0000907471 us-gaap:FinanceReceivablesMember us-gaap:NonperformingFinancingReceivableMember cash:PremiumFinanceMember us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember 2018-09-30

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~December 31, 2017~~June 30, 2019

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 0-22140

META FINANCIAL GROUP ~~INC.~~INC.®

(Exact name of registrant as specified in its charter)



Delaware	42-1406262
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

5501 South Broadband Lane, Sioux Falls, South Dakota57108

(Address of principal executive offices and Zip Code)

~~(605)~~ (605) 782-1767

(Registrant’s telephone number, including area code)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ~~YES~~Yes ☒ ~~NO☐~~No☐

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files). ~~YES~~Yes ☒ NONo ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company See the definitions of "large accelerated filer." "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange ~~Act (Check one):~~Act:



Large accelerated ~~filer☒~~filer	☒	Accelerated ~~filer☐~~filer	☐	Non-accelerated ~~filer☐~~filer	☐	Smaller Reporting ~~Company☐~~Company	☐
Emerging growth ~~company☐~~company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ YES ☒ NO

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $.01 par value	CASH	The NASDAQ Stock Market LLC

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.



Class:	Outstanding at ~~February 5, 2018:~~August 2, 2019:
Common Stock, $.01 par value	~~9,683,841 shares~~37,879,833	Shares
Nonvoting Common Stock, $.01 par value	0	Nonvoting shares

META FINANCIAL GROUP, INC.

FORM 10-Q

Table of Contents



PART I - FINANCIAL INFORMATION		2

Item 1.	Financial Statements (Unaudited)	2

	Condensed Consolidated Statements of Financial Condition as of ~~December 31, 2017~~June 30, 2019 and September 30, ~~2017~~2018	2

	Condensed Consolidated Statements of Operations for the Three and Nine Months Ended ~~December 31, 2017~~June 30, 2019 and ~~2016~~2018	3

	Condensed Consolidated Statements of Comprehensive Income ~~(Loss)~~ for the Three and Nine Months Ended ~~December 31, 2017~~June 30, 2019 and ~~2016~~2018	4

	Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Three and Nine Months Ended ~~December 31, 2017~~June 30, 2019 and ~~2016~~2018	5

	Condensed Consolidated Statements of Cash Flows for the ~~Three~~Nine Months Ended ~~December 31, 2017~~June 30, 2019 and ~~2016~~2018	67

	Notes to Condensed Consolidated Financial Statements	89

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3950

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	5463

Item 4.	Controls and Procedures	6066

PART II - OTHER INFORMATION		6168

Item 1.	Legal Proceedings	6168

Item 1A.	Risk Factors	6168

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	70

Item 6.	Exhibits	6370

SIGNATURES		6471

Table of Contents

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

META FINANCIAL GROUP, INC.

AND SUBSIDIARIES

Condensed Consolidated Statements of Financial Condition

~~(Dollars in Thousands, Except Share and Per Share Data)~~


	(Unaudited)
(Dollars in Thousands, Except Share Data⁽¹⁾)							(Unaudited)
ASSETS	December 31, 2017			September 30, 2017			June 30, 2019			September 30, 2018
Cash and cash equivalents	$	1,300,409		$	1,267,586		$	100,732		$	99,977
Investment securities available for sale	1,392,240			1,106,977
Mortgage-backed securities available for sale	600,112			586,454
Investment securities held to maturity	235,024			449,840
Mortgage-backed securities held to maturity	8,468			113,689
Loans receivable	1,509,140			1,325,371
Allowance for loan losses	(8,862		)	(7,534		)
Investment securities available for sale, at fair value							961,897			1,484,160
Mortgage-backed securities available for sale, at fair value							395,201			364,065
Investment securities held to maturity, at cost							138,128			163,893
Mortgage-backed securities held to maturity, at cost							7,414			7,850
Loans held for sale							62,839			15,606
Loans and leases							3,631,031			2,944,739
Allowance for loan and lease losses							(43,505		)	(13,040		)
Federal Home Loan Bank Stock, at cost	57,443			61,123			17,236			23,400
Accrued interest receivable	21,089			19,380			19,722			22,016
Premises, furniture, and equipment, net	20,571			19,320			46,360			40,458
Rental equipment, net							184,732			107,290
Bank-owned life insurance	85,371			84,702			89,193			87,293
Foreclosed real estate and repossessed assets	128			292			29,514			31,638
Goodwill	98,723			98,723			307,941			303,270
Intangible assets	50,521			52,178			56,153			70,719
Prepaid assets	29,758			28,392			22,023			27,906
Deferred taxes	5,379			9,101			21,630			18,737
Other assets	12,449			12,738			52,831			35,090

Total assets	$	5,417,963		$	5,228,332		$	6,101,072		$	5,835,067

LIABILITIES AND STOCKHOLDERS’ EQUITY

LIABILITIES
Non-interest-bearing checking	$	2,779,645		$	2,454,057
Noninterest-bearing checking							$	2,751,931		$	2,405,274
Interest-bearing checking	84,390			67,294			157,802			111,587
Savings deposits	53,535			53,505			52,179			54,765
Money market deposits	47,451			48,758			68,604			51,995
Time certificates of deposit	128,220			123,637			116,698			276,180
Wholesale deposits	420,404			476,173			1,628,000			1,531,186
Total deposits	3,513,645			3,223,424			4,775,214			4,430,987
Short-term debt	1,313,401			1,404,534
Long-term debt	85,552			85,533
Short-term borrowings							146,613			425,759
Long-term borrowings							209,765			88,963
Accrued interest payable	4,065			2,280			12,350			7,794
Accrued expenses and other liabilities	63,595			78,065			134,229			133,838
Total liabilities	4,980,258			4,793,836			5,278,171			5,087,341

STOCKHOLDERS’ EQUITY
Preferred stock, 3,000,000 shares authorized, no shares issued or outstanding at December 31, 2017 and September 30, 2017, respectively	—			—
Common stock, $.01 par value; 15,000,000 shares authorized, 9,685,398 and 9,626,431 shares issued, 9,664,846 and 9,622,595 shares outstanding at December 31, 2017 and September 30, 2017, respectively	96			96
Common stock, Nonvoting, $.01 par value; 3,000,000 shares authorized, no shares issued or outstanding at December 31, 2017 and September 30, 2017, respectively	—			—
Preferred stock, 3,000,000 shares authorized, no shares issued or outstanding at June 30, 2019 and September 30, 2018, respectively							—			—
Common stock, $.01 par value; 90,000,000 and 90,000,000 shares authorized, 37,878,694 and 39,192,063 shares issued, 37,878,205 and 39,167,280 shares outstanding at June 30, 2019 and September 30, 2018, respectively							379			393
Common stock, Nonvoting, $.01 par value; 3,000,000 shares authorized, no shares issued or outstanding at June 30, 2019 and September 30, 2018, respectively							—			—
Additional paid-in capital	262,872			258,336			578,715			565,811
Retained earnings	170,578			167,164			238,004			213,048
Accumulated other comprehensive income	5,782			9,166
Treasury stock, at cost, 20,552 and 3,836 common shares at December 31, 2017 and September 30, 2017, respectively	(1,623		)	(266		)
Accumulated other comprehensive income (loss)							2,308			(33,111		)
Treasury stock, at cost, 489 and 24,783 common shares at June 30, 2019 and September 30, 2018, respectively							(13		)	(1,989		)
Total equity attributable to parent							819,393			744,152
Noncontrolling interest							3,508			3,574
Total stockholders’ equity	437,705			434,496			822,901			747,726

Total liabilities and stockholders’ equity	$	5,417,963		$	5,228,332		$	6,101,072		$	5,835,067

See Notes to Condensed Consolidated Financial Statements.

⁽¹⁾All share and per share data has been adjusted to reflect the 3-for-1 forward stock split effected by the Company on October 4, 2018.

META FINANCIAL GROUP, INC.

AND SUBSIDIARIES

Condensed Consolidated Statements of Operations (Unaudited)

~~(Dollars in Thousands, Except Share and Per Share Data)~~


	Three Months Ended December 31,
(Dollars in Thousands, Except Share and Per Share Data⁽¹⁾)							Three Months Ended June 30,						Nine Months Ended June 30,
	2017			2016			2019			2018			2019			2018
Interest and dividend income:
Loans receivable, including fees	$	16,443		$	10,678
Loans and leases, including fees							$	69,732		$	19,056		$	203,900		$	53,344
Mortgage-backed securities	3,758			3,320			3,063			3,950			8,622			11,755
Other investments	10,656			8,577			8,837			11,098			32,380			33,234
	30,857			22,575			81,632			34,104			244,902			98,333
Interest expense:
Deposits	1,885			938			10,395			2,264			35,731			7,106
FHLB advances and other borrowings	2,776			1,804			4,269			3,429			10,581			9,215
	4,661			2,742			14,664			5,693			46,312			16,321

Net interest income	26,196			19,833			66,968			28,411			198,590			82,012

Provision for loan losses	1,068			843
Provision for loan and lease losses							9,112			5,315			51,529			24,726

Net interest income after provision for loan losses	25,128			18,990
Net interest income after provision for loan and lease losses							57,856			23,096			147,061			57,286

Non-interest income:
Noninterest income:
Refund transfer product fees	192			176			6,697			7,358			38,559			41,353
Tax advance product fees	1,947			449			34			(46		)	34,757			35,739
Card fees	25,247			18,414			19,537			22,807			61,939			74,910
Loan fees	1,292			870
Rental income							9,386			—			30,167			—
Loan and lease fees							1,012			1,111			3,185			3,445
Bank-owned life insurance	669			448			628			633			1,901			1,952
Deposit fees	848			150			2,335			1,134			6,365			2,964
Loss on sale of securities available-for-sale, net (Includes ($1,010) and ($1,234) reclassified from accumulated other comprehensive income (loss) for net gains (losses) on available for sale securities for the three months ended December 31, 2017 and 2016, respectively)	(1,010		)	(1,234		)
Gain (loss) on sale of securities available-for-sale, net (Includes $440 and ($22) reclassified from accumulated other comprehensive income (loss) for net gains (losses) on available for sale securities for the three months ended June 30, 2019 and 2018, respectively and $649 and ($1,198) for the nine months ended June 30, 2019 and 2018, respectively)							440			(22		)	649			(1,198		)
Gain on sale of loans and leases							1,913			—			3,865			—
Loss on foreclosed real estate	(19		)	—			—			—			(185		)	(19		)
Other income	102			76			1,808			250			5,363			766
Total non-interest income	29,268			19,349
Total noninterest income							43,790			33,225			186,565			159,912

Non-interest expense:
Noninterest expense:
Compensation and benefits	22,340			17,850			35,176			24,439			117,350			78,951
Refund transfer product expense	101			51			287			1,694			7,478			11,665
Tax advance product expense	280			27			425			(19		)	3,101			1,736
Card processing	6,540			5,579			4,613			7,068			18,670			20,798
Occupancy and equipment	4,890			3,977			7,136			4,720			20,806			14,087
Operating lease equipment depreciation							6,029			—			18,280			—
Legal and consulting	2,416			2,723			4,065			2,781			12,341			8,436
Marketing	553			470			368			416			1,493			1,637
Data processing	414			363			260			301			1,018			958
Intangible amortization expense	1,681			1,525
Intangible amortization							4,374			1,664			14,352			6,077
Impairment expense							—			—			9,660			—
Other expense	4,827			4,188			9,735			5,988			32,467			17,247
Total non-interest expense	44,042			36,753

Total noninterest expense							72,468			49,053			257,016			161,592

Income before income tax expense	10,354			1,586			29,178			7,268			76,610			55,606

Income tax expense (Includes ($380), and ($463) reclassified from accumulated other comprehensive income (loss) for the three months ended December 31, 2017 and 2016, respectively)	5,684			342
Income tax (benefit) expense (Includes $110 and ($6) reclassified from accumulated other comprehensive loss for the three months ended June 30, 2019 and 2018, respectively and $162 and ($335) for the nine months ended June 30, 2019 and 2018, respectively)							(1,158		)	476			(3,244		)	12,708

Net income	$	4,670		$	1,244
Net income before noncontrolling interest							30,336			6,792			79,854			42,898
Net income attributable to noncontrolling interest							1,045			—			3,045			—
Net income attributable to parent							$	29,291		$	6,792		$	76,809		$	42,898

Earnings per common share
Basic	$	0.48		$	0.14		$	0.75		$	0.23		$	1.96		$	1.48
Diluted	$	0.48		$	0.14		$	0.75		$	0.23		$	1.95		$	1.47

See Notes to Condensed Consolidated Financial Statements.

⁽¹⁾All share and per share data has been adjusted to reflect the 3-for-1 forward stock split effected by the Company on October 4, 2018.

META FINANCIAL GROUP, INC.

AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income ~~(Loss)~~ (Unaudited)

~~(Dollars in Thousands)~~

Three Months Ended
December 31,
2017 2016
Net income $ 4,670
$ 1,244

Other comprehensive income (loss):

Change in net unrealized loss on securities (7,480 ) (45,268 )
Losses realized in net income 1,010
1,234
(6,470 ) (44,034 )
LESS: Deferred income tax effect (3,086 ) (16,092 )
Total other comprehensive loss (3,384 ) (27,942 )
Total comprehensive income (loss) $ 1,286
$ (26,698 )



(Dollars in Thousands)	Three Months Ended June 30,						Nine Months Ended June 30,
	2019			2018			2019			2018
Net income before noncontrolling interest	$	30,336		$	6,792		$	79,854		$	42,898

Other comprehensive income (loss):
Change in net unrealized gain (loss) on debt securities	16,897			(9,905		)	48,157			(53,377		)
(Gain) loss realized in net income	(440		)	22			(649		)	1,198
	16,457			(9,883		)	47,508			(52,179		)
Unrealized gain (loss) on currency translation	221			—			(24		)	—
Deferred income tax effect	4,106			(2,447		)	11,590			(14,412		)
Total other comprehensive income (loss)	12,572			(7,436		)	35,894			(37,767		)
Total comprehensive income (loss)	42,908			(644		)	115,748			5,131
Total comprehensive income attributable to noncontrolling interest	1,045			—			3,045			—
Comprehensive income (loss) attributable to parent	$	41,863		$	(644	)	$	112,703		$	5,131

See Notes to Condensed Consolidated Financial Statements.

META FINANCIAL GROUP, INC.

AND SUBSIDIARIES

Condensed Consolidated Statements of Changes in Stockholders' Equity (Unaudited)

~~For the Three Months Ended December 31, 2017 and 2016~~

(Dollars in Thousands, Except Share and Per Share ~~Data)~~Data⁽¹⁾)



	Meta Financial Group, Inc. Stockholders' Equity
Three Months Ended June 30, 2019	Common Stock			Additional Paid-in Capital		Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Treasury Stock			Total Stockholders’ Equity			Noncontrolling Interest			Total Equity
Balance, March 31, 2019	$	395		$	576,406	$	258,600		$	(10,264	)	$	(4,956	)	$	820,181		$	3,528		$	823,709
Cash dividends declared on common stock ($0.05 per share)	—			—		(1,931		)	—			—			(1,931		)	—			(1,931		)
Issuance of common shares due to exercise of stock options	—			37		—			—			—			37			—			37
Share repurchases	(16		)	16		(43,000		)	—			(13		)	(43,013		)	—			(43,013		)
Retirement of treasury stock	—			—		(4,956		)	—			4,956			—						—
Stock compensation	—			2,256		—			—			—			2,256			—			2,256
Total other comprehensive income	—			—		—			12,572			—			12,572			—			12,572
Net income	—			—		29,291			—			—			29,291			1,045			30,336
Net investment by (distribution to) noncontrolling interests	—			—		—			—			—			—			(1,065		)	(1,065		)
Balance, June 30, 2019	$	379		$	578,715	$	238,004		$	2,308		$	(13	)	$	819,393		$	3,508		$	822,901

Nine Months Ended June 30, 2019
Balance, September 30, 2018	$	393		$	565,811	$	213,048		$	(33,111	)	$	(1,989	)	$	744,152		$	3,574		$	747,726
Adoption of Accounting Standards Update 2014-09, net of income taxes	—			—		1,502			—			—			1,502			—			1,502
Adoption of Accounting Standards Update 2016-01	—			—		475			(475		)	—			—			—			—
Cash dividends declared on common stock ($0.15 per share)	—			—		(5,874		)	—			—			(5,874		)	—			(5,874		)
Issuance of common shares due to exercise of stock options	—			92		—			—			—			92			—			92
Issuance of common shares due to restricted stock	3			—		—			—			—			3			—			3
Issuance of common shares due to ESOP	—			2,010		—			—			—			2,010			—			2,010
Share repurchases	(17		)	17		(43,000		)	—			(2,980		)	(45,980		)	—			(45,980		)
Retirement of treasury stock	—			—		(4,956		)	—			4,956			—			—			—
Stock compensation	—			10,785		—			—			—			10,785			—			10,785
Total other comprehensive income	—			—		—			35,894			—			35,894			—			35,894
Net income	—			—		76,809			—			—			76,809			3,045			79,854
Net investment by (distribution to) noncontrolling interests	—			—		—			—			—			—			(3,111		)	(3,111		)
Balance, June 30, 2019	$	379		$	578,715	$	238,004		$	2,308		$	(13	)	$	819,393		$	3,508		$	822,901

Common
Stock
Additional
Paid-in
Capital

Retained
Earnings Accumulated
Other
Comprehensive
Income

Treasury
Stock
Total
Stockholders’
Equity
Balance, September 30, 2016 $ 85
$ 184,780
$ 127,190
$ 22,920
$ —
$ 334,975

Cash dividends declared on common stock ($0.13 per share) —
—
(1,195 ) —
—
(1,195 )

Issuance of common shares due to issuance of stock options, restricted stock and ESOP 3
3,245
—
—
—
3,248

Issuance of common shares due to acquisition 5
37,291
—
—
—
37,296

Contingent consideration equity earnout due to SCS acquisition —
24,091
—
—
—
24,091

Stock compensation —
69
—
—
—
69

Net change in unrealized gains on securities, net of income taxes —
—
—
(27,942 ) —
(27,942 )

Net income —
—
1,244
—
—
1,244

Balance, December 31, 2016 $ 93
$ 249,476
$ 127,239
$ (5,022 ) $ —
$ 371,786

Balance, September 30, 2017 $ 96
$ 258,336
$ 167,164
$ 9,166
$ (266 ) $ 434,496

Cash dividends declared on common stock ($0.13 per share) —
—
(1,256 ) —
—
(1,256 )

Issuance of common shares due to ESOP —
1,606
—
—
—
1,606

Shares repurchased for tax withholdings on stock compensation —
(314 ) —
—
(1,357 ) (1,671 )

Stock compensation —
3,244
—
—
—
3,244

Net change in unrealized losses on securities, net of income taxes —
—
—
(3,384 ) —
(3,384 )

Net income —
—
4,670
—
—
4,670

Balance, December 31, 2017 $ 96
$ 262,872
$ 170,578
$ 5,782
$ (1,623 ) $ 437,705



	Meta Financial Group, Inc. Stockholders' Equity
Three Months Ended June 30, 2018	Common Stock		Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Treasury Stock			Total Stockholders’ Equity			Noncontrolling Interest		Total Equity
Balance, March 31, 2018	$	291	$	265,491		$	200,753		$	(21,166	)	$	(1,666	)	$	443,703		$	—	$	443,703
Cash dividends declared on common stock ($0.04 per share)	—		—			(1,261		)	—			—			(1,261		)	—		(1,261		)
Shares repurchased	—		—			—			—			(5		)	(5		)	—		(5		)
Stock compensation	—		2,119			—			—			—			2,119			—		2,119
Total other comprehensive (loss)	—		—			—			(7,435		)	—			(7,435		)	—		(7,435		)
Net income	—		—			6,792			—			—			6,792			—		6,792
Balance, June 30, 2018	$	291	$	267,610		$	206,284		$	(28,601	)	$	(1,671	)	$	443,913		$	—	$	443,913

Nine Months Ended June 30, 2018
Balance, September 30, 2017	$	288	$	258,144		$	167,164		$	9,166		$	(266	)	$	434,496		$	—	$	434,496
Cash dividends declared on common stock ($0.12 per share)	—		—			(3,778		)	—			—			(3,778		)	—		(3,778		)
Issuance of common shares due to exercise of stock options	—		147			—			—			—			147			—		147
Issuance of common shares due to restricted stock	2		—			—			—			—			2			—		2
Issuance of common shares due to ESOP	1		1,605			—			—			—			1,606			—		1,606
Shares repurchased	—		(726		)	—			—			(1,405		)	(2,131		)	—		(2,131		)
Stock compensation	—		8,440			—			—			—			8,440			—		8,440
Total other comprehensive (loss)	—		—			—			(37,767		)	—			(37,767		)	—		(37,767		)
Net income	—		—			42,898			—			—			42,898			—		42,898
Balance, June 30, 2018	$	291	$	267,610		$	206,284		$	(28,601	)	$	(1,671	)	$	443,913		$	—	$	443,913

See Notes to Condensed Consolidated Financial Statements.

