Table of ~~Presentation for further discussion on the current presentation.~~Contents

NOTE 1. BASIS OF PRESENTATION

The interim unaudited Condensed Consolidated Financial Statements contained herein should be read in conjunction with the audited consolidated financial statements and accompanying notes to the consolidated financial statements for the fiscal year ended September 30, ~~2017~~2021 included in ~~Meta~~Pathward Financial, ~~Group,~~ Inc.’s (“~~Meta Financial”~~Pathward” or the “Company”) Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on November ~~29, 2017.~~23, 2021. Accordingly, footnote disclosures which would substantially duplicate the disclosures contained in the audited consolidated financial statements have been omitted.

The financial information of the Company included herein has been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial reporting and has been prepared pursuant to the rules and regulations for reporting on Form 10-Q and Rule 10-01 of Regulation S-X. Such information reflects all adjustments (consisting of normal recurring adjustments), that are, in the opinion of management, necessary for a fair presentation of the financial position and results of operations for the periods presented. The results of the three ~~month period~~and nine months ended ~~December 31, 2017~~June 30, 2022 are not necessarily indicative of the results expected for the fiscal year ending September 30, ~~2018.~~2022.

~~In fiscal 2017,~~Certain prior year amounts have been reclassified to conform to the ~~Company early adopted Accounting Standards Update~~current year financial statement presentation. These changes and reclassifications did not impact previously reported net income or comprehensive income.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RECENTLY ADOPTED ACCOUNTING STANDARDS UPDATES ("ASU") ~~2016-09,~~ ~~"Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting."~~ ~~The requirement to report~~

Significant accounting policies in effect and disclosed within the excess tax benefit related to settlements of share-based payment awards in earnings as an increase or (decrease) to income tax expense has been applied utilizing the prospective method. While the adoption of ASU 2016-09 requires retrospective application to all fiscal year periods presented, the Company elected to not recast previously reportedCompany’s most recent audited consolidated financial statements as ~~the impact was considered insignificant. However,~~of September 30, 2021 remain substantially unchanged. The following ASUs became effective for the Company ~~reclassified stock compensation from financing to operating activities~~on October 1, 2021, none of which had a material impact on the Company’s significant accounting policies or Condensed Consolidated ~~Statement~~Financial Statements:

–ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.

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

–ASU 2020-10, Codification Improvements.

NOTE 3. SIGNIFICANT EVENTS

Rebranding

On December 7, 2021, the Company executed a Purchase Agreement (the “Agreement”) with Beige Key, LLC (the “Assignee”) for the sale of ~~Cash Flows~~all of the Company’s worldwide right, title and interest in and to company names and tradenames including Meta and other "Meta" formative names including MetaBank and Meta Financial Group, and the domain names, social media accounts and goodwill associated with the foregoing (collectively, the “Meta” tradenames) in exchange for $60.0 million in cash. Subject to the terms and conditions set forth in the Agreement, the Company has one year from the Agreement execution date to phase out and cease all use of the Meta tradenames. From the date of the Agreement until the date such phase out is completed (the “Phase Out Period”), Assignee has granted the Company a non-exclusive royalty free license in the United States and Canada to use the Meta tradenames in the manner in which they were used by the Company prior to the Agreement.

The Company received $50.0 million upon execution and delivery of the Agreement, at which time the Meta tradenames were assigned to the Assignee. The Company has recognized the $50.0 million as noninterest income during the period ended December 31, 2021. The remaining $10.0 million was paid by the Assignee and is being held in an escrow account by a third-party agent until the agreed upon activities within the Phase Out Period have been completed, at which time the funds will be released to the Company. The Company’s receipt of the $10.0 million payment is contingent upon phase out activities that have not yet been completed and has not been recognized in the Company’s consolidated financial statements for the fiscal quarter ended June 30, 2022.

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On July 13, 2022, the Company announced it changed its name to Pathward Financial, Inc.™, and its bank subsidiary MetaBank®, N.A. changed to Pathward™, N.A. ("Pathward"). Certain changes will be made immediately, with a full transition to Pathward expected by the end of this calendar year, including the launch of a new brand identity and website.

The Company recognized $3.4 million and $6.2 million of noninterest expense related to rebranding efforts during the three and nine months ended June 30, 2022, respectively.

NOTE 4. SECURITIES

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


	Debt Securities AFS
(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized (Losses)		Fair Value
At June 30, 2022
Corporate securities	$	25,000	$	—	$	(1,562)	$	23,438
SBA securities	84,506		247		(3,404)		81,349
Obligations of states and political subdivisions	2,726		—		(85)		2,641
Non-bank qualified obligations of states and political subdivisions	260,069		29		(15,137)		244,961
Asset-backed securities	171,623		—		(12,291)		159,332
Mortgage-backed securities	1,587,992		655		(143,845)		1,444,802
Total debt securities AFS	$	2,131,916	$	931	$	(176,324)	$	1,956,523
At September 30, 2021
Corporate securities	$	25,000	$	—	$	—	$	25,000
SBA securities	151,958		5,251		—		157,209
Obligations of states and political subdivisions	2,497		10		—		2,507
Non-bank qualified obligations of states and political subdivisions	266,048		3,347		(1,100)		268,295
Asset-backed securities	393,103		3,003		(1,247)		394,859
Mortgage-backed securities	1,016,478		9,728		(9,177)		1,017,029
Total debt securities AFS	$	1,855,084	$	21,339	$	(11,524)	$	1,864,899


	Debt Securities HTM
(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized (Losses)		Fair Value
At June 30, 2022
Non-bank qualified obligations of states and political subdivisions	$	41,122	$	—	$	(1,765)	$	39,357
Mortgage-backed securities	2,755		—		(149)		2,606
Total debt securities HTM	$	43,877	$	—	$	(1,914)	$	41,963
At September 30, 2021
Non-bank qualified obligations of states and political subdivisions	$	52,944	$	103	$	(471)	$	52,576
Mortgage-backed securities	3,725		90		—		3,815
Total debt securities HTM	$	56,669	$	193	$	(471)	$	56,391

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


	LESS THAN 12 MONTHS				OVER 12 MONTHS				TOTAL
(Dollars in thousands)	Fair Value		Gross Unrealized (Losses)		Fair Value		Gross Unrealized (Losses)		Fair Value		Gross Unrealized (Losses)
Debt Securities AFS
At June 30, 2022
Corporate securities	$	23,438	$	(1,562)	$	—	$	—	$	23,438	$	(1,562)
SBA securities	73,758		(3,404)		—		—		73,758		(3,404)
Obligations of state and political subdivisions	2,401		(85)		—		—		2,401		(85)
Non-bank qualified obligations of states and political subdivisions	237,769		(14,823)		3,414		(314)		241,183		(15,137)
Asset-backed securities	96,852		(6,435)		62,481		(5,856)		159,333		(12,291)
Mortgage-backed securities	1,033,772		(111,839)		227,715		(32,006)		1,261,487		(143,845)
Total debt securities AFS	$	1,467,990	$	(138,148)	$	293,610	$	(38,176)	$	1,761,600	$	(176,324)
At September 30, 2021


Non-bank qualified obligations of states and political subdivisions	$	101,046	$	(1,100)	$	—	$	—	$	101,046	$	(1,100)
Asset-backed securities	127,110		(283)		91,553		(964)		218,663		(1,247)
Mortgage-backed securities	759,035		(7,418)		60,792		(1,759)		819,827		(9,177)
Total debt securities AFS	$	987,191	$	(8,801)	$	152,345	$	(2,723)	$	1,139,536	$	(11,524)

Debt Securities HTM
At June 30, 2022
Non-bank qualified obligations of states and political subdivisions	$	35,121	$	(1,530)	$	4,236	$	(235)	$	39,357	$	(1,765)
Mortgage-backed securities	2,607		(149)		—		—		2,607		(149)
Total debt securities HTM	$	37,728	$	(1,679)	$	4,236	$	(235)	$	41,964	$	(1,914)
At September 30, 2021
Non-bank qualified obligations of states and political subdivisions	$	26,096	$	(471)	$	—	$	—	$	26,096	$	(471)

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

At June 30, 2022, there were 166 securities AFS in an unrealized loss position. Management assessed each investment security with unrealized losses for credit loss and determined substantially all unrealized losses on these securities were due to credit spreads and interest rates versus credit loss. As part of that assessment, management evaluated and concluded that it is more-likely-than-not that the Company will not be required and does not intend to sell any of the securities prior to recovery of the amortized cost. At June 30, 2022, there was no ACL for debt securities AFS.

The amortized cost and fair value of debt securities by contractual maturity are shown below. Certain securities have call features that allow the issuer to call the security prior to maturity. Expected maturities may differ from contractual maturities in mortgage-backed securities ("MBS") because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Therefore, MBS are not included in the maturity categories in the following maturity summary. The expected maturities of certain SBA securities may differ from contractual maturities because the borrowers may have the right to prepay the obligation. However, certain prepayment penalties may apply.

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(Dollars in thousands)	At June 30, 2022				At September 30, 2021
Securities AFS at Fair Value	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in one year or less	$	950	$	955	$	810	$	822
Due after one year through five years	10,797		10,489		13,026		13,378
Due after five years through ten years	68,339		63,705		50,785		52,357
Due after ten years	463,838		436,572		773,985		781,313
	543,924		511,721		838,606		847,870
Mortgage-backed securities	1,587,992		1,444,802		1,016,478		1,017,029
Total securities AFS, at fair value	$	2,131,916	$	1,956,523	$	1,855,084	$	1,864,899


	At June 30, 2022				At September 30, 2021
(Dollars in thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Securities HTM at Fair Value



Due after ten years	$	41,122	$	39,357	$	52,944	$	52,576
	41,122		39,357		52,944		52,576
Mortgage-backed securities	2,755		2,606		3,725		3,815
Total securities HTM, at cost	$	43,877	$	41,963	$	56,669	$	56,391

Equity Securities

The Company held $3.1 million at June 30, 2022 and $12.7 million at September 30, 2021 in marketable equity securities. The Company recognized $3.8 million and none in unrealized loss on marketable equity securities during the nine months ended June 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 nine months ended June 30, 2022 and 2021. There was one marketable security sold during the nine months ended June 30, 2022 for a $0.3 million gain.

Non-marketable equity securities with a readily determinable fair value totaled $6.5 million at June 30, 2022 and $4.6 million at September 30, 2021. The Company recognized $0.6 million in unrealized gains and $0.4 million in unrealized gainsduring the nine months ended June 30, 2022 and 2021, respectively. No such securities were sold during the nine months ended June 30, 2022.

Non-marketable equity securities without readily determinable fair value totaled $20.7 million at June 30, 2022 and $16.0 million at September 30, 2021. There were three securities sold during the nine months ended June 30, 2022 for a $0.2 million gain.

FRB Stock

The Bank is required by federal law to subscribe to capital stock (divided into shares of $100 each) as a member of the FRB of Minneapolis with an amount equal to six per centum of the paid-up capital stock and surplus. One-half of the subscription is paid at time of application, and one-half is subject to call of the Board of Governors of the Federal Reserve System. FRB of Minneapolis stock held by the Bank totaled $19.7 million at June 30, 2022 and September 30, 2021. These equity securities are 'restricted' in that they can only be owned by member banks.

FHLB Stock

The Company's borrowings from the FHLB are secured by specific investment securities. Such advances can be made pursuant to several different credit programs, each of which has its own interest rate and range of maturities.

The investments in the FHLB stock are required investments related to the Company's membership in and current borrowings from the FHLB of Des Moines. The investments in the FHLB of Des Moines could be adversely impacted by the financial operations of the FHLB and actions of their regulator, the Federal Housing Finance Agency.

The FHLB stock is carried at cost since it is generally redeemable at par value. The carrying value of the stock held at the FHLB was $9.1 million at June 30, 2022 and $8.7 million at September 30, 2021.

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These equity securities are ‘restricted’ in that they can only be sold back to the respective institution from which they were acquired or another member institution at par. Therefore, FRB and FHLB stocks are less liquid than other marketable equity securities, and the fair value approximates cost.

Equity Security Impairment

The Company evaluates impairment for investments held at cost on at least an annual basis based on the ultimate recoverability of the par value. All other equity investments, including those under the equity method, are reviewed for other-than-temporary impairment on at least a quarterly basis. The Company recognized no impairment for such investments for the nine months ended June 30, 2022.

NOTE 5. LOANS AND LEASES, NET

Loans and leases consist of the following:


(Dollars in thousands)	June 30, 2022		September 30, 2021
Term lending	$	1,047,764	$	961,019
Asset based lending	402,506		300,225
Factoring	408,777		363,670
Lease financing	218,789		266,050
Insurance premium finance	481,219		428,867
SBA/USDA	215,510		247,756
Other commercial finance	173,338		157,908
Commercial finance	2,947,903		2,725,495
Consumer credit products	152,106		129,251
Other consumer finance	107,135		123,606
Consumer finance	259,241		252,857
Tax services	41,627		10,405
Warehouse finance	434,748		419,926
Community banking	—		199,132
Total loans and leases	3,683,519		3,607,815
Net deferred loan origination costs	5,047		1,748
Total gross loans and leases	3,688,566		3,609,563
Allowance for credit losses	(75,206)		(68,281)
Total loans and leases, net	$	3,613,360	$	3,541,282

During the nine months ended June 30, 2022, the Company transferred $169.0 million of Community Banking loans to held for sale. During the nine months endedJune 30, 2021, the Company transferred $118.0 million of Community Banking loans to held for sale.

During the nine months ended June 30, 2022 and 2021, the Company originated $769.7 million and $472.9 million of consumer finance and SBA/USDA as held for sale, respectively.

The Company sold held for sale loans resulting in proceeds of $898.4 millionand loss on sale of $3.9 million during the nine months ended June 30, 2022. The Company sold held for sale loans resulting in proceeds of $694.1 millionand gains on sale of $9.8 million during the nine months ended June 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 $2.2 million in servicing fee expense during the nine months ended June 30, 2022 and 2021, respectively, and $3.3 million for the fiscal year ended September 30, 2021.

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Since the Closing Date, the Company has entered into subsequent loan portfolio sale agreements with Central Bank and other third parties. The Company sold additional loans from the retained Community Bank portfolio in the amount of $192.5 million and $233.0 million in the nine months ended June 30, 2022 and 2021, respectively, and $308.1 million for the fiscal year ended September 30, 2021. All loans from the retained Community Bank portfolio have been sold as of December 31, ~~2017 and December 31, 2016.~~2021.

~~NOTE 2. CREDIT DISCLOSURES~~

The allowance for loan losses represents management’s estimate of probable loan losses which have been incurred as of the date of the consolidated financial statements. The allowance for loan losses is increased by a provision for loan losses charged to expense and decreased by charge-offs (net of recoveries). Estimating the risk of loss and the amount of loss on any loan is necessarily subjective. Management’s periodic evaluation of the appropriateness of the allowance is based on the Company’s past loan loss experience, known and inherent risks in the portfolio, adverse situations that may affect the borrower’s ability to repay, the estimated value of any underlying collateral, and current economic conditions. While management may periodically allocate portions of the allowance for specific problem loan situations, the entire allowance is available for any loan charge-offs that occur.

Loans are considered impaired if full principal or interest payments are not probable in accordance with the contractual loan terms. Impaired loans are carried at the present value of expected future cash flows discounted at the loan’s effective interest rate or at the fair value of the collateral if the loan is collateral dependent. A portion of the allowance for loan losses is allocated to impaired loans if the value of such loans is deemed to be less than the unpaid balance.

~~The allowance consists of specific, general~~purchased and unallocated components. The specific component relates to impaired loans. For such loans, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan. The general component covers loans not considered impaired and is based on historical loss experience adjusted for qualitative factors. An unallocated component is maintained to cover uncertainties that could affect management’s estimate of probable losses. The unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and general losses in the portfolio.

~~Homogeneous loan populations are collectively evaluated for impairment. These loan populations may include commercial insurance premium finance loans, residential first mortgage loans secured~~sold by one-to-four family residences, residential construction loans, home equity and second mortgage loans, and tax product loans. Commercial and agricultural loans as well as mortgage loans secured by other properties are monitored regularly by the Bank given the larger balances. When analysis of the borrower operating results and financial condition indicates that underlying cash flows of the borrower’s business is not adequate to meet its debt service requirements, the individual loan or loan relationship is evaluated for impairment. Often 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 tax and other national lending loans and 90 days or more for other loans. Non-accrual loans and all troubled debt restructurings are considered impaired. Impaired loans, or portions thereof, are charged off when deemed uncollectible.

~~Loans receivable at December 31, 2017 and September 30, 2017~~portfolio segment, including participation interests, were as follows:


	Three Months Ended June 30,				Nine Months Ended June 30,
(Dollars in thousands)	2022		2021		2022		2021
Loans Purchased






Loans held for investment:
Commercial finance	$	—	$	—	$	3,098	$	—


Warehouse finance	19,657		46,153		105,472		142,389
Community banking	—		403		—		3,250
Total purchases	$	19,657	$	46,556	$	108,570	$	145,639
Loans Sold
Loans held for sale:
Commercial finance	$	1,216	$	45,695	$	48,329	$	81,996
Consumer finance	173,284		72,437		696,891		382,382


Community banking	—		—		153,222		232,979
Loans held for investment:
Commercial finance	—		—		15,549		—



Community banking	—		1,816		30,235		13,822
Total sales	$	174,500	$	119,948	$	944,226	$	711,179

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


(Dollars in thousands)	June 30, 2022		September 30, 2021
Carrying amount	$	226,347	$	278,341
Unguaranteed residual assets	11,862		14,393
Unamortized initial direct costs	348		490
Unearned income	(19,420)		(26,684)
Total net investment in direct financing and sales-type leases	$	219,137	$	266,540

Undiscounted future minimum lease payments receivable for direct financing and sales-type leases, and a reconciliation to the carrying amount recorded at June 30, 2022 were as follows:


(Dollars in thousands)
Remaining in 2022	$	24,394
2023	93,511
2024	62,678
2025	30,942
2026	10,471
Thereafter	4,351

Total undiscounted future minimum lease payments receivable for direct financing and sales-type leases	226,347
Third-party residual value guarantees	—
Total carrying amount of direct financing and sales-type leases	$	226,347

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

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December 31, 2017 September 30, 2017
(Dollars in Thousands)
1-4 Family Real Estate $ 203,967
$ 196,706
Commercial and Multi-Family Real Estate 654,029
585,510
Agricultural Real Estate 61,303
61,800
Consumer 274,981
163,004
Commercial Operating 56,516
35,759
Agricultural Operating 24,696
33,594
Commercial Insurance Premium Finance 235,671
250,459
Total Loans Receivable 1,511,163
1,326,832

Allowance for Loan Losses (8,862 ) (7,534 )
Net Deferred Loan Origination Fees (2,023 ) (1,461 )
Total Loans Receivable, Net $ 1,500,278
$ 1,317,837
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, 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 ~~loan~~credit losses and balances of loans ~~receivable~~and leases by portfolio segment ~~for the three months ended December 31, 2017 and 2016~~ was as follows:


	Three Months Ended June 30, 2022
(Dollars in thousands)	Beginning Balance		Provision (Reversal)		Charge-offs		Recoveries		Ending Balance
Allowance for credit losses:
Term lending	$	27,568	$	9	$	(3,086)	$	1,316	$	25,807
Asset based lending	2,583		(1,553)		—		295		1,325
Factoring	6,526		533		(194)		268		7,133
Lease financing	6,471		(429)		—		107		6,149
Insurance premium finance	1,057		583		(230)		41		1,451
SBA/USDA	2,943		338		(408)		25		2,898
Other commercial finance	1,197		(79)		—		—		1,118
Commercial finance	48,345		(598)		(3,918)		2,052		45,881
Consumer credit products	1,621		(170)		—		—		1,451
Other consumer finance	7,388		(205)		(2,428)		88		4,843
Consumer finance	9,009		(375)		(2,428)		88		6,294
Tax services	30,757		(166)		(7,998)		6		22,599
Warehouse finance	441		(9)		—		—		432

Total loans and leases	88,552		(1,148)		(14,344)		2,146		75,206
Unfunded commitments(1)	551		(154)		—		—		397
Total	$	89,103	$	(1,302)	$	(14,344)	$	2,146	$	75,603

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

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1-4 Family
Real Estate Commercial and
Multi-Family
Real Estate Agricultural
Real Estate Consumer Commercial
Operating Agricultural
Operating CML Insurance
Premium
Finance Unallocated Total
(Dollars in Thousands)
Three Months Ended December 31, 2017
Allowance for loan losses:
Beginning balance $ 803
$ 2,670
$ 1,390
$ 6
$ 158
$ 1,184
$ 796
$ 527
$ 7,534
Provision (recovery) for loan losses (118 ) 364
(210 ) 297
690
(380 ) 51
374
1,068
Charge offs (31 ) —
—
—
—
—
(129 ) —
(160 )
Recoveries —
—
—
367
46
—
7
—
420
Ending balance $ 654
$ 3,034
$ 1,180
$ 670
$ 894
$ 804
$ 725
$ 901
$ 8,862

Ending balance: individually evaluated for impairment —
—
—
—
—
—
—
—
—
Ending balance: collectively evaluated for impairment 654
3,034
1,180
670
894
804
725
901
8,862
Total $ 654
$ 3,034
$ 1,180
$ 670
$ 894
$ 804
$ 725
$ 901
$ 8,862

Loans:

Ending balance: individually
evaluated for impairment 95
707
—
61
—
1,052
—
—
1,915
Ending balance: collectively
evaluated for impairment 203,872
653,322
61,303
274,920
56,516
23,644
235,671
—
1,509,248
Total $ 203,967
$ 654,029
$ 61,303
$ 274,981
$ 56,516
$ 24,696
$ 235,671
$ —
$ 1,511,163


	Three Months Ended June 30, 2021
(Dollars in thousands)	Beginning Balance		Provision (Reversal)(2)		Charge-offs		Recoveries		Ending Balance
Allowance for credit losses:
Term lending	$	27,315	$	1,199	$	(1,998)	$	515	$	27,031
Asset based lending	1,749		21		—		212		1,982
Factoring	3,210		33		1		17		3,261
Lease financing	6,863		842		(916)		130		6,919
Insurance premium finance	1,326		(1,200)		(120)		1,583		1,589
SBA/USDA	3,300		(171)		—		—		3,129
Other commercial finance	541		183		—		—		724
Commercial finance	44,304		907		(3,033)		2,457		44,635
Consumer credit products	990		21		—		—		1,011
Other consumer finance	10,093		(180)		(2,327)		57		7,643
Consumer finance	11,083		(159)		(2,327)		57		8,654
Tax services	29,146		4,685		(9,505)		17		24,343
Warehouse finance	332		—		—		—		332
Community banking	14,027		(783)		—		—		13,244
Total loans and leases	98,892		4,650		(14,865)		2,531		91,208
Unfunded commitments(1)	779		(38)		—		—		741
Total	$	99,671	$	4,612	$	(14,865)	$	2,531	$	91,949

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

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


	Nine Months Ended June 30, 2022
(Dollars in thousands)	Beginning Balance		Provision (Reversal)		Charge-offs		Recoveries		Ending Balance
Allowance for credit losses:
Term lending	$	29,351	$	1,104	$	(6,993)	$	2,345	$	25,807
Asset based lending	1,726		(817)		(16)		432		1,325
Factoring	3,997		13,857		(11,057)		336		7,133
Lease financing	7,629		(1,647)		(112)		279		6,149
Insurance premium finance	1,394		374		(514)		197		1,451
SBA/USDA	2,978		517		(624)		27		2,898
Other commercial finance	1,168		(50)		—		—		1,118
Commercial finance	48,243		13,338		(19,316)		3,616		45,881
Consumer credit products	1,242		209		—		—		1,451
Other consumer finance	6,112		2,513		(4,049)		267		4,843
Consumer finance	7,354		2,722		(4,049)		267		6,294
Tax services	2		28,093		(8,253)		2,757		22,599
Warehouse finance	420		12		—		—		432
Community banking	12,262		(12,686)		—		424		—
Total loans and leases	68,281		31,479		(31,618)		7,064		75,206
Unfunded commitments(1)	690		(293)		—		—		397
Total	$	68,971	$	31,186	$	(31,618)	$	7,064	$	75,603

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

Table of Contents

1-4 Family
Real Estate Commercial and
Multi-Family
Real Estate Agricultural
Real Estate Consumer Commercial
Operating Agricultural
Operating CML Insurance
Premium
Finance Unallocated Total
(Dollars in Thousands)
Three Months Ended December 31, 2016
Allowance for loan losses:
Beginning balance $ 654
$ 2,198
$ 142
$ 51
$ 117
$ 1,332
$ 588
$ 553
$ 5,635
Provision (recovery) for loan losses —
(286 ) 334
(28 ) 691
(3 ) 110
25
843
Charge offs —
—
—
—
—
—
(118 ) —
(118 )
Recoveries —
—
—
24
5
12
14
—
55
Ending balance $ 654
$ 1,912
$ 476
$ 47
$ 813
$ 1,341
$ 594
$ 578
$ 6,415

Ending balance: individually
evaluated for impairment 11
—
—
—
339
—
—
—
350
Ending balance: collectively
evaluated for impairment 643
1,912
476
47
474
1,341
594
578
6,065
Total $ 654
$ 1,912
$ 476
$ 47
$ 813
$ 1,341
$ 594
$ 578
$ 6,415

Loans:

Ending balance: individually
evaluated for impairment 190
429
—
—
505
—
—
—
1,124
Ending balance: collectively
evaluated for impairment 172,687
440,083
64,014
173,164
50,319
33,617
179,508
—
1,113,392
Total $ 172,877
$ 440,512
$ 64,014
$ 173,164
$ 50,824
$ 33,617
$ 179,508
$ —
$ 1,114,516


	Nine Months Ended June 30, 2021
(Dollars in thousands)	Beginning Balance		Impact of CECL Adoption		Provision (Reversal)(2)		Charge-offs		Recoveries		Ending Balance
Allowance for credit losses:
Term lending	$	15,211	$	9,999	$	8,621	$	(7,787)	$	987	$	27,031
Asset based lending	1,406		164		1,399		(1,199)		212		1,982
Factoring	3,027		987		(1,928)		—		1,175		3,261
Lease financing	7,023		(556)		2,375		(2,264)		341		6,919
Insurance premium finance	2,129		(965)		(609)		(925)		1,959		1,589
SBA/USDA	940		2,720		(532)		—		1		3,129
Other commercial finance	182		364		178		—		—		724
Commercial finance	29,918		12,713		9,504		(12,175)		4,675		44,635
Consumer credit products	845		—		166		—		—		1,011
Other consumer finance	2,821		5,998		1,568		(2,964)		220		7,643
Consumer finance	3,666		5,998		1,734		(2,964)		220		8,654
Tax services	2		—		32,819		(9,505)		1,027		24,343
Warehouse finance	294		(1)		39		—		—		332
Community banking	22,308		(5,937)		(2,983)		(144)		—		13,244
Total loans and leases	56,188		12,773		41,113		(24,788)		5,922		91,208
Unfunded commitments(1)	32		831		(122)		—		—		741
Total	$	56,220	$	13,604	$	40,991	$	(24,788)	$	5,922	$	91,949

(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 June 30, 2022		At September 30, 2021
Term lending	$	65,998	$	20,965
Asset based lending	5,992		—
Factoring	27,333		1,268
Lease financing	11,684		3,882

SBA/USDA	1,249		—

Commercial finance(1)	112,256		26,115





Community banking	—		14,915
Total	$	112,256	$	41,030

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

In response to the ongoing COVID-19 pandemic, the Company allowed modifications, such as payment deferrals and temporary forbearances, to credit-worthy borrowers who are experiencing temporary hardship due to the effects of COVID-19. 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 will not be reported as past due during the deferral or forbearance period. As of June 30, 2022, $0.1 million of loan and lease balances that were granted deferral payments by the Company were still in their deferment period. These modifications consisted solely of payment deferrals ranging from 30 days to six months. These modifications are in line with applicable regulatory guidelines and, therefore, they are not reported as troubled debt restructurings. Other than the loan modifications that are on nonaccrual status, the Company is accruing and recognizing interest income on these modifications during the payment deferral period.

Federal regulations ~~promulgated by the Bank's primary federal regulator, the Office of the Comptroller of the Currency (the "OCC"),~~ provide for the classification of loans and other assets such as debt and equity ~~securities.~~securities considered by the Bank's primary regulator, the Office of the Comptroller of the Currency (the “OCC”), to be of lesser quality as “substandard,” “doubtful” or “loss.” The loan classification and risk rating definitions ~~for the Company and its wholly-owned subsidiary, MetaBank (the "Bank"),~~ are ~~generally~~ as follows:

~~Pass-~~

Table of Contents

Pass - A pass asset is of sufficient quality in terms of repayment, collateral and management to preclude a special mention or an adverse rating.

~~Watch-~~Watch - A watch asset is generally a credit performing well under current terms and conditions but with identifiable weakness meriting additional scrutiny and corrective measures. Watch is not a regulatory classification but can be used to designate assets that are exhibiting one or more weaknesses that deserve management’s attention. These assets are of better quality than special mention assets.

Special ~~Mention- Special~~Mention - A special mention ~~assets are credits~~asset is a credit with potential weaknesses deserving management’s close attention and, if left uncorrected, may result in deterioration of the repayment prospects for the asset. Special mention assets are not adversely classified and do not expose an institution to sufficient risk to warrant adverse classification. Special mention is a temporary status with aggressive credit management required to garner adequate progress and move to watch or higher.

~~Substandard-~~The adverse classifications are as follows:

Substandard - A substandard asset is inadequately protected by the net worth and/or repayment ability or by a weak collateral position. Assets so classified will have well-defined weaknesses creating a distinct possibility ~~that~~ the Bank will sustain some loss if the weaknesses are not corrected. Loss potential does not have to exist for an asset to be classified as substandard.

~~Doubtful-~~Doubtful - A doubtful asset has weaknesses similar to those classified substandard, with the degree of weakness causing the likely loss of some principal in any reasonable collection effort. Due to pending factors, the asset’s classification as loss is not yet appropriate.

~~Loss-~~Loss - A loss asset is considered uncollectible and of such little value that the asset’s continuance on the ~~Company's~~Bank’s balance sheet is no longer warranted. This classification does not necessarily mean an asset has no recovery or salvage value, leaving room for future collection efforts.

~~General allowances represent loss allowances which have been established to recognize the inherent risk~~Loans and leases, or portions thereof, are generally charged off when collection of principal becomes doubtful. Typically, this is associated with ~~lending activities, but which, unlike specific allowances,~~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 ~~allocated to particular problem assets. When assets are classified as “loss,”~~collected by the ~~Company is required either to establish a specific allowance for losses equal to 100%~~end of ~~that portion~~June and taxpayer advance loans if such loans have not been collected by the end of the ~~asset so classified or to charge-off such amount. The Company's determinations as to the classification of its assets~~calendar year. Nonaccrual loans and ~~the amount of its valuation allowances~~troubled debt restructurings are ~~subject to review by its regulatory authorities, which may order the establishment of additional general or specific loss allowances.~~generally individually evaluated for expected credit losses.

The Company recognizes that concentrations of credit may naturally occur and may take the form of a large volume of related loans and leases to an individual, a specific industry, or a geographic location. Credit concentration is a direct, indirect, or contingent obligation that has a common bond where the aggregate exposure equals or exceeds a certain percentage of the Company’s Tier 1 Capital plus the allowable Allowance for ~~Loan~~Credit Losses.

