CASH - Earnings call transcript Q2 2019 | Pathward Financial, Inc.

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Operator

Ladies and gentlemen, thank you for standing by and welcome to the Meta Financial Group Fiscal Year 2019 Second Quarter Investor Conference Call.

During the presentation, all participant lines will be in listen-only mode.

Following the prepared remarks, we will conduct a question-and-answer session.

As a reminder, this conference call is being recorded. I would now like to turn the conference call over to Brittany Elsasser, Director of Investor Relations. ahead. go Please

Brittany Elsasser

welcome discuss and quarter conference and afternoon. call March Thank financial to results to this earlier our XXXX fiscal for webcast XX, you released Meta's the ended second

company's earnings information, to these XXXX. that website some Executive be our President actual results future Vice not release on Additional forward-looking those and Private metafinancialgroup.com. the and you from statements, are presentation, Glen found at Hanson caution or may Brad statements CEO, sharing outcomes which CFO, investor could before the provisions pursuant cause statements, and to identified President on materially to questions. otherwise be and today or remarks plans, we uncertainties anticipated related Litigation goals. will that and Securities differ Today's including These are Reform Herrick of including We we forward-looking currently discuss Safe and may forward-looking reliance contain to place today. as the subsidiaries, for of prepared operating open to call Harbor call be the undue statements which the Meta made its subject generally objectives up may risks describing or Act

its could filings information and Commission. company's and results, most XX-K with further quarterly Forms Exchange affect recent the and reports the For other factors please about XX-Q that and annual future Securities Meta's see the filed on

time, subsidiaries call date as would of forward-looking on other behalf circumstances, any President made. future the CEO, statements they over reason. any its Brad only like or information, company to as expressly whether At or events changed the new speak update for intent of to Hanson. of or and turn the a statements any to Forward-looking I disclaims this result which Meta obligation are on

Brad Hanson

Thank you, Brittany.

of diluted year $XX.X pleased are to $X.XX share. million GAAP per or quarter XXXX, our second of for including report fiscal We results earnings

the $X.XX at a for for fiscal address and DC our diluted to company. agreement priorities the discuss previously in costs disclosed the executive further, announced leaseback, impact second quarter, As a adjusting share of per for we plan came Glen will solar EPS Last transition quarter. top the core

by initiatives a and As shareholder percentage upon of a asset to mix including profitable with partners. sheet build the and prior core In fiscal sheet targeted second growth average improving three balance increasing drive payment value, operating year's average, grew efforts quarter, our efficiencies. XX% deposits, for earnings identified we existing the opportunities deposit balance non-interest additional enhance bearing funding the from the reflecting of quarter reminder, over deposits optimizing the to

expansion Next, XX securities margin X.XX%. lower and cash quarter portfolio interest continue combined earning to with drive ongoing asset the loan quarter potent basis mix. Amortizing resulting from Net balances points over flow commercial growth sales more from strategic a was previous investment this to

refund further tax product incremental fee with our division. no on product. refund well consumers generating interest bearing our to solutions, advanced new The offered fixed individual year This tax expanded a we new interest in product while service traditional advance by amounts available featuring product addition income. was our received refund Focusing rate larger interest and loan a advanced

Overall, producing efforts March was last while year, season relative take contribution to processed number lower our our to transfers, X% business of the the margins team to trended income the due realize refund of mix primarily for for to Meta. another thank net to Turning quarter were I'd RTs their to compared up higher we business. in from able like opportunity tax successful of our entire the to tax this XXXX.

our building our our leadership a few have months a while on first as team. CEO, better broader by spend team expect Now bring few aligning to also management profitable leaders executive of like been our risk consumer the governance areas. great lending, minutes our focused already extend our I fortunate talented and management team. leveraging in to and and these drive senior work I strengthen management my breadth value growth new seasoned to franchise customers leadership team shareholders discussing adding I'd and In We've to alongside leaders structure, an alike. existing to

our over to fiscal financial to like second I'd quarter XXXX review Now provide to turn of CFO it Glen our Herrick results. a

