Exhibit 99.1
FOR IMMEDIATE RELEASE
Contact: Investor Relations
Telephone: 712.732.4117
META FINANCIAL GROUP, INC. (R) REPORTS THIRD QUARTER RESULTS
Storm Lake, Iowa - (July 26, 2006) Meta Financial Group, Inc. (the "Company")
(NASDAQ-Global Market: CASH) today reported net income of $2,483,000, or $0.98
per diluted share, for the 2006 fiscal year third quarter ended June 30, 2006,
compared to a net loss of $2,312,000, or $0.94 per diluted share, for the same
period last year. Net income for the first nine months of the 2006 fiscal year
totaled $3,260,000, or $1.30 per diluted share, compared to a net loss of
$1,471,000, or $0.60 per diluted share for the same period last year. Earnings
in the current period were impacted by non-recurring fee income, partially
offset by higher compensation, legal, and consulting expenses. Each of these
items is discussed in detail below. Earnings in the fiscal year 2005 period were
impacted by a higher provision for loan loss related to an impairment in the
Company's loan portfolio.
For the third fiscal quarter of 2006, Meta Payment Systems(R), a separate
reportable segment, recorded net income of $2,572,000, or $1.02 per diluted
share, compared to a loss of $152,000, or $0.06 per diluted share for the third
fiscal quarter of 2005. Meta Payment Systems' results for the quarter included
non-recurring pre-tax fee income of $2,570,000, which is discussed below. For
the nine month period ended June 30, 2006, Meta Payment Systems recorded net
income of $3,423,000, or $1.36 per diluted share, compared to a loss of
$867,000, or $0.35 per diluted share, for the nine month period ended June 30,
2005.
Meta Financial Group's net interest income for the third quarter of fiscal year
2006 was $5,124,000 compared to $5,116,000 for the third quarter of fiscal year
2005. For the nine months ended June 30, 2006 net interest income totaled
$14,834,000 compared to $14,792,000 for the same period in the prior fiscal
year. While net interest income has remained relatively unchanged on a
comparable period basis, the current period's results reflect higher margins on
a smaller balance sheet. Margin improvement has arisen from a more favorable
funding mix, resulting primarily from growth in the Company's low-cost demand
deposits, a decrease in low-margin wholesale investments and borrowings, and a
rising interest rate environment. Further discussion of the Company's favorable
balance sheet changes is included below.
During the third fiscal quarter of 2006, Meta Financial Group recorded no
provision for loan losses. During the third fiscal quarter of 2005, the Company
recorded a provision for loan losses of $4,956,000 stemming primarily from loans
to three companies involved in the sales, service, and financing of automobiles.
During the nine month period ended June 30, 2005, the Company recorded a
provision for loan losses of $5,390,000.
Meta Financial Group also recorded $2,570,000 in non-recurring fee income during
the third fiscal quarter of 2006, related to a purchased portfolio of prepaid
debit cards. Excluding this non-recurring item, card fee income for the third
quarter of fiscal year 2006 was $2,489,000. This compares to $374,000 for the
third quarter of fiscal year 2005. The increase relates to the significant
growth at Meta Payment Systems. Again, excluding the non-recurring item, card
fee income for the nine month period ending June 30, 2006 was $5,160,000
compared to $555,000 for the same period in fiscal year 2005.
The Company's compensation expense for the third fiscal quarter of 2006 totaled
$3,676,000, which reflected a $752,000 increase compared to the same quarter in
fiscal 2005. For the first nine months of fiscal year 2006, compensation expense
totaled $10,302,000, which reflected an increase of $1,686,000 compared to the
same period in fiscal year 2005. The increase was primarily the result of staff
acquisition costs and recruitment expenses related to the growth at Meta Payment
Systems, and the full-staffing of two de novo branch facilities in the Sioux
Falls market.
The Company also incurred higher legal and consulting expenses in the third
fiscal quarter of 2006. These expenses rose $763,000 from $88,000 in the third
fiscal quarter of 2005 to $851,000. The vast majority of the increase in the
third quarter arose from consulting work related to section 404 of the
Sarbanes-Oxley Act. The Company has contracted with an outside consulting firm
to complete implementation work related to the Sarbanes-Oxley Act. These
expenses are not expected to continue at this level over the long-term. For the
nine month period ended June 30, 2006, legal and consulting expenses rose
$2,148,000 from $248,000 for the same period in fiscal year 2005 to $2,396,000.
In addition to higher consulting expenses from Sarbanes-Oxley implementation,
the Company also incurred higher legal expenses related to the aforementioned
auto-related loans. The Company has been named in several lawsuits by
participant banks related to these loans, and the Company is vigorously
defending these claims. At this time, the Company continues to expect that total
cash expenditures on collection efforts related to these loans will range
between $750,000 and $1,100,000. A listing of lawsuits recently filed is
attached at the conclusion of this earnings release.
