|
$ |
756,404 |
|
|
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|
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LIABILITIES AND SHAREHOLDERS EQUITY |
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|
|
||
|
|
|
|
|
|
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LIABILITIES |
|
|
|
|
|
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Non-interest-bearing checking |
|
$ |
485,655 |
|
$ |
355,020 |
|
Interest-bearing checking |
|
16,200 |
|
15,029 |
|
||
Savings deposits |
|
9,833 |
|
9,394 |
|
||
Money market deposits |
|
34,098 |
|
43,038 |
|
||
Time certificates of deposit |
|
140,856 |
|
123,491 |
|
||
Total deposits |
|
686,642 |
|
545,972 |
|
||
Advances from Federal Home Loan Bank |
|
100,950 |
|
132,025 |
|
||
Securities sold under agreements to repurchase |
|
22,259 |
|
5,348 |
|
||
Subordinated debentures |
|
10,310 |
|
10,310 |
|
||
Accrued interest payable |
|
744 |
|
578 |
|
||
Contingent liability |
|
4,293 |
|
4,293 |
|
||
Accrued expenses and other liabilities |
|
17,370 |
|
12,145 |
|
||
Total liabilities |
|
842,568 |
|
710,671 |
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||
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SHAREHOLDERS EQUITY |
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|
|
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Preferred stock, 800,000 shares authorized, no shares issued or outstanding |
|
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|
|
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Common stock, $.01 par value; 5,200,000 shares authorized, 2,957,999 shares issued, 2,602,655 and 2,601,103 shares outstanding at March 31, 2009 and September 30, 2008, respectively |
|
30 |
|
30 |
|
||
Additional paid-in capital |
|
23,348 |
|
23,058 |
|
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Retained earnings - substantially restricted |
|
35,615 |
|
34,442 |
|
||
Accumulated other comprehensive (loss) |
|
(5,139 |
) |
(5,022 |
) |
||
Treasury stock, 355,344 and 356,896 common shares, at cost, at March 31, 2009 and September 30, 2008, respectively |
|
(6,775 |
) |
(6,775 |
) |
||
Total shareholders equity |
|
47,079 |
|
45,733 |
|
||
|
|
|
|
|
|
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Total liabilities and shareholders equity |
|
$ |
889,647 |
|
$ |
756,404 |
|
See Notes to Condensed Consolidated Financial Statements.
1
META FINANCIAL GROUP, INC.
AND SUBSIDIARIES
Condensed Consolidated Statements of Operations (Unaudited)
(Dollars in Thousands, Except Share and Per Share Data)
|
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Three Months Ended |
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Six Months Ended |
|
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March 31, |
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March 31, |
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||||||||
|
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2009 |
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2008 |
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2009 |
|
2008 |
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(As Restated) |
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(As Restated) |
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Interest and dividend income: |
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|
|
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|
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|
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Loans receivable, including fees |
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$ |
7,536 |
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$ |
6,599 |
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$ |
13,908 |
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$ |
12,877 |
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Mortgage-backed securities |
|
2,797 |
|
2,339 |
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4,805 |
|
3,846 |
|
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Other investments |
|
200 |
|
957 |
|
547 |
|
2,071 |
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10,533 |
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9,895 |
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19,260 |
|
18,794 |
|
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Interest expense: |
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|
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|
|
|
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Deposits |
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1,429 |
|
2,031 |
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2,973 |
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4,455 |
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FHLB advances and other borrowings |
|
860 |
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1,648 |
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1,882 |
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2,849 |
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||||
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2,289 |
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3,679 |
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4,855 |
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7,304 |
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Net interest income |
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8,244 |
|
6,216 |
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14,405 |
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11,490 |
|
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|
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|
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Provision for loan losses |
|
10,270 |
|
200 |
|
12,399 |
|
70 |
|
||||
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|
|
|
|
|
|
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|
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Net interest income (loss) after provision for loan losses |
|
(2,026 |
) |
6,016 |
|
2,006 |
|
11,420 |
|
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|
|
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|
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Non-interest income: |
|
|
|
|
|
|
|
|
|
||||
Card fees |
|
32,988 |
|
11,514 |
|
48,086 |
|
16,957 |
|
||||
Loan fees |
|
231 |
|
207 |
|
330 |
|
405 |
|
||||
Deposit fees |
|
177 |
|
177 |
|
378 |
|
371 |
|
||||
Bank-owned life insurance income |
|
131 |
|
124 |
|
258 |
|
246 |
|
||||
Gain on sale of securities available for sale, net |
|
9 |
|
198 |
|
9 |
|
207 |
|
||||
Other income |
|
75 |
|
65 |
|
85 |
|
229 |
|
||||
Total non-interest income |
|
33,611 |
|
12,285 |
|
49,146 |
|
18,415 |
|
||||
|
|
|
|
|
|
|
|
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|
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Non-interest expense: |
|
|
|
|
|
|
|
|
|
||||
Card processing expense |
|
14,861 |
|
5,044 |
|
20,111 |
|
8,101 |
|
||||
Compensation and benefits |
|
8,342 |
|
6,451 |
|
15,781 |
|
12,168 |
|
||||
Occupancy and equipment expense |
|
2,049 |
|
1,795 |
|
3,853 |
|
3,040 |
|
||||
Legal and consulting expense |
|
925 |
|
790 |
|
2,045 |
|
1,229 |
|
||||
Data processing expense |
|
816 |
|
322 |
|
1,272 |
|
582 |
|
||||
Marketing |
|
474 |
|
394 |
|
812 |
|
738 |
|
||||
Other expense |
|
2,183 |
|
1,559 |
|
4,328 |
|
3,283 |
|
||||
Total non-interest expense |
|
29,650 |
|
16,355 |
|
48,202 |
|
29,141 |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
Income from continuing operations before income tax expense |
|
1,935 |
|
1,946 |
|
2,950 |
|
694 |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
Income tax expense from continuing operations |
|
760 |
|
743 |
|
1,102 |
|
281 |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
Income from continuing operations |
|
1,175 |
|
1,203 |
|
1,848 |
|
413 |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
Gain on sale from discontinued operations before taxes |
|
|
|
2,309 |
|
|
|
2,309 |
|
||||
Income from discontinued operations before taxes |
|
|
|
4 |
|
|
|
76 |
|
||||
Income tax expense from discontinued operations |
|
|
|
1,552 |
|
|
|
1,574 |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
Income from discontinued operations |
|
|
|
761 |
|
|
|
811 |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
Net Income |
|
$ |
1,175 |
|
$ |
1,964 |
|
$ |
1,848 |
|
$ |
1,224 |
|
|
|
|
|
|
|
|
|
|
|
||||
Basic earnings per common share: |
|
|
|
|
|
|
|
|
|
||||
Income from continuing operations |
|
$ |
0.45 |
|
$ |
0.47 |
|
$ |
0.71 |
|
$ |
0.16 |
|
Income from discontinued operations |
|
|
|
0.29 |
|
|
|
0.31 |
|
||||
Net income |
|
$ |
0.45 |
|
$ |
0.76 |
|
$ |
0.71 |
|
$ |
0.47 |
|
|
|
|
|
|
|
|
|
|
|
||||
Diluted earnings per common share: |
|
|
|
|
|
|
|
|
|
||||
Income from continuing operations |
|
$ |
0.45 |
|
$ |
0.46 |
|
$ |
0.71 |
|
$ |
0.16 |
|
Income from discontinued operations |
|
|
|
0.29 |
|
|
|
0.31 |
|
||||
Net income |
|
$ |
0.45 |
|
$ |
0.75 |
|
$ |
0.71 |
|
$ |
0.47 |
|
|
|
|
|
|
|
|
|
|
|
||||
Dividends declared per common share: |
|
$ |
0.13 |
|
$ |
0.13 |
|
$ |
0.26 |
|
$ |
0.26 |
|
See Notes to Condensed Consolidated Financial Statements.