Glen Herrick

Brad, you, everyone. afternoon, good Thank and

disclosed GAAP year, quarter share after of over reached previously quarter discuss as reported basis X% income earnings share related per increase As Brad share in $X.XX million, share. the XXXX same per agreement fiscal the as per of million $X.XX mentioned, diluted DC results Notably, $X.X after earnings the executive pre-tax prior tax, Solar, later. $XX.X of cost tax and net for impact transition I'll per the a of detail in included well to $X.XX which second we greater the an as on the period for

at mix net came sheet, from related the quarter. XX. quarter core income ongoing for in growth XX, the of by balance charges, commercial an our finance growth leases Excluding progress year EPS up loans largely Earnings $XXX prior loan X% to increase $X.X Gross at of million the led increased March and adjusted December to by the billion portfolio. driven asset in interest in from $X.XX these the a was optimizing

Our led than $XX quarter national grew more or million portfolio our year-over-year, sequential by a acquisition of Crestmark. commercial the X%. quadrupled portfolios finance lending basis On

earning the consumer fiscal them average deposits. by margin asset million $XX to the On $XX previous second average quarter total during to grew quarter XXXX for the quarter In quarter XX% from loan second $XX of in basis interest representing compared the net levels. by quarter in primarily fiscal million credit XX the March fiscal prior the fiscal we were reducing lower portfolio, X.X% portfolio basis second The XXXX prior average the generally contributed during X.XX% for and deposits provision quarter mix, a for and bearing second loan non-interest growth advance a the given million originations higher to year. improving for interest by increase for of of loans loan sale of the the points net our of XXX Meta's to consumer driven well prior quarter, quarter, year quarter our prior fiscal $X.X basis new sold the drag the the and Our deposits bearing XX% investment average loans, $XX were commercial compared from securities effort influx million was as by tax the of XX% held to quarter. fiscal an Total year. in quarter, years, quarter, Loan XX second XXXX. second X.XX% for overall XXXX non-interest the interest points current basis our quarter on our we the same as witness losses top for compared quarter reserves There introduction points expense compared refund with quarter, quarter holdings year. in with optimize in XX refund product charge loans. tax basis bearing the mix to XX. yields no yielding fiscal reflected yielding ongoing further for linked on maintain accounting this interest higher net grew XXXX increased net that, reflecting margin earning replace consumer million, yields we June new of on our interest loans finance of a advanced of two asset and the for the as offs season quarter. product interest to In balances. of $XX fiscal by programs. will as basis, million was the purchase Net second these allowance X.XX% The and the to well in accretion linked of margin lease the bearing provision shift, for as points the appropriate refund advanced the were for contributed Meta's runoff provision

quarter second investor from depicted just income, was income deposit Non-performing credit of basis the eleven loans and largely at tolerance our million deck. Our and remain fees income represented as by same assets $XXX within strong total levels slide Non-interest other XX XXXX. XX, division, metrics sale of million well quarter, gain and on leases. XXXX. finance the March rental the was risk fiscal assets commercial The up driven $X.X increase for from of the fiscal of on points

to For XXXX product the advance product of deck represented increase Total the The $XX sizes. tax interest Slide income. includes X loan advance totaled million. breakout average tax income compared growth million, tax while season. billion net to totaled XXXX tax of in our investor $X.X tax of an $X season a fees we was due growth XX% largely loans in refund originated which

of year is as $X.X in ongoing continue to compared to year The prior fee while tax as moderate of card our by partners growth forward, quarter. the franchise season. years, overall the with are that million, fees. we fiscal believe prior certain associated due two we diversification on wind-down transition $XX prior of Going mentioned second to decrease earnings XX% income a to the should million saw well previously compared quarter the basis linked the increased of quarter fees to decrease to deposit volatility and Card their non-strategic

of headwind the of comparisons be for expect modest the through wind-down quarter effects to 'XX. fiscal the We continue to third year-over-year a

Turning initiatives. Meta's as merger, The support fiscal non-interest of well primarily to year-over-year to other as reflected XXXX hires Crestmark back expenses. in increase compensation new business expense related higher half in of the and in lending costs the

the financial and the specifically to of executive depreciation, included of Other DC included the non-interest included of $X.X addition, step-ups the and drivers lease loan earnings in quarter expenses under In detail occupancy With for expense on operating the solar DC our impact. release, disclosed equipment related million. acquisition. Solar much lease heading in expense Crestmark year-over-year the of overview compensation expense previously transition

with points. sale-leaseback on distributor engaged Solar generators me key DC of touch and Let a a mobile solar on few we is just transactions. whom manufacturer

we investigation disclosed, previously we fraudulent to record an today, what concluded $X.XX believe party physically single of appropriate Based million share ongoing this now conduct. are their it million units of third increase XXX having to was after and a with we that lessee on $X.X Solar was We DC DC know allegations involving As generator charge solar of per non-credit including non-cash to generators. of $X of from a Solar, the principles tax isolated goodwill. related earnings an an along subjects we XXX and provisional net solar purchased federal mobile of mobile event involving or identified seller

earnings our me outlook. per - share let discussed Finally, previously disclose disclosed