⁽¹⁾All share and per share data has been adjusted to reflect the 3-for-1 forward stock split effected by the Company on October 4, 2018.

META FINANCIAL GROUP, INC.

AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (Unaudited)

Three Months Ended December 31,
(Dollars in Thousands) 2017
2016⁽¹⁾
Cash flows from operating activities:
Net income $ 4,670
$ 1,244
Adjustments to reconcile net income to net cash provided (used in) by operating activities:

Depreciation, amortization and accretion, net 9,561
9,479
Stock-based compensation expense 3,244
69
Provision for loan losses 1,068
843
Provision (recovery) for deferred taxes 6,807
(927 )
(Gain) on other assets (8 ) (6 )
Loss on sale of foreclosed real estate 19
—
Loss on sale of securities available for sale, net 1,010
1,234
Net change in accrued interest receivable (1,709 ) (4,176 )
Fair value adjustment of foreclosed real estate 23
—
Originations of loans held for sale —
(27,191 )
Proceeds from sales of loans held for sale —
25,968
Change in bank-owned life insurance value (669 ) (448 )
Net change in other assets (1,102 ) (27,164 )
Net change in accrued interest payable 1,785
1,379
Net change in accrued expenses and other liabilities (14,462 ) 14,255
Net cash provided by (used in) operating activities 10,237
(5,441 )

Cash flows from investing activities:

Purchase of securities available-for-sale (105,327 ) (144,024 )
Proceeds from sales of securities available-for-sale 65,941
60,623
Proceeds from maturities and principal repayments of securities available for sale 35,065
30,849
Proceeds from maturities and principal repayments of securities held to maturity 12,021
13,301
Loans purchased (75,163 ) (136,172 )
Loans sold 5,916
6,525
Net change in loans receivable (114,827 ) (59,008 )
Proceeds from sales of foreclosed real estate or other assets 122
—
Net cash paid for acquisitions —
(29,425 )
Federal Home Loan Bank stock purchases (249,920 ) (140,680 )
Federal Home Loan Bank stock redemptions 253,600
184,360
Proceeds from the sale of premises and equipment —
58
Purchase of premises and equipment (2,593 ) (2,899 )
Net cash used in investing activities (175,165 ) (216,492 )

Cash flows from financing activities:

Net change in checking, savings, and money market deposits 341,407
309,726
Net change in time deposits 4,583
(3,658 )
Net change in wholesale deposits (55,769 ) 926,987
Net change in FHLB and other borrowings (205,000 ) (100,000 )
Net change in federal funds 113,000
(992,000 )
Net change in securities sold under agreements to repurchase 867
744
Principal payments on capital lease obligations (16 ) (18 )
Cash dividends paid (1,256 ) (1,195 )
Purchase of shares by ESOP 1,606
—
Proceeds from exercise of stock options and issuance of common stock —
3,248
Shares repurchased for tax withholdings on stock compensation (1,671 ) —
Net cash provided by financing activities 197,751
143,834

Net change in cash and cash equivalents 32,823
(78,099 )

Cash and cash equivalents at beginning of period 1,267,586
773,830
Cash and cash equivalents at end of period $ 1,300,409
$ 695,731



	Nine Months Ended June 30,
(Dollars in Thousands)	2019			2018
Cash flows from operating activities:
Net income	$	79,854		$	42,898
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation, amortization and accretion, net	41,290			27,995
Stock compensation	10,785			8,440
Provision (recovery):
Loan and lease losses	51,529			24,726
Deferred taxes	(14,468		)	488
Loans held for sale:
Originations	(104,121		)	—
Purchases	(12,643		)	—
Proceeds from sales	95,663			—
Net change	15,925			—
Fair value adjustment of foreclosed real estate	139			29
Net realized (gain) loss:
Other assets	(54		)	(1		)
Foreclosed real estate or other assets	185			19
Available for sale securities, net	(649		)	1,198
Loans held for sale	(3,650		)	—
Leases receivable and rental equipment	(2,598		)	—
Net change:
Other assets	(15,957		)	577
Accrued interest payable	4,556			1,425
Accrued expenses and other liabilities	18,785			4,879
Accrued interest receivable	2,294			1,555
Change in bank-owned life insurance value	(1,900		)	(1,952		)
Impairment on rental equipment	6,194			—
Impairment of intangibles	111			—
Net cash provided by operating activities	171,270			112,276

Cash flows from investing activities:
Available for sale securities:
Purchases	(297,548		)	(418,699		)
Proceeds from sales	720,376			312,863
Proceeds from maturities and principal repayments	110,810			115,878
Held to maturity:
Proceeds from maturities and principal repayments	24,809			29,752
Loans and leases:
Purchases	(219,551		)	(95,169		)
Proceeds from sales	13,069			19,961
Net change	(530,215		)	(238,679		)
Proceeds from sales of foreclosed real estate or other assets	1,905			244
Federal Home Loan Bank stock:
Purchases	(606,756		)	(713,444		)
Redemption	612,920			767,120
Rental equipment:
Purchases	(111,150		)	—
Proceeds from sales	6,551			—
Net change	1,868			—
Premises and equipment:
Purchases	(11,944		)	(5,176		)
Proceeds from sales	101			—
Net cash (used in) investing activities	(284,755		)	(225,349		)

Cash flows from financing activities:
Net change:
Checking, savings, and money market deposits	408,951			219,909
Time deposits	(159,611		)	(66,486		)
Wholesale deposits	96,763			144,786
FHLB and other borrowings	110,000			(415,000		)
Federal funds	(287,000		)	(963,000		)
Securities sold under agreements to repurchase	(36		)	754

Supplemental disclosure of cash flow information

Cash paid during the period for:

Interest $ 6,446
$ 1,362
Income taxes 218
2,110
Franchise taxes 31
20
Other taxes 1
1

Supplemental schedule of non-cash investing activities:

Securities transferred from held to maturity to available for sale $ (306,000 ) $ —
Contingent consideration - cash $ (17,259 )
Contingent consideration - equity —
(24,091 )
Stock issued for acquisition —
(37,296 )



Net investment by (distribution to) noncontrolling interests	(3,111		)	—
Proceeds from other liabilities	7,525
Principal payments:
Other liabilities	(9,404		)	—
Capital lease obligations	(64		)	(46		)
Cash dividends paid	(5,874		)	(3,778		)
Purchase of shares by ESOP	2,010			1,606
Issuance of restricted stock	3			2
Proceeds from exercise of stock options and issuance of common stock	92			147
Shares repurchased	(45,980		)	(2,131		)
Net cash provided by (used in) financing activities	114,264			(1,083,237		)

Effect of exchange rate changes on cash	(24		)	—

Net change in cash and cash equivalents	755			(1,196,310		)

Cash and cash equivalents at beginning of year	99,977			1,267,586
Cash and cash equivalents at end of year	$	100,732		$	71,276

META FINANCIAL GROUP, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (Con't.)



	Nine Months Ended June 30,
	2019			2018
Supplemental disclosure of cash flow information
Cash paid during the period for:
Interest	$	19,220		$	17,746
Income taxes	(247		)	8,211
Franchise taxes	184			199
Other taxes	539			129

Supplemental schedule of non-cash investing activities:
Transfers
Loans and leases to foreclosed real estate or other assets	105			29,922
Loans and leases to rental equipment	229			—
Loans transferred to held for sale	39,452			—
Purchases/Sales of investment securities accrued, not settled
Purchases - Available for sale	1,721			4,117
Securities transferred from held-to-maturity to available-for-sale	—			306,000
Short- and long-term borrowings transferred from other liabilities	20,026			—

See Notes to Condensed Consolidated Financial Statements.

⁽¹⁾ ~~See Note 1. Basis of Presentation for further discussion on the current presentation.~~

NOTE 1. BASIS OF PRESENTATION

The interim unaudited Condensed Consolidated Financial Statements contained herein should be read in conjunction with the audited consolidated financial statements and accompanying notes to the consolidated financial statements for the fiscal year ended September 30, ~~2017~~2018 included in Meta Financial Group, Inc.’s (“~~Meta Financial”~~Meta” or the “Company”) Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on November 29, ~~2017.~~2018. Accordingly, footnote disclosures which would substantially duplicate the disclosures contained in the audited consolidated financial statements have been omitted.

The financial information of the Company included herein has been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial reporting and has been prepared pursuant to the rules and regulations for reporting on Form 10-Q and Rule 10-01 of Regulation S-X. Such information reflects all adjustments (consisting of normal recurring adjustments), that are, in the opinion of management, necessary for a fair presentation of the financial position and results of operations for the periods presented. The results of the ~~three~~ three- and nine-month ~~period~~periods ended ~~December 31, 2017~~June 30, 2019 are not necessarily indicative of the results expected for the fiscal year ending September 30, ~~2018.~~2019.

~~In fiscal 2017,~~All share and per share data reported in this Form 10-Q has been adjusted to reflect the 3-for-1 forward stock split of the Company's common stock effected by the Company ~~early adopted Accounting Standards Update~~on October 4, 2018.

Certain prior year amounts have been reclassified to conform to the current year financial statement presentation. These changes and reclassifications did not impact previously reported net income or comprehensive income.

Certain amounts in the Recorded Investment table presented in Note 4 to the consolidated financial statements have been restated from what was previously reported as of September 30, 2018 on Form 10-K.

Loan and lease tables have been conformed to be consistent with the Company's updated presentation of its lending portfolio. The new presentation includes expanding the commercial and consumer finance portfolio to present the lending categories that are included in each, presenting the warehouse finance portfolio as its own category, and condensing the community bank loan categories. Warehouse finance loans were previously included in the consumer finance portfolio. All current and prior period numbers are reflective of this new presentation and total loan and lease balances remained unchanged.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RECENTLY ADOPTED ACCOUNTING STANDARDS UPDATES ("ASU") ~~2016-09,~~ ~~"Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting."~~ ~~The requirement to report~~

Significant accounting policies in effect and disclosed within the ~~excess tax benefit related to settlements~~Company’s most recent audited consolidated financial statements as of ~~share-based payment awards in earnings as an increase or (decrease) to income tax expense has been applied utilizing~~September 30, 2018 remain substantially unchanged with the ~~prospective method. While~~exception of the policies impacted by the adoption of noted ASUs below.

Adopted ASUs

Revenue Recognition - The Company adopted ASU ~~2016-09 requires retrospective application~~2014-09, Revenue from Contracts with Customers (Topic 606), subsequent related Updates (collectively, ASU 2014-09), and ASU 2016-04, Liabilities - Extinguishments of Liabilities (Subtopic 405-20): Recognition of Breakage of Certain Prepaid Stored-Value Products on October 1, 2018. ASU 2014-09 modifies the guidance used to ~~all fiscal year periods presented,~~recognize revenue from contracts with customers for transfers of goods or services and transfers of non-financial assets, unless those contracts are within the scope of other guidance. Upon adoption, the Company ~~elected~~ recorded a cumulative-effect adjustment of $1.5 millionto ~~not recast previously reported~~retained earnings, net of tax, due to changes in timing of revenue recognition from breakage of unregistered, unused prepaid cards in the Company’s Meta Payment Systems (MPS) division. Refer to Note 13. Revenue from Contracts with Customers for additional information.

Financial Instruments - The Company adopted ASU 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Liabilities and related Updates (collectively, ASU 2016-01) on October 1, 2018. ASU 2016-01 makes several revisions to Subtopic 825-10, including that ASU 2016-01: (1) requires equity investments to be measured at fair value with changes in fair value recognized in net income, (2) simplifies impairment assessment of equity investments without readily determinable fair value, (3) eliminates requirement to disclose methods and significant assumptions used to estimate fair value of financial instruments measured at amortized cost, (4) requires the use of an exit price notion when measuring fair value of financial instruments for disclosure purposes, and (5) requires separate presentation of financial assets and liabilities by measurement category and form of financial asset on the balance sheet and accompanying notes. Upon adoption, the Company recorded a cumulative-effect adjustment that reclassed $0.5 million, net of tax, from accumulated other comprehensive income to retained earnings, due to the Company’s cumulative change in fair value of equity securities with readily determinable fair value. Refer to Note 6. Securities for additional information.

The Company also adopted the following ASUs on October 1, 2018, none of which had a material impact on the Company’s consolidated financial statements.


–	ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments


–	ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash


–	ASU 2017-01, Clarifying the Definition of a Business


–	ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment


–	ASU 2017-05, Other Income - Gains and Losses from Derecognition of Non-Financial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and accounting for Partial Sales of Non-Financial Assets


–	ASU 2018-07, Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting

ASUs to be Adopted

Leases - ASU 2016-02, Leases (Topic 842), and related Updates (collectively Topic 842) will become effective for the Company on October 1, 2019. For lessees, Topic 842 establishes a right-of-use (ROU) model that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with a term longer than 12 months. Leases will be classified as finance or operating, with such classification affecting the pattern and classification of expense recognition in the income statement. For lessors, the guidance with Topic 842 is largely unchanged from current guidance.

A modified retrospective transition approach is required. An entity may choose to use either (1) the standard’s effective date or (2) the beginning of the earliest comparative period presented in the financial statements, as the ~~impact was considered insignificant. However,~~date of initial application. The Company expects to adopt Topic 842 using the effective date, October 1, 2019, as the date of initial application. Consequently, financial information will not be updated and disclosures required under Topic 842 will not be provided for dates and periods before October 1, 2019.

FASB has released several updates to Topic 842 through subsequent ASUs, many of which allow for practical expedients in transition. The Company expects to elect the ‘package of practical expedients’, which permits the Company ~~reclassified stock compensation from financing~~ to ~~operating~~not reassess under the new standard the Company’s prior conclusions about lease identification, lease classification and initial direct costs. The Company does not expect to elect the use-of-hindsight or the practical expedient pertaining to land easements, with the latter not being applicable to the Company. The new standard also provides practical expedients for a lessee’s and lessor’s ongoing accounting. The Company expects to elect the short-term lease recognition exemption for all leases that qualify.

Management has evaluated the Company’s leasing contracts and activities and is developing methodologies and processes to estimate and account for right-of-use assets and lease liabilities based on the ~~Consolidated Statement~~present value of ~~Cash Flows~~future lease payments. While the recognition of right-of-use assets will increase total consolidated assets as well as the Company’s risk-weighted assets, management does not expect the impact to capital ratios to be material. The adoption of this guidance is not expected to result in a material change to lessee expense recognition. Management expects the changes in lessor accounting to result in earlier recognition of expense due to a narrower definition of initial direct costs and presentation changes on the income statement due to costs excluded from contract consideration that are reimbursed by the lessee, in addition to other operational impacts.

Other Upcoming ASUs - Refer to the Company’s most recently audited consolidated financial statements for the year ended September 30, 2018 for the latest update on other ASUs relevant to the Company and not yet adopted as of ~~December 31, 2017 and December 31, 2016.~~June 30, 2019.

NOTE ~~2. CREDIT DISCLOSURES~~3. ACQUISITIONS

The ~~allowance~~Company acquired Crestmark Bancorp, Inc. ("Crestmark") and its bank subsidiary, Crestmark Bank, on August 1, 2018 for ~~loan losses represents management’s estimate~~a purchase price of ~~probable loan losses which have been incurred~~$295.8 million paid by issuance of 9,919,512 shares of Meta common stock. The initial accounting for certain liabilities and goodwill were incomplete and the amounts recorded were considered provisional. The Company recognized certain measurement period adjustments, discussed below, as of June 30, 2019. The amount of goodwill recorded remains provisional, as well as the other assets and liabilities noted in the table below. The measurement period remains open for the Crestmark acquisition until August 1, 2019. The following table summarizes the allocation of the purchase price to net assets of Crestmark as of the ~~date~~August 1, 2018 acquisition date.



(Dollars in Thousands)	Estimated fair value as previously reported^(a)		Measurement period adjustments			Fair value as adjusted
Rental Equipment	$	98,977	$	(3,355	)	$	95,622
Intangible assets	28,253		(117		)	28,136
Goodwill	204,547		4,671			209,218
Accrued expenses and other liabilities	88,301		1,199			89,500
Net other assets	55,464		—			55,464
Noncontrolling interest	3,167		—			3,167
Purchase price	295,773		—			295,773

^(a)As previously reported in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2018

Measurement Period Adjustments and Impairment - DC Solar

The Company previously purchased a portfolio of mobile solar generators ("MSGs") from DC Solar Solutions, Inc. and certain of its affiliates, a relationship in the Company's solar leasing business, and, in turn, leased the MSGs to DC Solar Distribution, Inc., an affiliate of DC Solar Solutions. During the second fiscal quarter of 2019, the Company became aware that the DC Solar entities and their affiliates filed for bankruptcy and the entities, including their principals, are subjects of ongoing federal investigations involving allegations of fraudulent misconduct. The Company had three separate operating leases with DC Solar - two of the ~~consolidated financial statements.~~transactions were included in the acquired Crestmark balances on August 1, 2018. The ~~allowance~~third transaction was originated in August 2018 after the Crestmark acquisition date. The Company considered the bankruptcy filing and fraud allegations as new facts and circumstances and concluded the alleged fraud existed at the acquisition date for ~~loan losses is increased by~~the acquired DC Solar transactions. As a ~~provision~~result, the identified impairment for ~~loan losses charged~~the acquired DC Solar transactions and other related adjustments were recorded as measurement period adjustments to ~~expense~~the acquired assets and ~~decreased by charge-offs (net of recoveries). Estimating~~liability amounts recognized and were offset through provisional goodwill. The impairment and related adjustments for the ~~risk of loss and the amount of loss on any loan is necessarily subjective. Management’s periodic evaluation~~DC Solar transaction originated post-acquisition are reflected in current earnings.