2
META FINANCIAL GROUP, INC.®
AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Income (Unaudited)
(Dollars in Thousands)
|
|
Three Months Ended |
|
Six Months Ended |
|
||||||||
|
|
March 31, |
|
March 31, |
|
||||||||
|
|
2009 |
|
2008 |
|
2009 |
|
2008 |
|
||||
|
|
|
|
(As Restated) |
|
|
|
(As Restated) |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
Net income |
|
$ |
1,175 |
|
$ |
1,964 |
|
$ |
1,848 |
|
$ |
1,224 |
|
|
|
|
|
|
|
|
|
|
|
||||
Other comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
||||
Change in net unrealized gains (losses) on securities available for sale |
|
(1,243 |
) |
1,749 |
|
(196 |
) |
3,800 |
|
||||
Gains realized in net income |
|
9 |
|
198 |
|
9 |
|
207 |
|
||||
|
|
(1,234 |
) |
1,947 |
|
(187 |
) |
4,007 |
|
||||
Deferred income tax effect |
|
(460 |
) |
726 |
|
(70 |
) |
1,495 |
|
||||
Total other comprehensive income (loss) |
|
(774 |
) |
1,221 |
|
(117 |
) |
2,512 |
|
||||
Total comprehensive income |
|
$ |
401 |
|
$ |
3,185 |
|
$ |
1,731 |
|
$ |
3,736 |
|
See Notes to Condensed Consolidated Financial Statements.
3
META FINANCIAL GROUP, INC.®
AND SUBSIDIARIES
Condensed Consolidated Statements of Changes in Shareholders Equity (Unaudited)
For the Six Months Ended March 31, 2009 and 2008
(Dollars in Thousands, Except Share and Per Share Data)
|
|
|
|
|
|
|
|
Accumulated |
|
Unearned |
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
Other |
|
Employee |
|
|
|
|
|
|||||||
|
|
|
|
Additional |
|
|
|
Comprehensive |
|
Stock |
|
|
|
Total |
|
|||||||
|
|
Common |
|
Paid-in |
|
Retained |
|
(Loss), |
|
Ownership |
|
Treasury |
|
Shareholders |
|
|||||||
|
|
Stock |
|
Capital |
|
Earnings |
|
Net of Tax |
|
Plan Shares |
|
Stock |
|
Equity |
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Balance, September 30, 2007 |
|
$ |
30 |
|
$ |
21,958 |
|
$ |
36,805 |
|
$ |
(3,345 |
) |
$ |
(377 |
) |
$ |
(6,973 |
) |
$ |
48,098 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Cash dividends declared on common stock ($.26 per share) |
|
|
|
|
|
(668 |
) |
|
|
|
|
|
|
(668 |
) |
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Issuance of 3,967 common shares from treasury stock due to exercise of stock options |
|
|
|
10 |
|
|
|
|
|
|
|
78 |
|
88 |
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Stock compensation |
|
|
|
224 |
|
|
|
|
|
|
|
|
|
224 |
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
6,378 common shares committed to be released under the ESOP |
|
|
|
107 |
|
|
|
|
|
217 |
|
|
|
324 |
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Change in net unrealized losses on securities available for sale, net |
|
|
|
|
|
|
|
2,512 |
|
|
|
|
|
2,512 |
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Net income for six months ended March 31, 2008 |
|
|
|
|
|
1,224 |
|
|
|
|
|
|
|
1,224 |
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Balance, March 31, 2008 (As Restated) |
|
$ |
30 |
|
$ |
22,299 |
|
$ |
37,361 |
|
$ |
(833 |
) |
$ |
(160 |
) |
$ |
(6,895 |
) |
$ |
51,802 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Balance, September 30, 2008 (As Restated) |
|
$ |
30 |
|
$ |
23,058 |
|
$ |
34,442 |
|
$ |
(5,022 |
) |
$ |
|
|
$ |
(6,775 |
) |
$ |
45,733 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Cash dividends declared on common stock ($.26 per share) |
|
|
|
|
|
(675 |
) |
|
|
|
|
|
|
(675 |
) |
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Stock compensation |
|
|
|
290 |
|
|
|
|
|
|
|
|
|
290 |
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Change in net unrealized losses on securities available for sale, net |
|
|
|
|
|
|
|
(117 |
) |
|
|
|
|
(117 |
) |
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Net income for six months ended March 31, 2009 |
|
|
|
|
|
1,848 |
|
|
|
|
|
|
|
1,848 |
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Balance, March 31, 2009 |
|
$ |
30 |
|
$ |
23,348 |
|
$ |
35,615 |
|
$ |
(5,139 |
) |
$ |
|
|
$ |
(6,775 |
) |
$ |
47,079 |
|
See Notes to Condensed Consolidated Financial Statements.