The Company has various portfolios of consumer finance and tax services loans that present unique risks that are statistically managed. Due to the unique risks associated with these portfolios, the Company monitors other credit quality indicators in their evaluation of the appropriateness of the allowance for credit losses on these portfolios, and as such, these loans are not included in the asset classification table below. The outstanding balances of consumer finance loans and tax services loans were $259.2 million and $41.6 million at June 30, 2022, respectively, and $252.9 million and $10.4 million at September 30, 2021, respectively. The amortized cost basis of loans ~~at December 31, 2017~~ and ~~September 30, 2017~~leases by asset classification and year of origination was as follows:

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	Amortized Cost Basis
(Dollars in thousands)	Term Loans and Leases by Origination Year												Revolving Loans and Leases		Total
At June 30, 2022	2022		2021		2020		2019		2018		Prior
Term lending
Pass	$	315,012	$	233,436	$	130,225	$	39,691	$	28,753	$	6,710	$	—	$	753,827
Watch	27,886		92,431		27,741		6,965		2,302		3,968		—		161,293
Special Mention	4,244		14,978		23,514		4,281		1,154		2,972		—		51,143
Substandard	18,744		19,436		25,688		13,185		2,565		97		—		79,715
Doubtful	346		404		465		538		33		—		—		1,786
Total	366,232		360,685		207,633		64,660		34,807		13,747		—		1,047,764
Asset based lending
Pass	—		—		—		—		—		—		223,126		223,126
Watch	—		—		—		—		—		—		136,315		136,315
Special Mention	—		—		—		—		—		—		36,909		36,909
Substandard	—		—		—		—		—		—		6,156		6,156

Total	—		—		—		—		—		—		402,506		402,506
Factoring
Pass	—		—		—		—		—		—		287,281		287,281
Watch	—		—		—		—		—		—		76,517		76,517
Special Mention	—		—		—		—		—		—		13,858		13,858
Substandard	—		—		—		—		—		—		31,101		31,101
Doubtful	—		—		—		—		—		—		20		20
Total	—		—		—		—		—		—		408,777		408,777
Lease financing
Pass	30,491		50,142		53,187		8,696		5,702		29		—		148,247
Watch	308		7,534		10,514		6,113		645		17		—		25,131
Special Mention	708		13,303		4,775		1,917		236		21		—		20,960
Substandard	—		5,948		11,126		4,409		320		11		—		21,814
Doubtful	—		165		1,207		1,147		118		—		—		2,637
Total	31,507		77,092		80,809		22,282		7,021		78		—		218,789
Insurance premium finance
Pass	473,925		6,683		23		2		—		—		—		480,633
Watch	64		71		—		—		—		—		—		135
Special Mention	138		192		—		—		—		—		—		330
Substandard	19		28		—		—		—		—		—		47
Doubtful	43		31		—		—		—		—		—		74
Total	474,189		7,005		23		2		—		—		—		481,219
SBA/USDA
Pass	65,066		47,690		15,532		10,724		13,748		7,807		—		160,567
Watch	3,077		—		19,513		3,154		1,092		2,883		—		29,719
Special Mention	��		—		1,551		212		—		286		—		2,049
Substandard	—		—		2,705		8,520		9,695		1,918		—		22,838
Doubtful	—		23		314		—		—		—		—		337
Total	68,143		47,713		39,615		22,610		24,535		12,894		—		215,510
Other commercial finance
Pass	20,261		29,369		865		8,914		2,374		67,248		—		129,031
Watch	—		20,000		13,282		—		—		—		—		33,282

Substandard	164		9,789		—		—		265		807		—		11,025

Table of Contents


Total	20,425		59,158		14,147		8,914		2,639		68,055		—		173,338
Warehouse finance
Pass	—		—		—		—		—		—		434,748		434,748




Total	—		—		—		—		—		—		434,748		434,748
Total loans and leases
Pass	904,755		367,320		199,832		68,027		50,577		81,794		945,155		2,617,460
Watch	31,335		120,036		71,050		16,232		4,039		6,868		212,832		462,392
Special Mention	5,090		28,473		29,840		6,410		1,390		3,279		50,767		125,249
Substandard	18,927		35,201		39,519		26,114		12,845		2,833		37,257		172,696
Doubtful	389		623		1,986		1,685		151		—		20		4,854
Total	$	960,496	$	551,653	$	342,227	$	118,468	$	69,002	$	94,774	$	1,246,031	$	3,382,651


	Amortized Cost Basis
(Dollars in thousands)	Term Loans and Leases by Origination Year												Revolving Loans and Leases		Total
At September 30, 2021	2021		2020		2019		2018		2017		Prior
Term lending
Pass	$	362,443	$	192,305	$	63,708	$	34,381	$	3,195	$	1,236	$	—	$	657,268
Watch	63,046		71,701		32,941		21,419		76		3,628		—		192,811
Special Mention	6,422		26,673		4,821		932		70		633		—		39,551
Substandard	18,569		16,810		26,920		3,529		928		641		—		67,397
Doubtful	252		1,673		1,756		311		—		—		—		3,992
Total	450,732		309,162		130,146		60,572		4,269		6,138		—		961,019
Asset based lending
Pass	—		—		—		—		—		—		185,432		185,432
Watch	—		—		—		—		—		—		52,072		52,072
Special Mention	—		—		—		—		—		—		43,135		43,135
Substandard	—		—		—		—		—		—		19,586		19,586

Total	—		—		—		—		—		—		300,225		300,225
Factoring
Pass	—		—		—		—		—		—		294,124		294,124
Watch	—		—		—		—		—		—		17,984		17,984
Special Mention	—		—		—		—		—		—		33,035		33,035
Substandard	—		—		—		—		—		—		18,527		18,527

Total	—		—		—		—		—		—		363,670		363,670
Lease financing
Pass	54,434		73,629		17,153		7,511		1,857		203		—		154,787
Watch	22,061		20,455		9,274		2,739		1,454		—		—		55,983
Special Mention	15,402		20,595		4,148		1,546		61		—		—		41,752
Substandard	479		4,765		4,981		831		25		—		—		11,081
Doubtful	—		6		2,402		38		1		—		—		2,447
Total	92,376		119,450		37,958		12,665		3,398		203		—		266,050
Insurance premium finance
Pass	428,131		144		9		—		—		—		—		428,284
Watch	262		5		—		—		—		—		—		267
Special Mention	58		5		—		—		—		—		—		63
Substandard	68		107		—		—		—		—		—		175
Doubtful	58		20		—		—		—		—		—		78
Total	428,577		281		9		—		—		—		—		428,867
SBA/USDA
Pass	110,122		37,006		14,461		12,760		6,525		3,779		—		184,653

Table of Contents


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
Pass	56,957		642		5,786		6,075		3,345		60,965		—		133,770
Watch	—		17,404		3,409		451		—		—		—		21,264

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

Total	57,423		18,046		9,195		6,799		4,182		62,264		—		157,909
Warehouse finance
Pass	—		—		—		—		—		—		419,926		419,926




Total	—		—		—		—		—		—		419,926		419,926
Community banking
Pass	—		—		4,159		—		5,683		472		—		10,314
Watch	—		10,134		—		10,854		6,133		—		—		27,121
Special Mention	—		—		35,916		—		—		—		—		35,916
Substandard	—		119		49,449		50,626		13,933		6,110		—		120,237
Doubtful	—		122		—		5,422		—		—		—		5,544
Total	—		10,375		89,524		66,902		25,749		6,582		—		199,132
Total loans and leases
Pass	1,012,088		303,727		105,274		60,727		20,605		66,655		899,481		2,468,557
Watch	85,369		140,131		47,620		37,132		9,057		3,926		70,056		393,291
Special Mention	21,882		55,606		45,099		5,826		307		1,552		76,171		206,443
Substandard	19,584		25,613		90,900		63,338		17,891		8,762		38,113		264,201
Doubtful	310		1,822		4,158		5,770		1		—		—		12,061
Total	$	1,139,233	$	526,899	$	293,051	$	172,793	$	47,861	$	80,895	$	1,083,821	$	3,344,553

Past due loans and leases were as follows:


	At June 30, 2022
	Accruing and Nonaccruing Loans and Leases												Nonperforming Loans and Leases
(Dollars in thousands)	30-59 Days Past Due		60-89 Days Past Due		> 89 Days Past Due		Total Past Due		Current		Total Loans and Leases Receivable		> 89 Days Past Due and Accruing		Nonaccrual Balance		Total
Loans held for sale	$	—	$	—	$	—	$	—	$	67,571	$	67,571	$	—	$	—	$	—

Term lending	4,882		1,960		3,483		10,325		1,037,439		1,047,764		613		8,965		9,578
Asset based lending	—		—		—		—		402,506		402,506		—		4,508		4,508
Factoring	—		—		—		—		408,777		408,777		—		743		743
Lease financing	8,708		1,584		3,345		13,637		205,152		218,789		1,788		3,844		5,632
Insurance premium finance	1,565		611		803		2,979		478,240		481,219		803		—		803
SBA/USDA	271		—		1,564		1,835		213,675		215,510		315		1,543		1,858
Other commercial finance	—		—		—		—		173,338		173,338		—		—		—
Commercial finance	15,426		4,155		9,195		28,776		2,919,127		2,947,903		3,519		19,603		23,122
Consumer credit products	3,298		3,039		2,886		9,223		142,883		152,106		2,886		—		2,886
Other consumer finance	510		437		615		1,562		105,573		107,135		615		—		615
Consumer finance	3,808		3,476		3,501		10,785		248,456		259,241		3,501		—		3,501
Tax services	—		41,627		—		41,627		—		41,627		—		—		—
Warehouse finance	—		—		—		—		434,748		434,748		—		—		—

Total loans and leases held for investment	19,234		49,258		12,696		81,188		3,602,331		3,683,519		7,020		19,603		26,623
Total loans and leases	$	19,234	$	49,258	$	12,696	$	81,188	$	3,669,902	$	3,751,090	$	7,020	$	19,603	$	26,623

Table of Contents

December 31, 2017 1-4 Family
Real Estate Commercial and
Multi-Family
Real Estate Agricultural
Real Estate Consumer Commercial
Operating Agricultural
Operating CML Insurance
Premium
Finance Total
(Dollars in Thousands)
Pass $ 203,035
$ 643,393
$ 28,794
$ 274,783
$ 56,245
$ 14,304
$ 235,671
$ 1,456,225
Watch 608
10,145
—
102
271
13
—
11,139
Special Mention 245
199
2,939
—
—
—
—
3,383
Substandard 79
292
29,570
96
—
10,379
—
40,416
Doubtful —
—
—
—
—
—
—
—
$ 203,967
$ 654,029
$ 61,303
$ 274,981
$ 56,516
$ 24,696
$ 235,671
$ 1,511,163


	At September 30, 2021
	Accruing and Nonaccruing Loans and Leases												Nonperforming Loans and Leases
(Dollars in thousands)	30-59 Days Past Due		60-89 Days Past Due		> 89 Days Past Due		Total Past Due		Current		Total Loans and Leases Receivable		> 89 Days Past Due and Accruing		Nonaccrual Balance		Total
Loans held for sale	$	—	$	—	$	—	$	—	$	56,194	$	56,194	$	—	$	—	$	—

Term lending	11,879		2,703		5,452		20,034		940,985		961,019		2,558		14,904		17,462
Asset based lending	—		—		—		—		300,225		300,225		—		—		—
Factoring	—		—		—		—		363,670		363,670		—		1,268		1,268
Lease financing	4,909		3,336		8,401		16,646		249,404		266,050		8,345		3,158		11,503
Insurance premium finance	1,415		375		599		2,389		426,478		428,867		599		—		599
SBA/USDA	66		974		987		2,027		245,729		247,756		987		—		987
Other commercial finance	—		—		—		—		157,908		157,908		—		—		—
Commercial finance	18,269		7,388		15,439		41,096		2,684,399		2,725,495		12,489		19,330		31,819
Consumer credit products	713		527		511		1,751		127,500		129,251		511		—		511
Other consumer finance	963		285		725		1,973		121,633		123,606		725		—		725
Consumer finance	1,676		812		1,236		3,724		249,133		252,857		1,236		—		1,236
Tax services	—		—		7,962		7,962		2,443		10,405		7,962		—		7,962
Warehouse finance	—		—		—		—		419,926		419,926		—		—		—
Community banking	—		—		—		—		199,132		199,132		—		14,915		14,915
Total loans and leases held for investment	19,945		8,200		24,637		52,782		3,555,033		3,607,815		21,687		34,245		55,932
Total loans and leases	$	19,945	$	8,200	$	24,637	$	52,782	$	3,611,227	$	3,664,009	$	21,687	$	34,245	$	55,932

September 30, 2017 1-4 Family
Real Estate Commercial and
Multi-Family
Real Estate Agricultural
Real Estate Consumer Commercial
Operating Agricultural
Operating Premium
Finance Total
(Dollars in Thousands)
Pass $ 195,838
$ 574,730
$ 27,376
$ 163,004
$ 35,759
$ 18,394
$ 250,459
$ 1,265,560
Watch 525
10,200
2,006
—
—
4,541
—
17,272
Special Mention 247
201
2,939
—
—
—
—
3,387
Substandard 96
379
29,479
—
—
10,659
—
40,613
Doubtful —
—
—
—
—
—
—
—
$ 196,706
$ 585,510
$ 61,800
$ 163,004
$ 35,759
$ 33,594
$ 250,459
$ 1,326,832

~~One-to-Four Family Residential Mortgage Lending~~. One-to-four family residential mortgage loan originations are generated by the Company’s marketing efforts, its present customers, walk-in customers and referrals. The Company offers fixed-rate and adjustable rate mortgage (“ARM”) loans for both permanent structures and those under construction. The Company’s one-to-four family residential mortgage originations are secured primarily by properties located in its primary market area and surrounding areas.

The Company originates one-to-four family residential mortgage loans with terms up to a maximum of 30 years and with loan-to-value ratios up to 100% of the lesser of the appraised value of the security property or the contract price. The Company generally requires that private mortgage insurance be obtained in an amount sufficient to reduce the Company’s exposure to at or below the 80% loan‑to‑value level. Residential loans generally do not include prepayment penalties. Due to consumer demand, the Company offers fixed-rate mortgage loans with terms up to 30 years, most of which conform to secondary market standards, such as Fannie Mae, Ginnie Mae, and Freddie Mac standards. The Company typically holds all fixed-rate mortgageNonaccrual loans and ~~does not engage in secondary market sales. Interest rates charged on these fixed-rate loans~~leases by year of origination at June 30, 2022 were as follows:


	Amortized Cost Basis
	Term Loans and Leases by Origination Year												Revolving Loans and Leases		Total		Nonaccrual with No ACL
(Dollars in thousands)	2022		2021		2020		2019		2018		Prior
Term lending	$	540	$	937	$	1,291	$	5,800	$	300	$	97	$	—	$	8,965	$	2,922
Asset based lending	—		—		—		—		—		—		4,508		4,508		4,508
Factoring	—		—		—		—		—		—		743		743		743
Lease financing	—		—		1,286		2,083		464		11		—		3,844		—

SBA/USDA	—		23		1,249		—		—		271		—		1,543		—

Commercial finance	540		960		3,826		7,883		764		379		5,251		19,603		8,173






Total nonaccrual loans and leases	$	540	$	960	$	3,826	$	7,883	$	764	$	379	$	5,251	$	19,603	$	8,173

Table of Contents

Loans and leases that are ~~competitively priced according to market conditions.~~

The Company also currently offers five- and ten-year ARM loans. These loans have a fixed-rate for the stated period and, thereafter, adjust annually. These loans generally provide for an annual cap of up to 200 basis points and a lifetime cap of 600 basis points over the initial rate. As a consequence of using an initial fixed-rate and caps, the interest rates on these loans may not be as rate sensitive as the Company’s cost of funds. The Company’s ARMs do not permit negative amortization of principal and are not convertible into fixed-rate loans. The Company’s delinquency experience on its ARM loans has generally been similar to its experience on fixed-rate residential loans. The current low mortgage interest rate environment makes ARM loans relatively unattractive and very few are currently being originated.

In underwriting one-to-four family residential real estate loans, the Company evaluates both the borrower’s ability to make monthly payments and the value of the property securing the loan. Properties securing real estate loans made by the Company are appraised by independent appraisers approved by the Board of Directors of the Company. The Company generally requires borrowers to obtain an attorney’s title opinion or title insurance, and fire and property insurance (including flood insurance, if necessary) in an amount not less than the amount of the loan. Real estate loans originated by the Company generally contain a “due on sale” clause allowing the Company to declare the unpaid principal balance due and payable upon the sale of the security property. The Company has not engaged in sub-prime residential mortgage originations.

~~Commercial and Multi-Family Real Estate Lending~~. The Company engages in commercial and multi-family real estate lending in its primary market area and surrounding areas and, in order to supplement its loan portfolio, has purchased whole loan and participation interests in loans from other financial institutions. The purchased loans and loan participation interests are generally secured by properties primarily located in the Midwest.

The Company’s commercial and multi-family real estate loan portfolio is secured primarily by apartment buildings, office buildings and hotels. Commercial and multi-family real estate loans generally are underwritten with terms not exceeding 20 years, have loan-to-value ratios of up to 80% of the appraised value of the security property, and are typically secured by guarantees of the borrowers. The Company has a variety of rate adjustment features and other terms in its commercial and multi-family real estate loan portfolio. Commercial and multi-family real estate loans provide for a margin over a number of different indices. In underwriting these loans, the Company analyzes the financial condition of the borrower, the borrower’s credit history, and the reliability and predictability of the cash flow generated by the property securing the loan. Appraisals on properties securing commercial real estate loans originated by the Company are performed by independent appraisers.

Commercial and multi-family real estate loans generally present a higher level of risk than loans secured by one-to-four family residences. This greater risk is due to several factors, including the concentration of principal in a limited number of loans and borrowers, the effect of general economic conditions on income producing properties and the increased difficulty of evaluating and monitoring these types of loans. Furthermore, the repayment of loans secured by commercial and multi-family real estate is typically dependent upon the successful operation of the related real estate project. If the cash flow from the project is reduced (for example, if leases are not obtained or renewed, or a bankruptcy court modifies a lease term, or a major tenant is unable to fulfill its lease obligations), the borrower’s ability to repay the loan may be impaired.

~~Agricultural Lending~~. The Company originates loans to finance the purchase of farmland, livestock, farm machinery and equipment, seed, fertilizer and other farm-related products. Agricultural operating loans are originated at either an adjustable or fixed rate of interest for up to a one year term or, in the case of livestock, upon sale. Such loans provide for payments of principal and interest at least annually or a lump sum payment upon maturity if the original term is less than one year. Loans secured by agricultural machinery are generally originated as fixed-rate loans with terms of up to seven years.

Agricultural real estate loans are frequently originated with adjustable rates of interest. Generally, such loans provide for a fixed rate of interest for the first five to ten years, after which the loan will balloon or the interest rate will adjust annually. These loans generally amortize over a period of 20 to 25 years. Fixed-rate agricultural real estate loans generally have terms up to ten years. Agricultural real estate loans are generally limited to 75% of the value of the property securing the loan.

Agricultural lending affords the Company the opportunity to earn yields higher than those obtainable on one-to-four family residential lending, but involves a greater degree of risk than one-to-four family residential mortgage loans because of the typically larger loan amount. In addition, payments on loans are dependent on the successful operation or management of the farm property securing the loan or for which an operating loan is utilized. The success of the loan may also be affected by many factors outside the control of the borrower.

Weather presents one of the greatest risks as hail, drought, floods, or other conditions can severely limit crop yields and thus impair loan repayments and the value of the underlying collateral. This risk can be reduced by the farmer with a variety of insurance coverages which can help to ensure loan repayment. Government support programs and the Company generally require that farmers procure crop insurance coverage. Grain and livestock prices also present a risk as prices may decline prior to sale, resulting in a failure to cover production costs. These risks may be reduced by the farmer with the use of futures contracts or options to mitigate price risk. The Company frequently requires borrowers to use futures contracts or options to reduce price risk and help ensure loan repayment. Another risk is the uncertainty of government programs and other regulations. During periods of low commodity prices, the income from government programs can be a significant source of cash for the borrower to make loan payments, and if these programs are discontinued or significantly changed, cash flow problems or defaults could result. Finally, many farms are dependent on a limited number of key individuals whose injury or death may result in an inability to successfully operate the farm.

~~Consumer Lending.~~ The Bank originates a variety of secured consumer loans, including home equity, home improvement, automobile and boat loans and loans secured by savings deposits. In addition, the Bank offers other secured and unsecured consumer loans and currently originates most of its community banking consumer loans in its primary market areas and surrounding areas. In addition, the Bank’s consumer lending portfolio includes two purchased student loan portfolios, the most recent purchased on October 11, 2017, along with consumer lending products offered through its payments segment.

The Bank's community banking consumer loan portfolio consists primarily of home equity loans and lines of credit. Substantially all of the Bank's home equity loans and lines of credit are secured by second mortgages on principal residences. The Bank will lend amounts which, together~~with all prior liens, may be up to 90% of the appraised value of the property securing the loan. Home equity loans and lines of credit generally have maximum terms of five years.~~

The Bank primarily originates automobile loans on a direct basis to the borrower, as opposed to indirect loans, which are made when the Bank purchases loan contracts, often at a discount, from automobile dealers which have extended credit to their customers. The Bank’s automobile loans typically are originated at fixed interest rates with terms of up to 60 months for new and used vehicles. Loans secured by automobiles are generally originated for up to 80% of the N.A.D.A. book value of the automobile securing the loan.

Consumer loan terms vary according to the type and value of collateral, length of contract and creditworthiness of the borrower. The underwriting standards employed by the Bank for consumer loans include an application, a determination of the applicant’s payment history on other debts and an assessment of ability to meet existing obligations and payments on the proposed loan. Although creditworthiness of the applicant is a primary consideration, the underwriting process also may include a comparison of the value of the security, if any, in relation to the proposed loan amount.

Consumer loans may entail greater credit risk than residential mortgage loans, particularly in the case of consumer loans which are unsecured or are secured by rapidly depreciable assets, such as automobiles or recreational equipment. In such cases, any repossessed collateral for a defaulted consumer loan may not provide an adequate source of repayment of the outstanding loan balance as a result of the greater likelihood of damage, loss or depreciation. In addition, consumer loan collections are dependent on the borrower’s continuing financial stability, and thus more likely to be affected by adverse personal circumstances. Furthermore, the application of various federal and state laws, including bankruptcy and insolvency laws, may limit the amount which can be recovered on such loans.

On October 11, 2017, the Company completed the purchase of a $73.0 million, seasoned, floating rate, private student loan portfolio. All loans are indexed to one-month LIBOR. The portfolio is serviced by ReliaMax Lending Services LLC and insured by ReliaMax Surety Company. This portfolio purchase builds on the Company's existing student loan platform.

The Bank’s student loan portfolio that was purchased during the first quarter of fiscal year 2017 is a seasoned portfolio that is also serviced by ReliaMax Lending Services, LLC and insured by ReliaMax Surety Company. All loans in this portfolio are floating rate and indexed to the three-month LIBOR plus various margins.

Through its Payments segment, the Bank strives to offer consumers innovative payment products, including credit products. Most credit products have fallen into the category of portfolio lending. The Payments segment, including Specialty Consumer Services ("SCS"), continues its development of new alternative portfolio lending products primarily to serve its customer base and to provide innovative lending solutions to the unbanked and under-banked segment.

The Payments segment also provides short-term consumer refund advance loans. Taxpayers are underwritten to determine eligibility for the unsecured loans, which are, by design, interest and fee-free to the consumer. Due to the nature of consumer 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. Generally, when the refund advance loan becomes delinquent for 18090 days or more ~~or when collection~~delinquent and accruing by year of ~~principal becomes doubtful, the Company will charge off the loan balance.~~origination at June 30, 2022 were as follows:


	Amortized Cost Basis
	Term Loans and Leases by Origination Year												Revolving Loans and Leases		Total
(Dollars in thousands)	2022		2021		2020		2019		2018		Prior
Term lending	$	285	$	203	$	85	$	1	$	—	$	39	$	—	$	613


Lease financing	601		573		282		128		204		—		—		1,788
Insurance premium finance	407		391		5		—		—		—		—		803
SBA/USDA	—		—		315		—		—		—		—		315

Commercial finance	1,293		1,167		687		129		204		39		—		3,519
Consumer credit products	258		2,504		63		57		4		—		—		2,886
Other consumer finance	—		83		—		—		—		532		—		615
Consumer finance	258		2,587		63		57		4		532		—		3,501


Total 90 days or more delinquent and accruing	$	1,551	$	3,754	$	750	$	186	$	208	$	571	$	—	$	7,020

~~Commercial Operating Lending~~. The Company also originates commercial operating loans. Most of the Company’s commercial operating loans have been extended to finance local and regional businesses and include short-term loans to finance machinery and equipment purchases, inventory and accounts receivable. Commercial loans also may involve the extension of revolving credit for a combination of equipment acquisitions and working capital in expanding companies. The Company also extends short-term commercial Electronic Return Originator ("ERO") advance loans through its Payments segment as described in more detail below.

The maximum term for loans extended on machinery and equipment is based on the projected useful life of such machinery and equipment. Generally, the maximum term on non-mortgage lines of credit is one year. The loan-to-value ratio on suchCertain loans and lines of credit generally may not exceed 80% of the value of the collateral securing the loan. ERO loans are not collateralized. The Company’s commercial operating lending policy includes credit file documentation and analysis of the borrower’s character, capacity to repay the loan, the adequacy of the borrower’s capital and collateral as well as an evaluation of conditions affecting the borrower. Analysis of the borrower’s past, present and future cash flows is also an important aspect of the Company’s credit analysis. As described further below, such loans are believed to carry higher credit risk than more traditional lending activities.

Unlike residential mortgage loans, which generally are made on the basis of the borrower’s ability to make repayment from his or her employment and other income and which are secured by real property whose value tends to be more easily ascertainable, commercial operating loans typically are made on the basis of the borrower’s ability to make repayment from the cash flow of the borrower’s business. As a result, the availability of funds for the repayment of commercial operating loans may be substantially dependent on the success of the business itself (which, in turn, is likely to be dependent upon the general economic environment). The Company’s commercial operating loans are usually, but not always, secured by business assets and personal guarantees. However, the collateral securing the loans may depreciate over time, may be difficult to appraise and may fluctuate in value based on the success of the business.

Through its Payments segment, the Company also provides short-term ERO advance loans on a nation-wide basis. These loans are typically utilized to purchase tax preparation software and to prepare tax offices for the upcoming tax season. EROs go through an underwriting process to determine eligibility for the unsecured advances. Collection on ERO advances begins once the ERO begins to process refund transfers. Generally, when the ERO advance loan becomes delinquent for 120leases 90 days or more past due as to interest or ~~when~~principal continue to accrue because they are (1) well-secured and in the process of collection ~~of principal becomes doubtful, the Company will charge off the loan balance.~~or (2) consumer loans exempt under regulatory rules from being classified as nonaccrual until later delinquency, usually 120 days past due.

~~Commercial Insurance Premium Finance Lending~~. Through its AFS/IBEX division, the Bank provides short-term and primarily collateralized financing to facilitate the commercial customers’ purchase of insurance for various forms of risk otherwise known as commercial insurance premium financing. This includes, but is not limited to, policies for commercial property, casualty and liability risk. The AFS/IBEX division markets itself to the insurance community as a competitive option based on service, reputation, competitive terms, cost and ease of operation.

Commercial insurance premium financing is the business of extending credit to a policyholder to pay for insurance premiums when the insurance carrier requires payment in full at inception of coverage. Premiums are advanced either directly to the insurance carrier or through an intermediary/broker and repaid by the policyholder with interest during the policy term. The policyholder generally makes a 20% to 25% down payment to the insurance broker and finances the remainder over nine to ten months on average. The down payment is set such that if the policy is canceled, the unearned premium is typically sufficient to cover the loan balance and accrued interest.

Due to the nature of collateral for commercial insurance premium finance receivables, it customarily takes 60-210 days to convert the collateral into cash. In the event of default, AFS/IBEX, by statute and contract, has the power to cancel the insurance policy and establish a first position lien on the unearned portion of the premium from the insurance carrier. In the event of cancellation, the cash returned in payment of the unearned premium by the insurer has typically been sufficient to cover the receivable balance, the interest and other charges due. Due to notification requirements and processing time by most insurance carriers, many receivables will become delinquent beyond 90 days while the insurer is processing the return of the unearned premium. Generally, when a loan becomes delinquent for 210 days or more, or when collection of principal or interest becomes doubtful, the Company will charge off the loan balance and any remaining interest and fees after applying any collection from the insurance company.

~~Past due loans at December 31, 2017 and September 30, 2017 were as follows:~~

Accruing and Non-accruing Loans Nonperforming Loans
December 31, 2017 30-59 Days
Past Due 60-89 Days
Past Due > 89 Days Past Due Total Past
Due Current Total Loans
Receivable > 89 Days Past Due and Accruing Non-accrual balance Total
(Dollars in Thousands)
1-4 Family Real Estate $ 106
$ —
$ 234
$ 340
$ 203,627
203,967
234
$ —
$ 234
Commercial and Multi-Family Real Estate —
284
—
284
653,745
654,029
—
284
284
Agricultural Real Estate —
—
27,818
27,818
33,485
61,303
27,818
—
27,818
Consumer 4,192
2,015
1,624
7,831
267,150
274,981
1,624
—
1,624
Commercial Operating —
—
—
—
56,516
56,516
—
—
—
Agricultural Operating —
—
—
—
24,696
24,696
—
—
—
CML Insurance Premium Finance 1,594
592
3,194
5,380
230,291
235,671
3,194
—
3,194
Total $ 5,892
$ 2,891
$ 32,870
$ 41,653
$ 1,469,510
1,511,163
32,870
$ 284
$ 33,154

Accruing and Non-accruing Loans Nonperforming Loans
September 30, 2017 30-59 Days
Past Due 60-89 Days
Past Due > 89 Days Past Due Total Past
Due Current Total Loans
Receivable > 89 Days Past Due and Accruing Non-accrual balance Total
(Dollars in Thousands)
1-4 Family Real Estate $ 370
$ 79
$ —
$ 449
$ 196,257
$ 196,706
—
$ —
$ —
Commercial and Multi-Family Real Estate 295
—
390
685
584,825
585,510
—
685
685
Agricultural Real Estate —
—
34,198
34,198
27,602
61,800
34,198
—
34,198
Consumer 2,512
558
1,406
4,476
158,528
163,004
1,406
—
1,406
Commercial Operating —
—
—
—
35,759
35,759
—
—
—
Agricultural Operating —
—
97
97
33,497
33,594
97
—
97
CML Insurance Premium Finance 1,509
2,442
1,205
5,156
245,303
250,459
1,205
—
1,205
Total $ 4,686
$ 3,079
$ 37,296
$ 45,061
$ 1,281,771
$ 1,326,832
36,906
$ 685
$ 37,591

When analysis of borrower or lessee operating results and financial condition indicates that underlying cash flows of the borrower’s business are not adequate to meet its debt service requirements, the loan or lease is evaluated for impairment. Often, this is associated with a delay or shortfall in scheduled payments, of 210 days or more for commercial insurance premium finance loans, 180 days or more for refund advance loans, 120 days or more for ERO advance loans and 90 days or more for other loan categories. As of December 31, 2017, there were no commercial insurance premium finance loans greater than 210 days past due.as described above.

Total loans past due decreased $3.4 million to $41.7 million at December 31, 2017 from $45.1 million at September 30, 2017. This decrease was due to a $4.4 million decrease in loans greater than 90 days past due. The primary driver of the decrease in loans greater than 90 days past due included the payoff of a large nonperforming agricultural loan relationship during the first quarter of fiscal 2018.