The Company has repossessed 173 of the ~~appropriateness~~176 underlying assets and is in the process of performing repairs and general maintenance to the assets where needed to ensure they are in prime condition for re-lease. As of June 30, 2019 the Company is continuing its repossession efforts with respect to the remaining three units. The timing and extent to which the Company will be able to re-lease the underlying assets remains uncertain as the Company is actively marketing the units. The adjustments to goodwill and impairment recognized for the DC Solar events reflect the Company's best estimate of the ~~allowance is~~potential loss incurred, based on the ~~Company’s past loan loss experience, known and inherent risks~~Company's present understanding of the relevant facts. Assumptions utilized in the ~~portfolio, adverse situations that may affect~~estimate included recoverability of the ~~borrower’s~~MSGs and the Company's ability to ~~repay,~~re-lease them, contractual rents, and residual values. As new facts and circumstances become available, the ~~estimated value~~Company will assess any remaining exposure with respect to these DC Solar matters to determine whether additional adjustments to goodwill and/or impairment loss are necessary. As long as the required criteria under GAAP are met, the Company will continue to account for adjustments to the acquired DC Solar transactions as adjustments to goodwill until the measurement period closes, which will not extend beyond August 1, 2019. During the fiscal quarter ended March 31, 2019, the Company recognized a net decrease in net income of ~~any underlying collateral,~~$6.6 million and ~~current economic conditions. While management may periodically allocate portions~~a net decrease of $8.5 million in regulatory capital as a result of the ~~allowance for specific problem loan situations,~~DC Solar bankruptcy and ongoing federal investigation. There were no additional adjustments recorded due to the ~~entire allowance is available for any loan charge-offs that occur.~~DC Solar events in the three months ended June 30, 2019.

~~Loans are considered impaired if full principal or interest payments are not probable~~Measurement Period Adjustments - Other

The Company recorded additional measurement period adjustments in ~~accordance~~the second and third fiscal quarters of 2019 for provisional tax and compensation liabilities assumed through the Crestmark acquisition. The Company obtained additional information about facts and circumstances existing at the Crestmark acquisition date that resulted in an increase to liabilities and goodwill recognized of $2.2 million.

NOTE 4. LOANS AND LEASES, NET

Loan and lease tables have been conformed to be consistent with the ~~contractual loan terms. Impaired loans are carried at the present value~~Company's updated categorization of expected future cash flows discounted at the loan’s effective interest rate or at the fair value of the collateral if the loan is collateral dependent. A portion of the allowance for loan losses is allocated to impaired loans if the value of such loans is deemed to be less than the unpaid balance.

~~The allowance consists of specific, general~~its lending portfolio between National Lending and unallocated components. The specific component relates to impaired loans. For such loans, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan. The general component covers loans not considered impaired and is based on historical loss experience adjusted for qualitative factors. An unallocated component is maintained to cover uncertainties that could affect management’s estimate of probable losses. The unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and general losses in the portfolio.

Homogeneous loan populations are collectively evaluated for impairment. These loan populations may include commercial insurance premium finance loans, residential first mortgage loans secured by one-to-four family residences, residential construction loans, home equity and second mortgage loans, and tax product loans. Commercial and agricultural loans as well as mortgage loans secured by other properties are monitored regularly by the Bank given the larger balances. When analysis of the borrower operating results and financial condition indicates that underlying cash flows of the borrower’s business is not adequate to meet its debt service requirements, the individual loan or loan relationship is evaluated for impairment. Often this is associated with a delay or shortfall in payments of 210 days or more for commercial insurance premium finance, 180 days or more for tax and other national lending loans and 90 days or more for other loans. Non-accrual loans and all troubled debt restructurings are considered impaired. Impaired loans, or portions thereof, are charged off when deemed uncollectible.

Community Banking.

Loans ~~receivable~~and leases at ~~December 31, 2017~~June 30, 2019 and September 30, ~~2017~~2018 were as follows:



	June 30, 2019			September 30, 2018
National Lending	(Dollars in Thousands)
Asset based lending	$	615,309		$	477,917
Factoring	320,344			284,221
Lease financing	341,957			265,315
Insurance premium finance	358,772			337,877
SBA/USDA	99,791			59,374
Other commercial finance	99,677			85,145
Commercial finance	1,835,850			1,509,849
Consumer credit products	155,539			80,605
Other consumer finance	164,727			189,756
Consumer finance⁽¹⁾	320,266			270,361
Tax services	24,410			1,073
Warehouse finance⁽¹⁾	250,003			65,000
Total National Lending	2,430,529			1,846,283
Community Banking
Commercial real estate and operating	877,412			790,890
Consumer one-to-four family real estate and other	256,853			247,318
Agricultural real estate and operating	61,169			60,498
Total Community Banking	1,195,434			1,098,706
Total gross loans and leases	3,625,963			2,944,989

Allowance for loan and lease losses	(43,505		)	(13,040		)
Net deferred loan origination fees (costs)	5,068			(250		)
Total loans and leases, net⁽²⁾	$	3,587,526		$	2,931,699

December 31, 2017 September 30, 2017
(Dollars in Thousands)
1-4 Family Real Estate $ 203,967
$ 196,706
Commercial and Multi-Family Real Estate 654,029
585,510
Agricultural Real Estate 61,303
61,800
Consumer 274,981
163,004
Commercial Operating 56,516
35,759
Agricultural Operating 24,696
33,594
Commercial Insurance Premium Finance 235,671
250,459
Total Loans Receivable 1,511,163
1,326,832

Allowance for Loan Losses (8,862 ) (7,534 )
Net Deferred Loan Origination Fees (2,023 ) (1,461 )
Total Loans Receivable, Net $ 1,500,278
$ 1,317,837
⁽¹⁾Warehouse finance loans are presented in their own line. Previously these balances were included with consumer finance loans. Prior period balances have also been adjusted to reflect this change.

⁽²⁾ As of June 30, 2019, the remaining balance of acquired loans and leases from the Crestmark acquisition was $402.4 million and the remaining balances of the credit and interest rate mark discounts related to the acquired loans and leases held for investment were $6.8 million and $3.2 million, respectively, while the remaining balance of the interest rate mark premium related to the acquired loans held for sale was $0.7 million. On August 1, 2018, the Company acquired loans and leases from the Crestmark acquisition totaling $1.06 billion and recorded related credit and interest rate mark discounts of $12.3 million and $6.0 million, respectively.

During the nine months ended June 30, 2019, the Company transferred $39.5 millionof consumer credit product loans to held for sale and originated $104.1 million of SBA/USDA and consumer credit product loans as held for sale. The Company sold held for sale loans resulting in proceeds of $95.7 millionand gains on sale of $3.7 million during the nine months ended June 30, 2019. During the nine months endedJune 30, 2018, the Company did not designate any loans as held for sale or sell any held for sale loans.

Loans purchased and sold by portfolio segment, including participation interests, for the three and nine months ended June 30, 2019 and 2018 were as follows:



	Three Months Ended				Nine Months Ended
	June 30, 2019		June 30, 2018		June 30, 2019		June 30, 2018
Loans Purchased	(Dollars in Thousands)
Loans held for sale	$	6,703	$	—	$	12,643	$	—
Loans held for investment:
Total National Lending	72,737		—		198,328		72,751
Total Community Banking	2,710		6,183		21,223		22,418
Total purchases	82,150		6,183		232,194		95,169
Loans Sold
Loans held for sale	57,661		—		92,565		—
Loans held for investment:
Total Community Banking	2,212		10,379		13,069		19,961
Total sales	$	59,873	$	10,379	$	105,634	$	19,961

The net investment in direct financing and sales-type leases was comprised of the following as of June 30, 2019 and September 30, 2018.



	June 30, 2019			September 30, 2018
	(Dollars in Thousands)
Minimum lease payments receivable	$	388,291		$	301,835
Estimated residual value of leased equipment	12,128			12,406
Unamortized initial direct costs	5,173			1,806
Premium on acquired leases	3			26
Unearned income	(58,450		)	(48,949		)
Net investment in direct financing and sales-type leases	$	347,145		$	267,124

Future minimum lease payments receivable on noncancelable direct financing and sales-type leases were as follows as of June 30, 2019.



	As of June 30, 2019
	(Dollars in thousands)
Remaining in 2019	$	36,473
2020	129,577
2021	104,805
2022	67,262
2023	37,753
2024 and thereafter	12,421
Total	$	388,291

The Company did not record any contingent rental income from sales-type and direct financing leases in the nine months ended June 30, 2019.

Activity in the allowance for loan and lease losses and balances of loans ~~receivable~~and leases by portfolio segment for each of the three and nine months ended ~~December 31, 2017~~June 30, 2019 and ~~2016~~2018 was as follows:



Allowance for loan and lease losses:	Beginning balance		Provision (recovery) for loan and lease losses			Charge-offs			Recoveries		Ending balance
Three Months Ended June 30, 2019	(Dollars in Thousands)
National Lending
Asset based lending	$	3,499	$	2,685		$	(1,380	)	$	3	$	4,807
Factoring	1,761		2,747			(1,335		)	31		3,204
Lease financing	1,965		(13		)	(736		)	203		1,419
Insurance premium finance	919		201			(275		)	171		1,016
SBA/USDA	474		449			—			—		923
Other commercial finance	525		432			—			—		957
Commercial finance	9,143		6,501			(3,726		)	408		12,326
Consumer credit products	1,314		142			—			—		1,456
Other consumer finance	5,130		1,890			(1,398		)	28		5,650
Consumer finance	6,444		2,032			(1,398		)	28		7,106
Tax services	24,102		914			(9,627		)	36		15,425
Warehouse finance	185		65			—			—		250
Total National Lending	39,874		9,512			(14,751		)	472		35,107
Community Banking
Commercial real estate and operating	6,673		(249		)	—			—		6,424
Consumer one-to-four family real estate and other	958		(65		)	—			—		893
Agricultural real estate and operating	1,167		(86		)	—			—		1,081
Total Community Banking	8,798		(400		)	—			—		8,398
Total	$	48,672	$	9,112		$	(14,751	)	$	472	$	43,505

1-4 Family
Real Estate Commercial and
Multi-Family
Real Estate Agricultural
Real Estate Consumer Commercial
Operating Agricultural
Operating CML Insurance
Premium
Finance Unallocated Total
(Dollars in Thousands)
Three Months Ended December 31, 2017
Allowance for loan losses:
Beginning balance $ 803
$ 2,670
$ 1,390
$ 6
$ 158
$ 1,184
$ 796
$ 527
$ 7,534
Provision (recovery) for loan losses (118 ) 364
(210 ) 297
690
(380 ) 51
374
1,068
Charge offs (31 ) —
—
—
—
—
(129 ) —
(160 )
Recoveries —
—
—
367
46
—
7
—
420
Ending balance $ 654
$ 3,034
$ 1,180
$ 670
$ 894
$ 804
$ 725
$ 901
$ 8,862

Ending balance: individually evaluated for impairment —
—
—
—
—
—
—
—
—
Ending balance: collectively evaluated for impairment 654
3,034
1,180
670
894
804
725
901
8,862
Total $ 654
$ 3,034
$ 1,180
$ 670
$ 894
$ 804
$ 725
$ 901
$ 8,862

Loans:

Ending balance: individually
evaluated for impairment 95
707
—
61
—
1,052
—
—
1,915
Ending balance: collectively
evaluated for impairment 203,872
653,322
61,303
274,920
56,516
23,644
235,671
—
1,509,248
Total $ 203,967
$ 654,029
$ 61,303
$ 274,981
$ 56,516
$ 24,696
$ 235,671
$ —
$ 1,511,163



Allowance for loan and lease losses:	Beginning balance		Provision (recovery) for loan and lease losses			Charge-offs			Recoveries		Ending balance
Nine Months Ended June 30, 2019	(Dollars in Thousands)
National Lending
Asset based lending	$	107	$	6,213		$	(1,642	)	$	129	$	4,807
Factoring	64		5,769			(2,711		)	82		3,204
Lease financing	59		1,529			(2,198		)	2,029		1,419
Insurance premium finance	1,031		2,091			(2,359		)	253		1,016
SBA/USDA	13		910			—			—		923
Other commercial finance	28		929			—			—		957
Commercial finance	1,302		17,441			(8,910		)	2,493		12,326
Consumer credit products	785		671			—			—		1,456
Other consumer finance	2,820		8,249			(5,477		)	58		5,650
Consumer finance	3,605		8,920			(5,477		)	58		7,106
Tax services	—		24,883			(9,670		)	212		15,425
Warehouse finance	65		185			—			—		250
Total National Lending	4,972		51,429			(24,057		)	2,763		35,107
Community Banking
Commercial real estate and operating	6,220		204			—			—		6,424
Consumer one-to-four family real estate and other	632		281			(20		)	—		893
Agricultural real estate and operating	1,216		(385		)	—			250		1,081
Total Community Banking	8,068		100			(20		)	250		8,398
Total	$	13,040	$	51,529		$	(24,077	)	$	3,013	$	43,505



Allowance for loan and lease losses:	Beginning balance		Provision (recovery) for loan and lease losses			Charge-offs			Recoveries		Ending balance
Three Months Ended June 30, 2018	(Dollars in Thousands)
National Lending
Insurance premium finance	$	746	$	304		$	(243	)	$	99	$	906
Other commercial finance	4		8			—			—		12
Commercial finance	750		312			(243		)	99		918
Consumer credit products	—		264			—			—		264
Other consumer finance	—		3,000			—			—		3,000
Consumer finance	—		3,264			—			—		3,264
Tax services	19,573		1,189			(10,507		)	1		10,256
Total National Lending	20,323		4,765			(10,750		)	100		14,438
Community Banking
Commercial real estate and operating	4,100		687			—			—		4,787
Consumer one-to-four family real estate and other	901		(218		)	—			—		683
Agricultural real estate and operating	765		(51		)	—			207		921
Unallocated	989		132			—			—		1,121
Total Community Banking	6,755		550			—			207		7,512
Total	$	27,078	$	5,315		$	(10,750	)	$	307	$	21,950

1-4 Family
Real Estate Commercial and
Multi-Family
Real Estate Agricultural
Real Estate Consumer Commercial
Operating Agricultural
Operating CML Insurance
Premium
Finance Unallocated Total
(Dollars in Thousands)
Three Months Ended December 31, 2016
Allowance for loan losses:
Beginning balance $ 654
$ 2,198
$ 142
$ 51
$ 117
$ 1,332
$ 588
$ 553
$ 5,635
Provision (recovery) for loan losses —
(286 ) 334
(28 ) 691
(3 ) 110
25
843
Charge offs —
—
—
—
—
—
(118 ) —
(118 )
Recoveries —
—
—
24
5
12
14
—
55
Ending balance $ 654
$ 1,912
$ 476
$ 47
$ 813
$ 1,341
$ 594
$ 578
$ 6,415

Ending balance: individually
evaluated for impairment 11
—
—
—
339
—
—
—
350
Ending balance: collectively
evaluated for impairment 643
1,912
476
47
474
1,341
594
578
6,065
Total $ 654
$ 1,912
$ 476
$ 47
$ 813
$ 1,341
$ 594
$ 578
$ 6,415

Loans:

Ending balance: individually
evaluated for impairment 190
429
—
—
505
—
—
—
1,124
Ending balance: collectively
evaluated for impairment 172,687
440,083
64,014
173,164
50,319
33,617
179,508
—
1,113,392
Total $ 172,877
$ 440,512
$ 64,014
$ 173,164
$ 50,824
$ 33,617
$ 179,508
$ —
$ 1,114,516



Allowance for loan and lease losses:	Beginning balance		Provision (recovery) for loan and lease losses			Charge-offs			Recoveries		Ending balance
Nine Months Ended June 30, 2018	(Dollars in Thousands)
National Lending
Insurance premium finance	$	796	$	569		$	(711	)	$	252	$	906
Other commercial finance	4		8			—			—		12
Commercial finance	800		577			(711		)	252		918
Consumer credit products	—		264			—			—		264
Other consumer finance	—		3,000			—			—		3,000
Consumer finance	—		3,264			—			—		3,264
Tax services	5		20,335			(10,507		)	423		10,256
Total National Lending	805		24,176			(11,218		)	675		14,438
Community Banking
Commercial real estate and operating	2,820		1,967			—			—		4,787
Consumer one-to-four family real estate and other	809		(98		)	(31		)	3		683
Agricultural real estate and operating	2,574		(1,914		)	—			261		921
Unallocated	526		595			—			—		1,121
Total Community Banking	6,729		550			(31		)	264		7,512
Total	$	7,534	$	24,726		$	(11,249	)	$	939	$	21,950

The following tables provide details regarding the allowance for loan and lease losses and balance by type of allowance as of June 30, 2019 and September 30, 2018.



	Allowance						Loans and Leases
Recorded Investment	Ending balance: individually evaluated for impairment		Ending balance: collectively evaluated for impairment		Total		Ending balance: individually evaluated for impairment		Ending balance: collectively evaluated for impairment		Total
As of June 30, 2019	(Dollars in Thousands)
National Lending
Asset based lending	$	12	$	4,795	$	4,807	$	8,119	$	607,190	$	615,309
Factoring	255		2,949		3,204		7,795		312,549		320,344
Lease financing	—		1,419		1,419		5,455		336,502		341,957
Insurance premium finance	—		1,016		1,016		—		358,772		358,772
SBA/USDA	—		923		923		1,276		98,515		99,791
Other commercial finance	—		957		957		—		99,677		99,677
Commercial finance	267		12,059		12,326		22,645		1,813,205		1,835,850
Consumer credit products	—		1,456		1,456		—		155,539		155,539
Other consumer finance	—		5,650		5,650		1,039		163,688		164,727
Consumer finance	—		7,106		7,106		1,039		319,227		320,266
Tax services	—		15,425		15,425		—		24,410		24,410
Warehouse finance	—		250		250		—		250,003		250,003
Total National Lending	267		34,840		35,107		23,684		2,406,845		2,430,529
Community Banking
Commercial real estate and operating	—		6,424		6,424		319		877,093		877,412
Consumer one-to-four family real estate and other	—		893		893		290		256,563		256,853
Agricultural real estate and operating	—		1,081		1,081		1,237		59,932		61,169
Total Community Banking	—		8,398		8,398		1,846		1,193,588		1,195,434
Total	$	267	$	43,238	$	43,505	$	25,530	$	3,600,433	$	3,625,963



	Allowance						Loans and Leases
Recorded Investment	Ending balance: individually evaluated for impairment⁽¹⁾		Ending balance: collectively evaluated for impairment⁽¹⁾		Total		Ending balance: individually evaluated for impairment		Ending balance: collectively evaluated for impairment		Total
As of September 30, 2018	(Dollars in Thousands)
National Lending
Asset based lending	$	—	$	107	$	107	$	1,404	$	476,513	$	477,917
Factoring	—		64		64		3,331		280,890		284,221
Lease financing	—		59		59		8,877		256,438		265,315
Insurance premium finance	—		1,031		1,031		—		337,877		337,877
SBA/USDA	—		13		13		—		59,374		59,374
Other commercial finance	—		28		28		—		85,145		85,145
Commercial finance	—		1,302		1,302		13,612		1,496,237		1,509,849
Consumer credit products	—		785		785		—		80,605		80,605
Other consumer finance	—		2,820		2,820		—		189,756		189,756
Consumer finance	—		3,605		3,605		—		270,361		270,361
Tax services	—		—		—		—		1,073		1,073
Warehouse finance	—		65		65		—		65,000		65,000
Total National Lending	—		4,972		4,972		13,612		1,832,671		1,846,283
Community Banking
Commercial real estate and operating	—		6,220		6,220		451		790,439		790,890
Consumer one-to-four family real estate and other	—		632		632		94		247,224		247,318
Agricultural real estate and operating	—		1,216		1,216		1,454		59,044		60,498
Total Community Banking	—		8,068		8,068		1,999		1,096,707		1,098,706
Total	$	—	$	13,040	$	13,040	$	15,611	$	2,929,378	$	2,944,989

⁽¹⁾Balances have been restated from what was previously reported as of September 30, 2018 on the Company's Annual Report on Form 10-K for its fiscal year ended September 30, 2018.