4
META FINANCIAL GROUP, INC.®
AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Unaudited)
(Dollars in Thousands)
|
|
Six Months Ended March 31, |
|
||||
|
|
2009 |
|
2008 |
|
||
|
|
|
|
(As Restated) |
|
||
|
|
|
|
|
|
||
Cash flows from operating activities: |
|
|
|
|
|
||
Net income |
|
$ |
1,848 |
|
$ |
1,224 |
|
Adjustments to reconcile net income to net cash provided by (used in) operating activities: |
|
|
|
|
|
||
Effect of contribution to employee stock ownership plan |
|
|
|
324 |
|
||
Depreciation, amortization and accretion, net |
|
1,983 |
|
1,545 |
|
||
Provision for loan losses |
|
12,399 |
|
70 |
|
||
Gain on sale of other |
|
(48 |
) |
(52 |
) |
||
Net change in accrued interest receivable |
|
408 |
|
289 |
|
||
Net change in other assets |
|
1,254 |
|
(889 |
) |
||
Net change in accrued interest payable |
|
166 |
|
(82 |
) |
||
Net change in accrued expenses and other liabilities |
|
5,225 |
|
(19,954 |
) |
||
Net cash provided by (used in) operating activities-continuing operations |
|
23,235 |
|
(17,525 |
) |
||
Net cash provided by operating activities-discontinued operations |
|
|
|
6,029 |
|
||
Net cash provided by (used in) operating activities |
|
23,235 |
|
(11,496 |
) |
||
|
|
|
|
|
|
||
Cash flow from investing activities: |
|
|
|
|
|
||
Purchase of securities available for sale |
|
(156,114 |
) |
(102,790 |
) |
||
Net change in federal funds sold |
|
4,972 |
|
75,000 |
|
||
Proceeds from sales of securities available for sale |
|
903 |
|
|
|
||
Proceeds from maturities and principal repayments of securities available for sale |
|
23,040 |
|
15,725 |
|
||
Loans purchased |
|
(7,054 |
) |
(7,313 |
) |
||
Net change in loans receivable |
|
(408 |
) |
(41,348 |
) |
||
Proceeds from sales of foreclosed real estate |
|
|
|
329 |
|
||
Net change in Federal Home Loan Bank stock |
|
1,305 |
|
(3,555 |
) |
||
Proceeds from the sale of premises and equipment |
|
1 |
|
97 |
|
||
Purchase of premises and equipment |
|
(2,309 |
) |
(3,759 |
) |
||
Other, net |
|
70 |
|
(1,208 |
) |
||
Net cash used in investing activities-continuing operations |
|
(135,594 |
) |
(68,822 |
) |
||
Net cash provided by investing activities-discontinued operations |
|
|
|
17,598 |
|
||
Net cash used in investing activities |
|
(135,594 |
) |
(51,224 |
) |
||
|
|
|
|
|
|
||
Cash flows from financing activities: |
|
|
|
|
|
||
Net change in checking, savings, and money market deposits |
|
123,305 |
|
87,297 |
|
||
Net change in time deposits |
|
17,365 |
|
(16,352 |
) |
||
Net change in advances from Federal Home Loan Bank |
|
(31,075 |
) |
(13,000 |
) |
||
Net change in securities sold under agreements to repurchase |
|
16,911 |
|
81,990 |
|
||
Cash dividends paid |
|
(675 |
) |
(668 |
) |
||
Stock compensation |
|
290 |
|
312 |
|
||
Net cash provided by financing activities-continuing operations |
|
126,121 |
|
139,579 |
|
||
Net cash used in financing activities-discontinued operations |
|
|
|
(33,210 |
) |
||
Net cash provided by provided by financing activities |
|
126,121 |
|
106,369 |
|
||
|
|
|
|
|
|
||
Net change in cash and cash equivalents |
|
13,762 |
|
43,649 |
|
||
|
|
|
|
|
|
||
Cash and cash equivalents at beginning of period |
|
2,963 |
|
20,903 |
|
||
Cash and cash equivalents at end of period |
|
$ |
16,725 |
|
$ |
64,552 |
|
|
|
|
|
|
|
||
Supplemental disclosure of cash flow information |
|
|
|
|
|
||
Cash paid during the period for: |
|
|
|
|
|
||
Interest |
|
$ |
4,689 |
|
$ |
7,984 |
|
Income taxes |
|
2,055 |
|
|
|
||
|
|
|
|
|
|
||
Supplemental schedule of non-cash investing and financing activities: |
|
|
|
|
|
||
Loans transferred to foreclosed real estate |
|
$ |
3,775 |
|
$ |
301 |
|
Cash received on sale of commercial bank |
|
|
|
8,224 |
|
See Notes to Condensed Consolidated Financial Statements.
5
META FINANCIAL GROUP, INC. ®
AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
NOTE 1. BASIS OF PRESENTATION
The interim unaudited condensed consolidated financial statements contained herein should be read in conjunction with the audited consolidated financial statements and accompanying notes to the consolidated financial statements for the fiscal year ended September 30, 2008 included in Meta Financial Group, Inc.s (the Company) Annual Report on Form 10-K/A filed with the Securities and Exchange Commission on July 6, 2009. Accordingly, footnote disclosures, which would substantially duplicate the disclosure contained in the audited consolidated financial statements, have been omitted.
The financial information of the Company included herein has been prepared in accordance with U.S. generally accepted accounting principles for interim financial reporting and has been prepared pursuant to the rules and regulations for reporting on Form 10-Q and Rule 10-01 of Regulation S-X. Such information reflects all adjustments (consisting of normal recurring adjustments), that are, in the opinion of management, necessary for a fair presentation of the financial position and results of operations for the periods presented. The results of the interim period ended March 31, 2009, are not necessarily indicative of the results expected for the year ending September 30, 2009.
NOTE 2. DISCONTINUED BANK OPERATIONS
Sale of MetaBank West Central
On November 29, 2007, the Company entered into an agreement to sell MetaBank West Central (MetaBank WC). On March 28, 2008 the Company consummated the sale of MetaBank WC to Anita Bancorporation (Iowa). MetaBank WC had three offices in Stuart, Casey, and Menlo, Iowa and was a state chartered commercial bank whose primary federal regulator is the Federal Reserve Bank of Chicago. The transaction involved the sale of the stock of MetaBank WC for approximately $8.2 million and generated a pre-tax gain on sale of $2.3 million. The activity related to Meta Bank WC is accounted for as discontinued operations.
Activities related to discontinued bank operations have been recorded separately with prior period amounts reclassified as discontinued operations on the condensed consolidated statements of operations and cash flows. The notes to the condensed consolidated financial statements have also been adjusted to eliminate the effect of discontinued bank operations.
