EXHIBIT 99.2
FOR IMMEDIATE RELEASE
Contact: Investor Relations
Telephone: 712.732.4117
META FINANCIAL GROUP, INC. (R) REPORTS RESULTS FOR THE QUARTER
ENDED DECEMBER 31, 2006
STORM LAKE, IOWA - (January 31, 2007) Meta Financial Group, Inc. (NASDAQ-Global
Market: "CASH") today reported a net loss of $3.25 million, or $1.30 per diluted
share, for the 2007 fiscal year first quarter ended December 31, 2006, compared
to net income of $515,000, or $0.21 per diluted share, for the 2006 fiscal year
first quarter. The reported loss in the current period is primarily the result
of impairments on two commercial loan relationships, which reduced pre-tax
earnings by $5.74 million, or $1.46 per diluted share.
"Despite the loss recorded in the current quarter, Meta Financial Group reached
several important milestones during the first fiscal quarter," remarked J. Tyler
Haahr, President and Chief Executive Officer. "Most notably was the Company's
share price, which closed at $29.80 at calendar year end--an all time high. For
calendar year 2006, our stock returned 50.4 percent, which reflects the
important progress our Company has made in enhancing shareholder value and
investing for future growth. Additionally, checking deposit growth surpassed 80
percent for the calendar year and also reached record levels at quarter end,
driven primarily by the spectacular growth of the Company's Meta Payment
Systems(R) division. Finally, the Company also reported total revenue growth of
over 40 percent, on a matched quarter basis, driven by a dramatic increase in
revenues from our debit cards and other payment systems product lines. We are
very pleased with these accomplishments and have plans to further capitalize on
our successes."
Financial Summary
The loss in the current quarter resulted in negative results for return on
average assets, return on average equity, and earnings per share growth; however
the Company noted a significant increase in net interest margin. Additionally,
Meta Financial Group and its two banking subsidiaries, MetaBank and MetaBank
West Central, remain well capitalized institutions under federal banking
guidelines. "Earnings growth was negatively impacted this quarter as a result of
two problem credits, yet the underlying trends in the Company are sound," said
Jonathan M. Gaiser, Senior Vice President and Chief Financial Officer. "We
continue to improve our asset and liability mix, and we are focused on creating
long term economic value for our shareholders."
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Revenue
Total revenue for the first quarter of fiscal year 2007 increased by more than
40 percent from the same quarter of 2006, driven by a higher net interest margin
and significant growth in card fee income. Total revenue was $9.22 million for
the quarter, up $2.66 million from $6.56 million a year ago.
Net Interest Income
Net interest income for the first quarter was $5.26 million, up 11 percent from
$4.72 million in the same quarter last year. Both higher asset yields and lower
liability costs contributed to this increase. Net interest margin rose 41 basis
points from 2.66 percent in the first quarter of fiscal year 2006 to 3.07
percent in the current quarter. The rise in short term interest rates during the
past year contributed to both higher loan and investment yields. Total asset
yields for the first quarter of fiscal year 2007 were 6.00 percent, up 32 basis
points from 5.68 percent for the same quarter last year. A significant change in
deposit mix, away from higher costing certificates and public funds deposits and
toward low- and no-cost demand deposits also contributed to a meaningful decline
in liability costs despite a higher interest rate environment. Total liability
costs fell 6 basis points from 3.01 percent in the first quarter of fiscal year
2006 to 2.95 percent in the current quarter.
Non Interest Income
Non interest income for the first quarter was $3.96 million, more than double
the level from the same quarter a year ago. The dramatic increase is the result
of higher fee income generated by the Meta Payment Systems division. Fees earned
on prepaid debit cards and other payment systems products and services were
$3.41 million for the first quarter of fiscal year 2007, compared to $1.22
million for the same quarter in 2006.