~~Impaired loans at December 31, 2017 and September 30, 2017 were as follows:~~

Recorded
Balance Unpaid Principal
Balance Specific
Allowance
December 31, 2017 (Dollars in Thousands)
Loans without a specific valuation allowance
1-4 Family Real Estate $ 95
$ 95
$ —
Commercial and Multi-Family Real Estate 707
707
—
Consumer 61
61
—
Agricultural Operating 1,052
1,052
—
Total $ 1,915
$ 1,915
$ —

Recorded
Balance Unpaid Principal
Balance Specific
Allowance
September 30, 2017 (Dollars in Thousands)
Loans without a specific valuation allowance
1-4 Family Real Estate $ 72
$ 72
$ —
Commercial and Multi-Family Real Estate 1,109
1,109
—
Total $ 1,181
$ 1,181
$ —

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


	Three Months Ended June 30,				Nine Months Ended June 30,
(Dollars in thousands)	2022		2021		2022		2021
Term lending	$	11,114	$	14,964	$	11,908	$	14,190
Asset based lending	3,500		127		4,502		591
Factoring	1,903		33		7,980		337
Lease financing	3,529		2,435		3,194		2,994

SBA/USDA	1,776		600		1,152		600

Commercial finance	21,822		18,159		28,736		18,712





Community banking	—		19,801		—		16,144
Total loans and leases	$	21,822	$	37,960	$	28,736	$	34,856

The recognized interest income on the Company's nonaccrual loans and leases for the three ~~month periods~~and nine months ended ~~December 31, 2017~~June 30, 2022 and ~~2016.~~2021 was not significant.

Three Months Ended December 31,
2017 2016
Average
Recorded
Investment Average
Recorded
Investment
(Dollars in Thousands)
1-4 Family Real Estate $ 80
$ 172
Commercial and Multi-Family Real Estate 975
432
Consumer 20
—
Commercial Operating —
168
Agricultural Operating 351
—
Total $ 1,426
$ 772

The Company’s troubled debt restructurings ~~(“TDR”~~("TDRs") typically involve forgiving a portion of interest or principal on existing loans, or making loans at a rate materially less than current market ~~rates.~~rates, or extending the term of the loan. There were ~~$1.1~~$0.2 million of commercial finance loans and $0.5 million of consumer finance loans that were modified in a TDR during the three ~~month period~~months ended ~~December 31, 2017~~June 30, 2022, all of which were modified to extend the term of the loan. There were $3.7 million of commercial finance loans and no$0.1 million of consumer finance loans that were modified in a TDR during the three ~~month period~~months ended ~~December 31, 2016. Additionally,~~June 30, 2021, all of which were modified to extend the term of the loan, and no community banking loans.

During the nine months ended June 30, 2022, there were $10.4 million of commercial finance loans and $0.7 million of consumer finance loans that were modified in a TDR, all of which were modified to extend the term of the loan. There were $5.9 million of commercial finance loans and $0.2 million of consumer finance loans that were modified in a TDR during the nine months ended June 30, 2021 and no community banking loans.

Table of Contents

During the nine months ended June 30, 2022, the Company had $1.4 million of commercial finance loans and $0.3 million of consumer finance loans that were modified in a TDR ~~loans~~within the previous 12 months and for which there was a payment ~~default during the three month periods ended December 31, 2017 or 2016 that had been modified during the 12-month period prior to the~~ default.

~~NOTE 3. ALLOWANCE FOR LOAN LOSSES~~

At December 31, 2017, the Company’s allowance for loan losses increased to $8.9 million from $7.5 million at September 30, 2017. This increase was primarily due to the additional provision expense related to tax advance loans. During the ~~three~~nine months ended ~~December 31, 2017,~~June 30, 2021, the Company ~~recorded a provision for loan losses of $1.1 million compared to $0.8 million for the same period of the prior year. The Company~~ had ~~$0.3~~$0.4 million of ~~net recoveries for the three months ended December 31, 2017, compared to~~commercial finance loans and $0.1 million of ~~net charge-offs for the three months ended December 31, 2016.~~

~~The allowance for loan losses is established through the provision for loan losses based on management’s evaluation of the risk inherent in its loan portfolio~~consumer finance loans, and changes in the nature and volume of its loan activity, including those loans which are being specifically monitored by management. Such evaluation, which includes a review of loans for which full collectability may not be reasonably assured, considers, among other matters, the estimated fair value of the underlying collateral, economic conditions, historical loan loss experience and other factors that warrant recognition in providing for an appropriate loan loss allowance.

Management closely monitors economic developments both regionally and nationwide, and considers these factors when assessing the appropriateness of its allowance for loan losses. The current economic environment continues to show signs of improvement in the Bank’s markets. The Bank’s average loss rates over the past three years forno community banking loans that were ~~relatively low compared to peers, but~~modified in a TDR within the previous 12 months and for which there was ~~offset with~~ a ~~higher agricultural loss rate in fiscal year 2016 driven by~~payment default. TDR net charge-offs and the ~~charge off~~impact of one relationship. Although the Bank’s four market areas have indirectly benefited from a stable agricultural market, the market has become slightly stressed as commodity prices have generally remained lower than a few years ago. Management believes the low commodity prices and adverse weather conditions have the potential to negatively impact the economies of our agricultural markets. The improving economic conditions have also kept the loss ratesTDRs on the ~~national lending loans as well as the tax service loans relatively low.~~

Management believes that, based on a detailed review of the loan portfolio, historic loan losses, current economic conditions, the size of the loan portfolio and other factors, the current level of theCompany's allowance for ~~loan~~credit losses ~~at December 31, 2017, reflects an appropriate allowance against probable losses from~~were insignificant during the ~~loan portfolio. Although the Company maintains its allowance for loan losses at a level it considers to be appropriate, investors~~nine months ended June 30, 2022 and others are cautioned that there can be no assurance that future losses will not exceed estimated amounts, or that additional provisions for loan losses will not be required in future periods. In addition, the Company’s determination of the allowance for loan losses is subject to review by the OCC, which can require the establishment of additional general or specific allowances.June 30, 2021.

Real estate properties acquired through foreclosure are recorded at the lesser of fair value or the recorded investment. If fair value at the date of foreclosure is lower than the balance of the related loan, the difference will be charged to the allowance for loan losses at the time of transfer. Valuations are periodically updated by management and, if the value declines, a specific provision for losses on such property is established by a charge to operations.

NOTE 4.6. EARNINGS PER COMMON SHARE ("EPS")

~~Earnings per share is computed after deducting dividends.~~ 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.~~calculation under the two-class method. Basic ~~earnings per share~~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 ~~earnings per share~~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 ~~after~~nonvested restricted stock, where applicable. Diluted EPS under the two-class method also considers the allocation of earnings to the participating securities. Antidilutive ~~options~~securities are disregarded in ~~the~~ earnings per share calculations. Diluted EPS shown below reflects the two-class method, as diluted EPS under the two-class method was more dilutive than under the treasury stock method.

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


	Three Months Ended June 30,				Nine Months Ended June 30,
(Dollars in thousands, except per share data)	2022		2021		2022		2021
Basic income per common share:
Net income attributable to Pathward Financial, Inc.	$	22,391	$	38,701	$	132,966	$	125,805
Dividends and undistributed earnings allocated to participating securities	(377)		(729)		(2,166)		(2,411)
Basic net earnings available to common stockholders	22,014		37,972		130,800		123,394
Undistributed earnings allocated to nonvested restricted stockholders	352		699		2,093		2,318
Reallocation of undistributed earnings to nonvested restricted stockholders	(352)		(699)		(2,092)		(2,316)


Diluted net earnings available to common stockholders	$	22,014	$	37,972	$	130,801	$	123,396

Total weighted-average basic common shares outstanding	28,868,136		31,320,893		29,444,979		31,880,653
Effect of dilutive securities(1)

Performance share units	—		18,054		9,607		19,944

Total effect of dilutive securities	—		18,054		9,607		19,944
Total weighted-average diluted common shares outstanding	28,868,136		31,338,947		29,454,586		31,900,597

Net earnings per common share:
Basic earnings per common share	$	0.76	$	1.21	$	4.44	$	3.87
Diluted earnings per common share(2)	$	0.76	$	1.21	$	4.44	$	3.87

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

(2) Excluded from the computation of diluted earnings per share for the three months ended ~~December 31, 2017~~June 30, 2022 and ~~2016~~2021, respectively, were 493,800 and 601,693 weighted average shares of nonvested restricted stock because their inclusion would be anti-dilutive. Excluded from the computation of diluted earnings per share for the nine months ended June 30, 2022 and 2021, respectively, were 487,538 and 622,954 weighted average shares of nonvested restricted stock because their inclusion would be anti-dilutive.

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NOTE 7. RENTAL EQUIPMENT, NET

Rental equipment consists of the following:


(Dollars in thousands)	June 30, 2022		September 30, 2021
Computers and IT networking equipment	$	21,512	$	17,683
Motor vehicles and other	98,684		87,396
Office furniture and equipment	57,228		48,828
Solar panels and equipment	129,479		125,457
Total	306,903		279,364

Accumulated depreciation	(86,266)		(67,825)
Unamortized initial direct costs	1,386		1,577
Net book value	$	222,023	$	213,116

Undiscounted future minimum lease payments expected to be received for operating leases at June 30, 2022 were as follows:


(Dollars in thousands)
Remaining in 2022	$	9,524
2023	36,218
2024	28,143
2025	20,536
2026	12,132
Thereafter	15,684
Total undiscounted future minimum lease payments receivable for operating leases	$	122,237

NOTE 8. GOODWILL AND INTANGIBLE ASSETS

The Company held a total of $309.5 million of goodwill at June 30, 2022. The recorded goodwill is ~~presented below.~~

Three Months Ended December 31, 2017 2016
(Dollars in Thousands, Except Share and Per Share Data)
Basic income per common share:
     Net income attributable to Meta Financial Group, Inc. $ 4,670
$ 1,244
Weighted average common shares outstanding 9,656,778
8,938,339
     Basic income per common share 0.48
0.14

Diluted income per common share:
     Net income attributable to Meta Financial Group, Inc. $ 4,670
$ 1,244
Weighted average common shares outstanding 9,656,778
8,938,339
     Outstanding options - based upon the two-class method 56,063
63,061
Weighted average diluted common shares outstanding 9,712,841
9,001,400
     Diluted income per common share 0.48
0.14
a result of multiple business combinations that have been consummated since fiscal year 2015, with the most recent pursuant to the Crestmark Acquisition that closed on August 1, 2018. Goodwill is assessed for impairment at least annually or more often if conditions indicate a possible impairment. The assessment is done at a reporting unit level, which is one level below the operating segments. See Note 14. Segment Reporting for additional information on the Company's segment reporting. There have been no changes to the carrying amount of goodwill during the nine months ended June 30, 2022.

~~NOTE 5. SECURITIES~~

~~During the first quarter of fiscal 2018, the Company early adopted Accounting Standard Update ("ASU") 2017-12,~~ ~~"Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities."~~ Due to the early adoption of the ASU, the Company transferred $204.7 million of investment securities and $101.3 million of MBS from HTM to AFS during the first quarter of fiscal 2018. This change allows for enhanced balance sheet management and provides the opportunity for more liquidity, should it be needed.

~~The amortized cost, gross unrealized gains and losses and estimated fair values of available for sale and held to maturity securities at December 31, 2017 and September 30, 2017 are presented below.~~

Available For Sale
At December 31, 2017 AMORTIZED
COST
GROSS
UNREALIZED
GAINS

GROSS
UNREALIZED
(LOSSES)

FAIR
VALUE
(Dollars in Thousands)
Debt securities
Small business administration securities 56,602
349
(3 ) 56,948
Obligations of states and political subdivisions 14,513
123
(26 ) 14,610
Non-bank qualified obligations of states and political subdivisions 1,212,661
16,079
(5,710 ) 1,223,030
Asset-backed securities 93,486
2,337
—
95,823
Mortgage-backed securities 606,338
198
(6,424 ) 600,112
Total debt securities 1,983,600
19,086
(12,163 ) 1,990,523
Common equities and mutual funds 1,298
532
(1 ) 1,829
Total available for sale securities $ 1,984,898
$ 19,618
$ (12,164 ) $ 1,992,352

At September 30, 2017 AMORTIZED
COST
GROSS
UNREALIZED
GAINS
GROSS
UNREALIZED
(LOSSES)
FAIR
VALUE
(Dollars in Thousands)
Debt securities
Small business administration securities 57,046
825
—
57,871
Non-bank qualified obligations of states and political subdivisions 938,883
14,983
(3,037 ) 950,829
Asset-backed securities 94,451
2,381
—
96,832
Mortgage-backed securities 588,918
1,259
(3,723 ) 586,454
Total debt securities 1,679,298
19,448
(6,760 ) 1,691,986
Common equities and mutual funds 1,009
436
—
1,445
Total available for sale securities $ 1,680,307
$ 19,884
$ (6,760 ) $ 1,693,431

Held to Maturity
At December 31, 2017 AMORTIZED
COST
GROSS
UNREALIZED
GAINS

GROSS
UNREALIZED
(LOSSES)

FAIR
VALUE
(Dollars in Thousands)
Debt securities
Obligations of states and political subdivisions $ 4,341
$ 26
$ (25 ) $ 4,342
Non-bank qualified obligations of states and political subdivisions 230,683
336
(3,537 ) 227,482
Mortgage-backed securities 8,468
—
(148 ) 8,320
Total held to maturity securities $ 243,492
$ 362
$ (3,710 ) $ 240,144

At September 30, 2017 AMORTIZED
COST
GROSS
UNREALIZED
GAINS
GROSS
UNREALIZED
(LOSSES)
FAIR
VALUE
(Dollars in Thousands)
Debt securities
Obligations of states and political subdivisions $ 19,247
$ 157
$ (36 ) $ 19,368
Non-bank qualified obligations of states and political subdivisions 430,593
4,744
(2,976 ) 432,361
Mortgage-backed securities 113,689
—
(1,233 ) 112,456
Total held to maturity securities $ 563,529
$ 4,901
$ (4,245 ) $ 564,185

Management has implemented a process to identify securities with potential credit impairment that are other-than-temporary. This process involves evaluation of the length of time and extent to which the fair value has been less than the amortized cost basis, review of available information regarding the financial position of the issuer, monitoring the rating, watch, and outlook of the security, monitoring changes in value, cash flow projections, and the Company’s intent to sell a security or whether it is more likely than not the Company will be required to sell the security before the recovery of its amortized cost which, in some cases, may extend to maturity. To the extent the Company determines that a security is deemed to be other-than-temporarily impaired, an impairment loss is recognized.

For all securities considered temporarily impaired, the Company does not intend to sell these securities and it is not more likely than not that the Company will be required to sell the security before recovery of its amortized cost, which may occur at maturity. The Company believes it will collect all principal and interest due on all investments with amortized cost in excess of fair value and considered only temporarily impaired.

GAAP requires that, at acquisition, an enterprise classify debt securities into one of three categories: Available for Sale (“AFS”), Held to Maturity (“HTM”) or trading. AFS securities are carried at fair value on the consolidated statements of financial condition, and unrealized holding gains and losses are excluded from earnings and recognized as a separate component of equity in accumulated other comprehensive income (“AOCI”). HTM debt securities are measured at amortized cost. Both AFS and HTM are subject to review for other-than-temporary impairment. The Company did not have any trading securities at December 31, 2017 or September 30, 2017.

Gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at December 31, 2017 and September 30, 2017, were as follows:

Available For Sale LESS THAN 12 MONTHS OVER 12 MONTHS TOTAL
At December 31, 2017 Fair
Value Unrealized
(Losses) Fair
Value Unrealized
(Losses) Fair
Value Unrealized
(Losses)
(Dollars in Thousands)
Debt securities
Small business administration securities $ 14,236
$ (3 ) $ —
$ —
$ 14,236
$ (3 )
Obligations of states and political subdivisions 3,139
(26 ) —
—
3,139
(26 )
Non-bank qualified obligations of states and political subdivisions 553,626
(4,945 ) 16,045
(765 ) 569,671
(5,710 )
Mortgage-backed securities 234,672
(1,275 ) 296,252
(5,149 ) 530,924
(6,424 )
Total debt securities 805,673
(6,249 ) 312,297
(5,914 ) 1,117,970
(12,163 )
Common equities and mutual funds 1,829
(1 ) —
—
1,829
(1 )
Total available for sale securities $ 807,502
$ (6,250 ) $ 312,297
$ (5,914 ) $ 1,119,799
$ (12,164 )

LESS THAN 12 MONTHS OVER 12 MONTHS TOTAL
At September 30, 2017 Fair
Value Unrealized
(Losses) Fair
Value Unrealized
(Losses) Fair
Value Unrealized
(Losses)
(Dollars in Thousands)
Debt securities
Non-bank qualified obligations of states and political subdivisions 280,900
(2,887 ) 5,853
(150 ) 286,753
(3,037 )
Mortgage-backed securities 237,897
(1,625 ) 100,287
(2,098 ) 338,184
(3,723 )
Total debt securities 518,797
(4,512 ) 106,140
(2,248 ) 624,937
(6,760 )
Total available for sale securities $ 518,797
$ (4,512 ) $ 106,140
$ (2,248 ) $ 624,937
$ (6,760 )

Held To Maturity LESS THAN 12 MONTHS OVER 12 MONTHS TOTAL
At December 31, 2017 Fair
Value Unrealized
(Losses) Fair
Value Unrealized
(Losses) Fair
Value Unrealized
(Losses)
(Dollars in Thousands)
Debt securities
Obligations of states and political subdivisions $ 1,261
$ (3 ) $ 2,147
$ (22 ) $ 3,408
$ (25 )
Non-bank qualified obligations of states and political subdivisions 114,999
(1,789 ) 80,813
(1,748 ) 195,812
(3,537 )
Mortgage-backed securities —
—
8,320
(148 ) 8,320
(148 )
Total held to maturity securities $ 116,260
$ (1,792 ) $ 91,280
$ (1,918 ) $ 207,540
$ (3,710 )

LESS THAN 12 MONTHS OVER 12 MONTHS TOTAL
At September 30, 2017 Fair
Value Unrealized
(Losses) Fair
Value Unrealized
(Losses) Fair Value Unrealized
(Losses)
(Dollars in Thousands)
Debt securities
Obligations of states and political subdivisions $ 1,364
$ (6 ) $ 4,089
$ (30 ) $ 5,453
$ (36 )
Non-bank qualified obligations of states and political subdivisions 202,018
(2,783 ) 6,206
(193 ) 208,224
(2,976 )
Mortgage-backed securities 112,456
(1,233 ) —
—
112,456
(1,233 )
Total held to maturity securities $ 315,838
$ (4,022 ) $ 10,295
$ (223 ) $ 326,133
$ (4,245 )

At December 31, 2017, the investment portfolio included securities with current unrealized losses which have existed for longer than one year. All of these securities are considered to be acceptable credit risks. Because the declines in fair value were due to changes in market interest rates, not in estimated cash flows, and because the Company does not intend to sell these securities (has not made a decision to sell) and it is not more likely than not that the Company will be required to sell the securities before recovery of their amortized cost basis, which may occur at maturity, no other-than-temporary impairment was recorded at December 31, 2017.

The amortized cost and fair value of debt securities by contractual maturity as of the dates set forth below are shown below. Certain securities have call features which allow the issuer to call the security prior to maturity. Expected maturities may differ from contractual maturities in mortgage-backed securities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Therefore, mortgage-backed securities are not included in the maturity categories in the following maturity summary. The expected maturities of certain housing related municipal securities, Small Business Administration and asset-backed securities may differ from contractual maturities because the borrowers may have the right to prepay the obligation. However, certain prepayment penalties may apply.

Available For Sale AMORTIZED
COST
FAIR
VALUE

At December 31, 2017 (Dollars in Thousands)

Due in one year or less $ 100
$ 100
Due after one year through five years 55,485
56,375
Due after five years through ten years 452,422
462,903
Due after ten years 869,255
871,033
1,377,262
1,390,411
Mortgage-backed securities 606,338
600,112
Common equities and mutual funds 1,298
1,829
Total available for sale securities $ 1,984,898
$ 1,992,352

AMORTIZED
COST
FAIR
VALUE
At September 30, 2017 (Dollars in Thousands)

Due in one year or less $ —
$ —
Due after one year through five years 36,586
37,674
Due after five years through ten years 347,831
358,198
Due after ten years 705,963
709,660
1,090,380
1,105,532
Mortgage-backed securities 588,918
586,454
Common equities and mutual funds 1,009
1,445
Total available for sale securities $ 1,680,307
$ 1,693,431

Held To Maturity AMORTIZED
COST
FAIR
VALUE

At December 31, 2017 (Dollars in Thousands)

Due in one year or less $ 2,674
$ 2,662
Due after one year through five years 11,864
11,895
Due after five years through ten years 27,919
28,206
Due after ten years 192,567
189,061
235,024
231,824
Mortgage-backed securities 8,468
8,320
Total held to maturity securities $ 243,492
$ 240,144

AMORTIZED
COST
FAIR
VALUE
At September 30, 2017 (Dollars in Thousands)
Due in one year or less $ 1,483
$ 1,480
Due after one year through five years 17,926
18,160
Due after five years through ten years 144,996
147,832
Due after ten years 285,435
284,257
449,840
451,729
Mortgage-backed securities 113,689
112,456
Total held to maturity securities $ 563,529
$ 564,185

~~NOTE 6. 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.~~

At December 31, 2017 and September 30, 2017, unfunded loan commitments approximated $349.5 million and $233.2 million, 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 or sell securities at December 31, 2017 or September 30, 2017.~~

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 and loans in process 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~~

The Bank was served on April 15, 2013, with a lawsuit captioned Inter National Bank v. NetSpend Corporation, MetaBank, BDO USA, LLP d/b/a BDO Seidman, Cause No. C-2084-12-I filed in the District Court of Hidalgo County, Texas. The Plaintiff’s Second Amended Original Petition and Application for Temporary Restraining Order and Temporary Injunction adds both MetaBank and BDO Seidman to the original causes of action against NetSpend. NetSpend acts as a prepaid card program manager and processor for both Inter National Bank ("INB") and MetaBank. According to the Petition, NetSpend has informed INB that the depository accounts at INB for the NetSpend program supposedly contained $10.5 million less than they should. INB alleges that NetSpend has breached its fiduciary duty by making affirmative misrepresentations to INB about the safety and stability of the program, and by failing to timely disclose the nature and extent of any alleged shortfall in settlement of funds related to cardholder activity and the nature and extent of NetSpend’s systemic deficiencies in its accounting and settlement processing procedures. To the extent that an accounting reveals that there is an actual shortfall, INB alleges that MetaBank may be liable for portions or all of said sum due to the fact that funds have been transferred from INB to MetaBank, and thus MetaBank would have been unjustly enriched. The Bank is vigorously contesting this matter. In January 2014, NetSpend was granted summary judgment in this matter which is under appeal. Because the theory of liability against both NetSpend and the Bank is the same, the Bank views the NetSpend summary judgment as a positive in support of our position. An estimate of a range of reasonably possible loss cannot be made at this stage of the litigation because discovery is still being conducted.

The Bank was served, on October 14, 2016, with a lawsuit captioned Card Limited, LLC v. MetaBank dba Meta Payment Systems, Civil No. 2:16-cv-00980 in the United States District Court for the District of Utah. This action was initiated by a former prepaid program manager of the Bank, which was terminated by the Bank in fiscal year 2016. Card Limited alleges that after all of the programs were wound down, there were two accounts with a positive balance to which they are entitled. The Bank’s position is that Card Limited is not entitled to the funds contained in said accounts. The total amount to which Card Limited claims it is entitled is $4,001,025. The Bank intends to vigorously defend this claim. An estimate of a range of reasonably possible loss cannot be made at this stage of the litigation because discovery is still being conducted.

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.

~~NOTE 7. STOCK COMPENSATION~~

The Company maintains the amended and restated Meta Financial Group, Inc. 2002 Omnibus Incentive Plan, as amended (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 Compensation Committee of the Board of Directors based on the performance of the award recipients or other relevant factors.

Compensation expense for share-based awards is recorded over the vesting period at the fair value of the award at the time of the grant. The exercise price of options or fair value of non-vested (restricted) shares granted under the Company’s incentive plan is equal to the fair market value of the underlying stock at the grant date. The Company has elected, with the adoption of ASU 2016-09, to record forfeitures as they occur.

The following tables show the activity of options and nonvested (restricted) shares granted, exercised, or forfeited under the 2002 Omnibus Incentive Plan for the three months ended December 31, 2017:

Number
of
Shares
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Contractual
Term (Yrs)
Aggregate
Intrinsic
Value
(Dollars in Thousands, Except Per Share Data)
Options outstanding, September 30, 2017 75,757
$ 22.62
2.28
$ 4,225
Granted —
—
—
—
Exercised —
—
—
—
Forfeited or expired —
—
—
—
Options outstanding, December 31, 2017 75,757
$ 22.62
2.03
$ 5,305

Options exercisable, December 31, 2017 75,757
$ 22.62
2.03
$ 5,305

Number
of
Shares
Weighted
Average
Fair Value
at Grant
(Dollars in Thousands, Except Per Share Data)
Nonvested (restricted) shares outstanding, September 30, 2017 304,526
$ 86.96
Granted 42,181
85.03
Vested (61,161 ) 83.55
Forfeited or expired —
—
Nonvested (restricted) shares outstanding, December 31, 2017 285,546
$ 87.40

During the first and second quarters of fiscal 2017, stock awards were granted to the Company's three highest paid executive officers in connection with their signing of employment agreements with the Company. These stock awards vest over eight years.

~~At December 31, 2017, stock-based compensation expense not yet recognized in income totaled $17.2 million, which is expected to be recognized over a weighted average remaining period of 3.68 years.~~

~~NOTE 8. 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 reports its results of operations through the following three business segments:~~ ~~Payments, Banking, and Corporate Services/Other~~. Certain shared services, including the investment portfolio, wholesale deposits and borrowings, are included in Corporate Services/Other. National Lending and Community Banking are reported in the Banking segment. MPS, Refund Advantage, EPS Financial ("EPS"), SCS, and other tax businesses are reported in the ~~Payments~~ ~~segment.~~

~~The Company reclassified goodwill, intangibles, and related amortization expenses during fiscal year 2017 from the~~

~~Corporate Services / Other~~ ~~segment to~~ ~~Payments~~ ~~and~~ ~~Banking~~ ~~based on how annual impairment testing is performed. Prior period amounts have also been reclassified to conform to the current year presentation.~~

~~The following tables present segment data for the Company for the three months ended December 31, 2017 and 2016, respectively.~~

Payments Banking Corporate
Services/Other Total
Three Months Ended December 31, 2017
Interest income $ 4,669
$ 16,478
$ 9,710
$ 30,857
Interest expense —
881
3,780
4,661
Net interest income 4,669
15,597
5,930
26,196
Provision for loan losses 1,017
51
—
1,068
Non-interest income 28,101
1,485
(318 ) 29,268
Non-interest expense 26,934
6,568
10,540
44,042
Income (loss) before income tax expense (benefit) 4,819
10,463
(4,928 ) 10,354

Total goodwill 87,145
11,578
—
98,723
Total assets 380,442
1,478,693
3,558,828
5,417,963
Total deposits 2,768,736
236,494
508,415
3,513,645

Payments Banking Corporate
Services/Other Total
Three Months Ended December 31, 2016
Interest income $ 2,912
$ 10,754
$ 8,909
$ 22,575
Interest expense —
544
2,198
2,742
Net interest income 2,912
10,210
6,711
19,833
Provision for loan losses 331
512
—
843
Non-interest income 19,024
1,072
(747 ) 19,349
Non-interest expense 22,080
5,845
8,828
36,753
Income (loss) before income tax expense (benefit) (475 ) 4,925
(2,864 ) 1,586

Total goodwill 87,320
11,578
—
98,898
Total assets 239,804
1,118,429
2,855,096
4,213,329
Total deposits 2,435,530
225,182
1,002,425
3,663,137

~~NOTE 9. NEW ACCOUNTING PRONOUNCEMENTS~~

~~Accounting Standards Update (“ASU”) No. 2016-13,~~ ~~Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments~~

This ASU requires organizations to replace the incurred loss impairment methodology with a methodology reflecting expected credit losses with considerations for a broader range of reasonable and supportable information to substantiate credit loss estimates. This ASU is effective for annual reporting periods beginning after December 15, 2019. The Company is currently undertaking a data analysis and is taking measures so that its systems capture data applicable to the standard. In addition, the Company is undergoing a readiness assessment with an external consultant that began in the first quarter of fiscal 2018.

~~ASU No. 2016-04,~~ ~~Extinguishment of Liabilities (Subtopic 405-20): Recognition of Breakage for Certain Prepaid Stored-Value Products~~

~~This ASU requires organizations to derecognize the deposit liabilities for unredeemed prepaid stored-value products (i.e. – breakage) consistent with breakage guidance in Topic 606,~~ ~~Revenue from Contracts with Customers.~~ ~~This ASU is effective for annual reporting periods beginning after December 15, 2017, and the Company expects the impact to the consolidated financial statements to be minimal.~~

~~ASU No. 2016-02,~~ ~~Leases (Topic 842): Amendments to the Leases Analysis~~

This ASU requires organizations to recognize lease assets and lease liabilities on the balance sheet, along with disclosing key information about leasing arrangements. This update is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period, and the Company has finalized its initial assessment of the ASU and expects that the standard will be immaterial to the consolidated financial statements with the Company's current leases.

~~ASU No. 2014-09,~~ ~~Revenue Recognition – Revenue from Contracts with Customers (Topic 606)~~

This ASU provides guidance on when to recognize revenue from contracts with customers. The objective of this ASU is to eliminate diversity in practice related to this topic and to provide guidance that would streamline and enhance revenue recognition requirements. The ASU defines five steps to recognize revenue, including identify the contract with a customer, identify the performance obligations in the contract, determine a transaction price, allocate the transaction price to the performance obligations and then recognize the revenue when or as the entity satisfies a performance obligation. This update is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period, and the Company is currently assessing all income streams, including different prepaid card programs so as to ascertain how breakage will be recognized under the standard.

~~ASU 2015-17,~~ ~~Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes~~

This ASU requires entities with a classified balance sheet to present all deferred tax assets and liabilities as noncurrent. This update was effective for annual and interim periods in fiscal years beginning after December 15, 2016, and did not have an impact on the consolidated financial statements.

~~ASU 2016-15,~~ ~~Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments~~

This ASU addresses eight classification issues related to the statement of cash flows including: debt prepayment or debt extinguishment costs, settlement of zero-coupon bonds, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, proceeds from the settlement of corporate-owned life insurance policies, including bank-owned life insurance policies, distributions received from equity method investees, beneficial interests in securitization transactions, and separately identifiable cash flows and application of the predominance principle. This update is effective for annual and interim periods in fiscal years beginning after December 15, 2017, and the Company expects the impact to the consolidated financial statements to be minimal.

~~ASU 2017-08,~~ ~~Receivables - Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities~~

This ASU requires entities to shorten the amortization period for certain callable debt securities held at a premium. Specifically, the amendments in this update require the premium to be amortized to the earliest call date. The amendments do not require an accounting change for securities held at a discount; the discount continues to be amortized to maturity. The amendments in this update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018, and is not expected to have a material impact on the consolidated financial statements.

~~ASU 2017-12,~~ ~~Receivables - Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities~~

This ASU targets improving the accounting treatment for hedging activities and provides more flexibility in defining what can be hedged, while reducing earnings volatility due to ineffective hedges, and minimizing documentation requirements. The ASU also offers the ability to reclassify prepayable debt securities from HTM to AFS and subsequently sell the securities, as long as the securities are eligible to be hedged. This update is effective for annual periods and interim periods in fiscal years beginning after December 15, 2018, with early adoption permitted in any interim period or fiscal year before the effective date. The Company early adopted ASU 2017-12 as of October 1, 2017. The Company reclassified certain prepayable debt securities from HTM to AFS during the first quarter of fiscal 2018. See Note 5 to the Notes to Condensed Consolidated Financial Statements for additional information on the securities reclassed.

~~ASU 2016-01,~~ ~~Financial Instruments (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities~~

This ASU allows equity investments that do not have a readily determinable fair value to be remeasured at fair value either upon the occurrence of an observable price change or upon identification of an impairment. The ASU also requires enhanced disclosure about those investments. The ASU simplifies the impairment assessment of equity investments without readily determinable fair values by requiring assessment for impairment qualitatively at each reporting period. Entities that are required to disclose the fair value of financial instruments measured at amortized cost on the balance sheet are required to use the exit price notion consistent with Topic 820, ~~Fair Value Measuremen~~t. This update will be effective for annual and interim periods in fiscal years beginning after December 15, 2017, with early adoption permitted. The Company is currently evaluating the potential impact of ASU 2016-01 on its consolidated financial statements.