NOTE 3. ALLOWANCE FOR LOAN LOSSES
At March 31, 2009 the Companys allowance for loan losses was $11.2 million, an increase of $5.5 million from $5.7 million at September 30, 2008. During the six months ended March 31, 2009 the Company recorded a provision for loan losses of $12.4 million. $7.4 million related to the Companys Meta Payment Systems® (MPS) division and the start-up and completion of loan originations offered in collaboration with MPS tax preparation partner. In addition to the Companys loss provision, the contractual arrangement with this partner provides for substantial, but not full, credit loss protection mechanisms which the Company does not foresee the need to utilize during the current fiscal year due to satisfactory portfolio performance. During the six months ended March 31, 2009 the Company also recorded a provision for loan losses in the amount of $5.0 million due to two commercial borrowers, one of which the Company believes committed fraud. As disclosed in the Companys 8-K filing of October 8, 2008, a borrower of the Bank has likely participated in a fraud on the Bank
6
and other banks. Based on the Banks investigation at that time, it concluded that, as of September 30, 2008, it was appropriate to establish an allowance for loan losses of $1.8 million. After subsequent review was completed on April 20, 2009, the Bank concluded that a $1.3 million increase to the loan loss allowance was warranted, primarily due to lower collateral values caused in large part by weaker economic conditions. Potential total losses range from $2.1 million to $4.2 million with an expected loss of $3.1 million. The allowance was recorded during the three months ended March 31, 2009.
During the three months ended March 31, 2009, the Company recorded a provision for loan losses in the amount of $6.1 million primarily related to the MPS tax loan portfolio and $4.2 million related to the two commercial borrowers. The Companys total net charge-offs for the three months ended March 31, 2009 were $6.8 million. Further discussion of this change in the allowance is included in Non-performing Assets and Allowance for Loan Loss in Managements Discussion and Analysis.
7
NOTE 4. EARNINGS PER COMMON SHARE (EPS)
Basic EPS is computed by dividing income available to common shareholders (the numerator) by the weighted average number of common shares outstanding (the denominator) during the period. Shares issued during the period and shares reacquired during the period are weighted for the portion of the period that they were outstanding. Diluted EPS shows the dilutive effect of additional common shares issuable pursuant to stock option agreements.
A reconciliation of the income and common stock share amounts used in the computation of basic and diluted EPS for the three and six months ended March 31, 2009 and 2008 is presented below.
Three Months Ended March 31, |
|
2009 |
|
2008 |
|
||
(Dollars in Thousands, Except Share and Per Share Data) |
|
|
|
(As Restated) |
|
||
|
|
|
|
|
|
||
Earnings |
|
|
|
|
|
||
Income from continuing operations |
|
$ |
1,175 |
|
$ |
1,203 |
|
Discontinued operations, net of tax |
|
|
|
761 |
|
||
Net income |
|
$ |
1,175 |
|
$ |
1,964 |
|
|
|
|
|
|
|
||
Basic EPS |
|
|
|
|
|
||
Weighted average common shares outstanding |
|
2,602,655 |
|
2,595,165 |
|
||
Less weighted average unallocated ESOP and nonvested shares |
|
(5,000 |
) |
(19,334 |
) |
||
Weighted average common shares outstanding |
|
2,597,655 |
|
2,575,831 |
|
||
|
|
|
|
|
|
||
Earnings Per Common Share |
|
|
|
|
|
||
Income from continuing operations |
|
$ |
0.45 |
|
$ |
0.47 |
|
Discontinued operations, net of tax |
|
|
|
0.29 |
|
||
Net income |
|
$ |
0.45 |
|
$ |
0.76 |
|
|
|
|
|
|
|
||
Diluted EPS |
|
|
|
|
|
||
Weighted average common shares outstanding for basic earnings per common share |
|
2,597,655 |
|
2,575,831 |
|
||
Add dilutive effect of assumed exercises of stock options, net of tax benefits |
|
|
|
44,634 |
|
||
Weighted average common and dilutive potential common shares outstanding |
|
2,597,655 |
|
2,620,465 |
|
||
|
|
|
|
|
|
||
Earnings Per Common Share |
|
|
|
|
|
||
Income from continuing operations |
|
$ |
0.45 |
|
$ |
0.46 |
|
Discontinued operations, net of tax |
|
|
|
0.29 |
|
||
Net income |
|
$ |
0.45 |
|
$ |
0.75 |
|
8
Six Months Ended March 31, |
|
2009 |
|
2008 |
|
||
(Dollars in Thousands, Except Share and Per Share Data) |
|
|
|
(As Restated) |
|
||
|
|
|
|
|
|
||
Earnings |
|
|
|
|
|
||
Income from continuing operations |
|
$ |
1,848 |
|
$ |
413 |
|
Discontinued operations, net of tax |
|
|
|
811 |
|
||
Net income |
|
$ |
1,848 |
|
$ |
1,224 |
|
|
|
|
|
|
|
||
Basic EPS |
|
|
|
|
|
||
Weighted average common shares outstanding |
|
2,602,655 |
|
2,593,860 |
|
||
Less weighted average unallocated ESOP and nonvested shares |
|
(5,000 |
) |
(19,758 |
) |
||
Weighted average common shares outstanding |
|
2,597,655 |
|
2,574,102 |
|
||
|
|
|
|
|
|
||
Earnings Per Common Share |
|
|
|
|
|
||
Income from continuing operations |
|
$ |
0.71 |
|
$ |
0.16 |
|
Discontinued operations, net of tax |
|
|
|
0.31 |
|
||
Net income |
|
$ |
0.71 |
|
$ |
0.47 |
|
|
|
|
|
|
|
||
Diluted EPS |
|
|
|
|
|
||
Weighted average common shares outstanding for basic earnings per common share |
|
2,597,655 |
|
2,574,102 |
|
||
Add dilutive effect of assumed exercises of stock options, net of tax benefits |
|
|
|
64,231 |
|
||
Weighted average common and dilutive potential common shares outstanding |
|
2,597,655 |
|
2,638,333 |
|
||
|
|
|
|
|
|
||
Earnings Per Common Share |
|
|
|
|
|
||
Income from continuing operations |
|
$ |
0.71 |
|
$ |
0.16 |
|
Discontinued operations, net of tax |
|
|
|
0.31 |
|
||
Net income |
|
$ |
0.71 |
|
$ |
0.47 |
|
Stock options totaling 34,395 and 39,933 were not considered in computing diluted EPS for the three and six months ended March 31, 2009, respectively, because they were not dilutive. Stock options totaling 125,018 were not considered in computing diluted EPS for the three months ended March 31, 2008 because they were not dilutive. Stock options totaling 111,018 and 6,000 were not considered in computing diluted EPS for the six months ended March 31, 2008 and 2007, respectively, because they were not dilutive.
9
NOTE 5. COMMITMENTS AND CONTINGENCIES
At March 31, 2009 and September 30, 2008, the Company had outstanding commitments to originate and purchase loans totaling $52.3 million and $64.2 million, respectively. It is expected that outstanding loan commitments will be funded with existing liquid assets. At March 31, 2009, the Company had no commitments to purchase or sell securities available for sale.