As of June 30, 2006, Meta Financial Group had assets totaling $746.8 million,
compared to $776.3 million at September 30, 2005. The reduction in total assets
of $29.5 million reflects the Company's planned strategy to reduce the level of
lower yielding investment securities and pay off higher costing wholesale
borrowings. Investment and mortgage-backed securities totaled $204.0 million at
June 30, 2006, compared to $268.4 million at September 30, 2005, reflecting a
decrease of $64.4 million. Similarly, advances from the Federal Home Loan Bank
of Des Moines, and other wholesale borrowings, declined $47.6 million from
$190.5 million at September 30, 2005 to $142.9 million at June 30, 2006. The
Company's deposit mix has also changed favorably. At June 30, 2006, total
deposits were $553.1 million, or $12.3 million higher than at September 30,
2005. Over this same time period, low- or no-costing demand deposits rose $77.2
million, from $135.6 million at September 30, 2005 to $212.8 million at June 30,
2006, while higher costing certificates of deposit decreased $49.3 million, from
$268.1 million at September 30, 2005 to $218.8 million at June 30, 2006. As of
June 30, 2006 the Company's shareholders' equity totaled $43.5 million. Both of
the company's banking subsidiaries, MetaBank and MetaBank West Central, meet
regulatory requirements for classification as well-capitalized institutions.
Shareholders of record on June 15, 2006 received a quarterly cash dividend of
$0.13 per share, which was paid on July 3, 2006. During the quarter ended June
30, 2006, Meta Financial Group shares traded between $21.22 and $23.18.
The following three lawsuits were filed against MetaBank during the quarter
ended June 30, 2006 or shortly thereafter:
First Midwest Bank-Deerfield Branches and Mid-Country Bank v. MetaBank (Civ. No.
06-2241). On June 28, 2006, First Midwest Bank-Deerfield Branches and
Mid-Country Bank filed suit against MetaBank in South Dakota's Second Judicial
Circuit Court, Minnehaha County, in the above titled action. The complaint
alleges that plaintiff banks, who were participating lenders with MetaBank on a
series of loans made to Dan Nelson Automotive Group ("DNAG") and South Dakota
Acceptance Corporation ("SDAC"), suffered damages exceeding $1 million as a
result of MetaBank's placement and administration of the loans that were the
subject of the loan participation agreements. The complaint sounds in breach of
contract, negligence, gross negligence, negligent misrepresentation, fraud in
the inducement, unjust enrichment and breach of fiduciary duty. On July 17,
2006, MetaBank removed the case from state court to the United States District
Court for the District of South Dakota, where the action has been assigned case
no. Civ. 06-4114.
First Premier Bank v. MetaBank (Civ. No. 06-2277). On July 5, 2006, First
Premier Bank filed suit against MetaBank in South Dakota's Second Judicial
Circuit Court, Minnehaha County in the above titled action. The complaint
alleges that First Premier, a participating lender with MetaBank on a series of
loans made to SDAC, has suffered damages in an as yet undetermined amount as a
result of MetaBank's actions in selling to First Premier a participation in a
loan made to SDAC and MetaBank's actions in administering that loan. The
complaint sounds in breach of contract, breach of covenant of good faith and
fair dealing, fraudulent inducement, fraud, deceit, negligent misrepresentation,
fraudulent misrepresentation, conversion, negligence, gross negligence, breach
of fiduciary duty and unjust enrichment. On July 17, 2006, MetaBank removed the
case from state court to the United States District Court for the District of
South Dakota, where the action has been assigned case no. Civ. 06-4115.
Home Federal Bank v. J. Tyler Haahr, Daniel A. Nelson and MetaBank (Civ. No.
06-2230). On June 26, 2006, Home Federal Bank filed suit against MetaBank and
two individuals, J. Tyler Haahr and Daniel A. Nelson, in South Dakota's Second
Judicial Circuit Court, Minnehaha County in the above titled action. The
complaint alleges that Home Federal, a participating lender with MetaBank on a
series of loans made to DNAG and SDAC, suffered damages exceeding $3.8 million
as a result of failure to make disclosures regarding an investigation of Nelson,
DNAG and SDAC by the Iowa Attorney General at the time Home Federal agreed to an
extension of the loan participation agreements. The complaint sounds in fraud,
negligent misrepresentation, breach of fiduciary duty, conspiracy and breach of
duty of good faith and fair dealing.
Corporate Profile: Meta Financial Group, Inc. (doing business as Meta Financial
Group) is the holding company for MetaBank, MetaBank West Central(R), and Meta
Trust Company(R). MetaBank is a federally-chartered savings bank with four
market areas: Northwest Iowa Market, Brookings Market, Central Iowa Market,
Sioux Empire Market; and the Meta Payment Systems prepaid debit card division.