~~NOTE 10. FAIR VALUE MEASUREMENTS~~

~~Accounting Standards Codification (“ASC”) 820,~~ ~~Fair Value Measurements~~ defines fair value, establishes a framework for measuring the fair value of assets and liabilities using a hierarchy system and requires disclosures about fair value measurement. It clarifies that fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the market in which the reporting entity transacts.

~~The fair value hierarchy is as follows:~~

~~Level 1 Inputs~~ ~~– Valuation is based upon quoted prices for identical instruments traded in active markets that the Company has the ability to access at measurement date.~~

~~Level 2 Inputs~~ – Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques for which significant assumptions are observable in the market.

~~Level 3 Inputs~~ – Valuation is generated from model-based techniques that use significant assumptions not observable in the market and are used only to the extent that observable inputs are not available. These unobservable assumptions reflect the Company’s own estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include use of option pricing models, discounted cash flow models and similar techniques.

~~Securities Available for Sale and Held to Maturity~~. Securities available for sale are recorded at fair value on a recurring basis and securities held to maturity are carried at amortized cost. 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. For both Level 1 and Level 2 securities, management uses various methods and techniques to corroborate prices obtained from the pricing service, including but not limited to reference to dealer or other market quotes, and by reviewing valuations of comparable instruments. The Company’s Level 1 securities include equity securities and mutual funds. Level 2 securities include U.S. Government agency and instrumentality securities, U.S. Government agency and instrumentality mortgage-backed securities, municipal bonds and corporate debt securities. The Company had no Level 3 securities at December 31, 2017 or September 30, 2017.

The fair values of securities are determined by obtaining quoted prices on nationally recognized securities exchanges (Level 1 inputs), or valuation based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model based valuation techniques for which significant assumptions are observable in the market (Level 2 inputs). The Company considers these valuations supplied by a third party provider which utilizes several sources for valuing fixed-income securities. These sources include Interactive Data Corporation, Reuters, Standard and Poor’s, Bloomberg Financial Markets, Street Software Technology, and the third party provider’s own matrix and desk pricing. The Company, no less than annually, reviews the third party’s methods and source’s methodology for reasonableness and to ensure an understanding of inputs utilized in determining fair value. Sources utilized by the third party provider include but are not limited to pricing models that vary based by asset class and include available trade, bid, and other market information. This methodology includes but is not limited to broker quotes, proprietary models, descriptive terms and conditions databases, as well as extensive quality control programs. Monthly, the Company receives and compares prices provided by multiple securities dealers and pricing providers to validate the accuracy and reasonableness of prices received from the third party provider. On a monthly basis, the Investment Committee reviews mark-to-market changes in the securities portfolio for reasonableness.

The following table summarizes the fair values of securities available for sale and held to maturity at December 31, 2017 and September 30, 2017. Securities available for sale are measured at fair value on a recurring basis, while securities held to maturity are carried at amortized cost in the consolidated statements of financial condition.

Fair Value At December 31, 2017
Available For Sale Held to Maturity
(Dollars in Thousands) Total Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3
Debt securities
Small business administration securities 56,948
—
56,948
—
—
—
—
—
Obligations of states and political subdivisions 14,610
—
14,610
—
4,342
—
4,342
—
Non-bank qualified obligations of states and political subdivisions 1,223,030
—
1,223,030
—
227,482
—
227,482
—
Asset-backed securities 95,823
—
95,823
—
—
—
—
—
Mortgage-backed securities 600,112
—
600,112
—
8,320
—
8,320
—
Total debt securities 1,990,523
—
1,990,523
—
240,144
—
240,144
—
Common equities and mutual funds 1,829
1,829
—
—
—
—
—
—
Total securities $ 1,992,352
$ 1,829
$ 1,990,523
$ —
$ 240,144
$ —
$ 240,144
$ —

Fair Value At September 30, 2017
Available For Sale Held to Maturity
(Dollars in Thousands) Total Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3
Debt securities
Small business administration securities 57,871
—
57,871
—
—
—
—
—
Obligations of states and political subdivisions —
—
—
—
19,368
—
19,368
—
Non-bank qualified obligations of states and political subdivisions 950,829
—
950,829
—
432,361
—
432,361
—
Asset-backed securities 96,832
—
96,832
—
—
—
—
—
Mortgage-backed securities 586,454
—
586,454
—
112,456
—
112,456
—
Total debt securities 1,691,986
—
1,691,986
—
564,185
—
564,185
—
Common equities and mutual funds 1,445
1,445
—
—
—
—
—
—
Total securities $ 1,693,431
$ 1,445
$ 1,691,986
$ —
$ 564,185
$ —
$ 564,185
$ —

~~Loans.~~ The Company does not record loans at fair value on a recurring basis. However, if a loan is considered impaired, an allowance for loan losses is established. Once a loan is identified as individually impaired, management measures impairment in accordance with ASC 310, ~~Receivables~~.

The following table summarizes the assets of the Company that were measured at fair value in the consolidated statements of financial condition on a non-recurring basis as of December 31, 2017 and September 30, 2017.

Fair Value At December 31, 2017
(Dollars in Thousands) Total Level 1 Level 2 Level 3
Foreclosed Assets, net 128
—
—
128
Total $ 128
$ —
$ —
$ 128

Fair Value At September 30, 2017
(Dollars in Thousands) Total Level 1 Level 2 Level 3
Foreclosed Assets, net 292
292
Total $ 292
$ —
$ —
$ 292

Quantitative Information About Level 3 Fair Value Measurements
(Dollars in Thousands) Fair Value at
December 31, 2017 Fair Value at
September 30, 2017 Valuation
Technique Unobservable Input Range of Inputs
Foreclosed Assets, net $ 128
292
Market approach
Appraised values ⁽¹⁾
4.00 - 10.00%

⁽¹⁾

~~The Company generally relies on external appraisers to develop this information. Management reduced the appraised value by estimating selling costs in a range of~~ 4% to ~~10%~~.

Table of ~~the outstanding shares of the Company.~~Contents

On January 25, 2018, the Company announced that the Bank entered into a three-year program agreement with Liberty Lending, LCC ("Liberty"), whereby the Bank will provide personal loans to Liberty customers. Under the agreement, the Bank expects to originate between $500 million and $1 billion in personal loans during the term of the program. The loan products contemplated under this agreement will be closed-end installment loans ranging from $3,500 to $45,000 in principal amount with lengths of between 13 and 60 months. The Bank expects to begin providing such loans as early as the third quarter of fiscal 2018. The Bank has the contractual right to sell these loans or interests in the loans. The agreement marks the entry point for the Company into a direct-to-consumer credit business.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

~~META~~PATHWARD FINANCIAL, ~~GROUP, INC®.~~INC.®

AND SUBSIDIARIES

~~FORWARD LOOKING~~FORWARD-LOOKING STATEMENTS

~~Meta Financial Group, Inc.®, (“Meta Financial”~~PATHWARD FINANCIAL, INC.TM("Pathward" or ~~“the Company”~~the "Company" or ~~“us”~~"us") and its wholly-owned subsidiary, ~~MetaBank® (the “Bank” or “MetaBank”~~PathwardTM, National Association ("the Bank"), may from time to time make written or oral “forward-looking statements,” including statements contained in this Quarterly Report on Form 10-Q, ~~in its~~the Company’s other filings with the Securities and Exchange Commission ~~(“SEC”~~(the "SEC"), ~~in its~~the Company’s reports to stockholders, and in other communications by the Company and ~~the Bank,~~Pathward, National Association, which are made in good faith by the Company pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995.

You can identify forward-looking statements by words such as “may,” “hope,” “will,” “should,” “expect,” “plan,” “anticipate,” “intend,” “believe,” “estimate,” “predict,” “potential,” “continue,” “could,” “future,” or the negative of those terms, or other words of similar meaning or similar expressions. You should carefully read statements that contain these words because they discuss our future expectations or state other “forward-looking” information. These forward-looking statements are based on information currently available to us and assumptions about future events, and include statements with respect to the Company’s beliefs, expectations, estimates, and intentions, which 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 risks, uncertainties and other factors may cause our actual growth, results of operations, financial condition, cash flows, performance and business prospects and opportunities to differ materially from those expressed in, or implied by, these forward-looking statements. Such statements address, among others, the following subjects: future operating results; our ability to remediate the material weakness in our internal controls over financial reporting and otherwise maintain effective internal controls over financial reporting; the expected impact of the ongoing COVID-19 pandemic and related governmental actions on our business, industry, and the capital markets; customer retention; expectations regarding the Company's and the Bank's ability to meet minimum capital ratios and capital conservation buffers; loan and other product demand; ~~important components of the Company's statements of financial condition~~expectations concerning acquisitions and ~~operations; growth and expansion;~~divestitures; new products and ~~services, such as those offered by~~services; credit quality; the ~~Bank or~~level of net charge-offs and the Company's Payments divisions (which includes Meta Payments Systems (“MPS”) and its tax-related financial solutions divisions: Refund Advantage, EPS Financial (“EPS”) and Specialty Consumer Services (“SCS”)); credit quality and adequacy of ~~reserves;~~the allowance for credit losses; technology; and ~~the Company's~~management and other employees. The following factors, among others, could cause the Company's financial performance and results of operations to differ materially from the expectations, estimates, and intentions expressed in such forward-looking statements: ~~the risk that the transaction with Crestmark may not occur on a timely basis or at all; the parties’ ability to obtain regulatory approvals~~successfully transitioning and approval of their respective shareholders, and otherwise satisfy the other conditions to closing, on a timely basis or at all; the risk that the businesses of the Company and MetaBank, on the one hand, and Crestmark and Crestmark Bank, on the other hand, may not be combined successfully, or such combination may take longer, be more difficult, time-consuming or costly to accomplish than expected; themaintaining our executive management team; expected growth opportunities ~~beneficial synergies and/or operating efficiencies from the proposed transaction with Crestmark~~ may not be ~~fully~~ realized or may take longer to realize than expected; ~~customer losses and business disruption following~~ the ~~announcement or consummation~~potential adverse effects of the ~~proposed transaction; potential litigation relating to the proposed merger transaction; the risk that the Company may incur unanticipated~~ongoing COVID-19 pandemic and any governmental or ~~unknown losses~~societal responses thereto, or ~~liabilities if it completes the proposed transaction with Crestmark~~other unusual and ~~Crestmark Bank; the risk that the Company’s preliminary analysis of~~infrequently occurring events, including the impact ofon financial markets from geopolitical conflicts such as the ~~Tax Act may be incorrect; additional~~military conflict between Russia and Ukraine; successfully completing our announced rebranding and our ability to achieve brand recognition equal to or greater than we currently enjoy; changes in tax laws; the risk that the Bank may be unable to originate between $500 million and $1 billion in personal loans during the three-year term of the program agreement with Liberty Lending, LLC; the risk that we are unable to recoup a significant portion of the lost earnings associated with the non-renewal of the agreement with H&R Block through agreements with new tax partners and expanded relationships with existing tax partners; the risk that loan production levels and other anticipated benefits related to the agreement with Jackson Hewitt Tax Service®, as extended, may not be as much as anticipated; maintaining our executive management team; 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~~operates; changes in trade, monetary, and fiscal policies and laws, including actual changes in interest ~~rate policies of~~rates and the Board of Governors of the Federal Reserve System (the “Federal Reserve”), as well as efforts of the United States Treasury in conjunction with bank regulatory agencies to stimulate the economy and protect the financial system;Fed funds rate; inflation, ~~interest rate,~~ market, and monetary fluctuations; the timely ~~development of,~~ and ~~acceptance~~efficient development of new products and services offered by the Company or its strategic partners, as well as risks (including reputational and litigation) attendant thereto, and the perceived overall value and acceptance of these products and services by users; the Bank's ability to maintain its Durbin Amendment exemption; the risks of dealing with or utilizing third parties, including, in connection with the Company’s tax refund advance ~~business,~~business; the risk of reduced volume of refund advance loans as a result of reduced customer demand for or ~~acceptance of~~ usage of ~~the Company’s~~Pathward’s strategic partners’ refund advance products; our relationship with, and any actions which may be initiated by our ~~regulators in the future; the impact of~~regulators; changes in financial services laws and regulations, including ~~but not limited to,~~ laws and regulations relating to the tax refund industry and the insurance premium finance ~~industry; our relationship with our primary regulators,~~industry and recent and potential changes in response to the Office of the Comptroller of the Currency (“OCC”) and the Federal Reserve, as well as the Federal Deposit Insurance Corporation (“FDIC”), which insures the Bank’s deposit accounts up to applicable limits;ongoing COVID-19 pandemic; technological changes, including, but not limited to, the ~~protection~~security of our electronic ~~files or databases; acquisitions;~~systems and information; the impact of acquisitions and divestitures; litigation ~~risk, in general, including, but not limited to, those risks involving the Bank's divisions;~~risk; the growth of the Company’s business, as well as expenses related thereto; continued maintenance by ~~the Bank~~Pathward, National Association of its status as a well-capitalized ~~institution, particularly in light of our growing deposit base, a portion of which has been characterized as “brokered”;~~institution; changes in consumer spending and saving habits; losses from fraudulent or illegal activity; technological risks and developments, and cyber threats, attacks or events; and the success of the Company at maintaining its high quality asset level and managing and collecting assets of borrowers in default should problem assets increase.

The foregoing list of factors is not exclusive. We caution you not to place undue reliance on these forward-looking statements. The forward-looking statements included in this Quarterly Report on Form 10-Q speak only as of the date ~~hereof.~~hereof, and the Company does not undertake any obligation to update, revise, or clarify these forward-looking statements whether as a result of new information, future events or otherwise. All subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in ~~their~~its entirety by the cautionary statements contained or referred to in this section. Additional discussions of factors affecting the Company’s business and prospects are ~~included~~reflected under the caption ~~"Risk Factors"~~“Risk Factors” and in other sections of the Company’s Annual Report on Form 10-K for the Company’s fiscal year ended September 30, ~~2017~~2021, and in other filings made with the SEC. The Company expressly disclaims any intent or obligation to update any forward-looking statements, whether written or oral, that may be made from time to time by or on behalf of the Company or its subsidiaries, whether as a result of new information, changed circumstances, or future events or for any other reason.

Table of Contents

GENERAL

The Company, a registered ~~unitary savings and loan~~bank holding company, is a Delaware corporation, the principal assets of which are all the issued and outstanding shares of the Bank, a ~~federal savings~~national bank. Unless the context otherwise requires, references herein to the Company include ~~Meta Financial~~Pathward and the Bank, and all direct or indirect subsidiaries of ~~Meta Financial~~Pathward on a consolidated basis.

The Company’s common stock trades on the NASDAQ Global Select Market under the symbol “CASH.”

The following discussion focuses on the consolidated financial condition of the Company at ~~December 31, 2017,~~June 30, 2022, compared to September 30, ~~2017,~~2021, and the consolidated results of operations for the three and nine months ended ~~December 31, 2017~~June 30, 2022 and ~~2016.~~2021. This discussion should be read in conjunction with the Company’s consolidated financial statements, and notes thereto, for the year ended September 30, ~~2017~~2021 and the related management's discussion and analysis of financial condition and results of operations contained in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, ~~2017.~~2021.

~~BUSINESS DEVELOPMENTS~~EXECUTIVE SUMMARY

Business Development Highlights for the 2022 Fiscal Third Quarter

•On ~~January 9, 2018,~~July 13, 2022, the Company announced ~~that~~ it ~~entered into a definitive merger agreement with Crestmark Bancorp,~~changed its name to Pathward Financial, Inc. ~~(“Crestmark”), the holding company of Crestmark Bank, whereby the Company will acquire Crestmark in an all-stock transaction.~~

Pursuant to the terms of the merger agreement, at the effective time of the merger, Crestmark will merge with and into the Company, and Crestmark Bank will merge with and into MetaBank. As of September 30, 2017, the Bank had $5.2 billion in assets and $1.3 billion in total loans and, on a pro forma consolidated basis, the combined company would have had approximately $6.4 billion in assets and $2.2 billion in loans and leases, or 34% of total assets, with lending operations throughout the U.S.

Under the terms of the merger agreement, Crestmark shareholders will receive 2.65 shares of the Company's common stock for each share of Crestmark common stock. The aggregate value of the acquisition consideration, based on the closing price of Meta Financial shares on January 8, 2018, of $91.35, would have been $320.6 million. Giving effect to the transaction, existing shareholders of the Company are expected to own approximately 75%™, and ~~Crestmark shareholders are expected~~its bank subsidiary, MetaBank®, N.A., changed its name to ~~own approximately 25%~~Pathward™, ofN.A. ("Pathward" or the ~~outstanding shares of the Company.~~

Crestmark, through Crestmark Bank, is a commercial lender offering asset-based loans, equipment finance leases and government guaranteed loans to small and mid-sized businesses across the US. Crestmark focuses on working"Bank"). Certain changes were made immediately, with a ~~broad range~~full transition to Pathward expected by the end of ~~industries,~~this calendar year, including ~~manufacturing, transportation~~the launch of a new brand identity and ~~health care. Crestmark will operate as a division~~website. The Company recognized $3.4 million of ~~MetaBank and will continue~~pre-tax expenses related to ~~operate from its offices in Troy, Michigan.~~

On January 25, 2018, the Company announced that MetaBank entered into a three year program agreement with Liberty Lending, LLC ("Liberty"), whereby MetaBank will provide personal loans to Liberty customers. Under the agreement, the Bank expects to originate between $500 million and $1 billion in personal loansrebranding efforts during the term of the program. The loan products contemplated under this agreement will be closed-end installment loans ranging from $3,500 to $45,000 in principal amount with lengths of between 13 and 60 months. The Bank expects to begin providing such loans as early as the third quarter of fiscal ~~2018.~~2022. The ~~Bank has~~Company continues to estimate total rebranding expenses will range between $15 million to $20 million.

•As part of the ~~contractual right~~Company's priority to ~~sell these loans or interests in~~work with partners that use a broader suite of the ~~loans. The agreement marks~~capabilities and multi-product solutions that it provides, the ~~entry point~~Company will not be renewing its agreements with Liberty Tax and Jackson Hewitt. This change is expected to boost operational efficiencies over time. Taxpayer advance volumes are expected to be reduced by approximately 30% next year. No significant impact is anticipated to refund transfer volumes. During the quarter, the Company recognized $1.2 million of pre-tax one-time partner termination related expenses.

Financial Highlights for the ~~Company into~~2022 Fiscal Third Quarter

•Total revenue for the third quarter was $126.1 million, a ~~direct-to-consumer credit business.~~

~~As previously disclosed, on October 11, 2017, the Company completed the purchase~~decrease of a $73.0 million, seasoned, floating rate, private student loan portfolio. All loans are indexed to one-month LIBOR. The portfolio is serviced by ReliaMax Lending Services LLC and insured by ReliaMax Surety Company. This portfolio purchase builds on the Company's existing student loan platform.

~~OVERVIEW OF FINANCIAL PERFORMANCE~~

~~The Company recorded net income of $4.7~~$4.8 million, or $0.48 per diluted share, for the three months ended December 31, 2017, compared to net income of $1.2 million, or $0.14 per diluted share, for the three months ended December 31, 2016, an increase of 275%. Included in the 2018 fiscal first quarter net income was an additional, non recurring income tax expense of $3.6 million from a reduction in the value of certain deferred tax assets as a result of the Tax Cuts and Jobs Act (the "Tax Act") signed into law on December 22, 2017. The 2018 fiscal first quarter pre-tax results included a $1.0 million loss on sale of investments and $1.3 million of acquisition expenses. The 2018 fiscal first quarter pre-tax results also included $1.7 million in amortization of intangible assets and $1.3 million in non-cash stock-related compensation associated with executive officer employment agreements.

~~Net interest income was $26.2 million in the 2018 fiscal first quarter, an increase of $6.4 million, or 32%~~4%, compared to the first quarter of fiscal 2017. This increase was primarily a result of high credit quality loan growth in both the commercial insurance premium finance loan portfolio and community banking loan portfolio, as well as the purchased floating rate student loans. Also contributing to the improvement were increases in higher yielding securities balances, primarily due to highly-rated tax-exempt municipal securities at relatively high tax equivalent yields and a continuing improvement in the overall interest-earning asset mix.

~~Card fee income increased $6.8 million, or 37%, for the 2018 fiscal first quarter when~~ compared to the same quarter in ~~2017. This increase was due to residual fees related to a wind down of two of our non-strategic programs. The Company expects~~ fiscal ~~year 2018 total card fee income to be between $95.0 million and $101.0 million and expects total card processing expense to be between $23.0 million and $27.0 million.~~

Total tax product fee income increased $1.5 million, or 242%, from $0.6 million for the three months ended December 31, 2016 to $2.1 million for the three months ended December 31, 2017. This increase was primarily due to the volume of pre-season tax advance loans originated during the first quarter of fiscal 2018 compared to the first quarter of fiscal 2017. All of these loans are being held during fiscal 2018, as opposed to the previous year when many of these loans were sold, which also contributed to the increase.

~~The Company's 2018 fiscal first quarter average assets grew to $4.12 billion, compared to $3.49 billion in the 2017 first quarter, an increase of 18%,~~2021, primarily driven by ~~growth~~a decrease in ~~loan and securities balances.~~

Total loans receivable, net of allowance for loan losses, increased $393.2 million, or 36%, at December 31, 2017, compared to December 31, 2016. This increase was primarily related to growth in commercial real estate loans of $213.5 million, or 48%, growth in consumer loans of $101.8 million, or an increase of 59%, of which $56.7 million was attributable to the Company's purchased student loan portfolios and $44.0 million was related to refund advance loans, growth in commercial insurance premium finance loans of $56.2 million, or an increase of 31%, and growth in residential mortgage loans of $31.1 million, or an increase of 18%. The growth in net loans receivable from December 31, 2016 to December 31, 2017 wasnoninterest income, partially offset by an ~~$11.6~~increase in interest income.

•Net interest income for the third quarter was $72.2 million, an increase of $3.7 million compared to $68.5 million in the third quarter last year.

•Net interest margin ("NIM") increased to 4.76% for the third quarter from 3.75% during the same period of last year. The prior year period was impacted by excess cash associated with the Company's participation in the U.S. Treasury Department's Economic Impact Program ("EIP").

•Total gross loans and leases at June 30, 2022 increased $188.3 million, to $3.68 billion, or 5%, compared to June 30, 2021 and decreased $42.6 million, or 1%, when compared to March 31, 2022. The increase compared to the prior year quarter was driven by growth across our commercial finance portfolio, partially offset by the sale of all remaining community banking loans during the fiscal 2022 first quarter. The primary driver for the decrease oron a ~~12% decrease,~~linked quarter basis was the seasonal decline in tax services loans.

•The Company originated $4.4 million in aggregate principal of renewable energy loan financing for the third quarter of fiscal 2022, resulting in $1.0 million in total ~~agricultural loans. Excluding all purchased student~~net investment tax credits. During the third quarter of fiscal 2021. the Company originated $13.5 million in aggregate principle of renewable energy loan ~~portfolios~~financing resulting in $3.4 million in total net investment tax credits.

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•On May 15, 2022, the Company retired the outstanding $75.0 million subordinated debt, which was due August 15, 2026. As a result of the retirement, the company will save more than $4 million of interest expense per year.

•The Company resumed share repurchases on July 1, 2022, and ~~refund advance loans,~~through August 2, 2022, the Company repurchased 305,700 shares of common stock at an average share price of $40.74. There are 4,562,477 shares available for repurchase under the common stock share repurchase program announced during the fourth quarter of fiscal year 2021.

Tax Season Recap

During the third quarter of fiscal 2022, total ~~loans receivable,~~tax services product revenue was $10.3 million, compared to $13.6 million in the prior year quarter. Total tax services product income, net of ~~allowance for loan~~ losses ~~at December 31, 2017 were up $293.1~~and direct product expenses, increased 9% to $43.5 million ~~or 30%, compared~~from $40.0 million, when comparing the first nine months of fiscal 2022 to the same period of the prior fiscal year. ~~At December 31, 2017, community banking loans increased $223.3 million, or 29%, compared~~

While taxpayer advances came in below the Company's expectations, overall refund transfer revenues grew 9% year-over-year. Looking ahead to ~~December 31, 2016.~~

~~Payments division average deposits increased $295.2 million, or 15%, for the 2018 fiscal first quarter when compared to the same quarter of 2017.~~

Non-performing assets (“NPAs”) were 0.61% of total assets at December 31, 2017, compared to 0.05% at December 31, 2016. The increase in NPAs was primarily related to a large, well-collateralized agricultural loan relationship being more than 90 days past due, which was still accruing at December 31, 2017. On January 2, 2018, a deed in lieu of foreclosure was executed on the collateral for this relationship upon whichnext year, the Company ~~took ownership~~continues to expect strong refund transfer volumes and greater efficiency in its tax line of business as a result of the ~~properties serving as collateral and transferred the loans to foreclosed real estate and repossessed assets. If, as expected, the properties are sold prior to the end~~non-renewal of the agreed-upon receivership period set forth in the settlement agreement, the Company will be entitled to all principal, note interest, legal and other fees and expenses. After the receivership period ends, if the properties are not sold, the Company will be entitled to the fair value of the properties, which the Company believes to be significantly in excess of all principal, note interest, legal and other fees and expenses. At September 30, 2017, NPAs were 0.72% of total assets. The decrease in NPAs from September 30, 2017 to December 30, 2017 was primarily due to the payoff of a $7.0 million nonperforming agricultural loan relationship during the first quarter of fiscal 2018.Company's two aforementioned tax partner relationships.

FINANCIAL CONDITION

At ~~December 31, 2017,~~June 30, 2022, the Company’s total assets increased by ~~$189.6~~$37.5 million ~~or 4%,~~ to ~~$5.42~~$6.73 billion compared to ~~$5.23 billion at~~ September 30, ~~2017. The increase in assets was~~2021, primarily due to an increase of $91.6 million in securities available for sale and an increase of $79.0 million in total loans ~~receivable.~~and leases, partially offset by a decrease in cash and cash equivalents of $156.8 million.

Total cash and cash equivalents ~~were $1.30 billion~~was $157.3 million at ~~December 31, 2017, an increase of $32.8~~June 30, 2022, decreasing from $314.0 million ~~or 3%, from $1.27 billion~~at September 30, ~~2017. Similar to September 30, 2017,~~2021, primarily resulting from a decrease in excess cash associated with the ~~Company also temporarily repositioned~~Company's participation in the ~~balance sheet at~~EIP in the ~~end of~~prior year. Otherwise, the ~~2018 fiscal first quarter to prepare for the upcoming seasonal tax lending activity.~~

~~The~~ Company maintains its cash investments primarily in interest-bearing overnight deposits with the FHLB of Des Moines and the ~~Federal Reserve Bank.~~ FRB. At June 30, 2022, the Company did not have any federal funds sold.

The total ~~of mortgage-backed securities (“MBS”) and~~ investment ~~securities decreased $21.1~~portfolio increased $78.8 million, or 1%4%, to ~~$2.24~~$2.00 billion at ~~December 31, 2017,~~June 30, 2022, compared to ~~$2.26~~$1.92 billion at September 30, ~~2017,~~2021, as purchases exceeded maturities ~~sales,~~ and principal pay ~~downs exceeded purchases.~~downs. The Company’s portfolio of ~~investment~~ securities ~~and MBS securities~~customarily consists primarily of ~~U.S. Government agency and instrumentality~~ MBS, which have ~~relatively short~~ expected lives ~~U.S. Government related asset backed securities, U.S. Government agency or instrumentality collateralized housing related municipal securities, and high quality~~much shorter than the stated final maturity, non-bank qualified obligations of states and political subdivisions, ~~(“NBQ”),~~ which mature in approximately 15 years or ~~less. Of~~less, and other tax exempt municipal mortgage related pass through securities which have average lives much shorter than their stated final maturities. All MBS held by the ~~total MBS, $600.1 million~~Company at June 30, 2022 were classified as available for sale, and $8.5 million were classified as held to maturity. Of the total investment securities, $1.39 billion were classified as available for sale and $235.0 million were classified as held to maturity.issued by a U.S. Government agency or instrumentality. During the ~~three month period~~nine months ended ~~December 31, 2017,~~June 30, 2022, the Company purchased ~~$105.3~~$689.5 million of investment ~~securities available~~securities.

Loans held for sale ~~no MBS securities,~~at June 30, 2022 totaled $67.6 million, increasing from $56.2 million at September 30, 2021. This increase was primarily driven by the balance of SBA/USDA loans held for sale as of June 30, 2022 as compared to September 30, 2021.

The Company’s total loans and noleases increased $75.7 million, or 2%, to $3.68 billion at June 30, 2022, from $3.61 billionat September 30, 2021. The increase was primarily driven by growth in the commercial finance, warehouse finance, and consumer finance portfolios, partially offset by the sales of all remaining community banking loans. See Note 5 to the “Notes to Condensed Consolidated Financial Statements” of this Quarterly Report on Form 10-Q.

Commercial finance loans increased $222.4 million, tax services loans increased $31.2 million, warehouse finance increased $14.8 million, and consumer finance increased $6.4 million at June 30, 2022 compared to September 30, 2021. The increase in commercial finance loan balances was largely driven by the asset-based lending, term lending, and insurance premium finance categories. The seasonality of the Company's tax services business led to the increase in tax services loans at June 30, 2022 compared to September 30, 2021.

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Community banking loans decreased $199.1 million, or 100%, at June 30, 2022 compared to September 30, 2021, as all remaining community banking loans were sold during the fiscal 2022 first quarter.

Through the Bank, the Company owns stock in the FHLB due to the Bank’s membership and participation in this banking system as well as stock in the Federal Reserve Bank. The FHLB requires a level of stock investment ~~securities held~~based on a pre-determined formula. The Company’s investment in these stocks increased $0.4 million, or 1% to ~~maturity,~~$28.8 million at June 30, 2022 from $28.4 million at September 30, 2021, resulting from the purchase of FHLB membership stock.

Total end-of-period deposits increased 4% to $5.71 billion at June 30, 2022, compared to September 30, 2021, primarily driven by an increase in noninterest-bearing deposits of $502.1 million partially offset by a decrease in interest-bearing checking of $254.4 million and a decrease in wholesale deposits of $72.7 million. As of June 30, 2022, the Company placed $1.22 billion of customer deposits at other banks in its capacity as custodian, as compared to $1.85 billion at March 31, 2022 and $1.27 billion at June 30, 2021. In placing those excess deposits at other banks, the Company can earn record keeping service fee income that has a contractual rate index that is consistent with the ~~available for sale investment security purchases consisting primarily~~federal funds effective rate ("EFFR"), which is recognized as part of ~~Ginnie Mae (“GNMA”) convertible~~payments card and ~~collateralized municipal housing securities and other municipal housing securities fully collateralized by U.S. agency and instrumentality securities.~~ deposit fee income.

The Company's total borrowings decreased $76.2 million, or 82%, from $92.8 million at September 30, 2021 to $16.6 million at June 30, 2022. During the ~~first~~third quarter of fiscal ~~2018,~~2022, the Company ~~early adopted Accounting Standard Update ("ASU") 2017-12, "Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities." Due to~~retired the ~~early adoption~~outstanding $75.0 million subordinated debt, which was due August 15, 2026.

At June 30, 2022, the Company’s stockholders’ equity totaled $724.8 million, a decrease of ~~the ASU, the Company transferred $204.7~~$147.1 million, ~~of investment securities and $101.3~~from $871.9 million ~~of MBS from HTM to AFS during the first quarter of fiscal 2018. This change allows for enhanced balance sheet management and provides the opportunity for more liquidity, should it be needed.~~

~~The Company’s portfolio of net loans receivable increased $182.4 million, or 14%, to $1.50 billion at December 31, 2017, from $1.32 billion~~ at September 30, ~~2017. This increase~~2021. The decrease was primarily attributable to a ~~$112.0 million increase~~reduction in ~~consumer~~accumulated other comprehensive income ("AOCI") and a reduction in retained earnings related to activity from the Company's share repurchase programs. The Company and Bank remained above the federal regulatory minimum capital requirements at June 30, 2022, continued to be classified as well-capitalized, and in good standing with the regulatory agencies. See “Liquidity and Capital Resources” for further information.