Legal Proceedings
First Federal Bank Littlefield Texas ssb, formerly known as First Federal Savings and Loan Association, Littlefield, Texas v. MetaBank, formerly known as First Federal Savings Bank of the Midwest, filed in the 154th Judicial District Court of Lamb County (Cause No. 17435); The Frost National Bank v. MetaBank and Meta Financial Group, Inc., filed in the United States District Court for the Northern District of Texas (Cause No. 3:08-CV-625-M). On April 3, 2008, First Federal Bank filed suit against MetaBank in Texas State Court in Lubbock seeking recovery of a purported MetaBank certificate of deposit (CD) that it claims it purchased. On April 11, 2008, Frost National Bank filed suit against MetaBank in the United States District Court for the District of Texas seeking a similar recovery. However, this suit has since been dismissed without prejudice. On June 25, 2008, an action was filed in the 95th Judicial District Court for Dallas County, Texas entitled Methodist Hospitals of Dallas v MetaBank and Meta Financial Group seeking recovery of a purported MetaBank CD purchased in May, 2001. Additionally, on July 14, 2008, a class action complaint was filed in the United States District Court for the District of New Hampshire entitled Guardian Angel Credit Union v MetaBank (Cause No. 08-CV-261-PB) and was filed on behalf of Guardian Angel Credit Union and all other CD purchasers similarly situated, to recover funds in connection with purported MetaBank CDs. Further, on November 18, 2008, Coreplus Federal Credit Union (Cause No. 3.08 cv 1763 AVC) filed a civil action in the Superior Court for New London County in the state of Connecticut seeking recovery of funds connected to a purported MetaBank CD. Since the last filing, a subrogation action has been filed in the U.S. District Court, Northern District of Illinois, entitled St. Paul Mercury Insurance Company, as assignee and subrogee of Lemont National Bank v- MetaBank, individually and as successor in interest to First Federal Savings Bank of the Midwest, (Case 1:09-cv-01031). In addition, the matter of Hamilton Federal Credit Union-v- MetaBank, (CV 09 1059) has been filed in the U.S. District Court for the Northern District of California. Recently, a related action was filed in the District Court, 7th Judicial District, State of Idaho, East Idaho Credit Union v- MetaBank (CV -2008-0007801). These cases arose after MetaBank was contacted by another institution, but could find no record of the CD it had allegedly purchased, and commenced an investigation. As a result of that investigation, it appears that a former MetaBank employee had been selling fraudulent CDs, using MetaBanks name and a form of CD, to various financial institutions through an independent broker and instructing purchasers to wire the purchase money into one of a number of false accounts she had created at MetaBank. The Bank has received a number of demands from purchasers of these fraudulent CDs in addition to the lawsuits listed above. All evidence currently available indicates that the former employee ran this fraud for her own benefit and regularly took money from the MetaBank accounts to which the purchase monies had been wired. As a result of the interruption of this fraud, there are some $4.2 million of bogus CDs still outstanding to various financial institutions. As the former employee was apparently using the funds of new victims to pay off the previous victims of her scheme, it does not appear at this time that she stole any Bank money as part of this fraud. MetaBank therefore does not appear at this time to have suffered any direct loss as a result of the fraud, but it may suffer a loss to the extent it is exposed to liability for claims such as these. There are unresolved questions as whether, under what theory and to what degree the Bank might be liable for the former employees actions. At this time, MetaBanks insurer has agreed to provide a defense to the litigation filed under a reservation of rights.
Other than the matters set forth above, there are no other material pending legal proceedings to which the Company or its subsidiaries is a party other than ordinary routine litigation to their respective businesses.
10
NOTE 6. STOCK OPTION PLAN
The Company maintains the 2002 Omnibus Incentive Plan, which, among other things, provides for the awarding of stock options and nonvested (restricted) shares to certain officers and directors of the Company. Awards are granted by the Stock Option Committee of the Board of Directors based on the performance of the award recipients or other relevant factors.
In accordance with SFAS No. 123(R), compensation expense for share based awards is recorded over the vesting period at the fair value of the award at the time of grant. The exercise price of options or fair value of nonvested shares granted under the Companys incentive plans is equal to the fair market value of the underlying stock at the grant date. The Company assumes no projected forfeitures on its stock based compensation, since actual historical forfeiture rates on its stock based incentive awards has been negligible.
A summary of option activity for the six months ended March 31, 2009 is presented below:
|
|
|
|
|
|
Weighted |
|
|
|
||
|
|
|
|
Weighted |
|
Average |
|
|
|
||
|
|
Number |
|
Average |
|
Remaining |
|
Aggregate |
|
||
|
|
of |
|
Exercise |
|
Contractual |
|
Intrinsic |
|
||
|
|
shares |
|
Price |
|
Term (Yrs) |
|
Value |
|
||
|
|
(Dollars in Thousands, Except Share and Per Share Data) |
|
||||||||
|
|
|
|
|
|
|
|
|
|
||
Options outstanding, September 30, 2008 |
|
514,328 |
|
$ |
23.85 |
|
7.53 |
|
$ |
329 |
|
Granted |
|
23,000 |
|
14.77 |
|
|
|
|
|
||
Exercised |
|
|
|
|
|
|
|
|
|
||
Forfeited or expired |
|
(500 |
) |
22.05 |
|
|
|
|
|
||
Options outstanding, March 31, 2009 |
|
536,828 |
|
$ |
23.46 |
|
7.14 |
|
$ |
58 |
|
|
|
|
|
|
|
|
|
|
|
||
Options exercisable, March 31, 2009 |
|
409,970 |
|
$ |
22.23 |
|
6.98 |
|
$ |
1 |
|
A summary of nonvested share activity for the six months ended March 31, 2009 is presented below:
|
|
Number |
|
Weighted |
|
|
|
|
|
|
|||
|
|
|
|
|||
|
|
|
|
|||
|
|
(Dollars in Thousands, Except Share and Per Share Data) |
|
|||
|
|
|
|
|
|
|
Nonvested shares outstanding, September 30, 2008 |
|
12,500 |
|
$ |
32.93 |
|
Granted |
|
5,200 |
|
16.00 |
|
|
Vested |
|
(5,200 |
) |
16.00 |
|
|
Forfeited or expired |
|
|
|
|
|
|
Nonvested shares outstanding, March 31, 2009 |
|
12,500 |
|
$ |
32.93 |
|
As of March 31, 2009, stock based compensation expense not yet recognized in income totaled $474,100 which is expected to be recognized over a weighted average remaining period of 1.01 years.