Federal regulations ~~promulgated by the Bank's primary federal regulator, the Office of the Comptroller of the Currency (the "OCC"),~~ provide for the classification of loans and other assets such as debt and equity ~~securities.~~securities considered by the Bank's primary regulator, the Office of the Comptroller of the Currency (the “OCC”), to be of lesser quality as “substandard,” “doubtful” or “loss.” The loan and lease classification and risk rating definitions ~~for the Company and its wholly-owned subsidiary, MetaBank (the "Bank"),~~ are ~~generally~~ as follows:

Pass- A pass asset is of sufficient quality in terms of repayment, collateral and management to preclude a special mention or an adverse rating.

Watch- A watch asset is generally a credit performing well under current terms and conditions but with identifiable weakness meriting additional scrutiny and corrective measures. Watch is not a regulatory classification but can be used to designate assets that are exhibiting one or more weaknesses that deserve management’s attention. These assets are of better quality than special mention assets.

Special Mention- Special mention assets are ~~credits~~a credit with potential weaknesses deserving management’s close attention and, if left uncorrected, may result in deterioration of the repayment prospects for the asset. Special mention assets are not adversely classified and do not expose an institution to sufficient risk to warrant adverse classification. Special mention is a temporary status with aggressive credit management required to garner adequate progress and move to watch or higher.

The adverse classifications are as follows:

Substandard- A substandard asset is inadequately protected by the net worth and/or repayment ability or by a weak collateral position. Assets so classified will have well-defined weaknesses creating a distinct possibility ~~that~~ the Bank will sustain some loss if the weaknesses are not corrected. Loss potential does not have to exist for an asset to be classified as substandard.

Doubtful- A doubtful asset has weaknesses similar to those classified substandard, with the degree of weakness causing the likely loss of some principal in any reasonable collection effort. Due to pending factors, the asset’s classification as loss is not yet appropriate.

Loss- A loss asset is considered uncollectible and of such little value that the asset’s continuance on the ~~Company's~~Bank’s balance sheet is no longer warranted. This classification does not necessarily mean an asset has no recovery or salvage value leaving room for future collection efforts.

General allowances represent loss allowances which have been established to recognize the inherent risk associated with lending activities, but which, unlike specific allowances, have not been allocated to particular problem assets. When assets are classified as “loss,” the Company is required either to establish a specific allowance for losses equal to 100% of that portion of the asset so classified or to charge-off such amount. The Company's determinations as to the classification of its assets and the amount of its valuation allowances are subject to review by its regulatory authorities, which may order the establishment of additional general or specific loss allowances.

The Company recognizes that concentrations of credit may naturally occur and may take the form of a large volume of related loans and leases to an individual, a specific industry, or a geographic location. Credit concentration is a direct, indirect, or contingent obligation that has a common bond where the aggregate exposure equals or exceeds a certain percentage of the Company’s Tier 1 Capital plus the Allowance for Loan and Lease Losses.

The asset classification of loans and leases at ~~December 31, 2017~~June 30, 2019 and September 30, ~~2017~~2018 were as follows:



Asset Classification	Pass		Watch		Special Mention		Substandard		Total
June 30, 2019	(Dollars in Thousands)
National Lending
Asset based lending	$	539,623	$	—	$	67,567	$	8,119	$	615,309
Factoring	272,589		—		39,960		7,795		320,344
Lease financing	323,539		—		12,963		5,455		341,957
Insurance premium finance	358,772		—		—		—		358,772
SBA/USDA	90,110		—		8,405		1,276		99,791
Other commercial finance	99,108		—		569		—		99,677
Commercial finance	1,683,741		—		129,464		22,645		1,835,850
Consumer credit products	155,539		—		—		—		155,539
Other consumer finance	164,727		—		—		—		164,727
Consumer finance	320,266		—		—		—		320,266
Tax services	24,410		—		—		—		24,410
Warehouse finance	250,003		—		—		—		250,003
Total National Lending	2,278,420		—		129,464		22,645		2,430,529
Community Banking
Commercial real estate and operating	866,255		3,962		3,487		3,708		877,412
Consumer one-to-four family real estate and other	254,959		1,403		462		29		256,853
Agricultural real estate and operating	42,808		4,148		5,615		8,598		61,169
Total Community Banking	1,164,022		9,513		9,564		12,335		1,195,434
Total loans and leases	$	3,442,442	$	9,513	$	139,028	$	34,980	$	3,625,963

December 31, 2017 1-4 Family
Real Estate Commercial and
Multi-Family
Real Estate Agricultural
Real Estate Consumer Commercial
Operating Agricultural
Operating CML Insurance
Premium
Finance Total
(Dollars in Thousands)
Pass $ 203,035
$ 643,393
$ 28,794
$ 274,783
$ 56,245
$ 14,304
$ 235,671
$ 1,456,225
Watch 608
10,145
—
102
271
13
—
11,139
Special Mention 245
199
2,939
—
—
—
—
3,383
Substandard 79
292
29,570
96
—
10,379
—
40,416
Doubtful —
—
—
—
—
—
—
—
$ 203,967
$ 654,029
$ 61,303
$ 274,981
$ 56,516
$ 24,696
$ 235,671
$ 1,511,163



Asset Classification	Pass		Watch		Special Mention		Substandard		Total
September 30, 2018	(Dollars in Thousands)
National Lending
Asset based lending	$	418,635	$	—	$	57,877	$	1,405	$	477,917
Factoring	248,246		—		32,644		3,331		284,221
Lease financing	252,487		—		3,951		8,877		265,315
Insurance premium finance	336,296		—		1,581		—		337,877
SBA/USDA	39,093		—		20,281		—		59,374
Other commercial finance	85,145		—		—		—		85,145
Commercial finance	1,379,902		—		116,334		13,613		1,509,849
Consumer credit products	80,605		—		—		—		80,605
Other consumer finance	189,756		—		—		—		189,756
Consumer finance	270,361		—		—		—		270,361
Tax services	1,073		—		—		—		1,073
Warehouse finance	65,000		—		—		—		65,000
Total National Lending	1,716,336		—		116,334		13,613		1,846,283
Community Banking
Commercial real estate and operating	778,445		12,251		194		—		790,890
Consumer one-to-four family real estate and other	246,463		537		239		79		247,318
Agricultural real estate and operating	42,292		2,447		4,872		10,887		60,498
Total Community Banking	1,067,200		15,235		5,305		10,966		1,098,706
Total loans and leases	$	2,783,536	$	15,235	$	121,639	$	24,579	$	2,944,989

National Lending (Commercial Finance, Consumer Finance, Tax Services and Warehouse Finance)

September 30, 2017 1-4 Family
Real Estate Commercial and
Multi-Family
Real Estate Agricultural
Real Estate Consumer Commercial
Operating Agricultural
Operating Premium
Finance Total
(Dollars in Thousands)
Pass $ 195,838
$ 574,730
$ 27,376
$ 163,004
$ 35,759
$ 18,394
$ 250,459
$ 1,265,560
Watch 525
10,200
2,006
—
—
4,541
—
17,272
Special Mention 247
201
2,939
—
—
—
—
3,387
Substandard 96
379
29,479
—
—
10,659
—
40,613
Doubtful —
—
—
—
—
—
—
—
$ 196,706
$ 585,510
$ 61,800
$ 163,004
$ 35,759
$ 33,594
$ 250,459
$ 1,326,832

~~One-to-Four Family Residential Mortgage Lending~~. One-to-four family residential mortgage loan originations are generated by the Company’s marketing efforts, its present customers, walk-in customers and referrals. The Company offers fixed-rate and adjustable rate mortgage (“ARM”) loans for both permanent structures and those under construction. The Company’s one-to-four family residential mortgage originations are secured primarily by properties located in its primary market area and surrounding areas.

Commercial Finance

The ~~Company originates one-to-four family residential mortgage~~Company's commercial finance product lines include asset-based lending, factoring, leasing, commercial insurance premium finance, and other commercial finance products offered on a nationwide basis. Asset-based lending and factoring primarily service small businesses that are startups, distressed and/or generally that may not otherwise qualify for traditional bank financing. Leasing focuses on providing equipment finance solutions to mid-market companies. These product offerings supplement the asset generation capacity in our community bank and tax services divisions and enhance the overall yield of our loan and lease portfolio, enabling us to earn attractive risk-adjusted net interest margins.

Asset-Based Lending. Through its Crestmark division, the Bank provides asset-based loans ~~with terms up to a maximum~~secured by short-term assets such as inventory, accounts receivable, and work-in-process. Asset-based loans may also be secured by real estate and equipment. The primary sources of ~~30 years and with loan-to-value ratios up to 100%~~repayment are the operating income of the ~~lesser~~borrower, the collection of the appraised value of the security property or the contract price. The Company generally requires that private mortgage insurance be obtained in an amount sufficient to reduce the Company’s exposure to at or below the 80% loan‑to‑value level. Residential loans generally do not include prepayment penalties. Due to consumer demand, the Company offers fixed-rate mortgage loans with terms up to 30 years, most of which conform to secondary market standards, such as Fannie Mae, Ginnie Mae, and Freddie Mac standards. The Company typically holds all fixed-rate mortgage loans and does not engage in secondary market sales. Interest rates charged on these fixed-rate loans are competitively priced according to market conditions.

The Company also currently offers five- and ten-year ARM loans. These loans have a fixed-rate for the stated period and, thereafter, adjust annually. These loans generally provide for an annual cap of up to 200 basis points and a lifetime cap of 600 basis points over the initial rate. As a consequence of using an initial fixed-rate and caps, the interest rates on these loans may not be as rate sensitive as the Company’s cost of funds. The Company’s ARMs do not permit negative amortization of principal and are not convertible into fixed-rate loans. The Company’s delinquency experience on its ARM loans has generally been similar to its experience on fixed-rate residential loans. The current low mortgage interest rate environment makes ARM loans relatively unattractive and very few are currently being originated.

~~In underwriting one-to-four family residential real estate loans, the Company evaluates both the borrower’s ability to make monthly payments and the value of the property~~receivables securing the loan. Properties securing real estate loans made by the Company are appraised by independent appraisers approved by the Board of Directors of the Company. The Company generally requires borrowers to obtain an attorney’s title opinion loan, and/or title insurance, and fire and property insurance (including flood insurance, if necessary) in an amount not less than the amount of the loan. Real estate loans originated by the Company generally contain a “due on sale” clause allowing the Company to declare the unpaid principal balance due and payable upon the sale of the ~~security property.~~inventory securing the loan. Loans are typically revolving lines of credit with terms of one to three years, whereby the Bank withholds a contingency reserve representing the difference between the amount advanced and the fair value of the invoice amount or other collateral value. Credit risk is managed through advance rates appropriate for the collateral, standardized loan policies, established and authorized credit limits, attentive portfolio management and the use of lock box agreements and similar arrangements that result in the Company receiving and controlling the debtors' cash receipts. The Bank also originates collateralized term loans and notes receivable, with terms ranging from three to 25 years.

Factoring. Through its Crestmark division, the Bank provides factoring lending where clients provide detailed inventory, accounts receivable, and work-in-process reports for lending arrangements. The factoring clients are diversified as to industry and geography. With these loans, the Crestmark division withholds a contingency reserve, which is the difference between the fair value of the invoice amount or other collateral value and the amount advanced. This reserve is withheld for nonpayment of factored receivables, service fees and other adjustments. Credit risk is managed through standardized advance policies, established and authorized credit limits, verification of receivables, attentive portfolio management and the use of lock box agreements and similar arrangements that result in the Company receiving and controlling the client's cash receipts. In addition, clients generally guarantee the payment of purchased accounts receivable.

Lease Financing. Through its Crestmark division, the Bank provides creative, flexible lease solutions for technology, capital equipment and select transportation assets like tractors and trailers. Direct financing leases and sales-type leases substantially transfer the benefits and risks of equipment ownership to the lessee. The lease may contain provisions that transfer ownership to the lessee at the end of the initial term, contain a bargain purchase option or allow for purchase of the equipment at fair market value. Residual values are estimated at the inception of the lease. Lease maturities are generally no greater than 84 months. The focus in this lease financing category is to support middle market companies by providing a variety of financing products to help them meet their business objectives.

Insurance Premium Finance. Through its AFS/IBEX division the Bank provides, on a national basis, short-term, primarily collateralized financing to facilitate the commercial customers’ purchase of insurance for various forms of risk, otherwise known as insurance premium financing. This includes, but is not limited to, policies for commercial property, casualty and liability risk. Premiums are advanced either directly to the insurance carrier or through an intermediary/broker and repaid by the policyholder with interest during the policy term. The policyholder generally makes a 20% to 25% down payment to the insurance broker and finances the remainder over nine to 10 months on average. The down payment is set such that if the policy is canceled, the unearned premium is typically sufficient to cover the loan balance and accrued interest. The AFS/IBEX division markets itself to the insurance community as a competitive option based on service, reputation, competitive terms, cost and ease of operation.

Small Business Administration ("SBA") and United States Department of Agriculture ("USDA"). The Bank originates loans through programs partially guaranteed by the SBA or USDA. These loans are made to small businesses and professionals with what the Bank believes are lower risk characteristics.

Other Commercial Finance. Included in this category of loans are the Company's healthcare receivables loan portfolio primarily comprised of loans to individuals for medical services received. The majority of these loans are guaranteed by the hospital providing the service to the debtor and this guarantee serves to reduce credit risk as the guarantors agree to repurchase severely delinquent loans. Credit risk is minimized on these loans based on the guarantor’s repurchase agreement. This loan category also includes commercial real estate loans to customers of the Crestmark division.

Consumer Finance

Consumer Credit Products. Through the acquisition of Specialty Consumer Services, the Bank acquired a platform that provides a total solution for marketplace lending, including underwriting and loan management in the direct-to-consumer credit business. The acquired platform allows the Bank to provide innovative lending solutions through consumer credit products. The Company designs and structures its credit programs in an effort to insulate the Company from program losses and to potentially increase the liquidity attributes of such lending programs' marketability to potential bank or other purchasers. While each program is different, all contain one or more types of credit enhancements, loss protections, or trigger events. When determining the applicable program enhancement, generally, the Company uses proprietary data provided by the Company’s partner, with respect to such program, supplemented with public data to design and shape appropriate loss curves, as well as implement stresses significantly higher than base to provide protection in changing credit cycles. Credit enhancements are typically built through holding excess program interest and fees in a reserve account to pay program credit losses. Cash flow waterfall positioning allows for losses and Company program principal and interest to be paid, under certain circumstances, before servicing or other program expenses. Trigger events allow programs and originations to be suspended if certain vintage loss limits, during a specific period of time, are triggered or if cumulative loss percentages are triggered. These triggers are designed to allow the Company to address potential issues quickly. Other trigger events in certain programs provide for excess credit or reserve enhancements, which could be beyond excess interest amounts, if certain loss triggers are breached. The Bank applies a reserve for loan losses of approximately 1% on outstanding loan balances within each of the consumer credit product programs.

Through June 30, 2019, the Bank has ~~not engaged~~launched two consumer credit programs. During the second quarter of fiscal 2018, the Bank entered into a three years program agreement with Liberty Lending, LLC ("Liberty Lending") whereby the Bank provides personal loans to Liberty Lending customers. The Bank and Liberty Lending market the program jointly through a wide variety of marketing channels. The loan products under the agreement with Liberty Lending are closed-end installment loans ranging from $3,500 to $45,000 in ~~sub-prime residential mortgage originations.~~initial principal amount with durations between 13 months and 60 months.

~~Commercial~~The Bank entered into an agreement for 3 years with Health Credit Services ("HCS") during the third quarter of fiscal 2018. The Bank approves and ~~Multi-Family~~originates loans for elective medical procedures for select HCS provider offices throughout the United States. HCS works with its provider partners to market the loans, as well as provide servicing for them. The loan products offered are unsecured, closed-end installment loans with terms between 12 months and 84 months and revolving lines of credit with durations between six months and 60 months.

Other Consumer Finance. The Bank's purchased student loan portfolios are seasoned, floating rate, private portfolios that are serviced by a third-party servicer. The portfolio purchased during the first quarter of fiscal year 2018 is indexed to one-month LIBOR, while the portfolio purchased in the first quarter of fiscal year 2017 is indexed to three-month LIBOR plus various margins. The Company received written notification on June 18, 2018 from ReliaMax Surety Company ("ReliaMax"), the company that provided insurance coverage for the student loan portfolios, which informed policy holders that the South Dakota Division of Insurance filed a petition to have ReliaMax declared insolvent and to adopt a plan of liquidation. An Order of Liquidation was entered on June 27, 2018 by the Sixth Circuit Court in Hughes County, South Dakota, declaring ReliaMax insolvent and appointing the South Dakota Division of Insurance as liquidator to adopt a plan of liquidation. The Company expects to ultimately recover a portion of the unearned premiums, though the Company can provide no assurance as to the timing and amount of any such recovery.

Tax Services

The Bank's tax services division provides short-term taxpayer advance loans. Taxpayers are underwritten to determine eligibility for these unsecured loans. Due to the nature of taxpayer advance loans, it typically takes no more than three e-file cycles (the period of time between scheduled IRS payments) from when the return is accepted by the IRS to collect from the borrower. In the event of default, the Bank has no recourse against the tax consumer. The Bank will charge off the balance of a taxpayer advance loan if there is a balance at the end of the calendar year, or when collection of principal becomes doubtful.

Through its tax services division, the Bank provides short-term electronic return originator ("ERO") advance loans on a nationwide basis. These loans are typically utilized by tax preparers to purchase tax preparation software and to prepare tax office operations for the upcoming tax season. EROs go through an underwriting process to determine eligibility for the unsecured advances. ERO loans are not collateralized. Collection on ERO advances begins once the ERO begins to process refund transfers. Generally, the Bank will charge off the balance of an ERO advance loan if there is a balance at the end of June, or when collection of principal becomes doubtful.

Warehouse Finance

In fiscal 2018, the Bank entered into a first-out participation agreement in a consumer receivable asset-backed warehouse line of credit, with the Bank holding a senior collateral position enhanced by a subordinate party structure. During the first quarter of fiscal 2019, the Bank entered into two additional first-out participation agreements in asset-backed warehouse lines of credit, including consumer loan receivables and small business loan receivables. The senior collateral position of the Bank is supported by a subordinate party position. During the third quarter of fiscal 2019, the Bank entered into a first-out participation agreement in a consumer receivable asset-backed warehouse line of credit, with the Bank holding a senior collateral position enhanced by a subordinate party structure.

Community Banking

Commercial Real Estate ~~Lending~~and Operating. The Company engages in commercial and multi-family real estate lending in ~~its~~the community bank's primary market ~~area~~areas and surrounding ~~areas and, in order to supplement its loan portfolio, has purchased whole loan and participation interests in~~areas. These loans ~~from other financial institutions. The purchased loans and loan participation interests~~ are ~~generally secured by properties primarily located in the Midwest.~~

~~The Company’s commercial and multi-family real estate loan portfolio is~~ secured primarily by apartment buildings, office buildings, and hotels. Commercial and multi-family real estate loans generally are underwritten with terms not exceeding 20 years, have loan-to-value ratios of up to 80% of the appraised value of the ~~security~~ property securing the loan, and are typically secured by guarantees of the borrowers. The Company has a variety of rate adjustment features and other terms in its commercial and multi-family real estate loan portfolio. Commercial and multi-family real estate loans provide for a margin over a number of different indices. In underwriting these loans, the Company analyzes the financial condition of the borrower, the borrower’s credit history, and the reliability and predictability of the cash flow generated by the property securing the loan. Appraisals on properties securing commercial real estate loans originated by the Company are performed by independent appraisers.