Payments Noninterest-bearing Checking Deposits

The Company may hold negative balances associated with cardholder programs in the payments division that are included within noninterest-bearing deposits on the Company's Condensed Consolidated Statements of Financial Condition. Negative balances can relate to any of the following payments functions:

–Prefundings: The Company deploys funds to cards prior to receiving cash (typically 2-3 days) where the prefunding balance is netted at a pooled partner level utilizing ASC 210-20.

–Discount fundings: The Company funds cards in an amount that is estimated to be less than final breakage values on card programs. Consumers may spend more than is estimated. These discounts are netted at a pooled partner level using ASC 210-20. The majority of these discount fundings relate to one partner.

–Demand Deposit Account ("DDA") overdrafts: Certain programs offered allow cardholders traditional DDA overdraft protection services whereby cardholders can spend a limited amount in excess of their available card balance. When overdrawn, these accounts are re-classed as loans ~~largely~~on the balance sheet within the Consumer Finance category.

The Company meets the Right of Set off criteria in ASC 210-20, Balance Sheet - Offsetting, for all payments negative deposit balances with the exception of DDA overdrafts. The following table summarizes the Company's negative deposit balances within the payments division:


(Dollars in thousands)	June 30, 2022		September 30, 2021
Noninterest-bearing deposits	$	5,952,197	$	5,492,646
Prefunding	(423,057)		(436,111)
Discount funding	1,407		(26,440)
DDA overdrafts	(10,251)		(11,862)
Noninterest-bearing checking, net	$	5,520,296	$	5,018,233

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Custodial Deposit Transference

The Bank utilizes a custodial deposit transference structure for certain prepaid and deposit programs whereby the Bank, acting as custodian of cardholder funds, places a portion of such cardholder funds that are not needed to support near term settlement at one or more third-party banks insured by the FDIC (each, a “Program Bank”). Accounts opened at Program Banks are established in the Bank’s name as custodian, for the benefit of the Bank’s cardholders. The Bank remains the issuer of all cards and holder of all accounts under the applicable cardholder agreements and has sole custodial control and transaction authority over the accounts opened at Program Banks.

The Bank maintains the records of each cardholder’s deposits maintained at Program Banks. Program Banks undergo robust due diligence prior to becoming a Program Bank and are also subject to continuous monitoring.

In return for record keeping services at Program Banks, the ~~student loan portfolio purchases and refund advance loans,~~Bank receives a ~~$68.5~~servicing fee (“Servicing Fee”). In prior periods, the Servicing Fee was not significant. As of July 31, 2022, the Servicing Fee has been typically reflective of the EFFR upon a renegotiation of the contracts with Program Banks.

RESULTS OF OPERATIONS

General

The Company recorded net income of $22.4 million, or 12%, increase in commercial real estate loans, a $20.8 million, or 58%, increase in commercial operating loans, and a $7.3 million, or 4%, increase in residential mortgage loans, offset in part by a $14.8 million, or 6%, decrease in commercial insurance premium finance loans and a $9.4 million, or 10%, decrease in total agricultural loans, during$0.76 per diluted share, for the three months ended ~~December 31, 2017. Excluding the purchased student loan portfolios and refund advances, total loans receivable,~~June 30, 2022, compared to net income of ~~allowance for loan losses, would have increased $72.2~~$38.7 million, or ~~6%, from September~~$1.21 per diluted share, for the three months ended June 30, ~~2017~~2021. Total revenue for the fiscal 2022 third quarter was $126.1 million, compared to ~~December 31, 2017. Community banking loans increased $61.5~~$130.9 million ~~or 7%, during this period. Of~~for the ~~$654.0 million~~same quarter in commercial and multi-family real estate loans at December 31, 2017, $129.9 million were considered high-volatility commercial real estate (“HVCRE”) loans. While such HVCRE loans are risk-weighted at 150% rather than 100%, as is customary for non-HVCRE commercial loans, the increase to the Company’s risk-weighted assets continues to be inconsequentialfiscal 2021. The decrease in ~~terms of the Company’s capital ratios.~~

~~Total deposits increased $290.2 million, or 9%, at December 31, 2017, to $3.51 billion from $3.22 billion at September 30, 2017,~~net income was primarily ~~related to~~driven by an increase ~~of $325.6 million~~ in ~~non-interest bearing deposits,~~noninterest expense, a decrease in noninterest income, and an increase ~~of $17.1 million~~ in ~~interest-bearing checking deposits and a $4.6 million increase in certificates of deposit. The increase in total deposits was~~income tax expense, partially offset by ~~a decrease~~an increase in net interest income.

The Company recorded net income of ~~$55.8 million in wholesale deposits. Deposits attributable to the Payments segment increased by $331.8~~$133.0 million, or ~~14%, to $2.77 billion at December 31, 2017,~~$4.44 per diluted share, for the nine months ended June 30, 2022, compared to $2.44 billion at September 30, 2017. The average balance of total deposits and interest-bearing liabilities was $3.62 billion for the three month period ended December 31, 2017, compared to $3.06 billion$125.8 million, or $3.87 per diluted share, for the same period in the prior year. ~~The average balance of non-interest bearing deposits~~Total revenue for the ~~three month~~nine months ended June 30, 2022 was $477.9 million, compared to $429.7 million for the same period of the prior year. The increase in net income was primarily driven by an increase in net interest income and noninterest income, partially offset by increases in both noninterest expense and income tax expense.

Net Interest Income

Net interest income for the fiscal 2022 third quarter was $72.2 million, an increase of 5%, from the same quarter in fiscal 2021. The increase was mainly attributable to investment interest income, an improved earning asset mix, and increased loan balances. For the nine months ended ~~December 31, 2017 increased by$272.3~~June 30, 2022, net interest income was $227.6 million, ~~or 13%~~an increase of 9%, ~~to $2.33 billion,~~from $208.3 million compared to the same period in the prior year.

~~Total borrowings~~The third quarter average outstanding balance of loans and leases increased $128.9 million compared to the same quarter of the prior year, primarily due to increases in core loan and lease portfolios, partially offset by the sale of the remaining community bank portfolio. The Company’s average interest-earning assets for the third quarter decreased ~~$91.1 million, or 6%, from $1.49~~by $1.23 billion ~~at September 30, 2017~~ to ~~$1.40~~$6.08 billion ~~at December 31, 2017,~~compared with the same quarter in fiscal 2021, primarily due to a ~~decrease~~reduction in cash balances as a result of ~~federal funds purchased. At September 30, 2017 and December 31, 2017,~~high cash levels during the prior year period related to the Company's participation in government stimulus programs. The decrease in interest-earnings assets was partially offset by growth in total investments and total loans and leases.

Fiscal 2022 third quarter NIM increased to 4.76% from 3.75% in the third quarter of last year. The overall reported tax equivalent yield (“TEY”) on average earning assets increased by 104 basis points to 4.89% compared to the prior year quarter, primarily driven by a decrease in lower-yielding cash balances. Growth in loan and lease and investment securities balances ~~were much higher than normal due~~also contributed to ~~a temporary repositioning~~the year-over-year TEY increase. The yield on the loan and lease portfolio was 6.69% compared to 6.90% for the comparable period last year and the TEY on the securities portfolio was 2.14% compared to 1.62% for that same period.

The commercial finance portfolio volumes and yields are impacted by market conditions, competitive landscape, product demand, spread between short- and long-term interest rates, and structures, which include floor interest rates and varied loan maturity terms. At June 30, 2022, $93.7 million of the ~~balance sheet~~portfolio had structures where the interest rate charged was at a floor level as compared to $370.0 million as of March 31, 2022 and $268.6 million as of June 30, 2021. Once the interest rate on a loan goes above the floor level, yields on those ~~dates as part~~loans will begin to increase.

Table of ~~its preparations~~Contents

For the nine months ended June 30, 2022, NIM was 4.72%, an increase of 104 basis points from 3.68% compared to the same period in the prior year. NIM, tax-equivalent for the ~~2018 tax season.~~ nine months ended June 30, 2022 increased to 4.73% from 3.70% in the same period of the prior year.

The Company's cost of funds for all deposits and borrowings averaged 0.12% during the fiscal 2022 third quarter, as compared to 0.09% during the prior year quarter. The increase in cost of funds was primarily related to accelerated interest expense of $0.9 million during the fiscal 2022 third quarter associated with the retirement of the subordinated debt.The Company's overall cost of deposits was 0.01% in the fiscal 2022 third quarter, the same as the prior year quarter.

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The following tables present, for the periods indicated, the Company’s ~~overnight federal funds purchased fluctuates~~total dollar amount of interest income from average interest-earning assets and the resulting yields, as well as the interest expense on average interest-bearing liabilities, expressed both in dollars and rates. Tax-equivalent adjustments have been made in yield on interest-bearing assets and net interest margin. Nonaccruing loans and leases have been included in the table as loans carrying a ~~daily basis~~zero yield.


	Three Months Ended June 30,
	2022						2021
(Dollars in thousands)	Average Outstanding Balance		Interest Earned / Paid		Yield / Rate(1)		Average Outstanding Balance		Interest Earned / Paid		Yield / Rate(1)
Interest-earning assets:
Cash and fed funds sold	$	309,324	$	787	1.02	%	$	1,867,988	$	528	0.11	%
Mortgage-backed securities	1,395,149		7,381		2.12	%	882,042		3,446		1.57	%
Tax exempt investment securities	173,192		851		2.50	%	263,401		884		1.70	%
Asset-backed securities	210,815		750		1.43	%	438,163		1,651		1.51	%
Other investment securities	246,218		1,596		2.60	%	246,493		1,187		1.93	%
Total investments	2,025,374		10,578		2.14	%	1,830,099		7,168		1.62	%
Commercial finance	2,949,813		50,785		6.91	%	2,616,942		48,641		7.46	%
Consumer finance	300,352		4,964		6.63	%	241,813		3,916		6.50	%
Tax services	62,934		53		0.34	%	91,804		604		2.64	%
Warehouse finance	434,532		6,739		6.22	%	332,759		5,151		6.21	%
Community banking	—		—		—	%	335,415		3,975		4.75	%
Total loans and leases	3,747,631		62,541		6.69	%	3,618,733		62,287		6.90	%
Total interest-earning assets	6,082,329		$	73,906	4.89	%	7,316,820		$	69,983	3.85	%
Noninterest-earning assets	695,468						841,738
Total assets	$	6,777,797					$	8,158,558

Interest-bearing liabilities:
Interest-bearing checking(2)	$	292	$	—	0.33	%	$	336,576	$	—	—	%
Savings	82,989		7		0.03	%	107,803		5		0.02	%
Money markets	101,943		53		0.21	%	58,517		66		0.45	%
Time deposits	8,709		9		0.40	%	11,877		27		0.91	%
Wholesale deposits	8,554		25		1.19	%	86,295		90		0.42	%
Total interest-bearing deposits	202,487		94		0.19	%	601,068		188		0.13	%
Overnight fed funds purchased	19,353		72		1.50	%	11		—		0.25	%

Subordinated debentures	36,480		1,444		15.87	%	73,907		1,148		6.23	%
Other borrowings	17,056		145		3.40	%	20,657		172		3.35	%
Total borrowings	72,889		1,661		9.14	%	94,575		1,320		5.60	%
Total interest-bearing liabilities	275,376		1,755		2.56	%	695,643		1,508		0.87	%
Noninterest-bearing deposits	5,538,585		—		—	%	6,380,371		—		—	%
Total deposits and interest-bearing liabilities	5,813,961		$	1,755	0.12	%	7,076,014		$	1,508	0.09	%
Other noninterest-bearing liabilities	213,293						225,862
Total liabilities	6,027,254						7,301,876
Shareholders' equity	750,543						856,682
Total liabilities and shareholders' equity	$	6,777,797					$	8,158,558
Net interest income and net interest rate spread including noninterest-bearing deposits			$	72,151	4.77	%			$	68,475	3.76	%

Net interest margin					4.76	%					3.75	%
Tax-equivalent effect					0.01	%					0.02	%
Net interest margin, tax-equivalent(3)					4.77	%					3.77	%

(1) Tax rate used to arrive at the TEY for the three months ended June 30, 2022 and 2021 was 21%.

(2) At June 30, 2021, $336.2 million of the total balance were interest-bearing deposits where interest expense was paid by a third party and not by the Company. On October 1, 2021, the Company reclassified the balances related to that program to noninterest bearing checking due to the ~~nature~~product moving to noninterest bearing.

(3) Net interest margin expressed on a fully-taxable-equivalent basis ("net interest margin, tax-equivalent") is a non-GAAP financial measure. The tax-equivalent adjustment to net interest income recognizes the estimated income tax savings when comparing taxable and tax-exempt assets and adjusting for federal and state exemption of interest income. The Company believes that it is a ~~portion~~standard practice in the banking industry to present net interest margin expressed on a fully taxable equivalent basis and, accordingly, believes the presentation of ~~its non-interest bearing deposit base, primarily~~this non-GAAP financial measure may be useful for peer comparison purposes.

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	Nine Months Ended June 30,
	2022						2021
(Dollars in thousands)	Average Outstanding Balance		Interest Earned / Paid		Yield / Rate(1)		Average Outstanding Balance		Interest Earned / Paid		Yield / Rate(1)
Interest-earning assets:
Cash and fed funds sold	$	570,806	$	2,067	0.48	%	$	2,279,550	$	2,461	0.14	%
Mortgage-backed securities	1,194,869		16,690		1.87	%	620,919		8,176		1.76	%
Tax exempt investment securities	190,076		2,575		2.29	%	298,276		3,232		1.83	%
Asset-backed securities	323,080		3,045		1.26	%	384,397		4,141		1.44	%
Other investment securities	269,561		4,482		2.22	%	232,852		3,373		1.94	%
Total investments	1,977,586		26,792		1.86	%	1,536,444		18,922		1.72	%
Commercial finance	2,858,837		148,678		6.95	%	2,501,911		140,570		7.51	%
Consumer finance	315,933		18,970		8.03	%	245,627		15,632		8.51	%
Tax services	228,181		13,126		7.69	%	274,706		7,156		3.48	%
Warehouse finance	448,358		20,816		6.21	%	310,593		14,930		6.43	%
Community banking	46,471		1,525		4.39	%	409,869		14,127		4.61	%
Total loans and leases	3,897,780		203,115		6.97	%	3,742,706		192,415		6.87	%
Total interest-earning assets	6,446,172		$	231,974	4.83	%	7,558,700		$	213,798	3.80	%
Noninterest-earning assets	783,251						858,088
Total assets	$	7,229,423					$	8,416,788

Interest-bearing liabilities:
Interest-bearing checking(2)	$	324	$	1	0.32	%	$	258,020	$	1	—	%
Savings	82,211		18		0.03	%	79,095		11		0.02	%
Money markets	93,262		157		0.23	%	55,816		146		0.35	%
Time deposits	8,670		34		0.52	%	14,046		118		1.12	%
Wholesale deposits	82,754		190		0.23	%	174,715		1,153		0.88	%
Total interest-bearing deposits	267,221		400		0.20	%	581,692		1,429		0.33	%
Overnight fed funds purchased	38,111		135		0.47	%	7		—		0.25	%

Subordinated debentures	61,505		3,432		7.46	%	73,864		3,442		6.23	%
Other borrowings	17,857		443		3.32	%	22,307		603		3.61	%
Total borrowings	117,473		4,010		4.56	%	96,178		4,045		5.62	%
Total interest-bearing liabilities	384,694		4,410		1.53	%	677,870		5,474		1.08	%
Noninterest-bearing deposits	5,843,962		—		—	%	6,727,627		—		—	%
Total deposits and interest-bearing liabilities	6,228,656		$	4,410	0.10	%	7,405,497		$	5,474	0.10	%
Other noninterest-bearing liabilities	203,283						184,825
Total liabilities	6,431,939						7,590,322
Shareholders' equity	797,484						826,466
Total liabilities and shareholders' equity	$	7,229,423					$	8,416,788
Net interest income and net interest rate spread including noninterest-bearing deposits			$	227,564	4.73	%			$	208,324	3.70	%

Net interest margin					4.72	%					3.68	%
Tax-equivalent effect					0.01	%					0.02	%
Net interest margin, tax-equivalent(3)					4.73	%					3.70	%

(1) Tax rate used to arrive at the TEY for the nine months ended June 30, 2022 and 2021 was 21%.

(2) At June 30, 2021, $218.5 million of the total balance were interest-bearing deposits where interest expense was paid by a third party and not by the Company. On October 1, 2021, the Company reclassified the balances related to ~~payroll processing timing with~~that program to noninterest bearing checking due to the product moving to noninterest bearing.

(3) Net interest margin expressed on a ~~higher volume~~fully-taxable-equivalent basis ("net interest margin, tax-equivalent") is a non-GAAP financial measure. The tax-equivalent adjustment to net interest income recognizes the estimated income tax savings when comparing taxable and tax-exempt assets and adjusting for federal and state exemption of ~~overnight federal funds purchased on Monday through Wednesday, which are typically paid down on Thursday and Friday. Secondarily,~~interest income. The Company believes that it is a ~~portion of certain programs are pre-funded, typically~~standard practice in the ~~final week~~banking industry to present net interest margin expressed on a fully taxable equivalent basis and, accordingly, believes the presentation of this non-GAAP financial measure may be useful for peer comparison purposes.

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Provision for Credit Losses

The Company recognized a reversal of provision for credit losses of $1.3 million for the quarter ended June 30, 2022, compared to a provision for credit losses of $4.6 million for the same quarter last year. The Company recognized a provision for credit losses of $31.2 million for the nine months ended June 30, 2022, and $41.0 million for the comparable period in the prior fiscal year. Net charge-offs were $12.2 millionfor the quarter ended June 30, 2022, compared to $12.3 million for the quarter ended June 30, 2021. Net charge-offs attributable to the tax services, consumer finance, and commercial finance portfolios for the quarter were $8.0 million, $2.3 million, and $1.9 million, respectively.

Noninterest Income

Fiscal 2022 third quarter noninterest income decreased to $54.0 million from $62.5 million for the same period of the ~~month~~prior year. The decrease was driven by a reduction in gain on sale of loan and ~~the corresponding deposits are received typically on the first day~~leases by $4.8 million, a decrease in payments fee income of ~~the following month causing~~$4.5 million, and a ~~temporary increased need for overnight borrowings. Accordingly, our level~~decrease in tax services product fee income of ~~borrowings may fluctuate significantly on any particular quarter end date.~~

~~At December 31, 2017, the Company’s stockholders’ equity totaled $437.7 million,~~$2.7 million. These decreases were partially offset by an increase in rental income of ~~$3.2~~$2.1 million ~~from $434.5 million at September 30, 2017. The increase was attributable to net earnings~~ and an increase in ~~additional paid-in capital,~~other income of $1.3 million. The prior year’s quarter benefited from greater card fee income associated with stimulus activity as well as a delayed tax season. Furthermore, the company recorded fewer gains on loan sales in the current fiscal year as the SBA and USDA sale volumes have been impacted by supply chain constraints within the solar construction market.

Noninterest income for the nine months ended June 30, 2022 increased to $250.4 million from $221.4 million for the same period of the prior year, primarily driven by the gain on sale of Meta names and trademarks during the first quarter of fiscal 2022.

Noninterest Expense

Noninterest expense increased 19% to $96.7 million for the fiscal 2022 third quarter, from $81.5 million for the same quarter last year. The increase in expense was primarily driven by an increase in compensation expense, legal and consulting expense, card processing, occupancy and equipment expense, and operating lease equipment depreciation. These increases were partially offset by ~~accumulated~~a decrease in other comprehensive income and cash dividends paid. At December 31, 2017, the Bank continued to exceed all regulatory requirements for classification as a well‑capitalized institution. See “Liquidity and Capital Resources” for further information.

~~Non-performing Assets and Allowance for Loan Losses~~

~~Generally,~~expense. Compensation expense for the ~~majority~~third quarter of ~~loan segments,~~fiscal 2022 includes $3.1 million of separation-related expenses stemming from expense reduction initiatives. In addition, the Company recognized $3.4 million in rebranding expenses and $1.2 million in expenses related to the non-renewal of the aforementioned tax partner agreements. Certain card processing expenses are derived from the terms of contractual agreements with some BaaS partners. The amount of expense paid under those agreements is based on an agreed upon rate index which varies depending on the deposit levels, floor rates, market conditions, and other performance conditions. Generally this rate index averages between 50% to 85% of the EFFR. Approximately 42% of the deposit portfolio may be subject to these higher card processing expenses. For the fiscal quarter ended June 30, 2022, card processing expenses related to these structured agreements were $2.2 million, as compared to $0.2 million for the fiscal quarter ended March 31, 2022 and $0.1 million for the fiscal quarter ended June 30, 2021.

Noninterest expense for the nine months ended June 30, 2022 increased to $282.2 million from $250.1 million for the same period of the prior year.

Income Tax Expense

The Company recorded an income tax expense of $7.0 million, representing an effective tax rate of 22.6%, for the fiscal 2022 third quarter, compared to $4.9 million, representing an effective tax rate of 11.0%, for the third quarter last year. The current quarter increase in income tax expense was primarily due to a reduction in renewable energy investment tax credit lending volume compared to the prior year period.

The Company originated $4.4 million in solar leases during the fiscal 2022 third quarter, compared to $13.5 million in last year's third quarter. Investment tax credits related to solar leases are recognized ratably based on income throughout each fiscal year. For the nine months ended June 30, 2022, the Company originated $26.9 million in solar leases, compared to $72.0 million for the comparable prior year period. The timing and impact of future solar tax credits are expected to vary from period to period, and the Company intends to undertake only those tax credit opportunities that meet the Company's underwriting and return criteria.

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Asset Quality

Generally, when a loan or lease becomes delinquent 90 days or more ~~(210 days or more for commercial insurance premium finance loans),~~ or when the collection of principal or interest becomes doubtful, the Company will place the loan or lease on a ~~non-accrual~~nonaccrual status and, as a result, previously accrued interest income on the loan or lease is reversed against current income. The loan or lease will generally remain inon a non-accrual status until six months of good payment history has been established or management believes the ~~loan becomes current~~financial status of the borrower has been significantly restored. Certain relationships in the table below are over 90 days past due and ~~has demonstrated a sustained period~~still accruing. The Company considers these relationships as being in the process of ~~satisfactory performance, typically after six months.~~

~~Consumer~~collection. Insurance premium finance loans, consumer finance and tax ~~advance~~services loans ~~originated through the Company's tax divisions,~~ are ~~interest and fee free to the consumer. Due to the nature of consumer advance loans, it typically takes no more than three e-file cycles, the period of time between scheduled IRS payments, from~~generally not placed on nonaccrual status, but are instead written off when the ~~return is accepted to collect. In the event~~collection of ~~default, MetaBank has no recourse with the tax consumer. Generally, when the refund advance loan becomes delinquent for 180 days~~principal and interest become doubtful.

Loans and leases, or ~~more, or~~portions thereof, are charged-off when collection of principal becomes ~~doubtful, the Company will~~doubtful. Generally, this is associated with a delay or shortfall in payments of greater than 210 days for insurance premium finance, 180 days for tax and other specialty lending loans, 120 days for consumer credit products and 90 days for other loans. Action is taken to charge off ERO loans if such loans have not been collected by the ~~loan balance.~~end of June and taxpayer advance loans if such loans have not been collected by the end of the calendar year. Nonaccrual loans and troubled debt restructurings are generally considered impaired.

The Company believes that the level of allowance for ~~loan~~credit losses at ~~December 31, 2017~~June 30, 2022 was appropriate and reflected probable losses related to these ~~loans;~~loans and leases; however, there can be no assurance that all loans and leases will be fully collectible or that the present level of the allowance will be adequate in the future. See the section below titled “Allowance for ~~Loan~~Credit Losses” ~~below.~~for further information.

The table below sets forth the amounts and categories of ~~non-performing assets in~~ the ~~Company’s portfolio as of the dates set forth below. Foreclosed assets include assets acquired in settlement of loans.~~Company's nonperforming assets.


(Dollars in thousands)	June 30, 2022			September 30, 2021
Nonperforming Loans and Leases
Nonaccruing loans and leases:
Commercial finance	$	19,603		$	19,330



Community banking	—			14,915
Total nonaccruing loans and leases	19,603			34,245

Accruing loans and leases delinquent 90 days or more:


Commercial finance	3,519			12,489
Consumer finance	3,501			1,236
Tax services(1)	—			7,962


Total accruing loans and leases delinquent 90 days or more	7,020			21,687
Total nonperforming loans and leases	26,623			55,932

Other Assets
Nonperforming operating leases	132			3,824

Foreclosed and repossessed assets:
Commercial finance	13			2,077

Total foreclosed and repossessed assets	13			2,077

Total other assets	145			5,901

Total nonperforming assets	$	26,768		$	61,833
Total as a percentage of total assets	0.40		%	0.92		%

(1) Certain tax services loans do not bear interest.

Non-Performing Assets As Of
December 31, 2017 September 30, 2017
Non-Performing Loans (Dollars in Thousands)

Non-Accruing Loans:
Commercial and Multi-Family Real Estate 284
685
Total ⁽¹⁾
284
685

Accruing Loans Delinquent 90 Days or More

1-4 Family Real Estate 234
—
Agricultural Real Estate 27,818
34,198
Consumer 1,624
1,406
Agricultural Operating —
97
CML Insurance Premium Finance 3,194
1,205
Total 32,870
36,906

Total Non-Performing Loans 33,154
37,591

Other Assets
Foreclosed Assets:
1-4 Family Real Estate —
62
Commercial and Multi-Family Real Estate 128
230
Total 128

292

Total Other Assets $ 128

$ 292

Total Non-Performing Assets $ 33,282

$ 37,883
Total as a Percentage of Total Assets 0.61 % 0.72 %
Total Non-Performing Assets as a Percentage of Total Assets - excluding insured loans⁽²⁾
0.58 % 0.70 %

⁽¹⁾During the three-month period ended December 31, 2017, the Company had $1.1 million of loans modified as troubled debt restructurings ("TDRs") and no loans modified as TDRs during the three-month period ended September 30, 2017. In addition, the Company had $1.6 million and $0.5 million of TDRs performing in accordance with their terms at each of the periods ended December 31, 2017 and September 30, 2017.

⁽²⁾~~Excludes from non-performing assets the student loans that are insured by ReliaMax Surety Company.~~

At ~~December 31, 2017, non-performing~~June 30, 2022, nonperforming loans and leases totaled ~~$33.2~~$26.6 million, representing ~~2.19%~~0.71% of total loans and leases, compared to ~~$37.6~~$55.9 million, or ~~2.83%~~1.16% of total loans and leases at September 30, ~~2017. This decrease in non-performing loans was primarily due to the payoff~~2021.

Table of ~~a $7.0 million nonperforming agricultural loan relationship during the first quarter of fiscal 2018.~~Contents

Classified Assets. Federal regulations provide for the classification of certain loans, leases, and other assets such as debt and equity securities considered by ~~our~~the Bank's primary regulator, the OCC, to be of lesser quality as “substandard,” “doubtful” or ~~“loss.~~“loss,” with each such classification dependent on the facts and circumstances surrounding the assets in question. An asset is considered “substandard” if it is inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. “Substandard” assets include those characterized by the “distinct possibility” that the Bank will sustain “some loss” if the deficiencies are not corrected. Assets classified as “doubtful” have all of the weaknesses inherent in those classified “substandard,” with the added characteristic that the weaknesses present make “collection or liquidation in full,” on the basis of currently existing facts, conditions and values, “highly questionable and improbable.” Assets classified as “loss” are those considered “uncollectible” and of such minimal value that their continuance as assets without the establishment of a specific loss reserve is not warranted.

General allowances represent loss allowances which have been established to recognize the inherent risk associated with lending activities, but which, unlike specific allowances, have not been allocated to particular problem assets. When assets are classified as “loss,” the Bank is required either to establish a specific allowance for losses equal to 100% of that portion of the asset so classified or to ~~charge-off~~charge off such amount. The Bank’s determinations as to the classification of its assets and the amount of its valuation allowances are subject to review by its regulatory authorities, which may order the establishment of additional general or specific loss allowances.

On the basis of management’s review of its loans, leases, and other assets, at ~~December 31, 2017,~~June 30, 2022, the Company had classified ~~$40.4~~loans and leases of $172.7 million ~~of its assets~~ as substandard, ~~and did not classify any assets~~$4.9 million as doubtful orand none as loss. At September 30, ~~2017,~~2021, the Company classified ~~$40.6~~loans and leases of $264.2 million ~~of its assets~~ as substandard, ~~and did not classify any assets~~$12.1 million as doubtful orand none as loss.

Allowance for ~~Loan~~Credit Losses. ~~The~~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 (collectively “Topic 326”), which measures credit loss 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 losses ("CECL") methodology to determine the allowance for credit losses ("ACL") 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 ACL represents management’s estimate of expected credit losses 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 credit loss, generally this 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. A reserve for unfunded credit commitments such as letters of credit and binding unfunded loan ~~losses~~commitments is ~~established through~~recorded in other liabilities on the Condensed Consolidated Statements of Financial Condition.

Individually evaluated loans and leases are a ~~provision for loan losses~~key component of the ACL. Generally, the Company measures credit loss on individually evaluated loans based on ~~management’s evaluation of~~ the risk inherent in its loan portfolio and changes in the nature and volume of its loan activity, including those loans which are being specifically monitored by management. Such evaluation, which includes a review of loans for which full collectability may not be reasonably assured, involves consideration of, among other matters, the estimated fair value of the ~~underlying~~ collateral ~~economic conditions, historical~~less estimated selling costs, as the Company considers these financial assets to be collateral dependent. If an individually evaluated loan or lease is not collateral dependent, credit loss ~~experience~~is measured at the present value of expected future cash flows discounted at the loan or lease initial effective interest rate.

The Company's ACL totaled $75.2 million at June 30, 2022, an increase compared to $68.3 million at September 30, 2021. The increase in the ACL at June 30, 2022 was driven primarily by the seasonal allowance build in the tax services loan portfolio. This increase was partially offset by the disposition of the community bank portfolio along with decreases in the commercial and ~~other factors that warrant recognition in providing for an appropriate~~consumer finance loan ~~loss allowance.~~portfolios.

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The following table presents the Company's ACL as a percentage of its total loans and leases.


	As of the Period Ended
	June 30, 2022		March 31, 2022		December 31, 2021		September 30, 2021		June 30, 2021
Commercial finance	1.56	%	1.66	%	2.04	%	1.77	%	1.73	%
Consumer finance	2.44	%	3.18	%	2.70	%	2.91	%	3.80	%
Tax services	54.29	%	35.76	%	1.60	%	0.02	%	58.99	%
Warehouse finance	0.10	%	0.10	%	0.10	%	0.10	%	0.10	%
Community banking	—	%	—	%	—	%	6.16	%	4.36	%
Total loans and leases	2.04	%	2.38	%	1.84	%	1.89	%	2.61	%
Total loans and leases excluding tax services	1.44	%	1.59	%	1.84	%	1.90	%	1.94	%

Management closely monitors economic developments ~~both regionally and nationwide,~~ and considers these factors when assessing the appropriateness of its ~~allowance for loan losses.~~ACL. The ~~current economic environment continues~~Company's ACL as a percentage of total loans and leases decreased to show signs of improvement in the Bank’s markets. The Bank’s average loss rates over the past three years for community banking loans were relatively low compared to peers, but were offset with a higher agricultural loss rate in fiscal year 2016 driven by the charge off of one relationship. The Bank does not believe it is likely that these low loss conditions will continue indefinitely. Although the Bank’s four market areas have indirectly benefited2.04% at June 30, 2022 from ~~a stable agricultural market, the market has become slightly stressed as commodity prices have generally remained lower than a few years ago. Management believes the low commodity prices~~2.38% at March 31, 2022 and adverse weather conditions have the potential to negatively impact the economies of our agricultural markets. The improving economic conditions have also kept the loss rates on the national lending loans as well as the tax service loans relatively low, although management realizes that these low loss conditions may not continue.