11
NOTE 7. SEGMENT INFORMATION
An operating segment is generally defined as a component of a business for which discrete financial information is available and whose results are reviewed by the chief operating decision-maker. Operating segments are aggregated into reportable segments if certain criteria are met. The Company has determined that it has two reportable segments. The first reportable segment, Traditional Banking, consists of its banking subsidiary, MetaBank. MetaBank operates as a traditional community bank providing deposit, loan and other related products to individuals and small businesses, primarily in the communities where their offices are located. The second reportable segment, Meta Payment Systems® (MPS), is a division of MetaBank. MPS provides a number of products and services, to financial institutions and other businesses. These products and services include issuance of prepaid debit cards, sponsorship of ATMs into the debit networks, credit programs, ACH origination services, gift card programs, rebate programs, travel programs and tax related programs. Other programs are in the process of development. The remaining grouping under the caption All Others consists of the operations of Meta Financial Group, Inc. and Meta Trust Company® and inter-segment eliminations. MetaBank WC is accounted for as discontinued bank operations. It is reported as part of the traditional banking segment and has been separately classified to show the effect of continuing operations. Transactions between affiliates, the resulting revenues of which are shown in the intersegment revenue category, are conducted at market prices, meaning prices that would be paid if the companies were not affiliates. The following tables present segment data for the Company for the three and six months ended March 31, 2009 and 2008, respectively.
|
|
Traditional |
|
Meta Payment |
|
|
|
|
|
||||
|
|
Banking(1) |
|
Systems® |
|
All Others |
|
Total |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
Three Months Ended March 31, 2009 (As Restated) |
|
|
|
|
|
|
|
|
|
||||
Interest income |
|
$ |
7,126 |
|
$ |
3,378 |
|
$ |
29 |
|
$ |
10,533 |
|
Interest expense |
|
1,864 |
|
271 |
|
154 |
|
2,289 |
|
||||
Net interest income (loss) |
|
5,262 |
|
3,107 |
|
(125 |
) |
8,244 |
|
||||
Provision for loan losses |
|
4,173 |
|
6,097 |
|
|
|
10,270 |
|
||||
Non-interest income |
|
584 |
|
33,009 |
|
18 |
|
33,611 |
|
||||
Non-interest expense |
|
4,781 |
|
24,455 |
|
414 |
|
29,650 |
|
||||
Income (loss) from continuing operations before tax |
|
(3,108 |
) |
5,564 |
|
(521 |
) |
1,935 |
|
||||
Income tax expense (benefit) |
|
(1,167 |
) |
2,092 |
|
(165 |
) |
760 |
|
||||
Income (loss) from continuing operations |
|
$ |
(1,941 |
) |
$ |
3,472 |
|
$ |
(356 |
) |
$ |
1,175 |
|
|
|
|
|
|
|
|
|
|
|
||||
Inter-segment revenue (expense) |
|
$ |
2,203 |
|
$ |
(2,203 |
) |
$ |
|
|
$ |
|
|
Total assets |
|
384,175 |
|
504,704 |
|
768 |
|
$ |
889,647 |
|
|||
Total deposits |
|
220,535 |
|
466,487 |
|
(380 |
) |
$ |
686,642 |
|
(1) For the three months ended March 31, 2009 there was no information to report on MetaBank WC.
12
|
|
Traditional |
|
Meta Payment |
|
|
|
|
|
||||
|
|
Banking(1) |
|
Systems® |
|
All Others |
|
Total |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
Three Months Ended March 31, 2008 (As Restated) |
|
|
|
|
|
|
|
|
|
||||
Interest income |
|
$ |
5,792 |
|
$ |
3,698 |
|
$ |
405 |
|
$ |
9,895 |
|
Interest expense |
|
2,723 |
|
472 |
|
484 |
|
3,679 |
|
||||
Net interest income (loss) |
|
3,069 |
|
3,226 |
|
(79 |
) |
6,216 |
|
||||
Provision for loan losses |
|
200 |
|
|
|
|
|
200 |
|
||||
Non-interest income |
|
693 |
|
11,528 |
|
64 |
|
12,285 |
|
||||
Non-interest expense |
|
4,449 |
|
11,588 |
|
318 |
|
16,355 |
|
||||
Income (loss) from continuing operations before tax |
|
(887 |
) |
3,166 |
|
(333 |
) |
1,946 |
|
||||
Income tax expense (benefit) |
|
(157 |
) |
1,009 |
|
(109 |
) |
743 |
|
||||
Income (loss) from continuing operations |
|
$ |
(730 |
) |
$ |
2,157 |
|
$ |
(224 |
) |
$ |
1,203 |
|
|
|
|
|
|
|
|
|
|
|
||||
Inter-segment revenue (expense) |
|
$ |
1,448 |
|
$ |
(1,448 |
) |
$ |
|
|
$ |
|
|
Total assets |
|
457,923 |
|
349,610 |
|
2,150 |
|
809,683 |
|
||||
Total deposits |
|
258,721 |
|
335,202 |
|
|
|
593,923 |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
|
|
West Central |
|
|
|
|
|
|
|
||||
Three Months Ended March 31, 2008 (As Restated) |
|
|
|
|
|
|
|
|
|
|
|||
Net interest income |
|
$ |
91 |
|
|
|
|
|
|
|
|||
Provision for loan losses |
|
(21 |
) |
|
|
|
|
|
|
||||
Non-interest income |
|
2,346 |
|
|
|
|
|
|
|
||||
Non-interest expense |
|
145 |
|
|
|
|
|
|
|
||||
Income from discontinued operations before tax |
|
2,313 |
|
|
|
|
|
|
|
||||
Income tax expense |
|
1,552 |
|
|
|
|
|
|
|
||||
Income from discontinued operations |
|
$ |
761 |
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
||||
Inter-segment revenue |
|
$ |
83 |
|
|
|
|
|
|
|
|||
Total assets |
|
|
|
|
|
|
|
|
|
||||
Total deposits |
|
|
|
|
|
|
|
|
|
|
|
Traditional |
|
Meta Payment |
|
|
|
|
|
||||
|
|
Banking(1) |
|
Systems® |
|
All Others |
|
Total |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
Six Months Ended March 31, 2009 (As Restated) |
|
|
|
|
|
|
|
|
|
||||
Interest income |
|
$ |
12,997 |
|
$ |
6,205 |
|
$ |
58 |
|
$ |
19,260 |
|
Interest expense |
|
3,887 |
|
630 |
|
338 |
|
4,855 |
|
||||
Net interest income (loss) |
|
9,110 |
|
5,575 |
|
(280 |
) |
14,405 |
|
||||
Provision for loan losses |
|
5,023 |
|
7,376 |
|
|
|
12,399 |
|
||||
Non-interest income |
|
972 |
|
48,133 |
|
41 |
|
49,146 |
|
||||
Non-interest expense |
|
9,649 |
|
37,866 |
|
687 |
|
48,202 |
|
||||
Income (loss) from continuing operations before tax |
|
(4,590 |
) |
8,466 |
|
(926 |
) |
2,950 |
|
||||
Income tax expense (benefit) |
|
(1,696 |
) |
3,122 |
|
(324 |
) |
1,102 |
|
||||
Income (loss) from continuing operations |
|
$ |
(2,894 |
) |
$ |
5,344 |
|
$ |
(602 |
) |
$ |
1,848 |
|
|
|
|
|
|
|
|
|
|
|
||||
Inter-segment revenue (expense) |
|
$ |
4,076 |
|
$ |
(4,076 |
) |
$ |
|
|
$ |
|
|
Total assets |
|
384,175 |
|
504,704 |
|
768 |
|
889,647 |
|
||||
Total deposits |
|
220,535 |
|
466,487 |
|
(380 |
) |
686,642 |
|
(1) For the six months ended March 31, 2009 there was no information to report on MetaBank WC.
