July 23, 2020

Earnings fell year-over-year at Meta Financial Group Inc., as the company navigated multiple government programs related to the COVID-19 pandemic.

Sioux Falls-based Meta reported net income of $18.2 million, or 53 cents per share, for the quarter that ended June 30, down from $29.3 million, or 75 cents per share, during the same time last year.

“I am proud of our performance to date during these unique and volatile times, both operationally and financially. While credit metrics remain sound, we have taken additional provision related to the uncertainty of the COVID-19 pandemic, allowing us to build our allowance and strengthen our capital position,” president and CEO Brad Hanson said in a statement.

“We are keeping the health and safety of our employees at the forefront as we continue serving customers, aligning for growth and keeping our eyes on the long game: bringing sustainable value to shareholders.”

The company was involved in multiple federal programs related to the pandemic, including support of the Treasury Department’s effort to provide debit cards as a way to distribute a segment of Economic Impact Payments payable by the IRS as part of the CARES Act.

Under the EIP program, 3.6 million cards were delivered with total loads of $6.42 billion. As a result of the program, Meta “saw a quick influx of deposits to its balance sheet in mid-May 2020 with limited visibility into the duration of those deposits,” it said.

“While this program’s impact to earnings was negligible, it did have a significant impact on cash and deposit balances, leading to a net drag on the net interest margin along with pressuring the company’s leverage capital ratios,” the company reported.

The total balances remaining on the EIP cards were $2.68 billion as of June 30 and $2.08 billion as of July 19.

Meta also is participating in the Paycheck Protection Program, administrated by the Small Business Administration, and had 686 loans outstanding as of June 30, totaling $215.5 million in balances.

From a credit perspective, the company reported that it is monitoring each of its lending portfolios, with specific attention to its hospitality loans and small-ticket equipment finance relationships.

“The credit management team has increased the monitoring of these relationships and has been in regular contact with these borrowers,” the company said.

Meta’s community bank hospitality loan balances increased to $169 million as of June 30, from $160.1 million as of March 31, and the average loan-to-value ratio on those loans improved to 60 percent from 61 percent at the end of the previous quarter. Two-thirds of the loan balances for these hotel relationships received PPP loans, and 51 percent received some form of payment deferral modifications.

Meta continues to put in place preventive health measures for its employees and customers, including mandating remote-work options and social distancing measures where possible, restricting nonessential business travel and enhancing preventative cleaning services at all office locations.

The quarter also brought other business developments.

MetaBank NA, a wholly owned subsidiary of Meta Financial, signed a letter of intent with Emerald Financial Services, a wholly owned indirect subsidiary of H&R Block Inc., to offer selected financial products to H&R Block clients and to negotiate the transition of certain financial products under an existing program manager agreement between H&R Block and a third party.

Meta also extended its agreement with Blackhawk Network Inc. through 2040. Blackhawk is a prepaid and payments company that supports the program management and distribution of gift cards, prepaid telecom products and financial service products in a number of retail, digital and incentive channels.

The company also promoted Brett Pharr to co-president and chief operating officer of MetaBank. Brad Hanson remains co-president and CEO of MetaBank and president and CEO of Meta Financial.

Meta’s stock (Nasdaq: CASH) was up in trading Thursday at more than $19 per share, compared with a 52-week low of $13.09 in March.