~~At December 31, 2017, the Company had established an allowance for loan losses totaling $8.9 million, compared to $7.5 million~~increased from 1.89% at September 30, ~~2017. This increase~~2021. The decrease in the total loans and leases coverage ratio was primarily ~~due to~~driven by a decrease in the ~~additional provision expense related to loans originated by our~~seasonal tax services ~~divisions. During~~loan portfolio, along with a decrease in the ~~three months ended December 31, 2017,~~coverage ratio for both the commercial and consumer finance portfolios. The Company ~~recorded a provision for loan losses of $1.1 million, partially offset by $0.3 million of net recoveries, compared~~expects to ~~$0.1 millionof net charge offs for~~continue to diligently monitor the ~~three months ended December 31, 2016.~~ ACL and adjust as necessary in future periods to maintain an appropriate and supportable level.

Management believes that, based on a detailed review of the loan and lease portfolio, historic loan and lease losses, current economic conditions, the size of the loan and lease portfolio and other factors, the level of the ~~allowance for loan losses~~ACL at ~~December 31, 2017~~June 30, 2022 reflected an appropriate allowance against ~~probable~~expected credit losses from the ~~loan~~lending portfolio. Although the Company maintains its ~~allowance for loan losses~~ACL at a level ~~that~~ it considers to be ~~adequate,~~appropriate, investors and others are cautioned that there can be no assurance that future losses will not exceed estimated amounts, or that additional provisions for ~~loan~~credit losses will not be required in future periods.

The allowance for loan losses reflects management’s best estimate of probable losses inherent in the portfolio based on currently available information. In addition to the factors mentioned above, future additions to the allowance for loan losses may become necessary based upon changing economic conditions, increased loan balances or changes in the underlying collateral of the loan portfolio. In addition, our regulators have the ability to order us to increase our allowance.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The Company’s financial statements are prepared in accordance with ~~U.S.~~ GAAP. The financial information contained within these financial statements is, to a significant extent, based on approximate measures of the financial effects of transactions and events that have already occurred. Management has identified its critical accounting policies, which are those policies that, in management's view, are most important in the ~~policies described below as Critical Accounting Policies.~~portrayal of our financial condition and results of operations, and include those for the ACL, goodwill and identifiable intangible assets. These policies involve complex and subjective decisions and assessments. Some of these estimates may be uncertain at the time they are made, could change from period to period, and could have a material impact on the financial statements. ~~This~~A discussion ~~and analysis should be read in conjunction with~~of the Company’s ~~financial statements~~critical accounting policies and estimates can be found in the ~~accompanying notes presented in Part II, Item 8 “Consolidated Financial Statements and Supplementary Data” of its~~Company's Annual Report on Form 10-K for the year ended September 30, ~~2017, and information contained herein.~~

~~Allowance for Loan Losses~~. The Company’s allowance for loan loss methodology incorporates a variety of risk considerations, both quantitative and qualitative, in establishing an allowance for loan loss that management believes is appropriate at each reporting date. Quantitative factors include the Company’s historical loss experience, delinquency and charge-off trends, collateral values,2021. There were no significant changes ~~in nonperforming loans, and other factors. Quantitative factors also incorporate known information about individual loans, including borrowers’ sensitivity~~ to interest rate movements. Qualitative factors include the general economic environment in the Company’s markets, including economic conditions throughout the Midwest and, in particular, the state of certain industries. Size and complexity of individual credits in relation to loan structure, existing loanthese critical accounting policies and pace of portfolio growth are other qualitative factors that are considered in the methodology. Although management believes the levels of the allowance at both December 31, 2017 and September 30, 2017 were adequate to absorb probable losses inherent in the loan portfolio, a decline in local economic conditions or other factors could result in losses in excess of the applicable allowance.

~~Goodwill and Intangible Assets~~. Each quarter, the Company evaluates the estimated useful lives of its amortizable intangible assets and whether events or changes in circumstances warrant a revision to the remaining periods of amortization. In accordance with ASC 350, ~~Intangibles – Goodwill and Other~~, recoverability of these assets is measured by comparison of the carrying amount of the asset to the future undiscounted cash flows the asset is expected to generate. If the asset is considered to be impaired, the amount of any impairment is measured as the difference between the carrying value and the fair value of the impaired asset.

In addition, goodwill and intangible assets are tested annually as of our fiscal year end for impairment or more often if conditions indicate a possible impairment. Determining the fair value of a reporting unit involves the use of significant estimates and assumptions. These estimates and assumptions include revenue growth rates and operating margins used to calculate future cash flows, risk-adjusted discount rates, future economic and market conditions, comparison of the Company’s market value to book value and determination of appropriate market comparables. Actual future results may differ from those estimates.

Assumptions and estimates about future values and remaining useful lives of the Company’s intangible and other long-lived assets are complex and subjective. They can be affected by a variety of factors, including external factors such as industry and economic trends, and internal factors such as changes in the Company’s business strategy and internal forecasts. Although the Company believes the historical assumptions and estimates used are reasonable and appropriate, different assumptions and estimates could materially impact the reported financial results.

Customer relationship, trademark, and non-compete intangibles are amortized over the periods in which the asset is expected to meaningfully contribute to the business as a whole, using either the present value of excess earnings or straight line amortization, depending on the nature of the intangible asset. Patents are estimated to have a useful life of 20 years, beginning on the date the patent application is originally filed. Thus, patents are amortized based on the remaining useful life once granted. Periodically, the Company reviews the intangible assets for events or circumstances that may indicate a change in recoverability of the underlying basis.

~~Deferred Tax Assets~~. The Company accounts for income taxes according to the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using the enacted tax rates applicable to income for the years in which those temporary differences are expected to be recovered or settled. Deferred tax assets are recognized subject to management’s judgment that realization is more-likely-than-not. An estimate of probable income tax benefits that will not be realized in future years is required in determining the necessity for a valuation allowance.

~~Security Impairment~~. Management monitors the investment securities portfolio for impairment on a security by security basis. Management has a process in place to identify securities that could potentially have a credit impairment that is other-than-temporary. This process involves the length of time and extent to which the fair value has been less than the amortized cost basis, review of available information regarding the financial position of the issuer, monitoring the rating of the security, monitoring changes in value, cash flow projections, and the Company’s intent to sell a security or whether it is more likely than not the Company will be required to sell the security before the recovery of its amortized cost which, in some cases, may extend to maturity. To the extent we determine that a security is deemed to be other-than-temporarily impaired, an impairment loss is recognized. If the Company intends to sell a security or it is more likely than not that the Company would be required to sell a security before the recovery of its amortized cost, the Company recognizes an other-than-temporary impairment in earnings for the difference between amortized cost and fair value. If we do not expect to recover the amortized cost basis, we do not plan to sell the security and if it is not more likely than not that the Company would be required to sell a security before the recovery of its amortized cost, the recognition of the other-than-temporary impairment is bifurcated. For those securities, the Company separates the total impairment into a credit loss component recognized in earnings, and the amount of the loss related to other factors is recognized in other comprehensive income net of taxes.

The amount of the credit loss component of a debt security impairment is estimated as the difference between amortized cost and the present value of the expected cash flows of the security. The present value is determined using the best estimate of cash flows discounted at the effective interest rate implicit to the security at the date of purchase or the current yield to accrete an asset- backed or floating rate security. Cash flow estimates for trust preferred securities are derived from scenario-based outcomes of forecasted default rates, loss severity, prepayment speeds and structural support.

~~Level 3 Fair Value Measurement~~. U.S. GAAP requires the Company to measure the fair value of financial instruments under a standard which describes three levels of inputs that may be used to measure fair value. Level 3 measurement includes significant unobservable inputs that reflect the Company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation. Although management believes that it uses a best estimate of information available to determine fair value, due to the uncertainty of future events, the approach includes a process that may differ significantly from other methodologies and still produce an estimate that is in accordance with U.S. GAAP.

~~RESULTS OF OPERATIONS~~

~~General~~. The Company recorded net income of $4.7 million, or $0.48 per diluted share, for the three months ended December 31, 2017, compared to net income of $1.2 million, or $0.14 per diluted share, for the three months ended December 31, 2016. Included in the 2018 fiscal first quarter net income was an income tax expense of $3.6 million from a reduction in the value of certain deferred tax assets as a result of the Tax Act signed into law on December 22, 2017 (see non-interest expense section for further discussion). The 2018 fiscal first quarter pre-tax results included a $1.0 million loss on sale of investments and $1.3 million of acquisition expenses. The 2018 fiscal first quarter pre-tax results also included $1.7 million in amortization of intangible assets and $1.3 million in non-cash stock-related compensation associated with executive officer employment agreements. Total revenue for the fiscal 2018 first quarter was $55.5 million, compared to $39.2 million for the same quarter in fiscal 2017, an increase of $16.3 million, or 42%, primarily due to an increase in interest from commercial insurance premium finance and community banking loans, card fee income, as well as the student loan purchases and income from tax-exempt securities (included in other investment securities), and growth in tax product fee income.

~~Seasonality~~. In the industries for electronic payments processing and tax refund processing, companies commonly experience seasonal fluctuations in revenue. For example, in recent years, the Company's results of operations for the first half of each fiscal year have been favorably affected by large numbers of taxpayers electing to receive their tax refunds via direct deposit on our pre-paid cards, which caused their operating revenues to be typically higher in the first half of those years than they were in the corresponding second half of those years. Meta's tax business is expected to continue to generate the vast majority of its revenues in the Company's fiscal second quarter, with some additional revenues in the third quarter, while most expenses are spread throughout the year with some elevated expenses in the December and March quarters. Management expects the Company's revenue to continue to be based on seasonal factors that affect the electronic payments processing and tax refund processing industries as a whole. The Company and its tax preparation partners rely on the Internal Revenue Service (the “IRS”), technology, and employees when processing and preparing tax refunds and tax-related products and services.

~~Net Interest Income~~. Net interest income for the fiscal 2018 first quarter increased by $6.4 million, or 32%, to $26.2 million from $19.8 million for the same quarter in 2017, primarily due to significant increases in the community banking loan portfolio, commercial insurance premium finance loan portfolio, and the purchased student loan portfolios. Growth in investment security balances also contributed to the increase in net interest income. Additionally, the overall increase was driven by a better mix and higher percentage of loans as a percentage of interest-earning assets, with loan yields driving a sizable increase due in part to the recently acquired student loan portfolios and their floating rate yields. The quarterly average outstanding balance of loans from all sources as a percentage of interest-earning assets increased from 30% as of the end of the first fiscal quarter of 2017 to 37% as of the end of the first fiscal quarter of 2018. In addition, lower-yielding agency Mortgage-Backed Securities ("MBS") decreased from 21% of interest-earning assets in the fiscal first quarter of 2017 compared to 18% of interest-earning assets for the same quarter in 2018. Net interest income for the fiscal 2018 first quarter was up $1.7 million from the Company's fiscal 2017 fourth quarter, as anticipated, primarily due to a better mix of earning assets.

Net interest margin, tax equivalent (“NIM”) increased from 2.90% in the fiscal 2017 first quarter to 3.06% in the fiscal 2018 first quarter. The reported 3.06% NIM reflects the lowered corporate prorated tax rate on the Company's tax-exempt municipal portfolio. Had corporate tax rates remained at previous rates, excluding changes resulting from the Tax Act, the reported NIM of 3.06% would have been 3.26%. The reported NIM of 3.06% was also impacted by 16 basis points due to tax service loans and wholesale deposits.

The overall reported tax equivalent yield (“TEY”) on average earning asset yields increased by 31 basis points to 3.55% when comparing the fiscal 2018 first quarter to the 2017 first quarter, which was driven primarily by the Company's improved earning asset mix, with increased exposure to its high-quality commercial insurance premium finance, student, and community banking loan portfolios. The increase in TEY continues to highlight the beneficial tailwind provided by this rotation among earning assets. The reported 3.55% TEY on earning assets reflects the lowered corporate prorated tax rate on the Company's tax-exempt municipal portfolio. Had corporate tax rates remained at previous rates, excluding changes resulting from the adoption of the Tax Act, reported TEY on earning assets would have been 3.75%.

The fiscal 2018 first quarter TEY on the securities portfolio increased by one basis point compared to the prior year fiscal first quarter, primarily due to the continued shift in new investments being made in higher-yielding investment securities, primarily mortgage-related, tax-exempt municipal securities rather than traditional agency MBS securities. The TEY on the securities portfolio of 2.93% for the first fiscal quarter of 2018 reflects the lowered corporate prorated tax rate on the Company's tax-exempt municipal portfolio. Had corporate tax rates remained at previous rates, excluding changes resulting from the adoption of the Tax Act, reported securities portfolio yield would have been 3.25%.

The Company’s average interest-earning assets for the fiscal 2018 first quarter increased by $539.4 million, or 17%, to $3.76 billion, up from $3.22 billion during the same quarter of the last fiscal year, primarily from growth in loan portfolios and tax-exempt investments securities, of $436.8 million and $236.3 million, respectively.

The Company’s average total deposits and interest-bearing liabilities for the 2018 first fiscal quarter increased $556.7 million, or 18%, to $3.62 billion from $3.06 billion for the same quarter of the prior fiscal year. This increase was primarily due to an increase in non-interest-bearing deposits of $272.3 million, an increase in Federal Home Loan Bank advances of $248.9 million and an increase in wholesale deposits of $126.7 million, offset by a decrease in federal funds purchased of $132.1 million. Average quarterly deposits in the Payments segment increased in the fiscal 2018 first quarter by $295.2 million, or 15%, from the same period last year.

Overall, the Company's cost of funds for all deposits and borrowings averaged 0.51% during the fiscal 2018 first quarter, compared to 0.36% for the 2017 first quarter. This increase was primarily due to increases in wholesale deposits, overnight borrowing rates and higher average overall funding balances due to the Company's utilization of more of its capital during non-tax season with higher investment balances and funding, and in preparation to hold more tax loans on the balance sheet. Notwithstanding this increase, the Company believes that its growing, low-cost deposit base gives it a distinct and significant competitive advantage over most banks, and even more so if interest rates continue to rise, because the Company anticipates that its cost of deposits will likely remain relatively low, increasing less than at many other banks. At December 31, 2017 and 2016, low-cost checking deposits represented 83% and 70% of total deposits, respectively.

The following tables present, for the periods indicated, the Company’s total dollar amount of interest income from average interest-earning assets and the resulting yields, as well as the interest expense on average interest-bearing liabilities, expressed both in dollars and rates. Tax equivalent adjustments have been made in yield on interest bearing assets and net interest margin. Non-accruing loans have been included in the table as loans carrying a zero yield.

Three Months Ended December 31, 2017 2016
(Dollars in Thousands)
Average
Outstanding
Balance Interest
Earned /
Paid
Yield /
Rate ⁽¹⁾
Average
Outstanding
Balance Interest
Earned /
Paid
Yield /
Rate⁽²⁾
Interest-earning assets:
Cash & fed funds sold $ 100,321
$ 607
2.40 % $ 186,565
$ 391
0.83 %
    Mortgage-backed securities 673,411
3,758
2.21 % 689,617
3,320
1.91 %
    Tax exempt investment securities 1,408,552
8,698
3.25 % 1,172,252
6,902
3.59 %
    Asset-backed securities 93,631
765
3.24 % 117,928
695
2.34 %
    Other investment securities 80,035
586
2.91 % 87,029
589
2.69 %
Total investments 2,255,629
13,807
2.93 % 2,066,826
11,506
2.92 %
    Community banking loans⁽³⁾
958,222
10,466
4.33 % 762,559
8,169
4.25 %
    Tax services loans 12,378
—
— % 5,573
—
— %
        Commercial insurance premium finance loans 244,380
2,799
4.54 % 181,422
2,078
4.54 %
        Student loans and other 191,510
3,178
6.58 % 20,129
431
8.50 %
    National lending loans⁽⁴⁾
435,891
5,977
5.44 % 201,551
2,509
4.94 %
Total loans 1,406,490
16,443
4.64 % 969,684
10,678
4.37 %
Total interest-earning assets $ 3,762,441
$ 30,857
3.55 % $ 3,223,075
$ 22,575
3.24 %
Non-interest-earning assets 360,508
267,947

Total assets $ 4,122,949
$ 3,491,022

Interest-bearing liabilities:
    Interest-bearing checking $ 71,448
$ 50
0.28 % $ 38,229
$ 39
0.40 %
    Savings 53,084
8
0.06 % 50,528
7
0.06 %
    Money markets 47,899
27
0.22 % 47,605
21
0.18 %
    Time deposits 128,496
366
1.13 % 131,169
259
0.78 %
    Wholesale deposits 483,878
1,434
1.18 % 357,224
612
0.68 %
Total interest-bearing deposits 784,805
1,885
0.95 % 624,755
938
0.60 %
    Overnight fed funds purchased 139,152
525
1.50 % 271,272
392
0.57 %
    FHLB advances 268,913
937
1.38 % 20,043
141
2.80 %
    Subordinated debentures 73,359
1,113
6.02 % 73,223
1,111
6.02 %
    Other borrowings 22,982
201
3.47 % 15,580
160
4.06 %
Total borrowings 504,406
2,776
2.18 % 380,118
1,804
1.88 %
Total interest-bearing liabilities 1,289,211
4,661
1.43 % 1,004,873
2,742
1.08 %
Non-Interest Bearing Deposits 2,328,159
—
— % 2,055,842
—
— %
Total deposits and interest-bearing liabilities $ 3,617,370
$ 4,661
0.51 % $ 3,060,715
$ 2,742
0.36 %
Other non-interest bearing liabilities 71,398
78,219

Total liabilities 3,688,768
3,138,934

Shareholders' equity 434,181
352,088

Total liabilities and shareholders' equity $ 4,122,949
$ 3,491,022

Net interest income and net interest rate spread including non-interest bearing deposits $ 26,196
3.04 % $ 19,833
2.88 %

Net interest margin 2.76 % 2.44 %
Net interest margin, tax equivalent⁽⁵⁾
3.06 % 2.90 %

~~(1) Tax rate used to arrive at the TEY for the three months ended December 31, 2017 was 24.53%~~

~~(2) Tax rate used to arrive at the TEY for the three months ended December 31, 2016 was 35%~~

~~(3) Previously stated Retail Bank loans have been renamed as Community Banking Loans~~

~~(4) Previously stated Specialty Finance Loans have been renamed as National Lending Loans~~

(5) Net interest margin expressed on a fully taxable equivalent basis ("Net interest margin, tax equivalent") is a non-GAAP financial measure. The tax-equivalent adjustment to net interest income recognizes the estimated income tax savings when comparing taxable and tax-exempt assets and adjusting for federal and state exemption of interest income. We believe that it is a standard practice in the banking industry to present net interest margin expressed on a fully taxable equivalent basis, and accordingly believe the presentation of this non-GAAP financial measure may be useful for peer comparison purposes.

~~Provision for Loan Losses~~. The Company recorded a $1.1 million provision for loan losses in the three month period ended December 31, 2017, as compared to a $0.8 million provision for loan losses in the three month period ended December 31, 2016. The provision during the three months ended December 31, 2017 was primarily due to the additional provision expense related to tax services loans as well as growth in the loan portfolio. See Note 3 to the Condensed Consolidated Financial Statements.

~~Non-Interest Income~~. Non-interest income for the fiscal 2018 first quarter increased by $10.0 million, or 51%, to $29.3 million from $19.3 million for the same period in the prior fiscal year. This increase was largely due to increases in card fee income of $6.8 million, or 37%, and tax product fee income of $1.5 million, or 242%. The increase in card fee income was primarily driven by residual fees related to wind-downs from two of our non-strategic programs. The increase in tax product fee income was primarily due to the volume of pre-season tax advance loans originated during the first ~~quarter~~nine months of fiscal 2018 compared to the first quarter of fiscal 2017. All of these loans are also being held during fiscal 2018, as opposed to the previous year when many of these loans were sold, which also contributed to the increase.2022.

~~Non-Interest Expense. Non-interest expense increased $7.3 million, or 20%, to $44.0 million, for the first quarter of fiscal year 2018, as compared to $36.8 million for the same period in 2017.~~This increase was largely caused by a $4.5 million increase in compensation expense, a $1.0 million increase in card processing expense and a $0.9 million increase in occupancy and equipment. The increase in compensation expense was primarily due to a full quarter of expenses related to the EPS and SCS acquisitions, both of which closed during the first quarter of fiscal 2017, along with increased staffing to support the Company's growing business initiatives. The integration of EPS and SCS allowed the Company to gain scale in the tax services divisions during fiscal 2017 and the Company expects to gain further efficiencies during fiscal 2018.

~~Income Tax~~. Income tax expense for the fiscal 2018 first quarter was $5.7 million, resulting in an effective tax rate of 54.9%, compared to $0.3 million, or an effective tax rate of 21.6%, for the 2017 fiscal first quarter. The increase in the effective tax rate is primarily due to a non-recurring income tax expense of approximately $3.6 million from a reduction in the value of certain deferred tax assets as a result of the Tax Act. The Company will continue to analyze the financial impact of the Tax Act. As the Company’s fiscal year end falls on September 30, the statutory corporate rate for fiscal 2018 will be prorated to 24.53%.

LIQUIDITY AND CAPITAL RESOURCES

The Company’s primary sources of funds are deposits, derived principally through its ~~Payments divisions, and to a lesser extent through its Community Banking~~payments division, borrowings, principal and interest payments on loans and leases and mortgage-backed securities, and maturing investment securities. In addition, the Company utilizes wholesale deposit sources to provide temporary funding when necessary or when favorable terms are available. While scheduled loan repayments and maturing investments are relatively predictable, deposit flows and early loan repayments are influenced by the level of interest rates, general economic conditions and competition. The Company uses its capital resources principally to meet ongoing commitments to fund maturing certificates of deposits and loan commitments, to maintain liquidity, and to meet operating expenses.

At ~~December 31, 2017,~~June 30, 2022, the Company had unfunded loan and lease commitments ~~to originate and purchase loans and unused lines~~ of ~~credit totaling $349.5 million. The Company~~$1.28 billion. Management believes that loan ~~repayments~~repayment and other sources of funds will be adequate to meet its foreseeable short- and long-term liquidity needs.

~~In July 2013,~~

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As U.S. banking organizations, the ~~Company’s primary federal regulator,~~Company and the Bank are required to comply with the regulatory capital rules adopted by the Federal Reserve and the ~~Bank’s primary federal regulator, the~~ OCC ~~approved final rules~~ (the ~~“Basel III Capital Rules”~~"Capital Rules") establishing a new comprehensive capital framework for U.S. banking organizations. The Basel III Capital Rules generally implement the Basel Committee on Banking Supervision’s (the “Basel Committee”) December 2010 final capital framework referred to as “Basel III” for strengthening international capital standards. The Basel III Capital Rules substantially revised the risk-based capital requirements applicable to financial institution holding companies and their depository institution subsidiaries, including us and the Bank, as compared to U.S. general risk-based capital rules. The Basel III Capital Rules revised the definitions and the components of regulatory capital, as well as addressed other issues affecting the numerator in banking institutions’ regulatory capital ratios. The Basel III Capital Rules also addressed asset risk weights and other matters affecting the denominator in banking institutions’ regulatory capital ratios and replaced the existing general risk-weighting approach, which was derived from the Basel Committee’s 1988 “Basel I” capital accords, with a more risk-sensitive approach based, in part, on the “standardized approach” in the Basel Committee’s 2004 “Basel II” capital accords. In addition, the Basel III Capital Rules implemented certain provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act, including the requirements of Section 939A to remove references to credit ratings from the federal agencies’ rules. The Basel III Capital Rulesthat became effective ~~for us and the Bank~~ on January 1, 2015, subject to phase-in periods for certain ~~of their components~~requirements and other ~~provisions.~~

~~Pursuant to~~provisions of the ~~Basel III~~ Capital Rules, the Company and Bank, respectively, are subject to new regulatory capital adequacy requirements promulgated by the Federal Reserve and the OCC. Failure by the Company or Bank to meet minimum capital requirements could result in certain mandatory and discretionary actions by our regulators that could have a material adverse effect on our consolidated financial statements. Prior to January 1, 2015, the Bank was subject to capital requirements under Basel I and there were no capital requirements for the Company.Rules. Under the ~~capital requirements~~Capital Rules and the regulatory framework for prompt corrective action, the Company and Bank must meet specific capital guidelines that involve quantitative measures of the Company’s and Bank’s assets, liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices. The Company’s and Bank’s capital amounts and classifications are also subject to qualitative judgments by regulators about components, risk weightings and other factors.

~~Quantitative measures established by regulation to ensure capital adequacy~~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 ~~December 31, 2017,~~June 30, 2022, both the ~~Bank~~Company and the ~~Company~~Bank 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”)~~AOCI opt-out election; under the rule, non-advanced approach banking organizations were given a one-time option to exclude certain AOCI components.

The tables below include certain non-GAAP financial measures that are used by investors, analysts and bank regulatory agencies to assess the capital position of financial services companies. Management reviews these measures along with other measures of capital as part of its financial ~~analysis.~~analyses and has included this non-GAAP financial information, and corresponding reconciliation to total equity. The decrease in Tier 1 leverage capital ratio for the period is the result of higher quarterly average assets related to its seasonal tax business. Regulatory Capital is not affected by the unrealized loss on AOCI. The securities portfolio is made up of nearly all amortizing securities that should provide consistent cash flow and is not expected to require sales to realize the losses to fund future loan growth.


At June 30, 2022	Company		Bank		Minimum to be Adequately Capitalized Under Prompt Corrective Action Provisions		Minimum to be Well Capitalized Under Prompt Corrective Action Provisions
Tier 1 leverage capital ratio	8.23	%	8.22	%	4.00	%	5.00	%
Common equity Tier 1 capital ratio	11.87		12.17		4.50		6.50
Tier 1 capital ratio	12.19		12.18		6.00		8.00
Total capital ratio	13.44		13.43		8.00		10.00

Minimum
Requirement to Be
Minimum Well Capitalized
Requirement For Under Prompt
Capital Adequacy Corrective Action
At December 31, 2017 Company Bank Purposes Provisions

Tier 1 leverage ratio 7.68 % 9.61 % 4.00 % 5.00 %
Common equity Tier 1 capital ratio 12.93
16.71
4.50
6.50
Tier 1 capital ratio 13.38
16.71
6.00
8.00
Total qualifying capital ratio 16.99
17.11
8.00
10.00

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The following table provides ~~certain non-GAAP financial measures used to compute certain~~a reconciliation of the ~~ratios~~amounts included in the table above ~~as well as a reconciliation of such non-GAAP financial measures to~~for the ~~most directly comparable financial measure in accordance with GAAP:~~Company.


(Dollars in thousands)	Standardized Approach(1) June 30, 2022
Total stockholders' equity	$	724,774
Adjustments:
LESS: Goodwill, net of associated deferred tax liabilities	299,616
LESS: Certain other intangible assets	27,809
LESS: Net deferred tax assets from operating loss and tax credit carry-forwards	11,978
LESS: Net unrealized gains (losses) on available for sale securities	(131,352)
LESS: Noncontrolling interest	665
ADD: Adoption of Accounting Standards Update 2016-13	10,011
Common Equity Tier 1(1)	526,069
Long-term borrowings and other instruments qualifying as Tier 1	13,661
Tier 1 minority interest not included in common equity Tier 1 capital	377
Total Tier 1 capital	540,107
Allowance for credit losses	55,506
Subordinated debentures (net of issuance costs)	—
Total capital	$	595,613

Standardized Approach (1)
December 31, 2017
(Dollars in Thousands)

Total equity $ 437,705
Adjustments:

LESS: Goodwill, net of associated deferred tax liabilities 95,705
LESS: Certain other intangible assets 40,417
LESS: Net deferred tax assets from operating loss and tax credit carry-forwards —
LESS: Net unrealized gains (losses) on available-for-sale securities 5,782
Common Equity Tier 1 ⁽¹⁾
295,801
Long-term debt and other instruments qualifying as Tier 1 10,310
LESS: Additional tier 1 capital deductions —
Total Tier 1 capital 306,111
Allowance for loan losses 9,058
Subordinated debentures (net of issuance costs) 73,382
Total qualifying capital 388,551

⁽¹⁾ Capital ratios were determined using the Basel III capital rules that became effective on January 1, 2015. Basel III revised the definition of capital, increased minimum capital ratios, and introduced a minimum common equity tier 1 capital ratio; those changes ~~are being~~were fully phased in through the end of 2021.

The following table provides a reconciliation of tangible common equity and tangible common equity excluding AOCI, each of which is used in calculating tangible book value data, to ~~Total Stockholders' Equity.~~

December 31, 2017
(Dollars in Thousands)
Total Stockholders' Equity $ 437,705
LESS: Goodwill 98,723
LESS: Intangible assets 50,521
Tangible common equity 288,461
LESS: AOCI 5,782
Tangible common equity excluding AOCI 282,679

~~Due to the predictable, quarterly cyclicality~~total stockholders' equity. Each of ~~MPS deposits in conjunction with tax season business activity, management believes that a six-month capital calculation~~tangible common equity and tangible common equity excluding AOCI is a ~~useful metric to monitor~~non-GAAP financial measure that is commonly used within the Company’s overall capital management process. As such, the Bank’s six-month average Tier 1 leverage ratio, Common equity Tier 1 capital ratio, Tier 1 capital ratio, and Total qualifying capital ratio as of December 31, 2017 were 9.75%, 18.17%, 18.17%, and 18.60%, respectively.banking industry.

~~Beginning~~


(Dollars in thousands)	At June 30, 2022
Total stockholders' equity	$	724,774
LESS: Goodwill	309,505
LESS: Intangible assets	27,088
Tangible common equity	388,181
LESS: AOCI	(131,407)
Tangible common equity excluding AOCI	$	519,588

Since January 1, 2016, ~~Basel III implemented a requirement for all banking organizations~~the Company and the Bank have been required to maintain a capital conservation buffer above the minimum risk-based capital requirements in order to avoid certain limitations on capital distributions, stock repurchases and discretionary bonus payments to executive officers. The capital conservation buffer is exclusively composed of Common Equity Tier 1 capital, and it applies to each of the three risk-based capital ratios but not the leverage ratio. The ~~implementation of the capital conservation buffer began on January 1, 2016, which increased or will increase the three risk-based capital ratios by 0.625% each year through 2019, at which point the~~required Common Equity Tier 1 risk-based, Tier 1 risk-based and total risk-based capital ratios ~~were or will be~~with the buffer are currently 7.0%, 8.5% and 10.5%, respectively.

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 ~~targeted~~the capital ~~ratios~~conservation buffer of 2.5% in addition to required ~~by the revised requirements, as they become effective.~~minimum capital ratios.

CONTRACTUAL OBLIGATIONS

See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations-Contractual Obligations" in the Company’s Annual Report on Form 10-K for its fiscal year ended September 30, ~~2017~~2021 for a summary of our contractual obligations as of September 30, ~~2017.~~2021. There were no material changes outside the ordinary course of our business in contractual obligations from September 30, ~~2017~~2021 through ~~December 31, 2017.~~June 30, 2022.