Commercial and multi-family real estate loans generally present a higher level of risk than loans secured by one-to-four family residences. This greater risk is due to several factors, including the concentration of principal in a limited number of loans and borrowers, the effect of general economic conditions on income producing properties and the increased difficulty of evaluating and monitoring these types of loans. Furthermore, theThe repayment of loans secured by commercial and multi-family real estate is typically dependent upon the successful operation of the related real estate project. If the cash flow from the project is reduced (for example, if leases are not obtained or renewed, or a bankruptcy court modifies a lease term, or a major tenant is unable to fulfill its lease obligations), the borrower’s ability to repay the loan may be impaired.

~~Agricultural Lending~~The Company originates its community banking commercial operating loans primarily in the community bank's market areas. Most of these commercial operating loans have been extended to finance local and regional businesses and include short-term loans to finance machinery and equipment purchases, inventory and accounts receivable. Commercial loans also may involve the extension of revolving credit for a combination of equipment acquisitions and working capital in expanding companies. The maximum term for loans extended on machinery and equipment is based on the projected useful life of such machinery and equipment. Generally, the maximum term on non-mortgage lines of credit is one year.

The Company’s commercial operating lending policy includes credit file documentation and analysis of the borrower’s management ability, capacity to repay the loan, the adequacy of the borrower’s capital and collateral as well as an evaluation of conditions affecting the borrower. Analysis of the borrower’s past, present and future cash flows is also an important aspect of the Company’s current credit analysis. Commercial operating loans typically are made on the basis of the borrower’s ability to make repayment from the cash flow of the borrower’s business. As a result, the availability of funds for the repayment of commercial operating loans may be substantially dependent on the success of the business itself (which, in turn, is likely to be dependent upon the general economic environment). The Company’s commercial operating loans are usually secured by business assets and personal guarantees. However, the collateral securing the loans may depreciate over time, may be difficult to appraise and may fluctuate in value based on the success of the business.

Consumer One-to-Four Family Real Estate and Other. One-to-four family real estate loan originations are typically generated by the Company’s marketing efforts, its present customers, walk-in customers and referrals. The Company offers fixed-rate loans and adjustable-rate mortgage ("ARM") loans for both permanent structures and those under construction. The Company’s one-to-four family real estate loan originations are secured primarily by properties located in the community bank's primary market areas and surrounding areas.

The Company originates one-to-four family real estate loans with terms up to a maximum of 30 years and with loan-to-value ratios up to 100% of the lesser of the appraised value of the property securing the loan or the contract price. However, the vast majority of these loans are originated with loan-to-value ratios below 80%. The Company ~~originates loans~~generally requires that private mortgage insurance be obtained in an amount sufficient to ~~finance~~reduce the ~~purchase of farmland, livestock, farm machinery and equipment, seed, fertilizer and other farm-related products. Agricultural operating loans are originated~~Company’s exposure to at ~~either an adjustable~~ or ~~fixed rate of interest for up~~below the 80% loan‑to‑value level. Due to ~~a one year term or, in~~consumer demand, the case of livestock, upon sale. Such loans provide for payments of principal and interest at least annually or a lump sum payment upon maturity if the original term is less than one year. Loans secured by agricultural machinery are generally originated asCompany also offers fixed-rate mortgage loans with terms of up to ~~seven~~30 years, which may conform to secondary market standards such as those imposed by Fannie Mae, Ginnie Mae, and Freddie Mac. The Company typically holds all fixed-rate mortgage loans and does not engage in secondary market sales. The Company also offers ARM loans with terms up to five years and ten years.

~~Agricultural~~In underwriting one-to-four family real estate loans, ~~are frequently originated with adjustable rates of interest. Generally, such loans provide for a fixed rate of interest for~~ the ~~first five~~Company evaluates both the borrower’s ability to ten years, after which the loan will balloon or the interest rate will adjust annually. These loans generally amortize over a period of 20 to 25 years. Fixed-rate agricultural real estate loans generally have terms up to ten years. Agricultural real estate loans are generally limited to 75% ofmake monthly payments and the value of the property securing the loan.

~~Agricultural lending affords~~ Properties securing real estate loans made by the Company are appraised by independent appraisers approved by the ~~opportunity to earn yields higher than those obtainable on one-to-four family residential lending, but involves a greater degree~~Board of ~~risk than one-to-four family residential mortgage loans because~~Directors of the ~~typically larger loan amount. In addition, payments on loans are dependent on~~Company. The Company generally requires borrowers to obtain an attorney’s title opinion or title insurance, as well as fire and property insurance (including flood insurance, if necessary) in an amount not less than the ~~successful operation or management~~amount of the ~~farm property securing the loan or for which an operating loan is utilized. The success of the loan may also be affected~~loan. Real estate loans originated by ~~many factors outside the control of the borrower.~~

Weather presents one of the greatest risks as hail, drought, floods, or other conditions can severely limit crop yields and thus impair loan repayments and the value of the underlying collateral. This risk can be reduced by the farmer with a variety of insurance coverages which can help to ensure loan repayment. Government support programs and the Company generally ~~require~~contain a “due on sale” clause that ~~farmers procure crop insurance coverage. Grain~~allows the Company to declare the unpaid principal balance due and ~~livestock prices also present a risk as prices may decline prior to~~payable upon the sale ~~resulting in a failure to cover production costs. These risks may be reduced by~~of the ~~farmer with the use of futures contracts or options to mitigate price risk.~~security property. The Company frequently requires borrowers to use futures contracts or options to reduce price risk and help ensure loan repayment. Another risk is the uncertainty of government programs and other regulations. During periods of low commodity prices, the income from government programs can be a significant source of cash for the borrower to make loan payments, and if these programs are discontinued or significantly changed, cash flow problems or defaults could result. Finally, many farms are dependent on a limited number of key individuals whose injury or death may resulthas not engaged in ~~an inability to successfully operate the farm.~~sub-prime residential mortgage originations.

~~Consumer Lending.~~The ~~Bank~~Company originates a variety of secured consumer loans, including home equity, home improvement, automobile and boat loans, ~~and~~as well as loans secured by savings ~~deposits. In addition, the Bank offers other secured and unsecured consumer loans and currently originates most of its community banking consumer loans~~deposits in its primary market areas and surrounding areas. In addition, the Bank’s consumer lending portfolio includes two purchased student loan portfolios, the most recent purchased on October 11, 2017, along with consumer lending products offered through its payments segment.

~~The Bank's community banking consumer loan portfolio consists primarily of home equity loans and lines of credit.~~ Substantially all of the ~~Bank's~~Company’s home equity loans and lines of credit are secured by second mortgages on principal residences. The Bank will lend amounts ~~which,~~that, togetherwith all prior liens, may be up to 90% of the appraised value of the property securing the loan. Home equity loans and lines of credit generally have maximum terms of five years.

The Bank primarily originates automobile loans on a direct basis to the borrower, as opposed to indirect loans, which are made when the Bank purchases loan contracts, often at a discount, from automobile dealers which have extended credit to their customers. The Bank’s automobile loans typically are originated at fixed interest rates with terms of up to 60 months for new and used vehicles. Loans secured by automobiles are generally originated for up to 80% of the N.A.D.A. book value of the automobile securing the loan.

Consumer loan terms vary according to the type and value of collateral, length of contract and creditworthiness of the borrower. The underwriting standards employed by the Bank for consumer loans include an application, a determination of the applicant’s payment history on other debts and an assessment of ability to meet existing obligations and payments on the proposed loan. Although creditworthiness of the applicant is a primary consideration, the underwriting process also may include a comparison of the value of the security, if any, in relation to the proposed loan amount.

~~Consumer~~Agricultural Real Estate and Operating. The Company originates loans ~~may entail greater credit risk than residential mortgage~~to finance the purchase of farmland, livestock, farm machinery and equipment, seed, fertilizer, and other farm-related products, primarily in its market areas. Agricultural operating loans ~~particularly~~are originated at either an adjustable- or fixed-rate of interest for up to a 1 year term or, in the case of ~~consumer~~livestock, are due upon sale. Agricultural real estate loans ~~which~~ are ~~unsecured or are secured by rapidly depreciable assets,~~frequently originated with adjustable rates of interest. Generally, such ~~as automobiles or recreational equipment. In such cases, any repossessed collateral~~loans provide for a ~~defaulted consumer~~fixed rate of interest for the first 5 years to 10 years, after which the loan ~~may not provide an adequate source~~will balloon or the interest rate will adjust annually. These loans generally amortize over a period of repayment of the outstanding loan balance as a result of the greater likelihood of damage, loss or depreciation. In addition, consumer loan collections are dependent on the borrower’s continuing financial stability, and thus more likely20 to be affected by adverse personal circumstances. Furthermore, the application of various federal and state laws, including bankruptcy and insolvency laws, may limit the amount which can be recovered on such loans.

~~On October 11, 2017, the Company completed the purchase of a $73.0 million, seasoned, floating rate, private student loan portfolio. All~~25 years. Fixed-rate agricultural real estate loans typically have terms up to 10 years. Agricultural real estate loans are ~~indexed~~generally limited to ~~one-month LIBOR. The portfolio is serviced by ReliaMax Lending Services LLC and insured by ReliaMax Surety Company. This portfolio purchase builds on the Company's existing student loan platform.~~

The Bank’s student loan portfolio that was purchased during the first quarter of fiscal year 2017 is a seasoned portfolio that is also serviced by ReliaMax Lending Services, LLC and insured by ReliaMax Surety Company. All loans in this portfolio are floating rate and indexed to the three-month LIBOR plus various margins.

Through its Payments segment, the Bank strives to offer consumers innovative payment products, including credit products. Most credit products have fallen into the category of portfolio lending. The Payments segment, including Specialty Consumer Services ("SCS"), continues its development of new alternative portfolio lending products primarily to serve its customer base and to provide innovative lending solutions to the unbanked and under-banked segment.

The Payments segment also provides short-term consumer refund advance loans. Taxpayers are underwritten to determine eligibility for the unsecured loans, which are, by design, interest and fee-free to the consumer. Due to the nature of consumer advance loans, it typically takes no more than three e-file cycles (the period of time between scheduled IRS payments) from when the return is accepted by the IRS to collect from the borrower. In the event of default, the Bank has no recourse against the tax consumer. Generally, when the refund advance loan becomes delinquent for 180 days or more, or when collection of principal becomes doubtful, the Company will charge off the loan balance.

~~Commercial Operating Lending~~. The Company also originates commercial operating loans. Most of the Company’s commercial operating loans have been extended to finance local and regional businesses and include short-term loans to finance machinery and equipment purchases, inventory and accounts receivable. Commercial loans also may involve the extension of revolving credit for a combination of equipment acquisitions and working capital in expanding companies. The Company also extends short-term commercial Electronic Return Originator ("ERO") advance loans through its Payments segment as described in more detail below.

The maximum term for loans extended on machinery and equipment is based on the projected useful life of such machinery and equipment. Generally, the maximum term on non-mortgage lines of credit is one year. The loan-to-value ratio on such loans and lines of credit generally may not exceed 80%75% of the value of the ~~collateral~~property securing the loan. ~~ERO~~

Payments on loans are not collateralized. The Company’s commercial operating lending policy includes credit file documentation and analysis of the borrower’s character, capacity to repay the loan, the adequacy of the borrower’s capital and collateral as well as an evaluation of conditions affecting the borrower. Analysis of the borrower’s past, present and future cash flows is also an important aspect of the Company’s credit analysis. As described further below, such loans are believed to carry higher credit risk than more traditional lending activities.

Unlike residential mortgage loans, which generally are made on the basis of the borrower’s ability to make repayment from his or her employment and other income and which are secured by real property whose value tends to be more easily ascertainable, commercial operating loans typically are made on the basis of the borrower’s ability to make repayment from the cash flow of the borrower’s business. As a result, the availability of funds for the repayment of commercial operating loans may be substantially dependent on the successful operation or management of the farm property securing the loan or for which an operating loan is utilized. The success of the ~~business itself (which, in turn, is likely to~~loan may also be ~~dependent upon~~affected by many factors outside the ~~general economic environment). The Company’s commercial operating loans are usually, but not always, secured by business assets~~control of the borrower such as weather, government support programs and ~~personal guarantees. However, the collateral securing the loans may depreciate over time,~~grain and livestock prices. These risks may be ~~difficult~~reduced, by the farmer, with the use of crop insurance coverage and futures contracts or options to ~~appraise and may fluctuate in value based on~~mitigate price risk, both of which the ~~success~~Company frequently requires of the ~~business.~~

~~Through its Payments segment, the Company~~borrowers to help ensure loan repayment. Many farms are also ~~provides short-term ERO advance loans~~dependent on a ~~nation-wide basis. These loans are typically utilized~~limited number of key individuals whose injury or death may result in an inability to ~~purchase tax preparation software and to prepare tax offices for~~successfully operate the upcoming tax season. EROs go through an underwriting process to determine eligibility for the unsecured advances. Collection on ERO advances begins once the ERO begins to process refund transfers. Generally, when the ERO advance loan becomes delinquent for 120 days or more, or when collection of principal becomes doubtful, the Company will charge off the loan balance.farm.

~~Commercial Insurance Premium Finance Lending~~. Through its AFS/IBEX division, the Bank provides short-term and primarily collateralized financing to facilitate the commercial customers’ purchase of insurance for various forms of risk otherwise known as commercial insurance premium financing. This includes, but is not limited to, policies for commercial property, casualty and liability risk. The AFS/IBEX division markets itself to the insurance community as a competitive option based on service, reputation, competitive terms, cost and ease of operation.

Commercial insurance premium financing is the business of extending credit to a policyholder to pay for insurance premiums when the insurance carrier requires payment in full at inception of coverage. Premiums are advanced either directly to the insurance carrier or through an intermediary/broker and repaid by the policyholder with interest during the policy term. The policyholder generally makes a 20% to 25% down payment to the insurance broker and finances the remainder over nine to ten months on average. The down payment is set such that if the policy is canceled, the unearned premium is typically sufficient to cover the loan balance and accrued interest.

Due to the nature of collateral for commercial insurance premium finance receivables, it customarily takes 60-210 days to convert the collateral into cash. In the event of default, AFS/IBEX, by statute and contract, has the power to cancel the insurance policy and establish a first position lien on the unearned portion of the premium from the insurance carrier. In the event of cancellation, the cash returned in payment of the unearned premium by the insurer has typically been sufficient to cover the receivable balance, the interest and other charges due. Due to notification requirements and processing time by most insurance carriers, many receivables will become delinquent beyond 90 days while the insurer is processing the return of the unearned premium. Generally, when a loan becomes delinquent for 210 days or more, or when collection of principal or interest becomes doubtful, the Company will charge off the loan balance and any remaining interest and fees after applying any collection from the insurance company.

Past due loans and leases at ~~December 31, 2017~~June 30, 2019 and September 30, ~~2017~~2018 were as follows:

Accruing and Non-accruing Loans Nonperforming Loans
December 31, 2017 30-59 Days
Past Due 60-89 Days
Past Due > 89 Days Past Due Total Past
Due Current Total Loans
Receivable > 89 Days Past Due and Accruing Non-accrual balance Total
(Dollars in Thousands)
1-4 Family Real Estate $ 106
$ —
$ 234
$ 340
$ 203,627
203,967
234
$ —
$ 234
Commercial and Multi-Family Real Estate —
284
—
284
653,745
654,029
—
284
284
Agricultural Real Estate —
—
27,818
27,818
33,485
61,303
27,818
—
27,818
Consumer 4,192
2,015
1,624
7,831
267,150
274,981
1,624
—
1,624
Commercial Operating —
—
—
—
56,516
56,516
—
—
—
Agricultural Operating —
—
—
—
24,696
24,696
—
—
—
CML Insurance Premium Finance 1,594
592
3,194
5,380
230,291
235,671
3,194
—
3,194
Total $ 5,892
$ 2,891
$ 32,870
$ 41,653
$ 1,469,510
1,511,163
32,870
$ 284
$ 33,154



	Accruing and Non-accruing Loans and Leases												Non-performing Loans and Leases
Past Due Loans and Leases	30-59 Days Past Due		60-89 Days Past Due		> 89 Days Past Due		Total Past Due		Current		Total Loans and Leases Receivable		> 89 Days Past Due and Accruing		Non-accrual balance		Total
June 30, 2019	(Dollars in Thousands)
National Lending
Asset based lending	$	1,701	$	428	$	2,890	$	5,019	$	610,290	$	615,309	$	180	$	5,654	$	5,834
Factoring	—		—		20		20		320,324		320,344		—		4,846		4,846
Lease financing	2,080		1,816		5,408		9,304		332,653		341,957		4,225		1,936		6,161
Insurance premium finance	2,233		1,081		1,679		4,993		353,779		358,772		1,679		—		1,679
SBA/USDA	85		—		259		344		99,447		99,791		—		259		259
Other commercial finance	—		—		—		—		99,677		99,677		—		—		—
Commercial finance	6,099		3,325		10,256		19,680		1,816,170		1,835,850		6,084		12,695		18,779
Consumer credit products	1,454		1,039		703		3,196		152,343		155,539		703		—		703
Other consumer finance	996		614		1,083		2,693		162,034		164,727		1,083		—		1,083
Consumer finance	2,450		1,653		1,786		5,889		314,377		320,266		1,786		—		1,786
Tax services	—		24,410		—		24,410		—		24,410		—		—		—
Warehouse finance	—		—		—		—		250,003		250,003		—		—		—
Total National Lending	8,549		29,388		12,042		49,979		2,380,550		2,430,529		7,870		12,695		20,565
Community Banking
Commercial real estate and operating	—		—		—		—		877,412		877,412		—		—		—
Consumer one-to-four family real estate and other	54		36		233		323		256,530		256,853		—		233		233
Agricultural real estate and operating	1,745		—		—		1,745		59,424		61,169		—		—		—
Total Community Banking	1,799		36		233		2,068		1,193,366		1,195,434		—		233		233
Total Loans and Leases	$	10,348	$	29,424	$	12,275	$	52,047	$	3,573,916	$	3,625,963	$	7,870	$	12,928	$	20,798



	Accruing and Non-accruing Loans and Leases												Non-performing Loans and Leases
Past Due Loans and Leases	30-59 Days Past Due		60-89 Days Past Due		> 89 Days Past Due		Total Past Due		Current		Total Loans and Leases Receivable		> 89 Days Past Due and Accruing		Non-accrual balance		Total
September 30, 2018	(Dollars in Thousands)
National Lending
Asset based lending	$	1,235	$	2,151	$	94	$	3,480	$	474,437	$	477,917	$	94	$	—	$	94
Factoring	—		—		—		—		284,221		284,221		—		—		—
Lease financing	16,542		532		2,921		19,995		245,320		265,315		726		2,864		3,590
Insurance premium finance	1,864		1,019		2,981		5,864		332,013		337,877		2,981		—		2,981
SBA/USDA	1,067		—		—		1,067		58,307		59,374		—		—		—
Other commercial finance	—		—		—		—		85,145		85,145		—		—		—
Commercial finance	20,708		3,702		5,996		30,406		1,479,443		1,509,849		3,801		2,864		6,665
Consumer credit products	532		284		147		963		79,642		80,605		147		—		147
Other consumer finance	2,677		1,311		2,237		6,225		183,531		189,756		2,237		—		2,237
Consumer finance	3,209		1,595		2,384		7,188		263,173		270,361		2,384		—		2,384
Tax services	—		—		1,073		1,073		—		1,073		1,073		—		1,073
Warehouse finance	—		—		—		—		65,000		65,000		—		—		—
Total National Lending	23,917		5,297		9,453		38,667		1,807,616		1,846,283		7,258		2,864		10,122
Community Banking
Commercial real estate and operating	—		—		—		—		790,890		790,890		—		—		—
Consumer one-to-four family real estate and other	105		—		79		184		247,134		247,318		79		—		79
Agricultural real estate and operating	—		—		—		—		60,498		60,498		—		—		—
Total Community Banking	105		—		79		184		1,098,522		1,098,706		79		—		79
Total Loans and Leases	$	24,022	$	5,297	$	9,532	$	38,851	$	2,906,138	$	2,944,989	$	7,337	$	2,864	$	10,201

Accruing and Non-accruing Loans Nonperforming Loans
September 30, 2017 30-59 Days
Past Due 60-89 Days
Past Due > 89 Days Past Due Total Past
Due Current Total Loans
Receivable > 89 Days Past Due and Accruing Non-accrual balance Total
(Dollars in Thousands)
1-4 Family Real Estate $ 370
$ 79
$ —
$ 449
$ 196,257
$ 196,706
—
$ —
$ —
Commercial and Multi-Family Real Estate 295
—
390
685
584,825
585,510
—
685
685
Agricultural Real Estate —
—
34,198
34,198
27,602
61,800
34,198
—
34,198
Consumer 2,512
558
1,406
4,476
158,528
163,004
1,406
—
1,406
Commercial Operating —
—
—
—
35,759
35,759
—
—
—
Agricultural Operating —
—
97
97
33,497
33,594
97
—
97
CML Insurance Premium Finance 1,509
2,442
1,205
5,156
245,303
250,459
1,205
—
1,205
Total $ 4,686
$ 3,079
$ 37,296
$ 45,061
$ 1,281,771
$ 1,326,832
36,906
$ 685
$ 37,591

Certain loans and leases 89 days or more past due as to interest or principal continue to accrue because they are (1) well-secured and in the process of collection or (2) one-to-four family real estate loans or consumer loans exempt under regulatory rules from being classified as non-accrual until later delinquency, usually 120 days past due.

