Exhibit 99.3
Meta Financial Group Inc., and Subsidiaries
Pro Forma Condensed Combined Financial Statements (Unaudited)
As previously announced, on September 8, 2015, Meta Financial Group, Inc. ("MFG”, “Meta”, or the “Company”) completed the acquisition of certain assets and liabilities of Fort Knox Financial Services Corporation and its subsidiary, Tax Product Services LLC (together “Fort Knox”).
The following unaudited pro forma condensed combined financial statements (the "Statements") are based on Meta’s historical financial statements and Fort Knox’s historical financial statements after giving effect to Meta’s purchase of Fort Knox (the “Acquisition”) using the purchase method of accounting.
The Statements are presented for illustrative purposes only and, therefore, are not necessarily indicative of the operating results that might have been achieved had the transaction occurred as of an earlier date, nor are they necessarily indicative of the operating results that may be achieved in the future.
The Statements, including the notes thereto, should be read in conjunction with:
• Meta’s Annual Report on Form 10-K for the year ended September 30, 2014 and Quarterly Report on Form 10-Q for the nine months ended June 30, 2015.
• Fort Knox’s audited historical consolidated financial statements for the years ended December 31, 2014 and unaudited historical consolidated financial statements as of June 30, 2015 and for the six months ended June 30, 2015, included as Exhibit 99.1 and Exhibit 99.2, respectively, to this Current Report on Form 8-K/A.
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META FINANCIAL GROUP, INC. AND SUBSIDIARIES ("MFG")
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
(Dollars in Thousands, Except Share and Per Share Data)
| Historical | Pro Forma | |||||||||||||||
Year ended September 30, 2014 | Year ended December 31, 2014 | |||||||||||||||
| MFG | Fort Knox | Adjustments | Combined | |||||||||||||
| Interest and dividend income: | ||||||||||||||||
| Loans receivable, including fees | $ | 19,674 | $ | - | $ | 13 | $ | 19,686 | ||||||||
| Mortgage-backed securities | 15,343 | - | - | 15,343 | ||||||||||||
| Other investments | 13,643 | - | - | 13,643 | ||||||||||||
| 48,660 | - | 13 | 48,673 | |||||||||||||
| Interest expense | 2,398 | 18 | - | 2,416 | ||||||||||||
| Net interest income | 46,262 | (18 | ) | 13 | 46,257 | |||||||||||
| Provision for loan losses | 1,150 | - | 87 | (6) | 1,237 | |||||||||||
| Net interest income after provision for loan losses | 45,112 | (18 | ) | (74 | ) | 45,020 | ||||||||||
| Non-interest income: | ||||||||||||||||
| Card fees | 48,738 | - | - | 48,738 | ||||||||||||
| Tax Product Fee Income | - | 23,159 | (13 | )(6) | 23,146 | |||||||||||
| Other income (loss) | 3,000 | - | - | 3,000 | ||||||||||||
| Total non-interest income | 51,738 | 23,159 | (13 | ) | 74,884 | |||||||||||
| Non-interest expense: | ||||||||||||||||
| Compensation and benefits | 38,155 | 5,009 | - | 43,164 | ||||||||||||
| Card processing expense | 15,487 | - | - | 15,487 | ||||||||||||
| Occupancy and equipment expense | 8,979 | - | 199 | 9,178 | ||||||||||||
