CASH - Earnings call transcript Q4 2020 | Pathward Financial, Inc.

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Meta Financial Group Fourth Quarter and Fiscal Year 2020 Investor Conference Call.

During the presentation, all participants will be in a 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 Kelley Elsasser, Director of Investor Relations. ahead. go Please

Brittany Kelley Elsasser

welcome and and Meta Group Financial Thank to call webcast. conference you, the

and and Pharr, of Our and Brad the September CEO, President Hanson; participating Also COO Herrick and year in discuss of XX, quarter XXXX. CFO, is Executive will the and fourth results Brett our call fiscal ended Co-President Glen President Vice MetaBank.

website including presentation may on our investor earnings be and at release the Additional information metafinancialgroup.com. found

subject forward-looking As investor to and factors materially to from language to actual a no recent our Meta's and are our differ any most in the that Those results reminder, refer actual for differ. results to statements. statements. Commission, forward-looking cautionary update forward-looking undertakes risks include that release, anticipated statements. cause filings information additional could including may Company the filings could obligation in cause covering presentation uncertainties to Securities a Please statements comments and earnings the with and Exchange The

will we non-GAAP for included measures this call. to be certain today non-GAAP Meta's Reconciliations appendix and are the Additionally, investor the such of on performance assist non-GAAP measures only provided results trends. References are in within financial conference presentation. understanding to measures you discussing

to will turn the Hanson. Now I call Brad over

Brad Hanson

Thank crazy talking you, year is Brittany. a Everyone about XXXX what I know has been.

of compared over XX% share of $XXX.X earnings And our working provision, loss my So by environment. to sizable the to XXXX, for this staff income fiscal substantial of during the team increased the million an of from net challenges time to XXXX. I year and a including difficult rate and start period. $X.XX express serve performance reported Despite shareholders loan cuts remote to appreciation dedicated want exemplary our for continuing and same my to recognizing X% some fiscal increase customers per we

buying previously share back price favorable September, afforded the believe bought we shares strong our at and average $XX.XX share. start are share reinstated program opportunity shares XXX,XXX operating of at from prices. approximately considerably announced is our us October repurchase the performance through has to weighted what While down per XX, back a In pre-COVID-XX levels, we

close interest-earning support and borrowers the million with prepaid X.X while return year, for community increasing the cards. new XXX $X.X by we ratio our of expenses Treasury's on by our relationships, Service we bank asset U.S. our maintaining our percentage Fiscal leverage. deposits, were distributing package stimulus exchange from time, impact with improving same return on in and loans existing optimizing low-cost relationships three several partnered assets just strategic managing of implementing of the focus by During At and sale billion COVID-XX. to $XXX operating and PPP further cost Bureau lower payments funding able replacing higher extended higher in Department pandemic core the deposits mix initiatives: closed our response efficiency to the million the and Fiserv improving of of the government on loans before the past retail We funded of to to economic plan

our addition further programs. In by governance enhancing company operating working have of foundations pay-for-performance hard organizational our programs, this, to solidify to the we structure, procedures, pool been talent and

We faster, efficient. more and are safer getting

vast ways segments years. data leverage and enhance looking to programs capabilities, our responsibility and and ahead, advantages upgrade in progress as the that new the our to amounts in us, gives our strive at expect to the initiatives. developing our on focused we the also aspirational scale, entering and competitive platform corporate communications, enabling In and accumulated inclusion diversity providers are year and for technical of we culture, our fintech We and social over messaging websites product see

over call the turn to me let Brett Pharr. Now

Brett Pharr

Brad. In losses of of fiscal quarter the million. $X and loan provision you, lease we took a Thank XXXX, for fourth

as Non-performing part no a our business. total with $XX.X services for charge-off was at Credit X.XX% material leases lease anticipated of September losses activity due quality deterioration quarter XX good quarter. in XX, in remains leases past large previous and loans to Our XX% than tax and lower June points seasonal end, reduction loan basis within dues. and allowance loans were million of XX, the compared XXXX, to

closely small monitoring ticket our finance We equipment are portfolio.