13
|
|
Traditional |
|
Meta Payment |
|
|
|
|
|
||||
|
|
Banking |
|
Systems® |
|
All Others |
|
Total |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
Six Months Ended March 31, 2008 (As Restated) |
|
|
|
|
|
|
|
|
|
||||
Interest income |
|
$ |
11,260 |
|
$ |
6,892 |
|
$ |
642 |
|
$ |
18,794 |
|
Interest expense |
|
5,748 |
|
615 |
|
941 |
|
7,304 |
|
||||
Net interest income (loss) |
|
5,512 |
|
6,277 |
|
(299 |
) |
11,490 |
|
||||
Provision for loan losses |
|
70 |
|
|
|
|
|
70 |
|
||||
Non-interest income |
|
1,276 |
|
17,038 |
|
101 |
|
18,415 |
|
||||
Non-interest expense |
|
8,604 |
|
20,116 |
|
421 |
|
29,141 |
|
||||
Income (loss) from continuing operations before tax |
|
(1,886 |
) |
3,199 |
|
(619 |
) |
694 |
|
||||
Income tax expense (benefit) |
|
(631 |
) |
1,119 |
|
(207 |
) |
281 |
|
||||
Income (loss) from continuing operations |
|
$ |
(1,255 |
) |
$ |
2,080 |
|
$ |
(412 |
) |
$ |
413 |
|
|
|
|
|
|
|
|
|
|
|
||||
Inter-segment revenue (expense) |
|
$ |
2,671 |
|
$ |
(2,671 |
) |
$ |
|
|
$ |
|
|
Total assets |
|
457,923 |
|
349,610 |
|
2,150 |
|
$ |
809,683 |
|
|||
Total deposits |
|
258,721 |
|
335,202 |
|
|
|
$ |
593,923 |
|
|||
|
|
|
|
|
|
|
|
|
|
||||
|
|
West Central |
|
|
|
|
|
|
|
||||
Six Months Ended March 31, 2008 (As Restated) |
|
|
|
|
|
|
|
|
|
|
|||
Net interest income |
|
$ |
262 |
|
|
|
|
|
|
|
|||
Provision for loan losses |
|
(57 |
) |
|
|
|
|
|
|
||||
Non-interest income, including gain on sale |
|
2,440 |
|
|
|
|
|
|
|
||||
Non-interest expense |
|
374 |
|
|
|
|
|
|
|
||||
Income from discontinued operations before tax |
|
2,385 |
|
|
|
|
|
|
|
||||
Income tax expense |
|
1,574 |
|
|
|
|
|
|
|
||||
Income from discontinued operations |
|
$ |
811 |
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
||||
Inter-segment revenue (expense) |
|
$ |
175 |
|
|
|
|
|
|
|
|||
Total assets |
|
|
|
|
|
|
|
|
|
||||
Total deposits |
|
|
|
|
|
|
|
|
|
14
NOTE 8. NEW ACCOUNTING PRONOUNCEMENTS
In June 2006 the FASB issued FASB Interpretation No. 48, (FIN No. 48), Accounting for Uncertainty in Income Taxes, an Interpretation of Statement No. 109, Accounting for Income Taxes. FIN No. 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN No. 48 was effective for the Company on October 1, 2007. As a result of the adoption and implementation of FIN No. 48, the Company determined that no liability for unrecognized tax benefits existed at October 1, 2007. There have been no changes to this amount since adoption.
At its September 2006 meeting, the Emerging Issues Task Force (EITF) reached a final consensus on Issue No. 06-04, Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar Life Insurance Arrangements. The consensus stipulates that an agreement by an employer to share a portion of the proceeds of a life insurance policy with an employee during the postretirement period is a postretirement benefit arrangement required to be accounted for under Statement No. 106 (SFAS No. 106) or Accounting Principles Board (APB) Opinion No. 12, Omnibus Opinion - 1967. The consensus concludes that the purchase of a split-dollar life insurance policy does not constitute a settlement under SFAS No. 106 and, therefore, a liability for the postretirement obligation must be recognized under SFAS No. 106 if the benefit is offered under an arrangement that constitutes a plan or under APB No. 12 if it is not part of a plan. The Company implemented Issue No. 06-04 beginning October 1, 2008 with no impact on the Companys financial position, results of operation or cash flows.
In September 2006, the FASB issued Statement No. 157, (SFAS No. 157), Fair Value Measurements. SFAS No. 157 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. It clarifies that fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the market in which the reporting entity transacts. SFAS No. 157 does not require any new fair value measurements, but rather, it provides enhanced guidance to other pronouncements that require or permit assets or liabilities to be measured at fair value. The Company adopted SFAS No. 157 beginning October 1, 2008 with no material impact on the Companys financial position, results of operation or cash flows.
In February 2007, the FASB issued FASB Statement No. 159, The Fair Value Option for Financial Assets and Financial Liabilities Including an Amendment of FASB Statement No. 115 (SFAS No. 159). SFAS No. 159 permits companies to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value. The objective of SFAS No. 159 is to provide opportunities to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply hedge accounting principles. SFAS No. 159 also establishes presentation and disclosure requirements designed to facilitate comparisons between companies that choose different measurement attributes for similar types of assets and liabilities. The Company adopted SFAS No. 159 beginning October 1, 2008 with no material impact on the Companys financial position, results of operation or cash flows.