MetaBank West Central is a state-chartered commercial bank in the West Central
Iowa Market. Eighteen offices support customers throughout northwest and central
Iowa, and in Brookings and Sioux Falls, South Dakota.
The Company, and its wholly-owned subsidiaries, MetaBank, MetaBank WC, and Meta
Trust Company may from time to time make written or oral "forward-looking
statements," including statements contained in its filings with the Securities
and Exchange Commission, in its reports to shareholders, and in other
communications by the Company, which are made in good faith by the Company
pursuant to the "safe harbor" provisions of the Private Securities Litigation
Reform Act of 1995.
These forward-looking statements include statements with respect to the
Company's beliefs, expectations, estimates and intentions that are subject to
significant risks and uncertainties, and are subject to change based on various
factors, some of which are beyond the Company's control. Such statements address
the following subjects: future operating results; customer growth and retention;
loan and other product demand; earnings growth and expectations; new products
and services, such as those offered by the Meta Payment Systems Division; credit
quality and adequacy of reserves; technology; and our employees. The following
factors, among others, could cause the Company's financial performance to differ
materially from the expectations, estimates, and intentions expressed in such
forward-looking statements: the strength of the United States economy in general
and the strength of the local economies in which the Company conducts
operations; the effects of, and changes in, trade, monetary, and fiscal policies
and laws, including interest rate policies of the Federal Reserve Board;
inflation, interest rate, market, and monetary fluctuations; the timely
development of and acceptance of new products and services of the Company and
the perceived overall value of these products and services by users; the impact
of changes in financial services' laws and regulations; technological changes;
acquisitions; litigation; changes in consumer spending and saving habits; and
the success of the Company at managing and collecting assets of borrowers in
default and managing the risks involved in the foregoing litigation.
The foregoing list of factors is not exclusive. Additional discussion of factors
affecting the Company's business and prospects is contained in the Company's
periodic filings with the SEC. The Company does not undertake, and expressly
disclaims any intent or obligation, to update any forward-looking statement,
whether written or oral, that may be made from time to time by or on behalf of
the Company.
Financial Highlights
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Consolidated Statement of Financial Condition
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(In Thousands)
Assets June 30, 2006 Sept. 30, 2005
Cash and Cash Equivalents $ 91,999 $ 14,370
Investments & Mortgage-backed Securities 203,950 268,406
Loans, net 399,088 440,496
Other Assets 51,773 53,077
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Total Assets $746,810 $776,349
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Liabilities
Deposits $553,066 $540,770
Borrowed Money 142,923 190,522
Other Liabilities 7,329 2,098
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Total Liabilities $703,318 $733,390
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Shareholders' Equity $ 43,492 $ 42,959
-------- --------
Total Liabilities and Shareholders' Equity $746,810 $776,349
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Consolidated Statements of Income
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For the 3 Months For the 9 Months
(Dollars In Thousands Ended June 30: Ended June 30:
except per share data) 2006 2005 2006 2005
Interest Income $ 10,315 $ 10,813 $ 30,686 $ 30,970
Interest Expense 5,191 5,697 15,852 16,178
-------- -------- -------- --------
Net Interest Income 5,124 5,116 14,834 14,792
Provision for Loan Losses 0 4,956 (310) 5,391
-------- -------- -------- --------
Net Interest Income After
Provision for Loan Losses 5,124 160 15,144 9,401
Other Income 5,736 949 9,778 2,234
Other Expenses 6,925 4,666 19,916 14,014
-------- -------- -------- --------
Income Before Income Tax 3,935 (3,557) 5,006 (2,379)
Income Tax Expense 1,452 (1,245) 1,747 (908)
-------- -------- -------- --------
Net Income $ 2,483 $ (2,312) $ 3,259 $ (1,471)
======== ======== ======== ========
Earnings Per Common Share (Basic): $ 1.00 $ (0.94) $ 1.32 $ (0.60)
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Earnings Per Common Share (Diluted): $ 0.98 $ (0.94) $ 1.30 $ (0.60)
======== ======== ======== ========
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Selected Financial Information
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For the 9 Months Ended June 30, 2006 2005
Return on Average Assets 0.60% -0.25%
Return on Average Equity 10.58% -4.28%
Average Shares Outstanding for
Diluted Earnings per Share 2,513,681 2,513,928
At Period Ended: March 31, 2006 Sept. 30, 2005
Equity to Total Assets 5.82% 5.53%
Book Value per Common Share Outstanding $ 17.28 $ 17.16
Tangible Book Value per Common Share
Outstanding $ 15.93 $ 15.80
Common Shares Outstanding 2,516,655 2,503,655
Non-Performing Assets to Total Assets 0.56% 0.69%
Meta Financial Group(R) \ 121 East Fifth Street \ P.O. Box 1307
\ Storm Lake, Iowa 50588