$XX.X reserves just cover believe are modifications to that million and adequate risk. portfolio in However, are any now associated we

COVID-XX. no We to seen in lending change measurable in performance portfolios due have our consumer

now to Bank pay $XXX Our down and portfolio just theater our Movie a continued and still are loan hospitality X% approximately loans and in Movie Community quarter-end, our COVID-XX million XX% category. for losses. at exposure has accounts total legacy theaters pandemic, by heavily balances. have roughly in student concern, been have to loans deferred total of we accounting $XX of this portfolio of impacted the for million and

and but the are principal credits we fully interest-only making payments. generally recovered. reserves level against deferrals, these the third from to loans interest, round Hotel are far additional trending of three-month deferral are taken Most on positive, currently risk. them While elevated reflect have of in

million Excluding now just $XXX.X loans. X% gross PPP total all loans, to portfolios total from across million account in deferments quarter, $XXX.X of the and down decreased for

under fees had recognized we have the $XXX,XXX. equates average over X.X% remaining loans amortized of and fee in average the size of million million outstanding, of The million Protection fees the $X.X rate $XXX lives be from loans of loans. approximately approximately remaining an approximately The As $X.X Program net Paycheck on to SBA. of will fees in loan XX, the XXX September totaling XXXX, total

the PPP Business We closely Small Administration of forgiveness development the rules. following are

over the Glen Herrick, our Now call CFO. let to me turn

Glen Herrick

on year. good Net generated points the at the be linked-quarter. for On XX% fourth a was lower share sale quarter, to key strategic Full income the quarter the for we million a balance to per share along accomplishment continue We $XXX a of Today, loan this and our optimize to the the year Treasury, per States current stimulus and division, everyone. for $XXX.X margin Community Bank prior gain diluted a of reported deposits earnings share and and $X.XX XXXX. quarter the our million remixing basis million, of X% card demand X.XX% afternoon, XXXX. growth you, income fiscal Thank decrease year $XX.X our sheet. sheet. path full fiscal of environment, one-time interest interest the the per basis, an interest for or income our compared Brett, focus of quarter $X.XX United results Despite generated fiscal XXXX included of we a net diluted GAAP over or year we on reinforces than in drag net level quarter. only believe balance XX the rate net our fourth on EIP albeit improvement fiscal

X.XX% XXXX Excluding compared fourth quarter. the the impact fiscal was NIM from to in X.XX%, EIP deposits,

and lower will asset While higher pressure net demand ongoing over interest near loan net in the leads slower interest our yields mix to margins to earning income in the likely time. continue shift term,

industry fiscal rate deposits, in Our total cost division. largely total sale the year, to environment. result of a compared of needs XXXX. above and income, overall now to funds lower the prior prior million, EIP non-interest quarter improved an the funding by of as gain Community influenced Bank XX non-interest Non-interest reduced $XXX levels Meta was on the increase continues represents the in fiscal to wholesale income generate for which the card basis an the and XX% year by revenue of income year, year compared X% of fiscal points same

the quarter, fourth income in SBA loans, the fee quarter can income. in million, increase non-interest be to For compared of increase an an payments was year. other and gain attributed sale to prior XX% The the income on same $XX increase of

Non-interest year, down result expense expense a million the ongoing the million, separation-related to to the as Community X% of prior compared For efficiency of non-interest and Bank initiatives, million. included a $X.X fiscal was expenses was $XX employee the $XXX X% for year. sale of our quarter, quarter including to a expenses prepayment penalty $X.X Fourth long-term debt the million extinguish increase division.

and growth that were the we X% loans the at and funding. on XX $X.X level of XXXX. company's EIP assets the to fiscal September for and pay basis loans billion from more comprise the reflecting decrease linked-quarter were a a expect wholesale stimulus issued lease totaled $X.X $X.X Growth total million of demand sell used and $X.X refinanced rebound XX The billion to down sheet, were XX% Average finance result of inflated for Community and Total balance which cash to or in which were legacy balance held card finance quarter Commercial portfolio business the down commercial leases which year-end. by were deposits $XXX cards at remaining and sale billion borrowings MetaBank. X% quarter. the Bank to a as loans classified to some sold investment loans as portfolio decreased this spent for was gross lines. were reduce EIP loan on away is Turning payments or leasing primarily of June reflecting normalized related is that held in factoring balances billion by billion

balances XXrd, in October million outstanding. EIP of remained $XXX As

overall various payments Excluding up component by the levels. spending consumer was the cards from in compared program the of fiscal large and EIP increase to payments impact the year. stimulus XX% cards, deposits lower A increased quarter partner ended average prior same on driven that