For adjusted $X.XX $X.XX to and from between $X.XX fiscal guidance per earnings XXXX, per share we our share are between share. $X.XX and tightening per

quarter's $X.XX agreement cost Solar non-recurring the this after excludes Importantly, DC our range of executive net adjusted related to earnings. EPS non-cash guidance tax and $X.XX transition to charge

expected per GAAP early a combined for the share a of for acquisition. range the in of fiscal earnings potential franchise to of per With I'll this up per of share, As result, the comments XXXX diluted compares demonstration XXXX turn share of to we the to Brad diluted power year for fiscal Crestmark is closing earnings back earnings as for $X.XX that, it $X.XX be and $X.XX questions. to the before result open conversation the

Brad Hanson

commitment our hiring, implemented resources operating mix Thanks to the fiscal improving maximize non-interest base, progress core recently initiatives effectively optimizing key the asset our our allocate pleased and which efficiencies. expense for moderate more operating curb our our and earning continued growth made Glen. we've should time. are and our To quarter against over deposit we results plan growing recap, of to three efficiencies, Related a with second to we

shareholders long will to value those we prepared resources and company to forward, term. completes and devoting the the ensure we that drive the our Going to the our That continue evaluate appropriate remarks. initiatives that are businesses to most over

any So line please I'll join me questions. Operator, the to Glen open for ask Q&A. for

Operator

[Operator Instructions] our And first KBW. with Michael question Perito from comes

Michael Perito

on to prepared - I go missed a so the apologize, some late, had of here remarks. I I So got little do

the think already. this back year? million, $XX much over that I the about start from - answered item tax how of card little want fee we as I line, at the business out XX But half line the over was in So might you apologize to if to try map fiscal there benefit how

Glen Herrick

what Hi, Mike, exactly to comes pinpoint is hard from this It's tax. Glen.

that certainly during continued a the had But loaded on seasonality our for we and was business, season have cards tax them seasonality would on there spend. payment do the in GPR basis. there March the quarter tax their as Before we and processing use March a see get refunds those and customers year-over-year

Michael Perito

mean growth the mean, curtail then - - of how we mentioned maybe and is, think of I think impact that some going mean, to XXXX XXXX. more hire enable the I try side. that to about drive guess, hire something able I about somewhat improvement? profitability and guess as I when down my trying maybe. And some ratio is financials. an of being to little of should But is the expense mean, to increase bit efficiency the that type that be that to on fiscal that a Brad, XXXX. we there'll I year-over-year, help to kind you in translates the

Brad Hanson

is as the We're any that it thoughtful we're the trying and kind can saying around hiring going sure of the enhance more a being hiring that without not phase Yeah. in to just We And appropriately will we of is, we prudent but discipline or necessary resource like just planning think free's without that. growth efficiency It's forward. business be believe disciplined ratios - what help that effectively, be hiring make manage our case. to to needs. of will process. and kind peer as better Then and our anything

Operator

question comes Moss Steve from with Riley FBR. B. next Our

Steve Moss

for I million. or guess expense the was it if $XX on tax here the piece, - $XX around you ignoring million the provision quarter,

the anything just of kind have just Was reserve - of you I Just purchase kind accounting? in building terms good that wondering reasonably outside of of what mean, is for wondering, accounting the I'm purchase run there isolation rate. runoff. in obviously,

Brad Hanson

bad building No, the it's having finance well new but pretty run albeit commercial accounting portfolio. as rate Again, the the we're I scratch, portfolios, a with scratch grow at for loan the portfolios, from overall think good we we're the for rate build consumer future. not it's run loan purchase as smaller near of originations as a to the level from majority

Steve Moss

going new And adjusted the getting margin Still then presentation forward. just the thinking about the with the here changed margin that to up. here going globe

- your what kind Just be with expectations help if tax, quarter? excluding could third the will of you for