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OFF-BALANCE SHEET FINANCING ARRANGEMENTS

~~For~~See Note 19. Commitments and Contingencies in "Item 8. Financial Statements and Supplementary Data" in the Company's Annual Report on Form 10-K for its fiscal year ended September 30, 2021 for discussion of the Company’s off-balance sheet financing arrangements as of December 31, 2017, see Note 6 to our consolidated financial statements included in Part I, Item 1 “Financial Statements” of this Quarterly Report on Form 10-Q. Depending on the extent to which the commitments or contingencies described in Note 6 occur, the effect on the Company’s capital and net income could be significant.September 30, 2021. There were no material changes from September 30, 2021 through June 30, 2022.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

MARKET RISK

The Company derives a portion of its income from the excess of interest collected over interest paid. The rates of interest the Company earns on assets and pays on liabilities generally are established contractually for a period of time. Market interest rates change over time. Accordingly, the Company’s results of operations, like those of most financial institutions, are impacted by changes in interest rates and the interest rate sensitivity of its assets and liabilities. The risk associated with changes in interest rates and the Company’s ability to adapt to these changes is known as interest rate risk and is the Company’s only significant “market” risk.

The Company monitors and measures its exposure to changes in interest rates in order to comply with applicable government regulations and risk policies established by the Board of Directors, and in order to preserve stockholder value. In monitoring interest rate risk, the Company analyzes assets and liabilities based on characteristics including size, coupon rate, repricing frequency, maturity date and likelihood of prepayment.

If the Company’s assets mature or reprice more rapidly or to a greater extent than its liabilities, then economic value of equity and net interest income would tend to increase during periods of rising rates and decrease during periods of falling interest rates. Conversely, if the Company’s assets mature or reprice more slowly or to a lesser extent than its liabilities, then economic value of equity and net interest income would tend to decrease during periods of rising interest rates and increase during periods of falling interest rates.

The Company currently focuses lending efforts toward originating and purchasing competitively priced adjustable-rate and fixed-rate loan products with short to intermediate terms to maturity, and may originate loans with terms longer than five years for borrowers that have a strong credit profile and typically lower loan-to-value ratios. This approach allows the Company to better maintain a portfolio of loans that will have less sensitivity to changes in the level of interest rates, while providing a reasonable spread to the cost of liabilities used to fund the loans.

The Company’s primary objective for its investment portfolio is to provide a source of liquidity for the Company. In addition, the investment portfolio may be used in the management of the Company’s interest rate risk profile. The investment policy generally calls for funds to be invested among various categories of security types and maturities based upon the Company’s need for liquidity, desire to achieve a proper balance between minimizing risk while maximizing yield, the need to provide collateral for borrowings, and the need to fulfill the Company’s asset/liability management goals.

The Company’s cost of funds responds to changes in interest rates due to the relatively short-term nature of its wholesale deposit portfolio, and due to the relatively short-term nature of its borrowed funds. The Company believes that its growing portfolio of longer duration, low-cost deposits generated from its ~~prepaid~~payments division provides a stable and profitable funding vehicle, but also subjects the Company to greater risk in a falling interest rate environment than it would otherwise have without this portfolio. This risk is due to the fact that, while asset yields may decrease in a falling interest rate environment, the Company cannot significantly reduce interest costs associated with these deposits, which thereby ~~compresses~~compress the Company’s net interest margin. As a result of the Company’s interest rate risk exposure in this regard, the Company has elected not to enter into any new longer-term wholesale borrowings, and generally has not emphasized longer-term time deposit products.

The Board of Directors and relevant government regulations establish limits on the level of acceptable interest rate risk at the Company, to which management adheres. There can be no assurance, however, that, in the event of an adverse change in interest rates, the Company’s efforts to limit interest rate risk will be successful.

Interest Rate Risk (“IRR”)

Overview. The Company actively manages interest rate risk, as changes in market interest rates can have a significant impact on reported earnings. The ~~Bank, like other financial institutions, is subject to~~Company's interest rate risk ~~to the extent that its interest-bearing liabilities mature or reprice more rapidly than its interest-earning assets. The interest rate risk process~~analysis is designed to compare income and economic valuation simulations in market scenarios designed to alter the direction, magnitude and speed of interest rate changes, as well as the slope of the yield curve. This analysis may not represent all impacts driven by changes in the interest rate environment. The Company does not currently engage in trading activities to control interest rate risk although it may do so in the future, if deemed necessary, to help manage interest rate risk.

Earnings at risk and economic value analysis. As a continuing part of its financial strategy, the Bank considers methods of managing an asset/liability mismatch consistent with maintaining acceptable levels of net interest income. In order to monitor interest rate risk, the Board of Directors has created an ~~Investment~~Asset/Liability Committee whose principal responsibilities are to assess the Bank’s asset/liability mix and implement strategies that will enhance income while managing the Bank’s vulnerability to changes in interest rates.

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The Company uses two approaches to model interest rate risk: Earnings at Risk (“EAR analysis”) and Economic Value of Equity (“EVE analysis”). Under EAR analysis, net interest income is calculated for each interest rate scenario and compared to the net interest income forecast in the base case. EAR analysis measures the sensitivity of interest-sensitive earnings over a one-year minimum time horizon. The results are affected by projected rates, prepayments, caps and floors. Management exercises its best ~~judgement~~judgment in making assumptions regarding events that management can influence, such as non-contractual deposit re-pricing, as well as events outside of management's control, such as customer behavior on loan and deposit activity and the effect that competition has on both ~~loan~~lending and deposit pricing. These assumptions are subjective and, as a result, net interest income simulation results will differ from actual results due to the timing, magnitude, and frequency of interest rate changes, changes in market conditions, customer behavior and management strategies, among other factors. ~~We perform~~The Company performs various sensitivity analyses on assumptions of deposit attrition, loan prepayments, and ~~deposit re-pricing. Market-implied~~asset re-pricing, as well as market-implied forward rates and various likely and extreme interest rate scenarios, ~~can be used for EAR analysis. These likely and extreme scenarios can include~~including rapid and gradual interest rate ramps, rate shocks and yield curve twists.

The EAR analysis used in the following table reflects the required analysis used no less than quarterly by management. It models ~~-100, +100, +200, +300, and +400~~ basis point parallel shifts in market interest rates over the next one-year period. ~~Due to the current low level of interest rates, only a -100 basis point parallel shift is represented.~~

The ~~Company was within Board policy limits for all rate scenarios using the snapshot as of December 31, 2017 as required by regulation. The~~following table ~~below~~ shows the results of the scenarios as of ~~December 31, 2017:~~June 30, 2022:


Net Sensitive Earnings at Risk
		Change in Interest Income/Expense for a given change in interest rates
		Over/(Under) Base Case Parallel Shift
(Dollars in Thousands)	Book Value	-100		Base		+100		+200		+300		+400


Total interest-sensitive income	5,903,406	298,311		320,853		343,783		366,880		389,752		412,820


Total interest-sensitive expense	193,458	279		1,055		1,844		2,657		3,487		4,349
Net interest-sensitive income		298,032		319,798		341,939		364,223		386,265		408,471

Percentage change from base		-6.8	%	—	%	6.9	%	13.9	%	20.8	%	27.7	%

~~Net Sensitive Earnings at Risk~~

Net Sensitive Earnings at Risk
Balances as of December 31, 2017 Standard (Parallel Shift) Year 1
Net Interest Income at Risk%
-100 +100 +200 +300 +400
Basis Point Change Scenario -7.4 % 3.3 % 5.5 % 7.4 % 9.4 %
Board Policy Limits -8.0 % -8.0 % -10.0 % -15.0 % -20.0 %

The EAR analysis reported at ~~December 31, 2017~~June 30, 2022, shows that ~~in all rising rate scenarios,~~total interest-sensitive income will change more ~~assets~~rapidly than ~~liabilities would reprice~~total interest-sensitive expense over the ~~modeled one-year period.~~

next year. IRR is a snapshot in time. The Company’s business and deposits are ~~very~~ predictably cyclical on a weekly, monthly and yearly basis. The Company’s static IRR results could vary depending on which day of the week ~~and timing in relation to certain payrolls, as well as time of~~ the month in regard to early funding of certain programs, when this snapshot is taken. The Company’s overnight federal funds purchased fluctuates on a predictable daily and monthly basis due to fluctuations in a portion of its non-interest bearing deposit base,ends, primarily related to payroll processing and timing of when certain programs are prefunded and when the funds are received. ~~Fiscal first quarter 2018 results do not necessarily show the typical effect of day of week cyclicality due to the temporary repositioning of the balance sheet, as previously noted.~~

Owing to the snapshot nature of IRR, as is required by regulators, in concert with the Company’s predictable weekly, monthly and yearly fluctuating deposit base and overnight borrowings, the results produced by static IRR analysis are not necessarily representative of what management, the Board of Directors, and others would view as the Company’s true IRR positioning. Management and the Board are aware of and understand these typical borrowing and deposit fluctuations as well as the point in time nature of IRR analysis and anticipated an outcome where the Company may temporarily be outside of Board policy limits based on a snapshot analysis.

For management to better understand the IRR position of the Bank, an alternative IRR analysis was completed whereby all December 31, 2017 values were utilized with the exception of overnight borrowings, non-interest bearing deposits, brokered deposits, cash due from banks, non-earning assets, and non-paying liabilities. To diminish potential issues documented above, quarterly average balances were utilized for overnight borrowings, non-interest-bearing deposits, brokered deposits and cash due from banks. Non-earning assets and non-paying liabilities were used to balance the balance sheet. Management believes this view on IRR, while still subject to some yearly cyclicality, more accurately portrays the Bank's IRR position. As noted in the below chart, the alternative EAR results are more normalized and slightly improved in the -100 interest rate shock compared to the static results, as timing issues in deposits and overnight borrowings are diminished and lower balances in cash and due from banks are observed.

~~The Company was within policy limits as of December 31, 2017 in all scenarios utilizing the alternative IRR scenario run. The table below highlights those results:~~

~~Alternative Net Sensitive Earnings at Risk~~

Net Sensitive Earnings at Risk
Alternative IRR Results Standard (Parallel Shift) Year 1
Net Interest Income at Risk%
-100 +100 +200 +300 +400
Basis Point Change Scenario -5.5 % 0.9 % 0.6 % — % -0.5 %
Board Policy Limits -8.0 % -8.0 % -10.0 % -15.0 % -20.0 %

The alternative EAR analysis reported at December 31, 2017 shows that in an increasing +100 and +200 interest rate environment, more assets than liabilities would reprice over the modeled one-year period. However, in the +300 scenario the results are more neutral to changes in interest rates, and in the +400 interest rate scenario, more liabilities (primarily due to overnight federal funds purchased) than assets would reprice over the modeled one-year period.

The alternative IRR results were somewhat lower in regard to the change in net interest income at risk percentages as compared to the fiscal 2018 first quarter alternative IRR results which resulted from higher average borrowings and an increased average interest-bearing deposit base. The Company anticipates solid EAR results in a rising rate environment due to continued commercial insurance premium finance loan growth, the addition of adjustable rate loans and securities, continued growth of non-interest bearing MPS deposits, and the sustained execution on its strategic plan.

~~Net Sensitive Earnings at Risk as of December 31, 2017~~

Balances as of December 31, 2017
% of Change in Interest Income/Expense
for a given change in interest rates
Total Earning Total Earning Over / (Under) Base Case Parallel Shift
Basis Point Change Scenario Assets (in $000's) Assets -100 Base +100 +200 +300 +400
Total Loans 1,509,141
30.2 % 65,404
70,803
75,956
80,981
85,966
91,142
Total Investments (non-TEY) and other Earning Assets 3,484,181
69.8 % 59,605
78,231
94,619
109,695
124,544
139,321
Total Interest-Sensitive Income 4,993,322
100.0 % 125,009
149,033
170,575
190,676
210,509
230,463
Total Interest-Bearing Deposits 734,000
35.8 % 6,482
8,244
12,439
16,634
20,829
25,024
Total Borrowings 1,315,261
64.2 % 7,543
20,878
34,212
47,547
60,883
74,234
Total Interest-Sensitive Expense 2,049,262
100.0 % 14,025
29,122
46,651
64,181
81,711
99,258

~~Alternative Net Sensitive Earnings at Risk~~

Alternative IRR Results
% of Change in Interest Income/Expense
for a given change in interest rates
Total Earning Total Earning Over / (Under) Base Case Parallel Shift
Basis Point Change Scenario Assets (in $000's) Assets -100 Base +100 +200 +300 +400
Total Loans 1,509,141
39.4 % 65,404
70,803
75,956
80,981
85,966
91,142
Total Investments (non-TEY) and other Earning Assets 2,323,118
60.6 % 52,958
59,952
64,692
68,099
71,273
74,350
Total Interest-Sensitive Income 3,832,259
100.0 % 118,362
130,755
140,648
149,080
157,238
165,492
Total Interest-Bearing Deposits 797,475
65.4 % 7,402
9,193
13,747
18,301
22,855
27,409
Total Borrowings 421,370
34.6 % 2,468
6,739
11,011
15,282
19,566
23,860
Total Interest-Sensitive Expense 1,218,845
100.0 % 9,870
15,932
24,758
33,583
42,421
51,269

The Company believes that its growing portfolio of non-interest bearing deposits provides a stable and profitable funding vehicle and a significant competitive advantage in a rising interest rate environment as the Company’s cost of funds will likely remain relatively low, with less increase expected relative to many other banks. When unable to match loan growth to deposit growth, the Company continues to execute its investment strategy of primarily purchasing NBQ municipal bonds and agency MBS, however, the Bank reviews opportunities to add diverse, high quality securities at attractive relative rates when opportunities present themselves. The NBQ municipal bonds are tax exempt and as such have a tax equivalent yield higher than their book yield. The tax equivalent yield calculation for NBQ municipal bonds uses the Company’s cost of funds as one of its components. With the Company’s large volume of non-interest bearing deposits, the tax equivalent yield for these NBQ municipal bonds is higher than a similar term investment in other investment categories of similar risk and higher than most other banks can realize and sustain on the same or similar instruments. The above interest income figures are quoted on a pre-tax basis which is particularly notable due to the size of the Company’s tax-exempt municipal portfolio.

Under EVE analysis, the economic value of financial assets, liabilities and off-balance sheet instruments is derived under each rate scenario. The economic value of equity is calculated as the difference between the estimated market value of assets and liabilities, net of the impact of off-balance sheet instruments.

The EVE analysis used in the following table reflects the required analysis used no less than quarterly by management. It models immediate ~~-100, +100, +200, +300 and +400~~ basis point parallel shifts in market interest rates. ~~Due to the current low level of interest rates, only a -100 basis point parallel shift is represented.~~

The ~~Company was within Board policy limits for all scenarios. The~~following table ~~below~~ shows the results of the scenarios as ~~of December 31, 2017:~~June 30, 2022:


Economic Value Sensitivity
	Standard (Parallel Shift)
	Economic Value of Equity at Risk %
	-100		+100		+200		+300		+400
Percentage change from base	-5.2	%	3.6	%	6.6	%	8.9	%	11.8	%

~~Economic Value Sensitivity as of December 31, 2017~~

Balances as of December 31, 2017 Standard (Parallel Shift)
Economic Value of Equity at Risk%
-100 +100 +200 +300 +400
Basis Point Change Scenario -4.1 % -1.3 % -4.8 % -9.3 % -12.7 %
Board Policy Limits -10.0 % -10.0 % -20.0 % -30.0 % -40.0 %

The EVE at risk reported at ~~December 31, 2017~~June 30, 2022 shows that ~~as interest rates increase,~~ the economic value of equity position ~~will decrease~~is expected to benefit from ~~the base, primarily~~rising interest rates due to the ~~degree~~large amount of ~~the economic value~~noninterest-bearing funding.

Table of its base asset size in relation to the economic value of its base liability size. When viewing total asset versus total liability economic value, projected total assets are affected similarly on a percentage basis as compared to projected total liabilities in a rising rate environment.

~~The Company was within policy limits in all scenarios utilizing the alternative IRR scenario run for management purposes. The table below highlights those results:~~

~~Alternative Economic Value Sensitivity~~

Contents

Alternative IRR Results Standard (Parallel Shift)
Economic Value of Equity at Risk%
-100 +100 +200 +300 +400
Basis Point Change Scenario -0.9 % -3.8 % -9.3 % -15.5 % -20.5 %
Board Policy Limits -10.0 % -10.0 % -20.0 % -30.0 % -40.0 %

The EVE at risk reported using the alternative methodology used for management purposes shows that if interest rates increase immediately, the economic value of equity position will decrease from the base, partially due to the degree of the economic value of its base asset size in relation to the economic value of its base liabilities size.

~~Detailed Economic Value Sensitivity~~

The following table details the economic value sensitivity to changes in market interest rates at December 31, 2017, for loans, investments, deposits, borrowings, and other assets and liabilities (dollars in thousands). The analysis reflects that in the +100 and +200 rising rate scenarios, total assets are marginally less sensitive than total liabilities, while in the +300 and +400, total assets are marginally more sensitive than total liabilities. Asset sensitivity is offset by the non-interest bearing deposits.

Balances as of December 31, 2017
% of Change in Economic Value
for a given change in interest rates
Book Total Over / (Under) Base Case Parallel Shift
Basis Point Change Scenario Value (in $000's) Assets -100 +100 +200 +300 +400
Total Loans 1,500,279
28 % 2.0 % -2.0 % -4.1 % -6.0 % -7.9 %
Total Investment 3,484,181
64 % 2.3 % -3.2 % -6.6 % -9.9 % -12.8 %
Other Assets 420,792
8 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 %
Assets 5,405,252
100 % 2.1 % -2.6 % -5.4 % -8.1 % -10.4 %
Interest Bearing Deposits 734,000
15 % 1.7 % -1.5 % -3.0 % -4.3 % -5.5 %
Non-Interest Bearing Deposits 2,783,941
57 % 5.7 % -5.1 % -9.7 % -13.8 % -17.5 %
Total Borrowings & Other Liabilities 1,363,650
28 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 %
Liabilities 4,881,591
100 % 3.2 % -2.9 % -5.5 % -7.8 % -10.0 %

~~Detailed Alternative Economic Value Sensitivity~~

The following is EVE at risk reported using the alternative methodology used for management purposes, for loans, investments, deposits, borrowings, and other assets and liabilities (dollars in thousands). The analysis reflects that in rising interest rate scenarios, the total assets are slightly more sensitive in regard to economic value sensitivity.

Alternative IRR Results
% of Change in Economic Value
for a given change in interest rates
Book Total Over / (Under) Base Case Parallel Shift
Basis Point Change Scenario Value (in $000's) Assets -100 +100 +200 +300 +400
Total Loans 1,500,279
28 % 2.0 % -2.0 % -4.1 % -6.0 % -7.9 %
Total Investment 2,323,118
43 % 3.5 % -4.9 % -9.9 % -14.9 % -19.2 %
Other Assets 1,581,855
29 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 %
Assets 5,405,252
100 % 2.1 % -2.6 % -5.4 % -8.1 % -10.4 %
Interest Bearing Deposits 797,475
16 % 1.1 % -1.0 % -1.9 % -2.8 % -3.7 %
Non-Interest Bearing Deposits 2,333,111
48 % 5.8 % -5.1 % -9.7 % -13.8 % -17.5 %
Total Borrowings & Other Liabilities 1,751,006
36 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 %
Liabilities 4,881,591
100 % 2.7 % -2.4 % -4.5 % -6.5 % -8.2 %

Certain shortcomings are inherent in the method of analysis discussed above and as presented in the tables above. For example, although certain assets and liabilities may have similar maturities or periods to repricing, they may react in different degrees to changes in market interest rates. Also, the interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market interest rates, while interest rates on other types may lag behind changes in market rates. Additionally, certain assets, such as adjustable rate mortgage loans, have features that restrict changes in interest rates on a short-term basis and over the life of the asset. Furthermore, although management has estimated changes in the levels of prepayments and early withdrawal in these rate environments, such levels would likely deviate from those assumed in calculating the tables above. Finally, the ability of some borrowers to service their debt may decrease in the event of an interest rate increase.

Item 4. Controls and Procedures.

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

Management, under the direction of its Chief Executive Officer and Chief Financial Officer, is responsible for maintaining disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "1934 Act")) that are designed to ensure that information required to be disclosed in reports filed or submitted under the 1934 Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and that such information is accumulated and communicated to management, including the Company's Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures.

In connection with the preparation of this Quarterly Report on Form 10-Q, management evaluated the Company's disclosure controls and procedures. The evaluation was performed under the direction of the Company's Chief Executive Officer and Chief Financial Officer to determine the effectiveness, as of June 30, 2022, of the design and operation of the Company's disclosure controls and procedures. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, at June 30, 2022, the Company’s disclosure controls and procedures were not designed effectively to ensure timely alerting of material information relating to the Company required to be included in the Company's periodic SEC filings.

In the fiscal fourth quarter of 2021 and the fiscal third quarter of 2022, the Company identified control deficiencies related to access permissions in two loan systems which resulted in a lack of segregation of duties over disbursements in which select individuals had the ability to both initiate and approve disbursements indicating that the user access provisioning and user entitlement review monitoring controls did not function to a precise level to ensure segregation of duties was maintained. Management determined that the combination of user access provisioning and user entitlement review deficiencies represent a material weakness in internal controls over financial reporting on the basis that the deficiencies could result in a misstatement potentially impacting the Company's financial statement accounts and disclosures that would not be prevented or detected on a timely basis.

REMEDIATION PLAN FOR REPORTED MATERIAL WEAKNESS

Annual entitlement review for the loan system identified in the fourth quarter of 2021 was performed in March 2022 and no inappropriate access was identified.

For the loan system identified with inappropriate system access in fiscal third quarter of 2022, management removed access for the individuals that had inappropriate access and performed testing of disbursements during the impacted period and did not identify any instances where the segregation of the disbursement over initiation and approval was not maintained. In May, management also implemented an IT application control to identify instances where the initiator and approver are the same to prevent disbursement from occurring.

The Company is also undergoing a broader risk assessment across all material applications to ensure preventative controls are in place to identify and strengthen sensitive user functions including but not limited to loan disbursements regarding the user access and entitlement provisioning controls.

INHERENT LIMITATIONS ON THE EFFECTIVENESS OF CONTROLS

Any control system, no matter how well designed and operated, can provide only reasonable (not absolute) assurance that its objectives will be met. Furthermore, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in a cost-effective control system, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected.

~~DISCLOSURE CONTROLS AND PROCEDURES~~

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The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s “disclosure controls and procedures”, as such term is defined in Rules 13a – 15(e) and 15d – 15(e) of the Securities Exchange Act of 1934 (“Exchange Act”) as of the end of the period covered by the report.

Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, at December 31, 2017, the Company’s disclosure controls and procedures were effective to provide reasonable assurance that (i) the information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (ii) information required to be disclosed by us in our reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

~~With the participation of the Company’s management, including its Chief Executive Officer and Chief Financial Officer, the Company~~Management conducted an evaluation of the Company’s internal control over financial reporting to determine whether any changes occurred during the ~~Company’s fiscal quarter~~three months ended ~~December 31, 2017,~~June 30, 2022 that have materially affected, or are reasonably likely to materially affect, the Company’s internal ~~control~~controls over financial reporting. Based on ~~such~~this evaluation, management concluded that, as of the end of the period covered by this report, there ~~have not been any~~were changes in the Company’s internal ~~control~~controls over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the ~~Exchange~~1934 Act) during the fiscal third quarter to which this report relates that could have materially affected ~~or are reasonably likely to materially affect,~~ the Company’s internal ~~control~~controls over financial ~~reporting.~~reporting, as described above.

~~META~~

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PATHWARD FINANCIAL, ~~GROUP,~~ INC.

PART II - OTHER INFORMATION

FORM 10-Q

Item 1. Legal ~~Proceedings.~~ ~~– See “Legal Proceedings” under Note 6~~Proceedings

There are no material pending legal proceedings to which we are a party or to which any of our properties are subject. There are no material proceedings known to us to be contemplated by any governmental authority. We are involved in a variety of litigation matters in the ~~Notes to Condensed Consolidated Financial Statements, which is incorporated herein by reference.~~ordinary course of our business and anticipate that we will become involved in new litigation matters in the future.

I~~tem~~Item 1A. Risk ~~Factors.~~ - Factors

A description of our risk factors can be found in "Item 1A. Risk Factors" included in our Annual Report on Form 10-K for the fiscal year ended September 30, ~~2017.~~2021. There were no material changes to those risk factors during the ~~three~~nine months ended ~~December 31, 2017,~~June 30, 2022, except that the following risk factors are hereby added:

~~There are risks associated with~~Our rebranding strategy may not produce the ~~proposed transaction with Crestmark~~benefits expected, may involve substantial costs and ~~Crestmark Bank, including the receipt of required shareholder and regulatory approvals and timing for completion of the transactions contemplated thereby.~~

We recently announced that we and MetaBank have entered into a definitive agreement and plan of merger with Crestmark and its wholly-owned subsidiary, Crestmark Bank, whereby we will acquire Crestmark in an all-stock transaction. The transaction remains subject to approval of our stockholders and Crestmark’s shareholders, regulatory approvals and other closing conditions. It is possible that one or more of the closing conditions may not be ~~satisfied or that it may take an extended amount~~favorably received by our customers.

To reflect the evolution and growth of ~~time until they are.~~our business, including our corporate mission of financial inclusion for all®, we rebranding, with the Company changing its name to Pathward Financial, Inc. and the Bank changing to Pathward, N.A. as of July 13, 2022. As previously announced, in connection with the sale of our rights to our current trade names and marks including METABANK and META FINANCIAL GROUP for $60 million, we have agreed to phase out and cease all use of the META marks and names, and change our corporate names by December 7, 2022. Accordingly, the full transition to Pathward is expected by the end of this calendar year, including the launch of a new brand identity and website.

Developing and maintaining awareness and integrity of our brand are important to achieving widespread acceptance of our existing and future product and service offerings and attracting new customers. Successful promotion of our rebranding will depend on the effectiveness of our marketing efforts and on our ability to provide reliable and useful banking solutions. We plan to invest resources to promote our new brand, but we cannot predict how such marketing efforts will be received and there is no guarantee that we will be able to achieve or maintain brand recognition or status under our new names and marks that is comparable to the recognition and status we previously enjoyed. If our rebranding strategy does not produce the benefits expected, it could adversely affect our ability to retain and attract customers, and may have a ~~risk~~negative impact on our operations, business, financial results and financial condition.

Our actual operating results may differ significantly from our guidance.

From time to time, we issue guidance in our quarterly earnings releases and conference calls, or otherwise, regarding our future performance that represents our management’s estimates as of the ~~proposed transaction~~date of release. Guidance is necessarily speculative in nature, and is only an estimate of what management believes is realizable as of the date of release, and it can be expected that some or all of the assumptions underlying the guidance furnished by us will prove to be incorrect or will vary significantly from actual results. Actual results will vary from our guidance and the variations may ~~not~~ be ~~completed~~material, especially in times of economic uncertainty.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

(a) None.

(b) None.

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The Company's Board of Directors authorized a 7,500,000 share repurchase program on ~~a timely basis or at all, which could have adverse effects~~November 20, 2019 that was publicly announced on November 20, 2019 and is scheduled to expire on December 31, 2022. All remaining shares available for repurchase under this program were repurchased during the ~~market price~~fiscal 2022 first quarter. On September 3, 2021, the Company's Board of Directors authorized an additional 6,000,000 share repurchase program that was publicly announced on September 7, 2021 and is scheduled to expire on September 30, 2024. The table below sets forth information regarding repurchases of our common stock ~~and our operating results. Furthermore,~~during the ~~transaction involves a number of other risks and uncertainties, including, but~~fiscal 2022 third quarter.


Period	Total Number of Shares Repurchased(1)	Average Price Paid per Share(1)(2)		Total Number Of Shares Purchased As Part of Publicly Announced Plans or Programs	Maximum Number Of Shares that may yet be Purchased Under the Plans or Programs
April 1 to 30	—	$	—	—	4,868,177
May 1 to 31	2,622	42.35		—	4,868,177
June 1 to 30	—	—		—	4,868,177
Total	2,622			—

(1) All shares not ~~limited to, the following:~~

~~the businesses may not be combined successfully, or such combination may take longer, be more difficult, time-consuming or costly to accomplish than expected;~~

~~the risk that the expected growth opportunities, beneficial synergies and/or operating efficiencies from the proposed transaction may not be fully realized or may take longer to realize than expected;~~

~~customer losses and business disruption in connection with and following the acquisition;~~

~~potential litigation relating to the transaction;~~

~~the risk that the Company may incur unanticipated or unknown losses or liabilities if it completes the proposed transaction; and~~

~~potential adverse effects on the market price of our common stock caused by the sale of such stock held by former Crestmark shareholders following the transaction.~~

~~Any~~purchased as part of the ~~foregoing risks or similar risks could have an adverse impact~~Company's publicly announced repurchase program were acquired in satisfaction of the tax withholding obligations of holders of restricted stock unit awards, which vested during the quarter.

(2) The average price paid per share is calculated on ~~our business. We have also incurred,~~a trade date basis for all open market transactions and ~~will incur, significant expenses associated with the proposed transaction with Crestmark, including fees of professional advisors.~~

Additional information regarding the risks and uncertainties associated with the proposed transaction with Crestmark will be contained in the registration statement on Form S-4, which will include a joint proxy statement and prospectus, that we intend to file with the SEC in connection with the proposed transaction.

Program agreements that the Company and the Bank have entered into, and expect to enter into from time to time in the future, with third parties to market and service consumer loans originated by the Bank may subject the Bank to claims from regulatory agenciesexcludes commissions and other ~~third parties that, if successful, could negatively impact MetaBank’s ongoing and future business.~~transaction expenses.

On January 25, 2018, the Company announced that the Bank had entered into a lending program with Liberty Lending, LLC, an unaffiliated third party (“Liberty”), whereby Liberty will market and service unsecured consumer loans underwritten and originated by the Bank. See “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Business Developments” for further information regarding the Bank’s program agreement with Liberty. The Company expects the Bank to enter into similar program agreements with other third parties to market and service loans originated by the Bank, from time to time in the future. Certain types of these arrangements have been challenged both in the courts and in regulatory actions. In these actions, plaintiffs have generally argued that the “true lender” is the marketer and that the intent of such lending program is to evade state usury and loan licensing laws. Other cases have also included other claims, including racketeering and other state law claims, in their challenge of such programs. There can be no assurance that lawsuits or regulatory actions in connection with any such lending programs the Bank enters into will not be brought in the future. If a regulatory agency, consumer advocate group or other third party were to bring an action against the Bank or any of the third parties with which the Bank operates such lending programs, such as Liberty, and such actions were successful, such an outcome could have a material adverse effect on the Bank and the Company.

Agreements with Liberty Lending and others whereby the Bank will originate and hold unsecured consumer loans, may result in increased exposure to credit risk and fraud and may present certain additional risks.

Although the Bank has offered unsecured consumer loans to its customers through its brick-and-mortar branch network, the Bank’s entry into program agreements with other third parties to market and service loans originated by the Bank, such as its recently announced program agreement with Liberty, represents a new area of the consumer credit market for the Bank, which presents potential increased credit risks. As a result of the loans originated under such program being unsecured, in the event a borrower does not repay the loan in accordance with its terms or otherwise defaults on the loan, the Bank may not be able to recover from the borrower an amount sufficient to pay any remaining balance on the loan. See “If the Company’s actual loan losses exceed the Company’s allowance for loan losses, the Company’s net income will decrease.” We may also become subject to claims by regulatory agencies or other third parties due to the conduct of the third parties with which the Bank operates such lending programs if such conduct does not comply with applicable laws in connection with marketing and servicing loans under the program.

Item 6. Exhibits.



Exhibit Number		Description

~~2.1~~31.1		Agreement and Plan of Merger, dated as of January 9, 2018, by and among Meta Financial Group, Inc., MetaBank, Crestmark Bancorp, Inc. and Crestmark Bank, filed on January 9, 2018 as an exhibit to the Registrant’s Current Report on Form 8-K, is incorporated herein by reference.

~~3.1~~	~~Certificate of Incorporation, as amended~~

~~10.1~~	Amended and Restated Meta Financial Group, Inc. 2002 Omnibus Incentive Plan, as amended, filed on January 24, 2018 as an exhibit to the Registrant’s Current Report on Form 8-K, is incorporated herein by reference.

~~31.1~~	Section 302 certification of Chief Executive Officer.