Brad program X.X reinstated XXX,XXX million on September that company share to has a XXXX. mentioned, average our our quarter, repurchased scheduled expire repurchase in XXrd authorized October per shares under is we $XX.XX of its we remaining repurchase at As program December program. repurchase restarting during XX through price the share approximately share. have share Since The shares weighted

context repurchase of initiatives funding to within overall share further capital and deployment activity consider including returning will growth excess strategies the shareholders. capital We our

million. one adopted effective by and losses for the have increase entry we credit XXXX X, our approximately to $XX.X day Finally CECL expect allowance October

our As further to in two-year to five-year of in disclose for CECL regulatory day one closing period impact short capital comments. it adjustment I the to the elected have back adoption We will turn regulatory total that term not ratios will capital in conversation detail impact. the we Brad XX-K. transition to our delay the the minimize With as relates intend the

Brad Hanson

missing made like a partners the Despite support Thanks and fronts shareholders our past all results multiple employees our delivered year. the to on thank targets, our their solid work hard significant few year. Glen. and we for progress pre-COVID during and for I'd

ahead. forward the lie and the We New the up all questions. line have to opportunities the any Year are that With that for I'll looking open operator

Operator

Instructions] KBW. comes question from [Operator first Our you. Perito Thank Michael with

is line now Your open.

Michael Perito

kind I profile or for think XXXX. is the outlook of in earnings be about to we earnings I income of million kind guys of us minus thanks without other question it spend you the Block to trend I that fair that year? I minute guess a taking -- where as it think way additional too forward. items to fiscal it additive assume kind fiscal we a $XX of fair the numbers think putting And to XXXX as afternoon you run good thoughts plus kind $XX that about power still to would about or then here. how XXXX growth earnings I -- into from wanted how we any just had look there of annual $XX continue long-winded And $XX I kind the well this transitions million question. -- to heading? is the of about will as a core Hey, specific guys million But is my if guess think point for business H&R on Is like on is that would to is believe that still opportunities XXXX around be kind there as million there could core the of that correct guess think core I range. a of move rate? it And partnership to next was the

Glen Herrick

I'll a Glen. that. at take is this shot Mike

expect other that sheet. increase we earnings our portfolio businesses So, point be and as is yes, portfolios will our talked balance I a would And drive we've certainly relates Block though in organic what will on primarily of balance size absolute that some dollar would in loan runoff number earnings we Bank the overall them. will growth drag it have in of increasing a XXXX. H&R additive student about we the to also the also also be our sheet. And without remixing year-over-year think and Community

Brad Hanson

higher had rates coming excuse September. of We XXXX. interest months six a of in XXXX. at rate -- And the that the reduction remember me the And have of we'll impact earnings that in -- than -- interest we'll a full full have in, in year year a in

Michael Perito

Right.

Thanks. if the helpful. kind That's sure comment, my else maybe I sheet and the or see this follow-up XXXX about Brad, fees side Okay. about the But two side could that or for opportunities think think the on ask here, curious the as the very was that balance you what just growth of And you one obviously I will pipelines. of I'm horizon kind Crestmark the think Meta then someone most be -- the we you business here. payments for But for of and are could at impactful point? biggest there's

Brad Hanson

Well.

the card an business, signed breadth their we tax business. on As certainly we as The programs, their to includes since over will their in loans of and we well, have that Block impact took deals. side said addition which some new H&R

have So as that portfolio that will well. on an impact

started hold. to genesis the of taking see business have faster also the payments We

think we launching. will key us. several I be that's It income start. play good from have for the a ramp-up And period programs a

-- continues in to from more that we so. of will And There's beyond, the a interest XXXX, start that probably So end XXXX I marketplace. in grow. an the and lot see as think impact then of that in to

future well. high have that line we for of as So the hopes business

other should some also business And acquiring. We that bit. a entered little ramp in lines up

compounding And we'll you from more new also you longer any that. opportunities, impact, start will start to before aggregate some think in that a material. truly that's ramp-up I Do they be scratch, period those think I follow-up if from Brett? even have an that there earlier. starting business But see have

Brett Pharr

it's I think it.

Michael Perito

-- will certain to initiatives kind Okay. some financials, the And be you those display of guys on broader in XXXX, a think be will that of that fiscal extent?

Brad Hanson

and signed other we've to also sign. business, there's continuing And are

launching, start So we that was that see which And up. to we'll of we're business. that about there's prospects MoneyLion excited announced ramp the

progresses. I initiatives, a come number recently impact there's year on have of to So as an will have well that new think the that start as

Michael Perito

my you Great. guys Thank questions, for taking appreciate I it.

Brett Pharr

Mike. Thanks

Operator

Thank you.