When analysis of borrower or lessee operating results and financial condition indicates that underlying cash flows of the borrower’s business are not adequate to meet its debt service requirements, the loan or lease is evaluated for impairment. Often, this is associated with a delay or shortfall in scheduled payments, of 210 days or more for commercial insurance premium finance loans, 180 days or more for refund advance loans, 120 days or more for ERO advance loans and 90 days or more for other loan categories. As of December 31, 2017, there were no commercial insurance premium finance loans greater than 210 days past due.as described above.

Total loans past due decreased $3.4 million to $41.7 million at December 31, 2017 from $45.1 million at September 30, 2017. This decrease was due to a $4.4 million decrease in loans greater than 90 days past due. The primary driver of the decrease in loans greater than 90 days past due included the payoff of a large nonperforming agricultural loan relationship during the first quarter of fiscal 2018.

Impaired loans and leases at ~~December 31, 2017~~June 30, 2019 and September 30, ~~2017~~2018 were as follows:

Recorded
Balance Unpaid Principal
Balance Specific
Allowance
December 31, 2017 (Dollars in Thousands)
Loans without a specific valuation allowance
1-4 Family Real Estate $ 95
$ 95
$ —
Commercial and Multi-Family Real Estate 707
707
—
Consumer 61
61
—
Agricultural Operating 1,052
1,052
—
Total $ 1,915
$ 1,915
$ —



June 30, 2019	Recorded Balance		Unpaid Principal Balance		Specific Allowance
Loans and leases without a specific valuation allowance	(Dollars in Thousands)
National Lending
Asset based lending	$	8,024	$	9,362	$	—
Factoring	3,580		4,655		—
Lease financing	5,455		5,455		—
SBA/USDA	1,276		1,276		—
Commercial finance	18,335		20,748		—
Other consumer finance	1,039		1,089		—
Consumer finance	1,039		1,089		—
Total National Lending	19,374		21,837		—
Community Banking
Commercial real estate and operating	319		319		—
Consumer one-to-four family real estate and other	290		290		—
Agricultural real estate and operating	1,237		1,237		—
Total Community Banking	1,846		1,846		—
Total	$	21,220	$	23,683	$	—
Loans and leases with a specific valuation allowance
National Lending
Asset based lending	$	95	$	107	$	12
Factoring	4,215		5,555		255
Commercial finance	4,310		5,662		267
Total National Lending	4,310		5,662		267
Total	$	4,310	$	5,662	$	267

Recorded
Balance Unpaid Principal
Balance Specific
Allowance
September 30, 2017 (Dollars in Thousands)
Loans without a specific valuation allowance
1-4 Family Real Estate $ 72
$ 72
$ —
Commercial and Multi-Family Real Estate 1,109
1,109
—
Total $ 1,181
$ 1,181
$ —



September 30, 2018	Recorded Balance		Unpaid Principal Balance		Specific Allowance
Loans and leases without a specific valuation allowance	(Dollars in Thousands)
National Lending
Asset based lending	$	1,325	$	1,325	$	—
Factoring	1,383		1,713		—
Lease financing	5,491		5,491		—
Commercial finance	8,199		8,529		—
Total National Lending	8,199		8,529		—
Community Banking
Commercial real estate and operating	405		405		—
Consumer one-to-four family real estate and other	140		140		—
Agricultural real estate and operating	1,454		1,454		—
Total Community Banking	1,999		1,999		—
Total	$	10,198	$	10,528	$	—
Loans and leases with a specific valuation allowance
National Lending
Asset based lending	$	79	$	79	$	22
Factoring	1,948		2,198		49
Lease financing	3,386		3,386		517
Commercial finance	5,413		5,663		588
Total National Lending	5,413		5,663		588
Total	$	5,413	$	5,663	$	588

The following table provides the average recorded investment in impaired loans and leases for the ~~three~~ three- and nine-month periods ended ~~December 31, 2017~~June 30, 2019 and ~~2016.~~2018.

Three Months Ended December 31,
2017 2016
Average
Recorded
Investment Average
Recorded
Investment
(Dollars in Thousands)
1-4 Family Real Estate $ 80
$ 172
Commercial and Multi-Family Real Estate 975
432
Consumer 20
—
Commercial Operating —
168
Agricultural Operating 351
—
Total $ 1,426
$ 772



Three Months Ended June 30,	2019				2018
	Average Recorded Investment		Recognized Interest Income		Average Recorded Investment		Recognized Interest Income
	(Dollars in Thousands)
National Lending
Asset based lending	$	6,683	$	88	$	—	$	—
Factoring	6,621		—		—		—
Lease financing	3,351		—		—		—
SBA/USDA	425		—		—		—
Commercial finance	17,080		88		—		—
Other consumer finance	1,190		28		—		—
Consumer finance	1,190		28		—		—
Total National Lending	18,270		116		—		—
Community Banking
Commercial real estate and operating	106		5		604		4
Consumer one-to-four family real estate and other	186		1		342		2
Agricultural real estate and operating	1,226		28		2,670		42
Total Community Banking	1,518		34		3,616		48
Total loans and leases	$	19,788	$	150	$	3,616	$	48



Nine Months Ended June 30,	2019				2018
	Average Recorded Investment		Recognized Interest Income		Average Recorded Investment		Recognized Interest Income
	(Dollars in Thousands)
National Lending
Asset based lending	$	3,993	$	262	$	—	$	—
Factoring	4,178		5		—		—
Lease financing	5,012		17		—		—
SBA/USDA	142		—		—		—
Commercial finance	13,325		284		—		—
Other consumer finance	1,215		38		—		—
Consumer finance	1,215		38		—		—
Total National Lending	14,540		322		—		—
Community Banking
Commercial real estate and operating	259		9		761		14
Consumer one-to-four family real estate and other	154		3		224		11
Agricultural real estate and operating	1,371		63		1,567		106
Total Community Banking	1,784		75		2,552		131
Total loans and leases	$	16,324	$	397	$	2,552	$	131

The Company’s troubled debt restructurings ~~(“TDR”~~("TDRs") typically involve forgiving a portion of interest or principal on existing loans, or making loans at a rate materially less than current market ~~rates.~~rates, or extending the term of the loan. There were ~~$1.1~~$0.7 million of Community Banking loans and $0.1 million of National Lending loans that were modified in a TDR during the three ~~month period~~months ended ~~December 31, 2017~~June 30, 2019, all of which were modified to extend the term of the loan. No loans and ~~no loans~~leases were modified in a TDR during the three ~~month period~~months ended ~~December 31, 2016. Additionally, there~~June 30, 2018.

There were no$1.7 million of National Lending loans and leases and $0.7 million of Community Banking loans that were modified in a TDR during the nine months ended June 30, 2019, all of which were modified to extend the term of the loan. There were $3.8 million of Community Banking loans that were modified in a TDR during the nine months ended June 30, 2018. During the nine months ended June 30, 2019, the Company had $0.9 million of Community Banking loans that were modified in a TDR within the previous 12 months and for which there was a payment ~~default during~~default. During the ~~three month periods~~nine months ended ~~December 31, 2017 or 2016~~June 30, 2018, the Company had $0.1 million of Community Banking loans that ~~had been~~were modified ~~during~~in a TDR within the ~~12-month period prior to the~~previous 12 months and for which there was a payment default.

~~NOTE 3. ALLOWANCE FOR LOAN LOSSES~~

At ~~December 31, 2017, the Company’s allowance for loan losses increased~~June 30, 2019, foreclosed and repossessed assets totaled $29.5 million, compared to ~~$8.9 million from $7.5~~$31.6 million at September 30, ~~2017. This increase was primarily due to the additional provision expense related to tax advance loans. During the three months ended December 31, 2017,~~2018. At June 30, 2019, the Company ~~recorded~~had established a ~~provision for loan losses~~valuation allowance of ~~$1.1 million compared to $0.8~~$0.1 million for ~~the same period of the prior year.~~repossessed assets. The Company did not have a valuation allowance established for any foreclosed and repossessed assets at September 30, 2018. There were no impairments on any foreclosed and repossessed assets at either date. The Company had ~~$0.3~~$0.2 million of ~~net recoveries for the three months ended December 31, 2017, compared to $0.1 million of net charge-offs for the three months ended December 31, 2016.~~

~~The allowance for loan losses is established through the provision for loan losses based on management’s evaluation of the risk inherent in its loan portfolio and changes~~Community Banking loans in the nature and volume of its loan activity, including those loans which are being specifically monitored by management. Such evaluation, which includes a review of loans for which full collectability may not be reasonably assured, considers, among other matters, the estimated fair value of the underlying collateral, economic conditions, historical loan loss experience and other factors that warrant recognition in providing for an appropriate loan loss allowance.

Management closely monitors economic developments both regionally and nationwide, and considers these factors when assessing the appropriateness of its allowance for loan losses. The current economic environment continues to show signs of improvement in the Bank’s markets. The Bank’s average loss rates over the past three years for community banking loans were relatively low compared to peers, but was offset with a higher agricultural loss rate in fiscal year 2016 driven by the charge off of one relationship. Although the Bank’s four market areas have indirectly benefited from a stable agricultural market, the market has become slightly stressed as commodity prices have generally remained lower than a few years ago. Management believes the low commodity prices and adverse weather conditions have the potential to negatively impact the economies of our agricultural markets. The improving economic conditions have also kept the loss rates on the national lending loans as well as the tax service loans relatively low.

Management believes that, based on a detailed review of the loan portfolio, historic loan losses, current economic conditions, the size of the loan portfolio and other factors, the current level of the allowance for loan losses at December 31, 2017, reflects an appropriate allowance against probable losses from the loan portfolio. Although the Company maintains its allowance for loan losses at a level it considers to be appropriate, investors and others are cautioned that there can be no assurance that future losses will not exceed estimated amounts, or that additional provisions for loan losses will not be required in future periods. In addition, the Company’s determination of the allowance for loan losses is subject to review by the OCC, which can require the establishment of additional general or specific allowances.

~~Real estate properties acquired through foreclosure are recorded at the lesser of fair value or the recorded investment. If fair value at the date~~process of foreclosure ~~is lower than the balance of the related loan, the difference will be charged to the allowance for loan losses~~ at ~~the time of transfer. Valuations are periodically updated by management~~June 30, 2019 and ~~if the value declines, a specific provision for losses on such property is established by a charge to operations.~~none at September 30, 2018.

NOTE 4.5. EARNINGS PER COMMON SHARE

Earnings per common share is computed after deducting ~~dividends.~~any preferred dividends, if applicable. The Company has granted restricted share awards with dividend rights that are considered to be participating securities. Accordingly, a portion of the Company’s earnings is allocated to those participating securities in the earnings per share calculation. Basic earnings per common share is computed by dividing income available to common stockholders after the allocation of dividends and undistributed earnings to the participating securities by the weighted average number of common shares outstanding for the period. Diluted earnings per common share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised, and is computed after giving consideration to the weighted average dilutive effect of the Company’s stock options and after the allocation of earnings to the participating securities. Antidilutive options are disregarded in ~~the~~ earnings per share calculations. The share and per share amounts for fiscal year 2018 have been restated to reflect the 3-for-1 forward stock split of the Company's common stock that was effected by the Company on October 4, 2018.

A reconciliation of net income and common stock share amounts used in the computation of basic and diluted earnings per share for the three and nine months ended ~~December 31, 2017~~June 30, 2019 and ~~2016~~2018 is presented below.


Three Months Ended December 31,	2017		2016
Three Months Ended June 30,					2019		2018
(Dollars in Thousands, Except Share and Per Share Data)
Basic income per common share:
Net income attributable to Meta Financial Group, Inc.	$	4,670	$	1,244	$	29,291	$	6,792
Weighted average common shares outstanding	9,656,778		8,938,339		38,903,266		29,099,472
Basic income per common share	0.48		0.14		0.75		0.23

Diluted income per common share:
Net income attributable to Meta Financial Group, Inc.	$	4,670	$	1,244	$	29,291	$	6,792
Weighted average common shares outstanding	9,656,778		8,938,339		38,903,266		29,099,472
Outstanding options - based upon the two-class method	56,063		63,061		74,424		119,508
Weighted average diluted common shares outstanding	9,712,841		9,001,400		38,977,690		29,218,980
Diluted income per common share	0.48		0.14		0.75		0.23



Nine Months Ended June 30,	2019		2018
(Dollars in Thousands, Except Share and Per Share Data)
Basic income per common share:
Net income attributable to Meta Financial Group, Inc.	$	76,809	$	42,898
Weighted average common shares outstanding	39,220,793		29,043,309
Basic income per common share	1.96		1.48

Diluted income per common share:
Net income attributable to Meta Financial Group, Inc.	$	76,809	$	42,898
Weighted average common shares outstanding	39,220,793		29,043,309
Outstanding options - based upon the two-class method	68,218		116,676
Weighted average diluted common shares outstanding	39,289,011		29,159,985
Diluted income per common share	1.95		1.47

NOTE 5.6. SECURITIES

~~During the first quarter of fiscal~~On October 1, 2018, the Company ~~early~~ adopted ~~Accounting Standard Update ("ASU") 2017-12,~~ ~~"Derivatives~~ASU 2016-01 on a prospective basis, which redefined the definition of equity securities and ~~Hedging (Topic 815): Targeted Improvements~~required their segregation from available for sale debt securities. While changes in the fair value of debt securities continue to ~~Accounting for Hedging Activities."~~ ~~Due~~be recorded in the equity category of accumulated other comprehensive income, the new guidance requires that changes in fair value of equity securities with readily determinable fair value be recorded in current earnings. As required by the new guidance, the unrealized gain in fair value on equity securities with readily determinable fair value (recorded in accumulated other comprehensive income at September 30, 2018) was reclassified to ~~the early adoption~~retained earnings on October 1, 2018. The amount of the ~~ASU, the Company transferred $204.7~~reclassification was $0.5 million, net of ~~investment~~tax. Equity securities with readily determinable fair value include mutual funds of $1.8 million at cost and ~~$101.3~~$1.9 million ~~of MBS from HTM to AFS during the first quarter of fiscal 2018. This change allows for enhanced balance sheet management and provides the opportunity for more liquidity, should it be needed.~~at fair value at June 30, 2019.

The amortized cost, gross unrealized gains and losses and estimated fair values of available for sale ("AFS") and held to maturity ("HTM") debt securities at ~~December 31, 2017~~June 30, 2019 and September 30, ~~2017~~2018 are presented below.

Available For Sale
At December 31, 2017 AMORTIZED
COST
GROSS
UNREALIZED
GAINS

GROSS
UNREALIZED
(LOSSES)

FAIR
VALUE
(Dollars in Thousands)
Debt securities
Small business administration securities 56,602
349
(3 ) 56,948
Obligations of states and political subdivisions 14,513
123
(26 ) 14,610
Non-bank qualified obligations of states and political subdivisions 1,212,661
16,079
(5,710 ) 1,223,030
Asset-backed securities 93,486
2,337
—
95,823
Mortgage-backed securities 606,338
198
(6,424 ) 600,112
Total debt securities 1,983,600
19,086
(12,163 ) 1,990,523
Common equities and mutual funds 1,298
532
(1 ) 1,829
Total available for sale securities $ 1,984,898
$ 19,618
$ (12,164 ) $ 1,992,352



At June 30, 2019	AMORTIZED COST		GROSS UNREALIZED GAINS		GROSS UNREALIZED (LOSSES)			FAIR VALUE
	(Dollars in Thousands)
Debt securities AFS
SBA securities	$	189,816	$	3,271	$	(21	)	$	193,066
Obligations of states and political subdivisions	858		17		—			875
Non-bank qualified obligations of states and political subdivisions	459,551		3,456		(2,347		)	460,660
Asset-backed securities	308,711		753		(2,168		)	307,296
Mortgage-backed securities	395,059		2,838		(2,696		)	395,201
Total debt securities AFS	$	1,353,995	$	10,335	$	(7,232	)	$	1,357,098
Common equities and mutual funds⁽¹⁾⁽²⁾	$	3,593	$	826	$	—		$	4,419

⁽¹⁾Equity securities at fair value are included within other assets on the consolidated statement of financial condition at June 30, 2019 and September 30, 2018.

⁽²⁾ ASU 2016-01 adopted on October 1, 2018, on a prospective basis, removed equity securities from AFS category at June 30, 2019.



At September 30, 2018	AMORTIZED COST		GROSS UNREALIZED GAINS		GROSS UNREALIZED (LOSSES)			FAIR VALUE
	(Dollars in Thousands)
Debt securities AFS
SBA securities	$	45,591	$	1	$	(1,255	)	$	44,337
Obligations of states and political subdivisions	17,154		49		(293		)	16,910
Non-bank qualified obligations of states and political subdivisions	1,140,884		826		(31,825		)	1,109,885
Asset-backed securities	310,700		2,585		(257		)	313,028
Mortgage-backed securities	378,301		—		(14,236		)	364,065
Total debt securities AFS	$	1,892,630	$	3,461	$	(47,866	)	$	1,848,225
Common equities and mutual funds⁽¹⁾	3,172		635		(7		)	3,800
Total AFS securities⁽¹⁾	$	1,895,802	$	4,096	$	(47,873	)	$	1,852,025

⁽¹⁾Equity securities at fair value are included within other assets on the consolidated statement of financial condition at June 30, 2019 and September 30, 2018.