At its March 2007 meeting, the EITF reached a final consensus on Issue No. 06-10, Accounting for Collateral Assignment Split-Dollar Life Insurance Arrangements. A consensus was reached that an employer should recognize a liability for the postretirement benefit related to a collateral assignment split-dollar life insurance arrangement in accordance with either FASB Statement No. 106 or APB Opinion No. 12, as appropriate, if the employer has agreed to maintain a life insurance policy during the employees retirement or provide the employee with a death benefit based on the substantive agreement with the employee. A consensus also was reached that an employer should recognize and measure an asset based on the nature and substance of the collateral assignment split-dollar life insurance arrangement. The consensuses are effective for the Company beginning October 1, 2008, including interim periods within those fiscal years, with early application permitted. Implementation of Issue No. 06-10 did not have an impact on the Companys financial position, results of operation or cash flows.
15
In December 2007, the FASB issued FASB Statement No. 141R, Business Combinations (SFAS No. 141R). SFAS No. 141R improves reporting by creating greater consistency in the accounting and financial reporting of business combinations, resulting in more complete, comparable, and relevant information for investors and other users of financial statements. SFAS No. 141R is effective October 1, 2009. The Company is currently evaluating the impact that the Statement will have on its consolidated financial statements.
In December 2007, the FASB issued FASB Statement No. 160, Noncontrolling Interests in Consolidated Financial Statementsan amendment of ARB No. 51 (SFAS No. 160) which is effective for the Company beginning October 1, 2009. SFAS 160 improves the relevance, comparability, and transparency of financial information provided to investors by requiring all entities to report noncontrolling (minority) interest in subsidiaries in the same wayas equity in the consolidated financial statements. The Company does not currently have any noncontrolling interest in the consolidated financial statements.
In March 2008, the FASB issued FASB Statement No. 161, Disclosures about Derivative Instruments and Hedging Activities (SFAS No. 161). SFAS No. 161 is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entitys financial position, financial performance, and cash flows. The Company adopted SFAS 161 effective January 1, 2009. The adoption of SFAS 161 did not have a significant effect on the Companys consolidated financial statements.
In May 2008, the FASB issued FASB Statement No. 162, The Hierarchy of Generally Accepted Accounting Principles (SFAS No. 162). SFAS No. 162 makes the hierarchy explicitly and directly applicable to preparers of financial statements, a step that recognizes preparers responsibilities for selecting the accounting principles for their financial statements. SFAS No. 162 provides for slight modifications to the current hierarchy in place by adding FASB Staff Positions, Statement No. 133 Implementation Issues and EITF D-Topics to it. The Company adopted SFAS No. 162 effective November 15, 2008.
In April 2009, the FASB issued FASB Staff Position FAS 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly (FSP FAS 157-4). FSP FAS 175-4 provides additional guidance for estimating fair value in accordance with SFAS No. 157, when the volume and level of activity for the asset or liability have significantly decreased. FSP FAS 157-4 also provides guidance on identifying circumstances that indicate a transaction is not orderly. FSP FAS 157-4 is effective for financial statements issued after June 15, 2009. The adoption of FSP FAS 157-4 will not have a significant effect on the Companys consolidated financial statements.
In April 2009, the FASB issued FASB Staff Position FAS 115-2 and FAS 124-2, Recognition and Presentation of Other-Than-Temporary Impairments (FSP FAS 115-2 and FAS 124-2). FSP FAS 115-2 and FAS 124-2 amends the other-than-temporary impairment guidance in U.S. GAAP for debt securities to make the guidance more operational and to improve the presentation and disclosure of other-than-temporary impairments on debt and equity securities in the financial statements. FSP FAS 115-2 and FAS 124-2 does not amend existing recognition and measurement guidance related to other-than-temporary impairment of equity securities. FSP FAS 115-2 and FAS 124-2 is effective for financial statements issued after June 15, 2009. The adoption of FSP FAS 115-2 and FAS 124-2 will not have a significant effect on the Companys consolidated financial statements.
In April 2009, the FASB issued FASB Staff Position FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial Instruments (FSP FAS 107-1 and APB 28-1). FSP FAS 107-1 and APB 28-1 amends FASB Statement No. 107, Disclosures about Fair Value of Financial Instruments, to require disclosures about fair value of financial instruments for interim reporting periods of publicly traded companies as well as in annual financial statements. FSP FAS 107-1 and APB 28-1 also amends APB Opinion No. 28, Interim Financial Reporting, to require those disclosures in summarized financial information at interim reporting periods. FSP FAS 107-1 and
16
APB 28-1 is effective for financial statements issued after June 15, 2009. The adoption of FSP FAS 107-1 and APB 28-1 will not have a significant effect on the Companys consolidated financial statements.
NOTE 9. FAIR VALUE MEASUREMENTS
Effective October 1, 2008, the Company adopted the provisions of SFAS No. 157, Fair Value Measurements. SFAS No. 157 defines fair value, establishes a framework for measuring the fair value of assets and liabilities using a hierarchy system and expands disclosures about fair value measurement. It clarifies that fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the market in which the reporting entity transacts.
The fair value hierarchy is as follows:
Level 1 Inputs Valuation is based upon quoted prices for identical instruments traded in active markets that the Company has the ability to access at measurement date.
Level 2 Inputs Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in active markets that are not active and model-based valuation techniques for which significant assumptions are observable in the market.
Level 3 Inputs Valuation is generated from model-based techniques that use significant assumptions not observable in the market and are used only to the extent that observable inputs are not available. These unobservable assumptions reflect the Companys own estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include use of option pricing models, discounted cash flow models and similar techniques.
A description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below. These valuation methodologies were applied to all of the Companys financial assets and liabilities carried at fair value effective October 1, 2008.
Securities Available for Sale. Securities available for sale are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted prices, if available. If quoted prices are not available, fair values are measured using an independent pricing service. Level 1 securities include those traded on an active exchange, such as the New York Stock Exchange, as well as U.S. Treasury and other U.S. government and agency securities that are traded by dealers or brokers in active over-the-counter markets. The Company had no Level 1 securities at March 31, 2009. Level 2 securities include agency mortgage-backed securities and private collateralized mortgage obligations, municipal bonds and corporate debt securities.
17
The following table summarizes the assets of the Company for which fair values are determined on a recurring basis as of March 31, 2009.
|
|
Fair Value at March 31, 2009 |
|
|||||||||
(Dollars in Thousands) |
|
Total |
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Securities available for sale |
|
335,539 |
|
$ |
|
|
$ |
335,539 |
|
$ |
|
|