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

now is line open. Your

Steve Moss

guys. afternoon Good

Brett Pharr

Hello?

Steve Moss

a this of Starting seeing were on quarter-over-quarter and with nicely definitely just loan remixing they over basis. here the especially up like an kind quarter within yields EOP portfolio

Just quarter? potential kind about you're leg into It seems decent yields forward like up. a the of fourth loan how going curious, thinking for here just

Glen Herrick

Yes.

on there. Sorry Steve, you your last part cut out

Steve Moss

there sorry It for just seems in like it quarter, that be loan into yields EIP for you loan the yields could the another step-up the December -- like seems remix? I'm here, upcoming quarter given

Glen Herrick

Yes.

that. going those Community than finance. It's But we run the given environment. rate do yields So with come to we higher We has shift are mix agree in continue commercial Bank certain in lower lower to as the that more or would off. portfolios others

and Community So securities portfolio we run Bank. off

Just that the overall swap set will yields. help

Steve Moss

deposits you're business the going on to of EIP kind front for of what know your Okay. card And seeing what's as business? the deposit there. then just on just non-interest-bearing growth from curious, I kind steer,

Brad Hanson

we to in EIP have has expect out some and that is couple we'll When little This be more that the seeking would We're it bit. and take Yes. that years hides still last go. just the picking business piece, occurred we bubble growth up. year-over-year EIP business. The to that of a continue We're Brad.

Glen Herrick

cards. were slower believe, that putting it seen consumer overall that those partner very stimulus getting folks calling so out then Steve twofold, been though one it of numbers are the that Yes. and above-normal growth we the our money we so little What's from cards deposits but bit Treasury loaded out, GPR card, called in on and we've the discrete issued taking a were we've stimulus also cards our spending we've have hard also is, on are

with tell And so our it's industry came hard is elevated the talking to where of the fungible levels everyone from, exactly that consistent that deposits. but that money is to peers pretty that's across at what

year-over-year. deposits card come will terms absolute probably in down So

to core we try you would continue If some expect there. business, growth to out still back our

Brad Hanson

And programs Block, H&R discussed MoneyLion are the new and there I others.

like portfolio. those H&R converting a of some So is Block

will business and are growing impact others we'll over well. some -- that the then year the as immediate So see from be

we coming to growth business and strength So over still see and we years. the expect -- should payments opportunity our in

Steve Moss

Okay. sure answered. I'm And was then this not that

quarter. commercial pretty the in quarter-over-quarter December you good finance the are good pipeline had more growth? I portfolio, about in to to guys you normalization on certain how know how portfolios. Just is see tend that growth. And alluded you thinking But You growth looking? loan

Glen Herrick

I seeing the Yes. we're finance. to I at look more pure think take transactions mean, commercial a in

lending there your of low. where you're is and are too because and choosing So because coming play, yield, asset-based the markets about we're some things factoring the other the some cases to of not talking your are yield down

you're finance think going I economic naturally time and think have So cycle the starts this But shine. through build mix is in if you that. the to some commercial that to

Steve Moss

Okay. appreciate Thank I you very much. that.

Glen Herrick

Steve. Thanks Yes.

Operator

And from you. next our Frank Sandler. question Thank Schiraldi with Piper comes

Your now is open. line

Frank Schiraldi

guys. Hey,

deferrals quarter, the you the borrowers on Just any of attention at what the with is color further -- they give of period? where end piece of on or the at there percentage were any what of end that based need deferral may X% your conversations the expectation can

Glen Herrick

type biggest the they're we are have the of resume the going that getting traditional can the we in kind Community of portfolio And we where and improvement in need Bank. they obviously to to winter properties they payments. that hotel-motel the residual are out piece come when P&I But And that we'll spring, continued then particularly so Well, what we seeing see through assistance closer happens months. the levels have. of with is certainly, the normal

on relatively again, all And very you are And large things -- We've then still and thing. particular that some the that of theater down period country they're there's geography. in small are but the who's time a ticket lot all. not on marketplace bit, those open at going on There's mentioned small, have that shut relationship not struggle depends big that. there's a in what's who's going around yet. for finance, of a to variability in the that's So where and the there to

see So with we'll those. happens what

Brad Hanson

And deferred. not the that well being interest just lot paying to it's hotels interest not payments a as -- it's some think of important and full principal I are understand