| Legal and consulting expense | 4,145 | - | 127 | (6) | 4,272 | |||||||||||
| Tax product expense | - | 9,878 | - | 9,878 | ||||||||||||
| Other expense | 11,465 | 1,618 | 3,774 | (7) | 16,857 | |||||||||||
| Total non-interest expense | 78,231 | 16,505 | 4,101 | 98,836 | ||||||||||||
| Income before income tax expense | 18,619 | 6,636 | (4,188 | ) | 21,068 | |||||||||||
| Income tax expense | 2,906 | - | 887 | 3,793 | ||||||||||||
| Net income | $ | 15,713 | $ | 6,636 | $ | (5,074 | ) | $ | 17,275 | |||||||
| Earnings per common share: | ||||||||||||||||
| Basic | $ | 2.57 | $ | - | $ | - | $ | 2.39 | ||||||||
| Diluted | $ | 2.53 | $ | - | $ | - | $ | 2.36 | ||||||||
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META FINANCIAL GROUP, INC. AND SUBSIDIARIES ("MFG")
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
June 30, 2015
(Dollars in Thousands)
| Historical | Pro Forma | |||||||||||||||
| ASSETS | MFG | Fort Knox | Adjustments | Combined | ||||||||||||
| Cash and cash equivalents | $ | 20,405 | $ | 11,655 | $ | (9,276 | )(1) | $ | 22,784 | |||||||
| Investment securities available-for-sale | 562,810 | - | - | 562,810 | ||||||||||||
| Mortgage-backed securities available-for-sale | 596,976 | - | - | 596,976 | ||||||||||||
| Investment securities held to maturity | 262,578 | - | - | 262,578 | ||||||||||||
| Mortgage-backed securities held to maturity | 69,057 | - | - | 69,057 | ||||||||||||
| Loans receivable - net of allowance for loan losses of | 651,530 | - | - | 651,530 | ||||||||||||
| Goodwill | - | - | 25,274 | (3) | 25,274 | |||||||||||
| Other assets | 146,627 | 632 | 21,836 | (3) | 169,095 | |||||||||||
| Total assets | $ | 2,309,983 | $ | 12,288 | $ | 37,834 | $ | 2,360,104 | ||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||||||
| LIABILITIES | ||||||||||||||||
| Non-interest-bearing checking | $ | 1,321,213 | $ | - | $ | - | $ | 1,321,213 | ||||||||
| Interest-bearing checking | 37,832 | - | - | 37,832 | ||||||||||||
| Savings deposits | 36,481 | - | - | 36,481 | ||||||||||||
| Money market deposits | 38,718 | - | - | 38,718 | ||||||||||||
| Time certificates of deposit | 78,963 | - | - | 78,963 | ||||||||||||
| Total deposits | 1,513,207 | - | - | 1,513,207 | ||||||||||||
| Federal funds purchased | 526,000 | - | - | 526,000 | ||||||||||||
| Accrued expenses and other liabilities | 61,506 | 2,012 | 2,263 | (4) | 65,780 | |||||||||||
| Total liabilities | 2,100,713 | 2,012 | 2,263 | 2,104,987 | ||||||||||||
| STOCKHOLDERS’ EQUITY | ||||||||||||||||
| Common stock | 70 | 1 | 10 | (5)(2) | 81 | |||||||||||
| Additional paid-in capital | 120,273 | - | 50,353 | (5)(2) | 170,626 | |||||||||||
| Retained earnings | 94,625 | 10,275 | (14,792 | )(5) | 90,108 | |||||||||||
| Accumulated other comprehensive income (loss) | (5,388 | ) | - | - | (5,388 | ) | ||||||||||
| Treasury stock | (310 | ) | - | - | (310 | ) | ||||||||||
| Total stockholders’ equity | 209,270 | 10,276 | 35,571 | 255,117 | ||||||||||||
| Total liabilities and stockholders’ equity | $ | 2,309,983 | $ | 12,288 | $ | 37,834 | $ | 2,360,104 | ||||||||
See Notes to Condensed Consolidated Financial Statements.