Brad Hanson

Sure. We're two part putting thesis - main Meta with where very at Crestmark. the together, margins pleased of of thesis companies the our these early and obviously

would going there the And so contributed points not is have the to margin. that And we loans out, that XX tax expect did basis we did year call not in have to from that a advance ago, forward. we quarters non-tax

purchase called XX So trend accretion, out this basis points as down over that's accounting assistance plus points the purchase XX mark we there's there, amortizes. in the basis will quarter, portfolio that time

not some so, pickup. loans, replace get headwinds though said and primarily down it securities run commercial as And portfolio some to we'll finance there's there, being we with continue

of back kind that So line. into arrange

Operator

question from next O'Neill. comes Our Frank Instructions] with Schiraldi [Operator Sandler

Frank Schiraldi

could if updated wondering Just you any on could XXXX? the consumer year-end where give business, finance anticipate thoughts would balances you on by be

Brad Hanson

our think manage numbers consumer balance there's plenty to guidance, going specific of XX% be headroom a haven't those a to of but manage And to given program we've sheet. in able that a we're of we that effectively forward. that program, Well, going maximum to lending said we

rest be through up next we'll year So and into this to the ramping - of next over that year and beyond. the

Frank Schiraldi

thoughts guys what are have a season. And terms right tax there you for in of I it a XXXX the in I know for what business, I of your good then mean, for. middle don't thought looking out earnings. year, this were you the was the range result

matured you it about about you I'd of maybe a those I or think bit similar how now season going a XXXX So, businesses for to be figured ask, should modeling sort we think think do what expectation that? that the is have

Glen Herrick

today that were things area season. services early we some next for today, a but we're strategic could Frank, a too payments that to again, of primary tax know flat for partners provides the We The digits of we taxpayers, But contributor and nice our the want client looking year-over-year. what now providing card the between we the change to single in We reporting be - especially on low said - are IRS to. be the forward tax company. overall Based clientele we're those have think tell, up growth and growth not in But to area not but this us. and synergies high in earnings, we to we've said what in as large it like press, business. previously, that the though looking is

All our of be factored guidance. which 'XX would into

Frank Schiraldi

a there. on just finally just then And fees, follow-up the card

seasonality, is the still quarter strongest fee revenue of for In terms line? the March card

Brad Hanson

Yes.

Operator

Raymond comes Our Cardenas, next question Daniel from James.

Daniel Cardenas

rate basis. be a a about could just little tax in on with should bit thinking how you benefit forward help a you Maybe your quarter. had if the go Obviously, I

forward, XX%, we kind kind we do XX% a back tax As to look of of rate? return

Brad Hanson

So, our is XX%. statutory rate

down by have the energy mini a pipeline would to forward. credits winding portfolio and municipal rate. the based how see portfolio, expect in What mid tax will small alternative we that rate today tax for to we We then single on the guided bond impacted digits we've and be is, are going run active

Daniel Cardenas

base valuation given then your which repurchase for stock quarter next given and you active the repurchases And appetite this levels capital growth I year, announced believe week. building expectations? stock becomes current plan What's

Glen Herrick

Sure.

and to and in We authorization with capital we about We buyback this we certainly intend where levels levels see with would buying value timing a would board to we're we and consider the tool back expect what discussions have and at the way. do that focus comfortable value. shareholder strong - with where shares. those maximizing a and balance shareholder a manage sheet a stock continue announced have capital to to friendly as on we capital We're positions strong

Brad Hanson

stock to time. at this But been has time, this a nothing or actually not at back decision nor buy predetermined

Daniel Cardenas

that there that Have is the done? or then of just some business. finished tax And still be you streamlining process needs to terms maybe in work

Brad Hanson

is of There to little be done. a bit needs that work

that have for the finite back launch tax date to time You a season. can't a project like, move complete you

So through there few the season. were of the a processes the cycle work did to end that and - manual as last year, we have came implement we to things

was we've needs more the to completed. Now some forward. most there the gap still work planned going gain continue going ongoing But but to that that on work be efficiencies of through close to forward is and done,

Operator

session. to concludes that Hanson. turn the back CEO, question-and-answer And will the Brad I now call

Brad Hanson

for like the support everyone truly I'd Have to great time call. participating us for thank you and appreciate today. Meta's investor by a took thanking you. thank We listen Well, you close quarterly your in evening. to to

Operator

Ladies and in today's Everyone your the concludes participation have gentlemen, thank This you disconnect. for day. and a conference. you great may program now

Pathward Financial (CASH) 27 Apr 192019 Q2 Earnings call transcript