So they are making contribution. some

Frank Schiraldi

Crestmark charge I as is early about and out Recession, as you lot and Great And look net sort you then where it the the cumulative thoughts to Okay. do at also here at credit think that in look last the in a it net of just there -- if the that higher? downturn X.X%. likely lower of talked you But we put this front. too you obviously Or any today any charge-offs side. to Is be we -- still that on Is around uncertainty say? time on expect sit

Glen Herrick

the talking one the good is Well, going of commercial finance. go factoring. that's a things of about that's lending to asset-based pure and indicator how I'm

have those the collect comes low even balances the loss designed, that's that considerably, down means are environment down you you exactly gone volume the receivables downturn products in which debt. have why And working a such notice you as as which rate. down a You'll the pay

some I that no called think areas that headed. the happening. balances if We're of So you that where specific to delinquencies out, space thing that's help there's gives than in the that's other we watch continuing you indicator

You're of a all. not seeing much at change

is that where portfolio So pretty good we feel today. about

Brad Hanson

any isn't yours as ball than crystal our Frank. better However,

to So very we'll portfolios react as performance we closely to is required. continue monitor and the their

Frank Schiraldi

with trend anything side, other there's I provide wondered just don't where going of might can could on expense run if out then I you break help you the And any Okay. particularly, expense forward. the and that if rate finally, know

Glen Herrick

prepared outside in XXXX a in then, items. And in expenses quarter. other for that $XXX I -- of less need of than Yes. We March out of type and long-term there employee the expenses quarters quarter severance as would this our our they anymore million invest were would expect onetime we debt XXXX. We the would some don't called three other some couple that we and prepaid costs year-end be to borrowings. were

outside $XX quarter. under certainly, So, million the tax

Frank Schiraldi

did $X going you that $XX Okay. out broke line, might And million I but $XX you million other of that? missed sorry, onetime I'm expense break of more Or forward? while million, million, I $XX is item to out -- have did as the opposed a out

Glen Herrick

then in million the and $X.X we in earnings $X.X severance down of prepayment penalties debt for what for again the script long-term out the at Well, called paying and release costs. million was FHLB,

Frank Schiraldi

Thank you. All Okay. right.

Operator

Thank Wallace from you. question James. William next And with our comes Raymond

is now Your open. line

William Wallace

Good quarter? accounting what at at some as evening, like trying about half Or the And just interest out the about right sitting to -- prepay? of looks with will just pressure they it you're October that margin FHLB that balance to the start back basis of do XXX level elsewhere accretion you points it deposits get deposits think Do and the then those go looks the you of that like to zero? from deploy moving balances XXXX of liquidity the you to out they now. sheet? on the Maybe somewhere one about on in expense parts from net the stands probably guys. first. was purchase Yes. think then, it break Could EIP the savings be What do going XXX

Glen Herrick

folks tail, savings We Hey, people leg using down peers latter. The are. this are quarter, final Wally, this pay -- account the think they'll another or Glen. but the certain for tail is final the them

level off. that's have to them expect as -- throughout we run and earning opportunities deploy those deposits so And with itself XXXX we Purchase fiscal assets. have we'll some of year as accretion

nature. in that portfolio So getting primarily short Think from more Crestmark we're not any benefit that. is of the term

left was a from be there. question of about that's it the it What your part third So basis and might point Wally?

William Wallace

The FHLB expense.

Glen Herrick

Yes.

XX-month a payback. about it's So

equal about interest being next of all $X year benefit we'll save expense million So things

William Wallace

And question. follow-up Okay. then my

relates capital believe buyback could commentary you capital make your And constraints. you of On just unlikely that there any frame or at the to provide as would opportunity or the levels also, by to a cetera? buyback to I however hand the continue what are could it constraints company said, plenty internal your et on up conversation? Any holding would buyback to cash appetite capital around, governed you be then dividend

Glen Herrick

ratios the season. No year north at average, signaled tax our we've on to Yes. X% that risk-weighted. on time. little will in -- on around And leverage But i.e. move constraints a and a XX% we're of an during this be bit looking the or capital XX.X%, going

William Wallace

Okay.

Okay. All right. Thank you.

Glen Herrick

Wally. Thanks,

Operator

showing Thank the And questions at this time. the queue further to in like back you. I'd I'm speakers no to closing turn remarks. call the any for

Brad Hanson

hope I'd joining to for great everybody I thank have the Thank evening. call so like much. and today, you a you

Operator

Ladies participation thank does conference. your and on conclude your gentlemen, program. This you today's for

now may You disconnect.

Pathward Financial (CASH) 28 Oct 202020 Q4 Earnings call transcript