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META FINANCIAL GROUP, INC. AND SUBSIDIARIES ("MFG")
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
(Dollars in Thousands, Except Share and Per Share Data)
Nine Months Ended June 30, 2015 | ||||||||||||||||
| Historical | Pro Forma | |||||||||||||||
| MFG | Fort Knox | Adjustments | Combined | |||||||||||||
| Interest and dividend income: | ||||||||||||||||
| Loans receivable, including fees | $ | 21,561 | $ | - | $ | - | $ | 21,561 | ||||||||
| Mortgage-backed securities | 10,798 | - | - | 10,798 | ||||||||||||
| Other investments | 12,885 | - | - | 12,885 | ||||||||||||
| 45,244 | - | - | 45,244 | |||||||||||||
| Interest expense | 1,727 | 4 | - | 1,731 | ||||||||||||
| Net interest income | 43,517 | (4 | ) | - | 43,513 | |||||||||||
| Provision (recovery) for loan losses | 1,341 | - | - | 1,341 | ||||||||||||
| Net interest income after provision for loan losses | 42,176 | (4 | ) | - | 42,172 | |||||||||||
| Non-interest income: | ||||||||||||||||
| Card fees | 40,607 | - | - | 40,607 | ||||||||||||
| Tax Product Fee Income | - | 22,883 | (97 | )(6) | 22,786 | |||||||||||
| Other income (loss) | 2,461 | - | 97 | 2,558 | ||||||||||||
| Total non-interest income | 43,068 | 22,883 | - | 65,951 | ||||||||||||
| Non-interest expense: | ||||||||||||||||
| Compensation and benefits | 34,324 | 4,916 | - | 39,240 | ||||||||||||
| Card processing | 12,374 | - | - | 12,374 | ||||||||||||
| Occupancy and equipment | 8,304 | - | 168 | (6) | 8,472 | |||||||||||
| Legal and consulting | 3,333 | - | 336 | (6) | 3,669 | |||||||||||
| Tax product expense | - | 9,103 | - | 9,103 | ||||||||||||
| Other expense | 11,970 | 1,511 | 2,436 | (7) | 15,917 | |||||||||||
| Total non-interest expense | 70,305 | 15,530 | 2,941 | 88,775 | ||||||||||||
| Income before income tax expense | 14,939 | 7,349 | (2,941 | ) | 19,347 | |||||||||||
| Income tax expense | 1,523 | - | 1,604 | (8) | 3,127 | |||||||||||
| Net income | $ | 13,416 | $ | 7,349 | $ | (4,545 | ) | $ | 16,220 | |||||||
| Earnings per common share: | ||||||||||||||||
| Basic | $ | 2.05 | $ | - | $ | - | $ | 2.12 | ||||||||
| Diluted | $ | 2.03 | $ | - | $ | - | $ | 2.10 | ||||||||
| Weighted-average common shares issued and outstanding: | ||||||||||||||||
| Basic | 6,551,222 | - | 1,116,260 | (9)(2) | 7,667,482 | |||||||||||
| Diluted | 6,616,450 | - | 1,116,260 | (9)(2) | 7,732,710 | |||||||||||
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| NOTE 1. | BASIS OF PRESENTATION |
The unaudited pro forma condensed combined financial statements have been derived from Meta’s historical consolidated financial statements and Fort Knox’s historical consolidated financial statements. Certain financial statement line items included in Fort Knox’s historical presentation have been reclassified to conform to the corresponding financial statement line items included in Meta’s historical presentation. The reclassification of these items has no impact on the historical net income or stockholders’ equity reported by Meta or Fort Knox.
The unaudited pro forma condensed combined balance sheet as of June 30, 2015 combines Meta’s historical consolidated balance sheet as of June 30, 2015 with Fort Knox’s historical consolidated balance sheet as of June 30, 2015, giving effect to the Acquisition as if it had been completed on June 30, 2015.
The unaudited pro forma condensed combined statements of operations for the year ended September 30, 2014 combines Meta’s historical consolidated statement of operations for the year ended September 30, 2014 with Fort Knox’s historical consolidated statement of operations for the year ended December 31, 2014, giving effect to the Acquisition as if each of the entities had been combined at the earliest date presented for their respective fiscal years.