Credit Quality
The Company recorded a provision for loan losses in the first quarter of $5.46
million. This provision is directly related to two commercial loan relationships
which the Company has determined to be impaired. First, a $690,000 provision was
recorded on a loan secured by the assets of a road paving company; the process
of collecting and liquidating these assets is presently underway. The Company
also charged off $1.05 million related to this loan. Second, the Company
recognized a $4.95 million provision on a purchased participation loan
relationship, and reversed $101,000 in related accrued interest. The Company
participates with over 20 other financial institutions in this
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loan and is not the lead lender or servicer. The loan is purportedly secured by
stock in a charter airline company, the residence of the principal borrower, and
an airplane. Questions have arisen concerning the extent and quality of the
collateral, which the banks are investigating. Offsetting the above specific
provisions, the Company also recorded a $180,000 negative provision during the
quarter as a result of shrinkage in the loan portfolio.
Non Interest Expense
The Company's non interest expense was $8.83 million for the first quarter of
fiscal year 2007, reflecting a $3.04 million increase from $5.79 million in the
same quarter last year. The increase is broad based and is generally the result
of the Company's investment in the Meta Payment Systems division. Card
processing expenses rose $1.32 million from $333,000 in the first quarter of
fiscal year 2006 to $1.65 million in the current quarter. These expenses reflect
costs associated with processing and delivering debit card related products and
services. Compensation expense rose just under $1 million on a quarter over
quarter basis to $4.03 million. This increase reflects the staffing of two new
full service branches, one each in Sioux Falls, SD and West Des Moines, IA, an
increase in the sales force and operations support staff at Meta Payment
Systems, and the addition of IT staff and other administrative support within
the Company. Many of the new employees at MPS and in IT will be focused on
developing new product lines and increasing market penetration of our payments
systems products and services. Other expenses at the Company have also exhibited
growth as business volumes have increased. Increases in occupancy and equipment
expense reflect the aforementioned new branches and the addition of
administrative office space in Sioux Falls. Similarly, increases in marketing,
legal and consulting, and other expenses reflect the Company's continuing
efforts to support growth of business opportunities that management believes
will be profitable over time.
Loans
The Company's loan portfolio, net of allowance for loan losses, decreased $19.5
million during the first fiscal quarter to $369.3 million. The Company continues
to experience pay downs and payoffs mainly in its originated and purchased
commercial and commercial real estate portfolios. The decrease is driven in part
by a decrease in the overall demand for credit and competition from secondary
market investors. The Company has recently begun efforts to expand its reach for
lending opportunities beyond its traditional markets. In March 2007, the Company
will open an office in Omaha, Nebraska, which will house certain functions of
the Meta Payment Systems Division. In addition to providing access to the rich
talent pool Omaha enjoys in the payments and technology arena, the office may
serve as a stepping stone for additional loan production in the future.
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Deposits
Deposit growth continues to be a bright spot for the Company. Growth in low- and
no-cost checking deposits surpassed 80 percent during calendar year 2006, and
reached a record level of $291.8 million at December 31, 2006. Checking growth
of $75.5 million in the first quarter of fiscal year 2007 capped this
performance, driven in part by substantial sales of prepaid holiday gift cards.
The dramatic growth of these inexpensive funds has enabled the Company to shrink
its higher costing deposit and borrowing portfolios, thereby improving margins
and enhancing balance sheet stability.
Business Segment Performance
Meta Payment Systems
MPS recorded net income of $606,000, or $0.24 per diluted share, in the first
quarter of fiscal year 2007, compared to $494,000, or $0.20 per diluted share,
for the same period last year. The growth was driven mainly by increased
interest income generated from checking deposits and increased fee income from
card sales and payment transactions. Since its inception in May 2004, MPS has
issued over 25 million cards -- 5 million of these alone were issued during the
first fiscal quarter of 2007. Brad Hanson, President of Meta Payment Systems,
noted, "Consumer interest in prepaid debit card products and services continues
to expand on a global scale, and the Meta Payment Systems division is poised to
capitalize on the tremendous opportunities this growing market presents. The
division is focused on increasing its penetration of these markets and is
actively developing additional products and services to meet the needs of its
clients and customers in the emerging payments industry."
Traditional Banking
The Traditional Banking segment recorded a net loss of $3.46 million, or $1.38
per diluted share, for the first quarter of fiscal year 2007, driven primarily
by the additional loan loss provisions discussed earlier. Absent the loan loss
provisions and related interest reductions, the Traditional Banking Segment
would have recorded net income of $0.08 per diluted share, compared to $0.10 per
diluted share for the first quarter of fiscal year 2006. The Company continues
to focus on increasing operating efficiencies, while simultaneously improving
support systems. Meta Financial Group, MetaBank, and MetaBank West Central meet
regulatory requirements for classification as well-capitalized institutions.