At June 30, 2019	AMORTIZED COST		GROSS UNREALIZED GAINS		GROSS UNREALIZED (LOSSES)			FAIR VALUE
	(Dollars in Thousands)
Debt securities HTM
Non-bank qualified obligations of states and political subdivisions	$	138,128	$	15	$	(2,500	)	$	135,643
Mortgage-backed securities	7,414		—		(119		)	7,295
Total held to maturity securities	$	145,542	$	15	$	(2,619	)	$	142,938



At September 30, 2018	AMORTIZED COST		GROSS UNREALIZED GAINS		GROSS UNREALIZED (LOSSES)			FAIR VALUE
	(Dollars in Thousands)
Debt securities HTM
Non-bank qualified obligations of states and political subdivisions	$	163,893	$	—	$	(10,758	)	$	153,135
Mortgage-backed securities	7,850		—		(422		)	7,428
Total held to maturity securities	$	171,743	$	—	$	(11,180	)	$	160,563

At September 30, 2017 AMORTIZED
COST
GROSS
UNREALIZED
GAINS
GROSS
UNREALIZED
(LOSSES)
FAIR
VALUE
(Dollars in Thousands)
Debt securities
Small business administration securities 57,046
825
—
57,871
Non-bank qualified obligations of states and political subdivisions 938,883
14,983
(3,037 ) 950,829
Asset-backed securities 94,451
2,381
—
96,832
Mortgage-backed securities 588,918
1,259
(3,723 ) 586,454
Total debt securities 1,679,298
19,448
(6,760 ) 1,691,986
Common equities and mutual funds 1,009
436
—
1,445
Total available for sale securities $ 1,680,307
$ 19,884
$ (6,760 ) $ 1,693,431

Held to Maturity
At December 31, 2017 AMORTIZED
COST
GROSS
UNREALIZED
GAINS

GROSS
UNREALIZED
(LOSSES)

FAIR
VALUE
(Dollars in Thousands)
Debt securities
Obligations of states and political subdivisions $ 4,341
$ 26
$ (25 ) $ 4,342
Non-bank qualified obligations of states and political subdivisions 230,683
336
(3,537 ) 227,482
Mortgage-backed securities 8,468
—
(148 ) 8,320
Total held to maturity securities $ 243,492
$ 362
$ (3,710 ) $ 240,144

At September 30, 2017 AMORTIZED
COST
GROSS
UNREALIZED
GAINS
GROSS
UNREALIZED
(LOSSES)
FAIR
VALUE
(Dollars in Thousands)
Debt securities
Obligations of states and political subdivisions $ 19,247
$ 157
$ (36 ) $ 19,368
Non-bank qualified obligations of states and political subdivisions 430,593
4,744
(2,976 ) 432,361
Mortgage-backed securities 113,689
—
(1,233 ) 112,456
Total held to maturity securities $ 563,529
$ 4,901
$ (4,245 ) $ 564,185

Management has implemented a process to identify securities with potential credit impairment that are other-than-temporary. This process involves evaluation of the length of time and extent to which the fair value has been less than the amortized cost basis, review of available information regarding the financial position of the issuer, monitoring the rating, watch, and outlook of the security, monitoring changes in value, cash flow projections, and the Company’s intent to sell a security or whether it is more likely than not the Company will be required to sell the security before the recovery of its amortized cost which, in some cases, may extend to maturity. To the extent the Company determines that a security is deemed to be other-than-temporarily impaired, an impairment loss is recognized.

For all securities considered temporarily impaired, the Company does not intend to sell these securities, and it is not more likely than not that the Company will be required to sell the security before recovery of its amortized cost, which may occur at maturity. The Company believes it will collect all principal and interest due on all investments with amortized cost in excess of fair value and considered only temporarily impaired.

GAAP requires that, at acquisition, an enterprise classify debt securities into one of three categories: ~~Available for Sale (“AFS”), Held to Maturity (“HTM”)~~AFS, HTM or trading. AFS securities are carried at fair value on the consolidated statements of financial condition, and unrealized holding gains and losses are excluded from earnings and recognized as a separate component of equity in accumulated other comprehensive income (“AOCI”). HTM debt securities are measured at amortized cost. Both AFS and HTM are subject to review for other-than-temporary impairment. The Company ~~did not have any~~had no trading securities at ~~December 31, 2017~~June 30, 2019 or September 30, ~~2017.~~2018.

Gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at ~~December 31, 2017~~June 30, 2019 and September 30, ~~2017,~~2018, were as follows:



	LESS THAN 12 MONTHS					OVER 12 MONTHS					TOTAL
At June 30, 2019	Fair Value		Unrealized (Losses)			Fair Value		Unrealized (Losses)			Fair Value		Unrealized (Losses)
	(Dollars in Thousands)
Debt securities AFS
SBA securities	$	13,785	$	(21	)	$	—	$	—		$	13,785	$	(21	)
Obligations of states and political subdivisions	—		—			—		—			—		—
Non-bank qualified obligations of states and political subdivisions	—		—			230,117		(2,347		)	230,117		(2,347		)
Asset-backed securities	134,246		(1,230		)	62,450		(938		)	196,696		(2,168		)
Mortgage-backed securities	—		—			172,718		(2,696		)	172,718		(2,696		)
Total debt securities AFS	$	148,031	$	(1,251	)	$	465,285	$	(5,981	)	$	613,316	$	(7,232	)
Common equities and mutual funds⁽¹⁾⁽²⁾	—		—			—		—			—		—

⁽¹⁾Equity securities at fair value are included within other assets on the consolidated statement of financial condition at June 30, 2019 and September 30, 2018.

⁽²⁾ ASU 2016-01 adopted on October 1, 2018, on a prospective basis, removed equity securities from AFS category at June 30, 2019.



	LESS THAN 12 MONTHS					OVER 12 MONTHS					TOTAL
At September 30, 2018	Fair Value		Unrealized (Losses)			Fair Value		Unrealized (Losses)			Fair Value		Unrealized (Losses)
	(Dollars in Thousands)
Debt securities AFS
SBA securities	$	43,097	$	(1,255	)	$	—	$	—		$	43,097	$	(1,255	)
Obligations of state and political subdivisions	11,036		(279		)	881		(14		)	11,917		(293		)
Non-bank qualified obligations of states and political subdivisions	626,693		(13,539		)	358,095		(18,286		)	984,788		(31,825		)
Asset-backed securities	146,638		(257		)	—		—			146,638		(257		)
Mortgage-backed securities	121,217		(3,292		)	242,849		(10,944		)	364,066		(14,236		)
Total debt securities AFS	$	948,681	$	(18,622	)	$	601,825	$	(29,244	)	$	1,550,506	$	(47,866	)
Common equities and mutual funds⁽¹⁾	1,818		(7		)	—		—			1,818		(7		)
Total debt AFS securities⁽¹⁾	$	950,499	$	(18,629	)	$	601,825	$	(29,244	)	$	1,552,324	$	(47,873	)

⁽¹⁾Equity securities at fair value are included within other assets on the consolidated statement of financial condition at June 30, 2019 and September 30, 2018.

Available For Sale LESS THAN 12 MONTHS OVER 12 MONTHS TOTAL
At December 31, 2017 Fair
Value Unrealized
(Losses) Fair
Value Unrealized
(Losses) Fair
Value Unrealized
(Losses)
(Dollars in Thousands)
Debt securities
Small business administration securities $ 14,236
$ (3 ) $ —
$ —
$ 14,236
$ (3 )
Obligations of states and political subdivisions 3,139
(26 ) —
—
3,139
(26 )
Non-bank qualified obligations of states and political subdivisions 553,626
(4,945 ) 16,045
(765 ) 569,671
(5,710 )
Mortgage-backed securities 234,672
(1,275 ) 296,252
(5,149 ) 530,924
(6,424 )
Total debt securities 805,673
(6,249 ) 312,297
(5,914 ) 1,117,970
(12,163 )
Common equities and mutual funds 1,829
(1 ) —
—
1,829
(1 )
Total available for sale securities $ 807,502
$ (6,250 ) $ 312,297
$ (5,914 ) $ 1,119,799
$ (12,164 )



	LESS THAN 12 MONTHS				OVER 12 MONTHS					TOTAL
At June 30, 2019	Fair Value		Unrealized (Losses)		Fair Value		Unrealized (Losses)			Fair Value		Unrealized (Losses)
	(Dollars in Thousands)
Debt securities HTM
Non-bank qualified obligations of states and political subdivisions	$	—	$	—	$	129,424	$	(2,500	)	$	129,424	$	(2,500	)
Mortgage-backed securities	—		—		7,295		(119		)	7,295		(119		)
Total held to maturity securities	$	—	$	—	$	136,719	$	(2,619	)	$	136,719	$	(2,619	)



	LESS THAN 12 MONTHS					OVER 12 MONTHS					TOTAL
At September 30, 2018	Fair Value		Unrealized (Losses)			Fair Value		Unrealized (Losses)			Fair Value		Unrealized (Losses)
	(Dollars in Thousands)
Debt securities HTM
Non-bank qualified obligations of states and political subdivisions	$	5,767	$	(287	)	$	147,368	$	(10,471	)	$	153,135	$	(10,758	)
Mortgage-backed securities	—		—			7,428		(422		)	7,428		(422		)
Total held to maturity securities	$	5,767	$	(287	)	$	154,796	$	(10,893	)	$	160,563	$	(11,180	)

LESS THAN 12 MONTHS OVER 12 MONTHS TOTAL
At September 30, 2017 Fair
Value Unrealized
(Losses) Fair
Value Unrealized
(Losses) Fair
Value Unrealized
(Losses)
(Dollars in Thousands)
Debt securities
Non-bank qualified obligations of states and political subdivisions 280,900
(2,887 ) 5,853
(150 ) 286,753
(3,037 )
Mortgage-backed securities 237,897
(1,625 ) 100,287
(2,098 ) 338,184
(3,723 )
Total debt securities 518,797
(4,512 ) 106,140
(2,248 ) 624,937
(6,760 )
Total available for sale securities $ 518,797
$ (4,512 ) $ 106,140
$ (2,248 ) $ 624,937
$ (6,760 )

Held To Maturity LESS THAN 12 MONTHS OVER 12 MONTHS TOTAL
At December 31, 2017 Fair
Value Unrealized
(Losses) Fair
Value Unrealized
(Losses) Fair
Value Unrealized
(Losses)
(Dollars in Thousands)
Debt securities
Obligations of states and political subdivisions $ 1,261
$ (3 ) $ 2,147
$ (22 ) $ 3,408
$ (25 )
Non-bank qualified obligations of states and political subdivisions 114,999
(1,789 ) 80,813
(1,748 ) 195,812
(3,537 )
Mortgage-backed securities —
—
8,320
(148 ) 8,320
(148 )
Total held to maturity securities $ 116,260
$ (1,792 ) $ 91,280
$ (1,918 ) $ 207,540
$ (3,710 )

LESS THAN 12 MONTHS OVER 12 MONTHS TOTAL
At September 30, 2017 Fair
Value Unrealized
(Losses) Fair
Value Unrealized
(Losses) Fair Value Unrealized
(Losses)
(Dollars in Thousands)
Debt securities
Obligations of states and political subdivisions $ 1,364
$ (6 ) $ 4,089
$ (30 ) $ 5,453
$ (36 )
Non-bank qualified obligations of states and political subdivisions 202,018
(2,783 ) 6,206
(193 ) 208,224
(2,976 )
Mortgage-backed securities 112,456
(1,233 ) —
—
112,456
(1,233 )
Total held to maturity securities $ 315,838
$ (4,022 ) $ 10,295
$ (223 ) $ 326,133
$ (4,245 )

At ~~December 31, 2017,~~June 30, 2019, the investment portfolio included securities with current unrealized losses ~~which~~that have existed for longer than one year. All of these securities are considered to be acceptable credit risks. Because (i) the declines in fair value were due to changes in market interest rates, not in estimated cash flows, ~~and because~~(ii) the Company does not intend ~~to sell these securities (has~~or has not made a decision to ~~sell)~~sell these securities and (iii) it is not more likely than not that the Company will be required to sell the securities before recovery of their amortized cost basis, which may occur at maturity, no other-than-temporary impairment was recorded at ~~December 31, 2017.~~June 30, 2019.

The amortized cost and fair value of debt securities by contractual maturity as of the dates set forth below are shown below. Certain securities have call features which allow the issuer to call the security prior to maturity. Expected maturities may differ from contractual maturities in mortgage-backed securities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Therefore, mortgage-backed securities are not included in the maturity categories in the following maturity summary. The expected maturities of certain housing related municipal securities, ~~Small Business Administration~~SBA and asset-backed securities may differ from contractual maturities because the borrowers may have the right to prepay the obligation. However, certain prepayment penalties may apply.



AFS Securities at Fair Value	AMORTIZED COST		FAIR VALUE
	AMORTIZED COST		FAIR VALUE
At June 30, 2019	(Dollars in Thousands)

Due in one year or less	$	—	$	—
Due after one year through five years	11,336		11,711
Due after five years through ten years	62,337		64,221
Due after ten years	885,263		885,965
	958,936		961,897
Mortgage-backed securities	395,059		395,201
Total securities at fair value	$	1,353,995	$	1,357,098



	AMORTIZED COST		FAIR VALUE
At September 30, 2018	(Dollars in Thousands)

Due in one year or less	$	2,532	$	2,529
Due after one year through five years	41,415		41,504
Due after five years through ten years	352,099		350,143
Due after ten years	1,118,283		1,089,984
	1,514,329		1,484,160
Mortgage-backed securities	378,301		364,065
Common equities and mutual funds⁽¹⁾	3,172		3,800
Total securities at fair value	$	1,895,802	$	1,852,025

⁽¹⁾Equity securities at fair value are included within other assets on the consolidated statement of financial condition at June 30, 2019 and September 30, 2018.



HTM Securities at Fair Value	AMORTIZED COST		FAIR VALUE
	AMORTIZED COST		FAIR VALUE
At June 30, 2019	(Dollars in Thousands)

Due after ten years	$	138,128	$	135,643
	138,128		135,643
Mortgage-backed securities	7,414		7,295
Total held to maturity securities at cost	$	145,542	$	142,938



	AMORTIZED COST		FAIR VALUE
At September 30, 2018	(Dollars in Thousands)
Due after ten years	$	163,893	$	153,135
	163,893		153,135
Mortgage-backed securities	7,850		7,428
Total held to maturity securities at cost	$	171,743	$	160,563

Other investments, at cost, which are included in other assets on the consolidated statement of financial condition, include equity securities without a readily determinable fair value and shares of stock in the Federal Home Loan Bank ("FHLB") of Des Moines. Equity securities without a readily determinable fair value totaled $2.5 million at June 30, 2019 and $2.0 million at September 30, 2018. FHLB of Des Moines stock at June 30, 2019 and September 30, 2018 totaled $17.2 million and $23.4 million, respectively. The decrease in FHLB stock directly correlates with lower short-term borrowings balances at June 30, 2019 compared to September 30, 2018. The Company’s wholly-owned subsidiary, MetaBank, is required by federal law to maintain FHLB stock as a member of FHLB of Des Moines. These equity securities are ‘restricted’ in that they can only be sold back to the respective institution from which they were acquired or another member institution at par. Therefore, FHLB stock is less liquid than other marketable equity securities, and the fair value approximates cost. The Company evaluates impairment for investments held at cost on at least an annual basis based on the ultimate recoverability of the par value. No impairment was recognized for such investments for the nine months ended June 30, 2019.

NOTE 7. RENTAL EQUIPMENT, NET

Rental equipment was as follows as of June 30, 2019 and September 30, 2018.



	June 30, 2019			September 30, 2018
	(Dollars in thousands)
Computers and IT networking equipment	$	38,360		$	53,035
Motor vehicles and other	56,359			43,505
Office furniture and equipment	3,233			3,590
Solar panels and equipment	140,532			57,242
Total	238,484			157,372

Accumulated depreciation	(53,752		)	(50,082		)
Net book value	$	184,732		$	107,290

During the second quarter of fiscal year 2019, an impairment was recorded related to solar panels and equipment. Please refer to Note 3 for further discussion.

Future minimum lease payments receivable on equipment under operating leases was as follows as of June 30, 2019.



	June 30, 2019
	(Dollars in thousands)
Remaining in 2019	$	7,829
2020	26,938
2021	22,527
2022	15,911
2023	13,516
2024 and thereafter	28,309
Total	$	115,030

NOTE 8. GOODWILL AND INTANGIBLE ASSETS

The Company held a total of $307.9 million of goodwill as of June 30, 2019. The recorded goodwill is a result of multiple business combinations that have occurred since fiscal year 2015, the most recent being the merger with Crestmark pursuant to the Crestmark acquisition that closed on August 1, 2018. Goodwill is assessed for impairment at a reporting unit level, which is one level below the operating segments.

The changes in the carrying amount of the Company’s goodwill and intangible assets for the nine months ended June 30, 2019 and 2018 were as follows:



	Payments		Banking		Corporate Services/Other		Total
Goodwill	(Dollars in Thousands)
September 30, 2018	$	87,145	$	216,125	$	—	$	303,270
Acquisitions	—		—		—		—
Measurement Period Adjustments ⁽¹⁾	—		4,671		—		4,671
Impairment	—		—		—		—
June 30, 2019	$	87,145	$	220,796	$	—	$	307,941

September 30, 2017	$	87,145	$	11,578	$	—	$	98,723
Acquisitions	—		—		—		—
Impairment	—		—		—		—
June 30, 2018	$	87,145	$	11,578	$	—	$	98,723

⁽¹⁾The Company recognized measurement period adjustments on provisional goodwill during the second and third fiscal quarters of 2019 related to the Crestmark acquisition. Refer to Note 3. Acquisitions.



	Trademark(1)			Non-Compete(2)			Customer Relationships(3)			All Others(4)			Total
Intangibles	(Dollars in Thousands)
Balance as of September 30, 2018	$	12,987		$	1,297		$	48,455		$	7,980		$	70,719
Acquisitions during the period	—			—			—			100			100
Amortization during the period	(771		)	(353		)	(12,504		)	(724		)	(14,352		)
Write-offs during the period	—			—			—			(314		)	(314		)
Balance as of June 30, 2019	$	12,216		$	944		$	35,951		$	7,042		$	56,153

Gross carrying amount	$	14,624		$	2,480		$	82,088		$	10,688		$	109,880
Accumulated amortization	(2,408		)	(1,536		)	(35,889		)	(2,987		)	(42,820		)
Accumulated impairment	—			—			(10,248		)	(659		)	(10,907		)
Balance as of June 30, 2019	$	12,216		$	944		$	35,951		$	7,042		$	56,153

⁽¹⁾Book amortization period of 5-15 years. Amortized using the straight line and accelerated methods.

⁽²⁾ Book amortization period of 3-5 years. Amortized using the straight line method.

⁽³⁾ Book amortization period of 10-30 years. Amortized using the accelerated method.

⁽⁴⁾ Book amortization period of 3-20 years. Amortized using the straight line method.

Available For Sale AMORTIZED
COST
FAIR
VALUE

At December 31, 2017 (Dollars in Thousands)

Due in one year or less $ 100
$ 100
Due after one year through five years 55,485
56,375
Due after five years through ten years 452,422
462,903
Due after ten years 869,255
871,033
1,377,262
1,390,411
Mortgage-backed securities 606,338
600,112
Common equities and mutual funds 1,298
1,829
Total available for sale securities $ 1,984,898
$ 1,992,352



	Trademark(1)			Non-Compete(2)			Customer Relationships(3)			All Others(4)			Total
Intangibles	(Dollars in Thousands)
Balance as of September 30, 2017	$	10,051		$	1,782		$	31,707		$	8,638		$	52,178
Acquisitions during the period	—			—			—			85			85
Amortization during the period	(477		)	(367		)	(4,548		)	(685		)	(6,077		)
Write-offs during the period	—			—			—			(88		)	(88		)
Balance as of June 30, 2018	$	9,574		$	1,415		$	27,159		$	7,950		$	46,098

Gross carrying amount	$	10,990		$	2,480		$	57,810		$	10,587		$	81,867
Accumulated amortization	(1,416		)	(1,065		)	(20,403		)	(2,020		)	(24,904		)
Accumulated impairment	—			—			(10,248		)	(617		)	(10,865		)
Balance as of June 30, 2018	$	9,574		$	1,415		$	27,159		$	7,950		$	46,098

⁽¹⁾ Book amortization period of 15 years. Amortized using the straight line and accelerated methods.