The unaudited pro forma condensed combined statements of operations for the nine months ended June 30, 2015 combines Meta’s historical consolidated statement of operations for the nine months ended June 30, 2015 with Fort Knox’s historical consolidated statement of operations for the nine month period ended June 30, 2015 giving effect to the Acquisition as if it had been completed on October 1, 2014.
| NOTE 2. | PRELIMINARY PURCHASE PRICE ALLOCATION |
Our preliminary estimates of the purchase price allocation to the assets acquired and liabilities assumed are based on their estimated fair values using currently available information and assumptions. The allocation is dependent upon certain valuations and other studies which are not complete. Accordingly, the pro forma adjustments are preliminary, have been made solely for the purpose of providing the Statements, and are subject to revision based on a final determination of fair value as of the date of the Acquisition. Meta expects to complete the final purchase price allocation no later than twelve months following the closing date of the Acquisition.
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Preliminary allocation of the estimated purchase price was as follows:
| June 30, 2015 | ||||
| (in thousands) | ||||
| Assets: | ||||
| Cash and cash equivalents | 2,379 | |||
| Prepaid expenses and other assets | 474 | |||
| Property and equipment, net | 158 | |||
| Intangible assets | 24,119 | |||
| Goodwill | 25,274 | |||
| Total assets | $ | 52,404 | ||
| Liabilities: | ||||
| Accounts payable and other liabilities | 2,012 | |||
| Total liabilities: | $ | 2,012 | ||
| Total estimated purchase price | $ | 50,392 | ||
Cash and cash equivalents; prepaid expenses and other assets and accounts payable and other liabilities are short term in nature, and, accordingly, we believe their carrying amounts approximate their fair values. The net book value of property and equipment is also expected to approximate its fair value and any adjustments are not expected to be material.
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The identifiable intangible assets of $24.1 million consist primarily of customer lists and trademark names. The fair value and estimated useful lives of the intangible assets are as follows:
| Intangible assets | Estimated Useful Life | Fair Value | ||||||
| (In years) | (In thousands) | |||||||
| Customer relationships | 12-15 | $ | 18,800 | |||||
| Software | 3 | 87 | ||||||
| Trademark | 15 | 4,950 | ||||||
| Non-Compete | 3 | 40 | ||||||
| Lease Intangible | 6.3 | 242 | ||||||
| $ | 24,119 | |||||||
| NOTE 3. | PRO FORMA ADJUSTMENTS |
Pro forma adjustments are attributable to the Acquisition and include the following:
| 1. | Represents cash retained by Fort Knox in accordance with the Purchase Agreement related to the Acquisition. |
| 2. | Represents issuance of 535,000 shares of our common stock in private placements to raise additional capital of approximately $26 million. |
| 3. | Represents Meta’s preliminary estimated fair value of identifiable intangible assets and goodwill resulting from the Acquisition. |
| 4. | Represents accrual of Acquisition transaction costs and income taxes. |
| 5. | Represents the elimination of the historical ownership of Fort Knox shareholders and issuance of shares of our common stock as part of the purchase price consideration to Fort Knox shareholders. |
| 6. | Represents reclassification to conform Fort Knox’s historical financial results to Meta’s presentation. |
| 7. | Represents amortization expense associated with identifiable intangible assets acquired. See discussion in Note 2 above. The amount of this adjustment may change as Meta finalizes the purchase price allocation. The amount also includes Acquisition transaction costs. |
| 8. | Represents income tax expense attributable to Fort Knox’s income before income taxes. Fort Knox was previously organized as a Subchapter S corporation, and thus it did not recognize federal or state income taxes. |
| 9. | Represents the issuance of 581,260 shares of our common stock to the previous shareholders of Fort Knox. |
| NOTE 4. | PRO FORMA EARNINGS PER COMMON SHARE |
Our pro forma basic and diluted earnings per common share is based on the weighted average number of shares of our common stock outstanding during each period, after giving effect to the Acquisition.
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