31.2		Section 302 certification of Chief Financial Officer.

32.1		Section 906 certification of Chief Executive Officer.

32.2		Section 906 certification of Chief Financial Officer.

~~101.INS~~101		~~Instance Document~~The following financial information from the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2022 formatted in Inline Extensible Business Reporting Language (iXBRL) includes: (i) Cover Page, (ii) Condensed Consolidated Statements of Financial Condition, (iii) Condensed Consolidated Statements of Operations, (iv) Condensed Consolidated Statements of Comprehensive Income, (v) Condensed Consolidated Statements of Changes in Stockholders' Equity, (vi) Condensed Consolidated Statements of Cash Flows, and (vii) Notes to Condensed Consolidated Financial Statements, tagged in summary and in detail.

~~101.SCH~~104		Cover Page Interactive Data File (formatted as Inline XBRL ~~Taxonomy Extension Schema Document~~

~~101.CAL~~	~~XBRL Taxonomy Extension Calculation Linkbase Document~~

~~101.DEF~~	~~XBRL Taxonomy Extension Definition Linkbase Document~~

~~101.LAB~~	~~XBRL Taxonomy Extension Label Linkbase Document~~

~~101.PRE~~	~~XBRL Taxonomy Extension Presentation Linkbase Document~~and contained in Exhibit 101).

* Management contract or compensatory plan or agreement.

~~META~~

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PATHWARD FINANCIAL, ~~GROUP,~~ INC.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



		~~META~~PATHWARD FINANCIAL, ~~GROUP,~~ INC.

Date: ~~February 7, 2018~~August 9, 2022		By:	/s/ ~~J. Tyler Haahr~~Brett L. Pharr
			~~J. Tyler Haahr, Chairman of the Board~~Brett L. Pharr,
			~~and~~ Chief Executive Officer and Director

Date: ~~February 7, 2018~~August 9, 2022		By:	/s/ Glen W. Herrick
			Glen W. Herrick,
			Executive Vice President
	and Chief Financial Officer



Delaware			42-1406262
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $.01 par value	CASH	The NASDAQ Stock Market LLC



Class:	Outstanding at ~~February 5, 2018:~~August 2, 2022:
Common Stock, $.01 par value	~~9,683,841 shares~~29,053,520	Shares
Nonvoting Common Stock, $.01 par value	0	Nonvoting shares


Description					Page
PART I - Financial Information
Item 1.			Financial Statements (Unaudited)		2

~~PART I - FINANCIAL INFORMATION~~			2

~~Item 1.~~	~~Financial Statements (Unaudited)~~	2

	Condensed Consolidated Statements of Financial Condition as of ~~December 31, 2017~~June 30 , 2022 and September 30, ~~2017~~2021	2

			Condensed Consolidated Statements of Operations for the Three and Nine Months Ended ~~December 31, 2017~~June 3 0 , 2022 and ~~2016~~2021		3

			Condensed Consolidated Statements of Comprehensive Income ~~(Loss)~~ for the Three and Nine Months Ended ~~December 31, 2017~~June 3 0 2022 and ~~2016~~2021		4

			Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Three and Nine Months Ended ~~December 31, 2017~~June 3 0 , 2022 and ~~2016~~2021		5

			Condensed Consolidated Statements of Cash Flows for the ~~Three~~Nine Months Ended ~~December 31, 2017~~June 30 , 2022 and ~~2016~~2021		67

			Notes to Condensed Consolidated Financial Statements		8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations			3936

Item 3.	Quantitative and Qualitative Disclosures About Market Risk			5450

Item 4.	Controls and Procedures			6051

PART II - ~~OTHER INFORMATION~~Other Information
Item 1.			Legal Proceedings		6154

Item 1.1A.	~~Legal Proceedings~~Risk Factors			6154

Item ~~1A.~~ 2.	~~Risk Factors~~Unregistered Sales of Equity Securities and Use of Proceeds			6154



Item 6.			Exhibits		6355

SIGNATURES		6456



	(Unaudited)
ASSETS	December 31, 2017			September 30, 2017
Cash and cash equivalents	$	1,300,409		$	1,267,586
Investment securities available for sale	1,392,240			1,106,977
Mortgage-backed securities available for sale	600,112			586,454
Investment securities held to maturity	235,024			449,840
Mortgage-backed securities held to maturity	8,468			113,689
Loans receivable	1,509,140			1,325,371
Allowance for loan losses	(8,862		)	(7,534		)
Federal Home Loan Bank Stock, at cost	57,443			61,123
Accrued interest receivable	21,089			19,380
Premises, furniture, and equipment, net	20,571			19,320
Bank-owned life insurance	85,371			84,702
Foreclosed real estate and repossessed assets	128			292
Goodwill	98,723			98,723
Intangible assets	50,521			52,178
Prepaid assets	29,758			28,392
Deferred taxes	5,379			9,101
Other assets	12,449			12,738

Total assets	$	5,417,963		$	5,228,332

LIABILITIES AND STOCKHOLDERS’ EQUITY

LIABILITIES
Non-interest-bearing checking	$	2,779,645		$	2,454,057
Interest-bearing checking	84,390			67,294
Savings deposits	53,535			53,505
Money market deposits	47,451			48,758
Time certificates of deposit	128,220			123,637
Wholesale deposits	420,404			476,173
Total deposits	3,513,645			3,223,424
Short-term debt	1,313,401			1,404,534
Long-term debt	85,552			85,533
Accrued interest payable	4,065			2,280
Accrued expenses and other liabilities	63,595			78,065
Total liabilities	4,980,258			4,793,836

STOCKHOLDERS’ EQUITY
Preferred stock, 3,000,000 shares authorized, no shares issued or outstanding at December 31, 2017 and September 30, 2017, respectively	—			—
Common stock, $.01 par value; 15,000,000 shares authorized, 9,685,398 and 9,626,431 shares issued, 9,664,846 and 9,622,595 shares outstanding at December 31, 2017 and September 30, 2017, respectively	96			96
Common stock, Nonvoting, $.01 par value; 3,000,000 shares authorized, no shares issued or outstanding at December 31, 2017 and September 30, 2017, respectively	—			—
Additional paid-in capital	262,872			258,336
Retained earnings	170,578			167,164
Accumulated other comprehensive income	5,782			9,166
Treasury stock, at cost, 20,552 and 3,836 common shares at December 31, 2017 and September 30, 2017, respectively	(1,623		)	(266		)
Total stockholders’ equity	437,705			434,496

Total liabilities and stockholders’ equity	$	5,417,963		$	5,228,332



	Three Months Ended December 31,
	2017			2016
Interest and dividend income:
Loans receivable, including fees	$	16,443		$	10,678
Mortgage-backed securities	3,758			3,320
Other investments	10,656			8,577
	30,857			22,575
Interest expense:
Deposits	1,885			938
FHLB advances and other borrowings	2,776			1,804
	4,661			2,742

Net interest income	26,196			19,833

Provision for loan losses	1,068			843

Net interest income after provision for loan losses	25,128			18,990

Non-interest income:
Refund transfer product fees	192			176
Tax advance product fees	1,947			449
Card fees	25,247			18,414
Loan fees	1,292			870
Bank-owned life insurance	669			448
Deposit fees	848			150
Loss on sale of securities available-for-sale, net (Includes ($1,010) and ($1,234) reclassified from accumulated other comprehensive income (loss) for net gains (losses) on available for sale securities for the three months ended December 31, 2017 and 2016, respectively)	(1,010		)	(1,234		)
Loss on foreclosed real estate	(19		)	—
Other income	102			76
Total non-interest income	29,268			19,349

Non-interest expense:
Compensation and benefits	22,340			17,850
Refund transfer product expense	101			51
Tax advance product expense	280			27
Card processing	6,540			5,579
Occupancy and equipment	4,890			3,977
Legal and consulting	2,416			2,723
Marketing	553			470
Data processing	414			363
Intangible amortization expense	1,681			1,525
Other expense	4,827			4,188
Total non-interest expense	44,042			36,753


Income before income tax expense	10,354			1,586

Income tax expense (Includes ($380), and ($463) reclassified from accumulated other comprehensive income (loss) for the three months ended December 31, 2017 and 2016, respectively)	5,684			342

Net income	$	4,670		$	1,244

Earnings per common share
Basic	$	0.48		$	0.14
Diluted	$	0.48		$	0.14



	Three Months Ended December 31,
	2017			2016
Net income	$	4,670		$	1,244

Other comprehensive income (loss):
Change in net unrealized loss on securities	(7,480		)	(45,268		)
Losses realized in net income	1,010			1,234
	(6,470		)	(44,034		)
LESS: Deferred income tax effect	(3,086		)	(16,092		)
Total other comprehensive loss	(3,384		)	(27,942		)
Total comprehensive income (loss)	$	1,286		$	(26,698	)


(Dollars in thousands, except per share data)	Pathward Financial, Inc.
Three Months Ended June 30, 2022	Common Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Treasury Stock		Total Pathward Stockholders’ Equity		Noncontrolling interest		Total Stockholders’ Equity
Balance, March 31, 2022	$	294	$	612,917	$	223,760	$	(69,374)	$	(4,513)	$	763,084	$	322	$	763,406
Cash dividends declared on common stock ($0.05 per share)	—		—		(1,465)		—		—		(1,465)		—		(1,465)



Repurchases of common stock	—		—		—		—		(110)		(110)		—		(110)

Stock compensation	—		2,242		—		—		—		2,242		—		2,242
Total other comprehensive (loss)	—		—		—		(62,033)		—		(62,033)		—		(62,033)
Net income	—		—		22,391		—		—		22,391		1,448		23,839
Net investment by (distribution to) noncontrolling interests	—		—		—		—		—		—		(1,105)		(1,105)
Balance, June 30, 2022	$	294	$	615,159	$	244,686	$	(131,407)	$	(4,623)	$	724,109	$	665	$	724,774

Three Months Ended June 30, 2021
Balance, March 31, 2021	$	319	$	601,222	$	225,471	$	12,809	$	(5,655)	$	834,166	$	1,092	$	835,258

Cash dividends declared on common stock ($0.05 per share)	—		—		(1,594)		—		—		(1,594)		—		(1,594)



Repurchases of common stock	—		—		—		—		(41)		(41)		—		(41)

Stock compensation	—		1,498		—		—		—		1,498		—		1,498
Total other comprehensive (loss)	—		—		—		2,413		—		2,413		—		2,413
Net income	—		—		38,701		—		—		38,701		1,158		39,859
Net investment by (distribution to) noncontrolling interests	—		—		—		—		—		—		(760)		(760)
Balance, June 30, 2021	$	319	$	602,720	$	262,578	$	15,222	$	(5,696)	$	875,143	$	1,490	$	876,633


Net change in cash and cash equivalents	(156,759)		292,876

Cash and cash equivalents at beginning of fiscal year	314,019		427,367
Cash and cash equivalents at end of fiscal period	$	157,260	$	720,243


								Nine Months Ended June 30,
Supplemental disclosure of cash flow information
(Dollars in thousands)							(Dollars in thousands)	2022		2021
Supplemental disclosure of cash flow information:							Supplemental disclosure of cash flow information:
Cash paid during the period for:							Cash paid during the period for:
Interest	$	6,446		$	1,362		Interest	$	4,779	$	5,544
Income taxes	218			2,110			Income taxes	10,898		4,147
Franchise taxes	31			20			Franchise taxes	200		200
Other taxes	1			1			Other taxes	516		671
Supplemental schedule of non-cash investing activities:							Supplemental schedule of non-cash investing activities:
Purchases/sales of securities accrued, not settled							Purchases/sales of securities accrued, not settled
Trade Date Purchases - AFS							Trade Date Purchases - AFS	101,993		—

Supplemental schedule of non-cash investing activities:
Securities transferred from held to maturity to available for sale	$	(306,000	)	$	—
Contingent consideration - cash				$	(17,259	)
Contingent consideration - equity	—			(24,091		)
Stock issued for acquisition	—			(37,296		)

Transfers							Transfers

Held for sale to loans and leases							Held for sale to loans and leases	14,731		—
Loans and leases to held for sale							Loans and leases to held for sale	169,045		118,037
Loans and leases to rental equipment							Loans and leases to rental equipment	3,393		14,844
Loans and leases to foreclosed real estate and repossessed assets							Loans and leases to foreclosed real estate and repossessed assets	—		9
Rental equipment to loan and leases							Rental equipment to loan and leases	233,634		14,014

Recognition of operating lease ROU assets, net of measurements							Recognition of operating lease ROU assets, net of measurements	389		12,954



	1-4 Family Real Estate			Commercial and Multi-Family Real Estate		Agricultural Real Estate			Consumer		Commercial Operating		Agricultural Operating			CML Insurance Premium Finance			Unallocated		Total
	(Dollars in Thousands)
Three Months Ended December 31, 2017
Allowance for loan losses:
Beginning balance	$	803		$	2,670	$	1,390		$	6	$	158	$	1,184		$	796		$	527	$	7,534
Provision (recovery) for loan losses	(118		)	364		(210		)	297		690		(380		)	51			374		1,068
Charge offs	(31		)	—		—			—		—		—			(129		)	—		(160		)
Recoveries	—			—		—			367		46		—			7			—		420
Ending balance	$	654		$	3,034	$	1,180		$	670	$	894	$	804		$	725		$	901	$	8,862

Ending balance: individually evaluated for impairment	—			—		—			—		—		—			—			—		—
Ending balance: collectively evaluated for impairment	654			3,034		1,180			670		894		804			725			901		8,862
Total	$	654		$	3,034	$	1,180		$	670	$	894	$	804		$	725		$	901	$	8,862

Loans:
Ending balance: individually evaluated for impairment	95			707		—			61		—		1,052			—			—		1,915
Ending balance: collectively evaluated for impairment	203,872			653,322		61,303			274,920		56,516		23,644			235,671			—		1,509,248
Total	$	203,967		$	654,029	$	61,303		$	274,981	$	56,516	$	24,696		$	235,671		$	—	$	1,511,163



	Accruing and Non-accruing Loans											Nonperforming Loans
December 31, 2017	30-59 Days Past Due		60-89 Days Past Due		> 89 Days Past Due		Total Past Due		Current		Total Loans Receivable	> 89 Days Past Due and Accruing	Non-accrual balance		Total
	(Dollars in Thousands)
1-4 Family Real Estate	$	106	$	—	$	234	$	340	$	203,627	203,967	234	$	—	$	234
Commercial and Multi-Family Real Estate	—		284		—		284		653,745		654,029	—	284		284
Agricultural Real Estate	—		—		27,818		27,818		33,485		61,303	27,818	—		27,818
Consumer	4,192		2,015		1,624		7,831		267,150		274,981	1,624	—		1,624
Commercial Operating	—		—		—		—		56,516		56,516	—	—		—
Agricultural Operating	—		—		—		—		24,696		24,696	—	—		—
CML Insurance Premium Finance	1,594		592		3,194		5,380		230,291		235,671	3,194	—		3,194
Total	$	5,892	$	2,891	$	32,870	$	41,653	$	1,469,510	1,511,163	32,870	$	284	$	33,154



	Recorded Balance		Unpaid Principal Balance		Specific Allowance
December 31, 2017	(Dollars in Thousands)
Loans without a specific valuation allowance
1-4 Family Real Estate	$	95	$	95	$	—
Commercial and Multi-Family Real Estate	707		707		—
Consumer	61		61		—
Agricultural Operating	1,052		1,052		—
Total	$	1,915	$	1,915	$	—



Available For Sale
At December 31, 2017	AMORTIZED COST		GROSS UNREALIZED GAINS		GROSS UNREALIZED (LOSSES)			FAIR VALUE
	(Dollars in Thousands)
Debt securities
Small business administration securities	56,602		349		(3		)	56,948
Obligations of states and political subdivisions	14,513		123		(26		)	14,610
Non-bank qualified obligations of states and political subdivisions	1,212,661		16,079		(5,710		)	1,223,030
Asset-backed securities	93,486		2,337		—			95,823
Mortgage-backed securities	606,338		198		(6,424		)	600,112
Total debt securities	1,983,600		19,086		(12,163		)	1,990,523
Common equities and mutual funds	1,298		532		(1		)	1,829
Total available for sale securities	$	1,984,898	$	19,618	$	(12,164	)	$	1,992,352



At September 30, 2017	AMORTIZED COST		GROSS UNREALIZED GAINS		GROSS UNREALIZED (LOSSES)			FAIR VALUE
	(Dollars in Thousands)
Debt securities
Small business administration securities	57,046		825		—			57,871
Non-bank qualified obligations of states and political subdivisions	938,883		14,983		(3,037		)	950,829
Asset-backed securities	94,451		2,381		—			96,832
Mortgage-backed securities	588,918		1,259		(3,723		)	586,454
Total debt securities	1,679,298		19,448		(6,760		)	1,691,986
Common equities and mutual funds	1,009		436		—			1,445
Total available for sale securities	$	1,680,307	$	19,884	$	(6,760	)	$	1,693,431



Held to Maturity
At December 31, 2017	AMORTIZED COST		GROSS UNREALIZED GAINS		GROSS UNREALIZED (LOSSES)			FAIR VALUE
	(Dollars in Thousands)
Debt securities
Obligations of states and political subdivisions	$	4,341	$	26	$	(25	)	$	4,342
Non-bank qualified obligations of states and political subdivisions	230,683		336		(3,537		)	227,482
Mortgage-backed securities	8,468		—		(148		)	8,320
Total held to maturity securities	$	243,492	$	362	$	(3,710	)	$	240,144



	Number of Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Yrs)	Aggregate Intrinsic Value
	(Dollars in Thousands, Except Per Share Data)
Options outstanding, September 30, 2017	75,757	$	22.62	2.28	$	4,225
Granted	—	—		—	—
Exercised	—	—		—	—
Forfeited or expired	—	—		—	—
Options outstanding, December 31, 2017	75,757	$	22.62	2.03	$	5,305

Options exercisable, December 31, 2017	75,757	$	22.62	2.03	$	5,305



	Number of Shares		Weighted Average Fair Value at Grant
(Dollars in Thousands, Except Per Share Data)
Nonvested (restricted) shares outstanding, September 30, 2017	304,526		$	86.96
Granted	42,181		85.03
Vested	(61,161	)	83.55
Forfeited or expired	—		—
Nonvested (restricted) shares outstanding, December 31, 2017	285,546		$	87.40



	Payments		Banking		Corporate Services/Other			Total
Three Months Ended December 31, 2017
Interest income	$	4,669	$	16,478	$	9,710		$	30,857
Interest expense	—		881		3,780			4,661
Net interest income	4,669		15,597		5,930			26,196
Provision for loan losses	1,017		51		—			1,068
Non-interest income	28,101		1,485		(318		)	29,268
Non-interest expense	26,934		6,568		10,540			44,042
Income (loss) before income tax expense (benefit)	4,819		10,463		(4,928		)	10,354

Total goodwill	87,145		11,578		—			98,723
Total assets	380,442		1,478,693		3,558,828			5,417,963
Total deposits	2,768,736		236,494		508,415			3,513,645



	Fair Value At December 31, 2017
	Available For Sale								Held to Maturity
(Dollars in Thousands)	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
Debt securities
Small business administration securities	56,948		—		56,948		—		—		—		—		—
Obligations of states and political subdivisions	14,610		—		14,610		—		4,342		—		4,342		—
Non-bank qualified obligations of states and political subdivisions	1,223,030		—		1,223,030		—		227,482		—		227,482		—
Asset-backed securities	95,823		—		95,823		—		—		—		—		—
Mortgage-backed securities	600,112		—		600,112		—		8,320		—		8,320		—
Total debt securities	1,990,523		—		1,990,523		—		240,144		—		240,144		—
Common equities and mutual funds	1,829		1,829		—		—		—		—		—		—
Total securities	$	1,992,352	$	1,829	$	1,990,523	$	—	$	240,144	$	—	$	240,144	$	—



	Fair Value At September 30, 2017
	Available For Sale								Held to Maturity
(Dollars in Thousands)	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
Debt securities
Small business administration securities	57,871		—		57,871		—		—		—		—		—
Obligations of states and political subdivisions	—		—		—		—		19,368		—		19,368		—
Non-bank qualified obligations of states and political subdivisions	950,829		—		950,829		—		432,361		—		432,361		—
Asset-backed securities	96,832		—		96,832		—		—		—		—		—
Mortgage-backed securities	586,454		—		586,454		—		112,456		—		112,456		—
Total debt securities	1,691,986		—		1,691,986		—		564,185		—		564,185		—
Common equities and mutual funds	1,445		1,445		—		—		—		—		—		—
Total securities	$	1,693,431	$	1,445	$	1,691,986	$	—	$	564,185	$	—	$	564,185	$	—


(Dollars in thousands)	Trademark(1)		Non-Compete(2)		Customer Relationships(3)		All Others(4)		Total
Intangible Assets
At September 30, 2021	$	9,823	$	40	$	17,868	$	5,417	$	33,148
Acquisitions during the period	—		—		—		1		1
Amortization during the period	(871)		(40)		(3,884)		(393)		(5,188)
Write-offs during the period	—		—		(670)		(203)		(873)
At June 30, 2022	$	8,952	$	—	$	13,314	$	4,822	$	27,088

Gross carrying amount	$	14,624	$	2,481	$	82,088	$	9,940	$	109,133
Accumulated amortization	(5,672)		(2,481)		(57,856)		(4,900)		(70,909)
Accumulated impairment	—		—		(10,918)		(218)		(11,136)
At June 30, 2022	$	8,952	$	—	$	13,314	$	4,822	$	27,088

At September 30, 2020	$	10,901	$	422	$	24,333	$	6,036	$	41,692
Acquisitions during the period	—		—		—		14		14
Amortization during the period	(816)		(286)		(5,202)		(480)		(6,784)
Write-offs during the period	—		—		—		(24)		(24)
At June 30, 2021	$	10,085	$	136	$	19,131	$	5,546	$	34,898

Gross carrying amount	$	14,624	$	2,481	$	82,088	$	10,131	$	109,324
Accumulated amortization	(4,539)		(2,345)		(52,709)		(4,367)		(63,960)
Accumulated impairment	—		—		(10,248)		(218)		(10,466)
At June 30, 2021	$	10,085	$	136	$	19,131	$	5,546	$	34,898


(Dollars in thousands)
Remaining in 2022	$	1,397
2023	4,938
2024	4,124
2025	3,562
2026	3,216
Thereafter	9,851
Total anticipated intangible amortization	$	27,088


(Dollars in thousands)
Remaining in 2022	$	1,102
2023	3,946
2024	3,913
2025	3,718
2026	3,195
Thereafter	21,732
Total undiscounted future minimum lease payments	37,606
Discount	(4,750)
Total operating lease liabilities	$	32,856


Weighted-average discount rate	2.34	%
Weighted-average remaining lease term (years)	10.57



	December 31, 2017
	Carrying Amount		Estimated Fair Value		Level 1		Level 2		Level 3
	(Dollars in Thousands)
Financial assets
Cash and cash equivalents	$	1,300,409	$	1,300,409	$	1,300,409	$	—	$	—

Securities available for sale	1,992,352		1,992,352		1,829		1,990,523		—
Securities held to maturity	243,492		240,144		—		240,144		—
Total securities	2,235,844		2,232,496		1,829		2,230,667		—

Loans receivable:
One to four family residential mortgage loans	203,967		205,413		—		—		205,413
Commercial and multi-family real estate loans	654,029		655,777		—		—		655,777
Agricultural real estate loans	61,303		61,257		—		—		61,257
Consumer loans	274,981		293,832		—		—		293,832
Commercial operating loans	56,516		56,520		—		—		56,520
Agricultural operating loans	24,696		24,506		—		—		24,506
CML insurance premium finance loans	235,671		235,530		—		—		235,530
Total loans receivable	1,511,163		1,532,835		—		—		1,532,835

Federal Home Loan Bank stock	57,443		57,443		—		57,443		—
Accrued interest receivable	21,089		21,089		21,089		—		—

Financial liabilities
Noninterest bearing demand deposits	2,779,645		2,779,645		2,779,645		—		—
Interest bearing demand deposits, savings, and money markets	185,376		185,376		185,376		—		—
Certificates of deposit	128,220		127,451		—		127,451		—
Wholesale non-maturing deposits	40,928		40,928		40,928		—		—
Wholesale certificates of deposit	379,476		379,101		—		379,101		—
Total deposits	3,513,645		3,512,501		3,005,949		506,552		—

Advances from Federal Home Loan Bank	210,000		210,002		—		210,002		—
Federal funds purchased	1,100,000		1,100,000		1,100,000		—		—
Securities sold under agreements to repurchase	3,339		3,339		—		3,339		—
Capital lease	1,922		1,922		—		1,922		—
Trust preferred securities	10,310		10,445		—		10,445		—
Subordinated debentures	73,382		75,750		—		75,750		—
Accrued interest payable	4,065		4,065		4,065		—		—



	Trademark⁽¹⁾			Non-Compete⁽²⁾			Customer Relationships⁽³⁾			All Others⁽⁴⁾			Total
Intangibles
Balance as of September 30, 2017	$	10,051		$	1,782		$	31,707		$	8,638		$	52,178
Acquisitions during the period	—			—			—			38			38
Amortization during the period	(159		)	(132		)	(1,160		)	(230		)	(1,681		)
Write-offs during the period	—			—			—			(14		)	(14		)
Balance as of December 31, 2017	$	9,892		$	1,650		$	30,547		$	8,432		$	50,521

Gross carrying amount	$	10,990		$	2,480		$	57,810		$	10,540		$	81,820
Accumulated amortization	(1,098		)	(830		)	(17,015		)	(1,565		)	(20,508		)
Accumulated impairment	—			—			(10,248		)	(543		)	(10,791		)
Balance as of December 31, 2017	$	9,892		$	1,650		$	30,547		$	8,432		$	50,521



	(Dollars in Thousands)
Remaining in 2018	$	6,028
2019	7,151
2020	5,753
2021	5,184
2022	4,262
2023	3,625
Thereafter	18,518
Total anticipated intangible amortization	$	50,521


(Dollars in thousands, except per share data)	Number of Shares	Weighted Average Fair Value at Grant
Nonvested shares outstanding, September 30, 2021	547,063	$	30.22
Granted	166,389	57.14
Vested	(208,156)	34.68
Forfeited or expired	(19,762)	42.98
Nonvested shares outstanding, June 30, 2022	485,534	$	37.02


(Dollars in thousands, except per share data)	Number of Units	Weighted Average Fair Value at Grant
Performance share units outstanding, September 30, 2021	60,984	$	34.03
Granted(1)	35,705	57.20
Vested	—	—
Forfeited or expired	—	—
Performance share units outstanding, June 30, 2022	96,689	$	42.59


(Dollars in thousands)	Consumer				Commercial				Corporate Services/Other				Consolidated Company
Three Months Ended June 30,	2022		2021		2022		2021		2022		2021		2022		2021
Net interest income(1)	$	23,213	$	23,132	$	46,802	$	44,850	$	2,136	$	493	$	72,151	$	68,475
Noninterest income:
Refund transfer product fees	10,289		12,073		—		—		—		—		10,289		12,073
Tax advance product fees(1)	(20)		891		—		—		—		—		(20)		891
Payment card and deposit fees	24,673		29,203		—		—		—		—		24,673		29,203
Other bank and deposit fees	—		—		252		334		10		4		262		338
Rental income(1)	—		6		11,890		9,970		192		—		12,082		9,976
Net gain realized on investment securities(1)	—		—		—		—		198		—		198		—

Gain (loss) on sale of other(1)	—		—		1,239		5,982		—		(27)		1,239		5,955
Other income(1)	1,284		1,056		2,479		1,702		1,508		1,259		5,271		4,017
Total noninterest income	36,226		43,229		15,860		17,988		1,908		1,236		53,994		62,453
Revenue	$	59,439	$	66,361	$	62,662	$	62,838	$	4,044	$	1,729	$	126,145	$	130,928

Nine Months Ended June 30,
Net interest income(1)	$	79,323	$	70,205	$	136,923	$	129,461	$	11,318	$	8,658	$	227,564	$	208,324
Noninterest income:
Refund transfer product fees	38,674		35,400		—		—		—		—		38,674		35,400
Tax advance product fees(1)	40,513		47,413		—		—		—		—		40,513		47,413
Payment card and deposit fees	76,075		81,641		—		—		—		—		76,075		81,641
Other bank and deposit fees	—		—		728		694		22		15		750		709
Rental income(1)	—		16		34,192		29,691		342		—		34,534		29,707
Net gain realized on investment securities(1)	—		—		—		—		595		6		595		6
Gain on sale of trademarks	—		—		—		—		50,000		—		50,000		—
Gain (loss) on sale of other(1)	—		—		7,331		10,198		(8,932)		737		(1,601)		10,935
Other income(1)	3,434		2,135		8,103		6,511		(726)		6,904		10,811		15,550
Total noninterest income	158,696		166,605		50,354		47,094		41,301		7,662		250,351		221,361
Revenue	$	238,019	$	236,810	$	187,277	$	176,555	$	52,619	$	16,320	$	477,915	$	429,685


	Fair Value At June 30, 2022
(Dollars in thousands)	Total		Level 1		Level 2		Level 3
Debt securities AFS
Corporate securities	$	23,438	$	—	$	23,438	$	—
SBA securities	81,349		—		81,349		—
Obligations of states and political subdivisions	2,641		—		2,641		—
Non-bank qualified obligations of states and political subdivisions	244,961		—		244,961		—
Asset-backed securities	159,332		—		159,332		—
Mortgage-backed securities	1,444,802		—		1,444,802		—
Total debt securities AFS	$	1,956,523	$	—	$	1,956,523	$	—
Common equities and mutual funds(1)	$	3,065	$	3,065	$	—	$	—
Non-marketable equity securities(2)	$	6,494	$	—	$	—	$	—


	Fair Value At September 30, 2021
(Dollars in thousands)	Total		Level 1		Level 2		Level 3
Debt securities AFS
Corporate securities	$	25,000	$	—	$	25,000	$	—
SBA securities	157,209		—		157,209		—
Obligations of states and political subdivisions	2,507		—		2,507		—
Non-bank qualified obligations of states and political subdivisions	268,295		—		268,295		—
Asset-backed securities	394,859		—		394,859		—
Mortgage-backed securities	1,017,029		—		1,017,029		—
Total debt securities AFS	$	1,864,899	$	—	$	1,864,899	$	—
Common equities and mutual funds(1)	$	12,668	$	12,668	$	—	$	—
Non-marketable equity securities(2)	$	4,560	$	—	$	—	$	—



	Non-Performing Assets As Of
	December 31, 2017			September 30, 2017
Non-Performing Loans	(Dollars in Thousands)

Non-Accruing Loans:
Commercial and Multi-Family Real Estate	284			685
Total ⁽¹⁾	284			685

Accruing Loans Delinquent 90 Days or More
1-4 Family Real Estate	234			—
Agricultural Real Estate	27,818			34,198
Consumer	1,624			1,406
Agricultural Operating	—			97
CML Insurance Premium Finance	3,194			1,205
Total	32,870			36,906

Total Non-Performing Loans	33,154			37,591

Other Assets
Foreclosed Assets:
1-4 Family Real Estate	—			62
Commercial and Multi-Family Real Estate	128			230
Total	128			292

Total Other Assets	$	128		$	292

Total Non-Performing Assets	$	33,282		$	37,883
Total as a Percentage of Total Assets	0.61		%	0.72		%
Total Non-Performing Assets as a Percentage of Total Assets - excluding insured loans⁽²⁾	0.58		%	0.70		%



							Minimum
							Requirement to Be
					Minimum		Well Capitalized
					Requirement For		Under Prompt
					Capital Adequacy		Corrective Action
At December 31, 2017	Company		Bank		Purposes		Provisions

Tier 1 leverage ratio	7.68	%	9.61	%	4.00	%	5.00	%
Common equity Tier 1 capital ratio	12.93		16.71		4.50		6.50
Tier 1 capital ratio	13.38		16.71		6.00		8.00
Total qualifying capital ratio	16.99		17.11		8.00		10.00