Other Information
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Please see the additional Meta Financial Group, Inc. press release issued on
January 31, 2007 regarding the sale of certain retail branches.
This press release and other important information about the Company are
available at www.metacash.com.
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Corporate Profile: Meta Financial Group, Inc. (doing business as Meta Financial
Group) is the holding company for MetaBank, MetaBank West Central, and Meta
Trust Company(R). MetaBank is a federally-chartered savings bank with four
market areas: Northwest Iowa Market, Brookings Market, Central Iowa Market,
Sioux Empire Market; and the Meta Payment Systems prepaid debit card division.
MetaBank West Central is a state-chartered commercial bank in the West Central
Iowa Market. Nineteen banking offices support customers throughout northwest and
central Iowa, and in Brookings and Sioux Falls, South Dakota.
The Company, and its wholly-owned subsidiaries, MetaBank, MetaBank WC, and Meta
Trust Company may from time to time make written or oral "forward-looking
statements," including statements contained in this release and in its filings
with the Securities and Exchange Commission, in its reports to shareholders, and
in other communications by the Company, which are made in good faith by the
Company pursuant to the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995.
These forward-looking statements include statements with respect to the
Company's beliefs, expectations, estimates and intentions that are subject to
significant risks and uncertainties, and are subject to change based on various
factors, some of which are beyond the Company's control. Such statements address
the following subjects: future operating results; customer growth and retention;
loan and other product demand; earnings growth and expectations; new products
and services, such as those offered by the Meta Payment Systems 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 its 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.
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<table>
<caption>
Financial Highlights
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Consolidated Statement of Financial Condition
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(Dollars In Thousands)
Assets Dec. 31, 2006 Sept. 30, 2006
<s> <c> <c>
Cash and cash equivalents $ 151,330 $ 109,353
Investments and mortgage-backed securities 180,906 192,067
Loans receivable, net 369,277 388,762
Other assets 52,998 51,429
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Total assets $ 754,511 $ 741,611
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Liabilities
Deposits $ 599,655 $ 565,711
Other borrowings 106,416 125,054
Other liabilities 4,816 5,514
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Total liabilities $ 710,887 $ 696,279
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Shareholders' equity $ 43,624 $ 45,332
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Total liabilities and shareholders' equity $ 754,511 $ 741,611
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<caption>
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Consolidated Statements of Income
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For the 3 Months
Ended Dec. 31:
(Dollars In Thousands, except per share data) 2006 2005
<s> <c> <c>
Interest income $ 10,377 $ 10,177
Interest expense 5,118 5,457
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Net interest income 5,259 4,720
Provision for loan losses 5,465 40
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Net interest income (expense) after
provision for loan losses (206) 4,680
Non-interest income 3,961 1,845
Non-interest expense 8,830 5,791
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Net income (loss) before income tax expense (benefit) (5,075) 734
Income tax expense (benefit) (1,821) 219
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Net income (loss) $ (3,254) $ 515
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Earnings (loss) per common share
Basic $ (1.30) $ 0.21
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Diluted $ (1.30) $ 0.21
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<caption>
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Selected Financial Information
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For the 3 Months Ended December 31, 2006 2005
<s> <c> <c>
Return on average assets -1.77% 0.27%
Return on average equity -28.49% 4.80%
Average shares outstanding for diluted earnings per share 2,506,220 2,507,152
<caption>
At Period Ended: Dec. 31, 2006 Dec. 31, 2005
<s> <c> <c>
Equity to total assets 5.78% 6.11%
Book value per common share outstanding $ 17.18 $ 18.11
Tangible book value per common share outstanding $ 15.84 $ 16.75
Common shares outstanding 2,539,326 2,503,655
Non-performing assets to total assets 1.20% 1.16%
</table>
Meta Financial Group, Inc. (R) \ 121 East Fifth Street \
P.O. Box 1307 \ Storm Lake, Iowa 50588