AMORTIZED
COST
FAIR
VALUE
At September 30, 2017 (Dollars in Thousands)

Due in one year or less $ —
$ —
Due after one year through five years 36,586
37,674
Due after five years through ten years 347,831
358,198
Due after ten years 705,963
709,660
1,090,380
1,105,532
Mortgage-backed securities 588,918
586,454
Common equities and mutual funds 1,009
1,445
Total available for sale securities $ 1,680,307
$ 1,693,431
⁽²⁾ Book amortization period of 3 years. Amortized using the straight line method.

⁽³⁾ Book amortization period of 10-30 years. Amortized using the accelerated method.

Held To Maturity AMORTIZED
COST
FAIR
VALUE

At December 31, 2017 (Dollars in Thousands)

Due in one year or less $ 2,674
$ 2,662
Due after one year through five years 11,864
11,895
Due after five years through ten years 27,919
28,206
Due after ten years 192,567
189,061
235,024
231,824
Mortgage-backed securities 8,468
8,320
Total held to maturity securities $ 243,492
$ 240,144
⁽⁴⁾ Book amortization period of 3-20 years. Amortized using the straight line method.

AMORTIZED
COST
FAIR
VALUE
At September 30, 2017 (Dollars in Thousands)
Due in one year or less $ 1,483
$ 1,480
Due after one year through five years 17,926
18,160
Due after five years through ten years 144,996
147,832
Due after ten years 285,435
284,257
449,840
451,729
Mortgage-backed securities 113,689
112,456
Total held to maturity securities $ 563,529
$ 564,185

~~NOTE 6. COMMITMENTS AND CONTINGENCIES~~

~~In the normal course~~The estimated amortization expense of ~~business, the Bank makes various commitments to extend credit~~intangible assets assumes no activities, such as acquisitions, which ~~are not reflected~~would result in additional amortizable intangible assets. Estimated amortization expense of intangible assets in the ~~accompanying consolidated financial statements.~~remaining three months of fiscal 2019 and subsequent fiscal years is as follows:



	(Dollars in Thousands)
Remaining in 2019	$	3,357
2020	10,986
2021	8,527
2022	6,402
2023	5,084
2024	4,367
Thereafter	17,430
Total anticipated intangible amortization	$	56,153

At December 31, 2017 and September 30, 2017, unfunded loan commitments approximated $349.5 million and $233.2 million, respectively, excluding undisbursed portions of loans in process. Commitments, which are disbursed subject to certain limitations, extend over various periods of time. Generally, unused commitments are canceled upon expiration of the commitment term as outlined in each individual contract.

The Company ~~had~~tests intangible assets for impairment at least annually or more often if conditions indicate a possible impairment. There was $0.1 million in impairments to intangible assets during the nine months ended June 30, 2019 and no ~~commitments~~impairments to ~~purchase~~intangible assets during the three months ended June 30, 2019 or ~~sell securities at December 31, 2017~~the three and nine months ended June 30, 2018.

NOTE 9. STOCKHOLDERS' EQUITY

Retirement of Treasury Stock

On June 25, 2019, Meta retired $5.0 million, or 114,558 shares, of common stock held in treasury. The Company accounts for the retirement of repurchased shares, including treasury stock, using the par value method under which the repurchase price is charged to paid-in capital up to the amount of the original proceeds of those shares. When the repurchase price is greater than the original issue proceeds, the excess is charged to retained earnings.

Repurchase of Common Stock

On March 26, 2019, Meta announced a share repurchase program of up to 2.0 million of its outstanding shares of common stock, or approximately 5% of its outstanding shares. The program became effective on May 1, 2019 and is scheduled to expire on September 30, ~~2017.~~2021. During the third quarter of fiscal 2019, Meta repurchased under the program a total of $43.0 million, or 1,574,734 shares of its common stock, at an average price of $27.31 per share. Under the repurchase program, repurchased shares were retired and designated as authorized but unissued shares, and the value of the shares reduced retained earnings. As of June 30, 2019, the remaining number of shares available for repurchase under this program was 425,266 shares of common stock.

~~The exposure to credit loss in~~For the ~~event~~nine months ended June 30, 2019, and 2018, the Company also repurchased 90,264 and 17,155 shares, or $3.0 million and $1.4 million, of non-performance by other parties to financial instruments for commitments to extend credit is represented by the contractual amount of those instruments. The same credit policies and collateral requirements are used in making commitments and conditional obligations as are used for on-balance-sheet instruments.

Since certain commitments to make loans and to fund lines of credit and loans in process expire without being used, the amount does not necessarily represent future cash commitments. In addition, commitments used to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract.

~~Legal Proceedings~~

The Bank was served on April 15, 2013, with a lawsuit captioned Inter National Bank v. NetSpend Corporation, MetaBank, BDO USA, LLP d/b/a BDO Seidman, Cause No. C-2084-12-I filed in the District Court of Hidalgo County, Texas. The Plaintiff’s Second Amended Original Petition and Application for Temporary Restraining Order and Temporary Injunction adds both MetaBank and BDO Seidman to the original causes of action against NetSpend. NetSpend acts as a prepaid card program manager and processor for both Inter National Bank ("INB") and MetaBank. According to the Petition, NetSpend has informed INB that the depository accounts at INB for the NetSpend program supposedly contained $10.5 million less than they should. INB alleges that NetSpend has breached its fiduciary duty by making affirmative misrepresentations to INB about the safety and stability of the program, and by failing to timely disclose the nature and extent of any alleged shortfallcommon stock, respectively, in settlement of ~~funds related to cardholder activity and~~employee tax withholding obligations due upon the ~~nature and extent~~vesting of NetSpend’s systemic deficiencies in its accounting and settlement processing procedures. To the extent that an accounting reveals that there is an actual shortfall, INB alleges that MetaBank may be liable for portions or all of said sum due to the fact that funds have been transferred from INB to MetaBank, and thus MetaBank would have been unjustly enriched. The Bank is vigorously contesting this matter. In January 2014, NetSpend was granted summary judgment in this matter which is under appeal. Because the theory of liability against both NetSpend and the Bank is the same, the Bank views the NetSpend summary judgment as a positive in support of our position. An estimate of a range of reasonably possible loss cannot be made at this stage of the litigation because discovery is still being conducted.restricted stock.

The Bank was served, on October 14, 2016, with a lawsuit captioned Card Limited, LLC v. MetaBank dba Meta Payment Systems, Civil No. 2:16-cv-00980 in the United States District Court for the District of Utah. This action was initiated by a former prepaid program manager of the Bank, which was terminated by the Bank in fiscal year 2016. Card Limited alleges that after all of the programs were wound down, there were two accounts with a positive balance to which they are entitled. The Bank’s position is that Card Limited is not entitled to the funds contained in said accounts. The total amount to which Card Limited claims it is entitled is $4,001,025. The Bank intends to vigorously defend this claim. An estimate of a range of reasonably possible loss cannot be made at this stage of the litigation because discovery is still being conducted.

NOTE 7.10. STOCK COMPENSATION

The Company maintains the amended and restated Meta Financial Group, Inc. 2002 Omnibus Incentive Plan, as amended (the "2002 Omnibus Incentive Plan"), which, among other things, provides for the awarding of stock options and nonvested (restricted) shares to certain officers and directors of the Company. Awards are granted by the Compensation Committee of the Board of Directors based on the performance of the award recipients or other relevant factors.

Compensation expense for share-based awards is recorded over the vesting period at the fair value of the award at the time of the grant. The exercise price of options or fair value of non-vested (restricted) shares granted under the Company’s incentive plan is equal to the fair market value of the underlying stock at the grant date. The Company has elected, with the adoption of ASU 2016-09, to record forfeitures as they occur.

The following tables show the activity of options and nonvested (restricted) shares granted, exercised, or forfeited under the 2002 Omnibus Incentive Plan for the ~~three~~nine months ended ~~December 31, 2017:~~June 30, 2019:



	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Yrs)	Aggregate Intrinsic Value
	(Dollars in Thousands, Except Per Share Data ⁽¹⁾)
Options outstanding, September 30, 2018	155,961		$	8.48	1.78	$	2,974
Granted	—		—		—	—
Exercised	(48,678	)	9.07		—	802
Forfeited or expired	(3,027	)	10.60		—	33
Options outstanding, June 30, 2019	104,256		$	8.14	1.22	$	2,075

Options exercisable, June 30, 2019	104,256		$	8.14	1.22	$	2,075

Number
of
Shares
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Contractual
Term (Yrs)
Aggregate
Intrinsic
Value
(Dollars in Thousands, Except Per Share Data)
Options outstanding, September 30, 2017 75,757
$ 22.62
2.28
$ 4,225
Granted —
—
—
—
Exercised —
—
—
—
Forfeited or expired —
—
—
—
Options outstanding, December 31, 2017 75,757
$ 22.62
2.03
$ 5,305

Options exercisable, December 31, 2017 75,757
$ 22.62
2.03
$ 5,305



	Number of Shares		Weighted Average Fair Value at Grant
(Dollars in Thousands, Except Per Share Data ⁽¹⁾)
Nonvested (restricted) shares outstanding, September 30, 2018	1,005,813		$	29.89
Granted	296,302		24.84
Vested	(352,218	)	26.77
Forfeited or expired	(2,679	)	26.14
Nonvested (restricted) shares outstanding, June 30, 2019	947,218		$	29.48

⁽¹⁾ All share and per share data has been adjusted to reflect the 3-for-1 forward stock split effected by the Company on October 4, 2018.

Number
of
Shares
Weighted
Average
Fair Value
at Grant
(Dollars in Thousands, Except Per Share Data)
Nonvested (restricted) shares outstanding, September 30, 2017 304,526
$ 86.96
Granted 42,181
85.03
Vested (61,161 ) 83.55
Forfeited or expired —
—
Nonvested (restricted) shares outstanding, December 31, 2017 285,546
$ 87.40

During the first and second quarters of fiscal 2017, stock awards were granted to the Company's three highest paid executive officers in connection with their signing of employment agreements with the Company. These stock awards vest over eight years.

At ~~December 31, 2017,~~June 30, 2019, stock-based compensation expense not yet recognized in income totaled ~~$17.2~~$13.5 million, which is expected to be recognized over a weighted average remaining period of ~~3.68~~3.09 years.

NOTE 11. INCOME TAXES

The Company recorded an income tax benefit of $3.2 million for the nine months ended June 30, 2019, resulting in an effective tax rate of (4.20%), compared to an income tax expense of $12.7 million, or an effective tax rate of 22.90%, for the nine months ended June 30, 2018. The Company’s effective tax rate is lower than the U.S. statutory rate of 21% primarily because of the anticipated effect of investment tax credits during fiscal year 2019. The Company’s effective tax rate in the future will depend in part on actual investment tax credits earned as part of its financing of solar energy projects.

The table below compares the income tax expense components for the periods presented.



Nine Months Ended June 30,	2019			2018
(Dollars in Thousands)
Provision at statutory rate	$	15,449		$	13,639
Tax-exempt income	(2,360		)	(5,506		)
State income taxes	3,243			2,314
Interim period effective rate adjustment	1,397			(1,070		)
Tax credit investments, net - federal	(22,484		)	—
Tax Reform rate adjustment	—			3,635
IRC 162(m) nondeductible compensation	1,612			—
Other, net	(101		)	(304		)
Income tax expense	$	(3,244	)	$	12,708
Effective tax rate	(4.2		%)	22.9		%

NOTE ~~8. SEGMENT INFORMATION~~12. COMMITMENTS AND CONTINGENCIES

In the normal course of business, the Bank makes various commitments to extend credit that are not reflected in the accompanying Consolidated Financial Statements.

At June 30, 2019 and September 30, 2018, unfunded loan commitments approximated $1.01 billion and $748.8 million, respectively, excluding undisbursed portions of loans in process. Commitments, which are disbursed subject to certain limitations, extend over various periods of time. Generally, unused commitments are canceled upon expiration of the commitment term as outlined in each individual contract.

The Company had $1.7 million and $1.4 million in commitments to purchase securities at June 30, 2019 and September 30, 2018, respectively. The Company had no commitments to sell securities at June 30, 2019 or September 30, 2018.

The exposure to credit loss in the event of non-performance by other parties to financial instruments for commitments to extend credit is represented by the contractual amount of those instruments. The same credit policies and collateral requirements are used in making commitments and conditional obligations as are used for on-balance-sheet instruments. At June 30, 2019 and at September 30, 2018, the Company had an allowance for credit losses on off-balance sheet credit exposures of $0.1 million. This amount is maintained as a separate liability account within other liabilities.

As disclosed in Note 3. Acquisitions, the Company continues to monitor the bankruptcy proceedings and federal investigations of DC Solar. As of the date of the filing of this quarterly report, the Company has not accrued for any additional loss contingencies related to DC Solar as of June 30, 2019.

~~An operating segment is generally defined~~Legal Proceedings

The Bank was served, on October 14, 2016, with a lawsuit captioned Card Limited, LLC v. MetaBank dba Meta Payment Systems, Civil No. 2:16-cv-00980 in the United States District Court for the District of Utah. This action was initiated by a former prepaid program manager of the Bank, which was terminated by the Bank in fiscal year 2016. Card Limited alleges that after all of the programs were wound down, there were two accounts with a positive balance to which they are entitled. The Bank’s position is that Card Limited is not entitled to the funds contained in said accounts. The total amount to which Card Limited claims it is entitled is $4.0 million. The Bank intends to vigorously defend this claim. An estimate of a ~~business~~range of reasonably possible loss cannot be made at this stage of the litigation because discovery is still being conducted.

On February 9, 2018, the Bank’s AFS/IBEX division filed a lawsuit in the United States District Court for the Eastern District of New York captioned AFS/IBEX, a division of MetaBank v. Aegis Managing Agency Limited ("AMA"), Aegis Syndicate 1225 (together with AMA, the "Aegis defendants"), CRC Insurance Services, Inc. ("CRC"), and Transportation Underwriters, Inc. The suit was filed against commercial insurance underwriters and brokers that facilitated the issuance of commercial insurance policies to Red Hook Construction Group-II, LLC (“Red Hook”). The Bank’s position is that both CRC and Transportation Underwriters represented to the Bank that, upon cancellation of the insurance policies prior to their stated terms, any unearned premiums would be refunded. The Bank then provided insurance premium financing to Red Hook, and Red Hook executed a written premium finance agreement pursuant to which ~~discrete financial information~~Red Hook assigned its rights to any unearned premiums to the Bank. After the policies were cancelled, the Aegis defendants failed to return the unearned insurance premiums totaling just over $1.6 million owed to the Bank under the insurance policies and the premium finance agreement. The Bank is ~~available~~seeking recovery of all amounts to which it is entitled at law or equity and ~~whose results are reviewed~~intends to vigorously pursue its claims against the defendants.

The Bank was served on December 24, 2018, with a lawsuit captioned The Ohio Valley Bank Company v. MetaBank dba Refund Advantage, Case No. 18 CV 134 in the Court of Common Pleas, Gallia County, Ohio. This action alleges that MetaBank breached a contract with The Ohio Valley Bank Company by terminating the ~~chief operating decision-maker. Operating segments are aggregated into reportable segments if certain criteria are met.~~

contract before the term expired, resulting in over $3.0 million in damages. The Bank intends to vigorously defend this claim. The Company ~~reports~~has established an accrual for this related claim.

From time to time, the Company or its subsidiaries are subject to certain legal proceedings and claims in the ordinary course of business. Accruals have been recorded when the outcome is probable and can be reasonably estimated. While management currently believes that the ultimate outcome of these proceedings will not have a material adverse effect on the Company’s financial position or its results of operations, ~~through the following three business segments:~~ ~~Payments, Banking,~~legal proceedings are inherently uncertain and ~~Corporate Services/Other. Certain shared services, including the investment portfolio, wholesale deposits and borrowings, are included in Corporate Services/Other. National Lending and Community Banking are reported~~unfavorable resolution of some or all of these matters could, individually or in the ~~Banking segment. MPS, Refund Advantage, EPS Financial ("EPS"), SCS,~~aggregate, have a material adverse effect on the Company’s and ~~other tax~~its subsidiaries’ respective businesses, ~~are reported in the~~ ~~Payments~~ ~~segment.~~financial condition or results of operations.

~~The~~NOTE 13. REVENUE FROM CONTRACTS WITH CUSTOMERS

On October 1, 2018, the Company ~~reclassified goodwill, intangibles, and related amortization expenses during fiscal year 2017 from the~~

~~Corporate Services / Other~~ ~~segment to~~ ~~Payments~~ ~~and~~ ~~Banking~~ ~~based~~adopted Topic 606 on ~~how annual impairment testing is performed.~~a modified retrospective basis. Prior period amounts have ~~also~~not been ~~reclassified~~adjusted to ~~conform~~reflect the adoption of Topic 606 and continue to be reported in accordance with the Company’s historical accounting policies. The impact of the Company’s adoption of Topic 606 was limited to the ~~current year presentation.~~MPS division within the Payments reporting segment. Upon adoption, Meta recorded a cumulative-effect adjustment that increased retained earnings by $1.5 million, net of tax.

Topic 606 applies to all contracts with customers unless such revenue is specifically addressed under existing guidance. The ~~following tables present segment data for~~table below presents the ~~Company for~~Company’s revenue by operating segment. For additional descriptions of the ~~three months ended December 31, 2017~~Company’s operating segments, including additional financial information and ~~2016, respectively.~~the underlying management accounting process, see Note 15. Segment Reporting to the Consolidated Financial Statements.

Payments Banking Corporate
Services/Other Total
Three Months Ended December 31, 2017
Interest income $ 4,669
$ 16,478
$ 9,710
$ 30,857
Interest expense —
881
3,780
4,661
Net interest income 4,669
15,597
5,930
26,196
Provision for loan losses 1,017
51
—
1,068
Non-interest income 28,101
1,485
(318 ) 29,268
Non-interest expense 26,934
6,568
10,540
44,042
Income (loss) before income tax expense (benefit) 4,819
10,463
(4,928 ) 10,354

Total goodwill 87,145
11,578
—
98,723
Total assets 380,442
1,478,693
3,558,828
5,417,963
Total deposits 2,768,736
236,494
508,415
3,513,645



(Dollars in thousands)	Payments					Banking				Corporate Services/Other						Consolidated Company
Three Months Ended June 30,	2019		2018			2019		2018		2019			2018			2019		2018
Net interest income⁽¹⁾	$	15,232	$	6,298		$	60,043	$	18,077	$	(8,307	)	$	4,036		$	66,968	$	28,411
Noninterest income:
Refund transfer product fees	6,697		7,358			—		—		—			—			6,697		7,358
Tax advance product fees⁽¹⁾	34		(46		)	—		—		—			—			34		(46		)
Card fees	19,445		22,717			92		90		—			—			19,537		22,807
Rental income⁽¹⁾	4		—			9,382		—		—			—			9,386		—
Loan and lease fees⁽¹⁾	—		—			1,012		1,111		—			—			1,012		1,111
Bank-owned life insurance⁽¹⁾	—		—			—		—		628			633			628		633
Deposit fees	1,932		1,027			403		107		—			—			2,335		1,134
Gain (loss) on sale of securities available-for-sale, net⁽¹⁾	—		—			—		—		440			(22		)	440		(22		)
Gain on sale of loans and leases⁽¹⁾	—		—			1,913		—		—			—			1,913		—
Other income⁽¹⁾	290		251			781		10		737			(11		)	1,808		250
Total noninterest income	28,402		31,307			13,583		1,318		1,805			600			43,790		33,225
Revenue	$	43,634	$	37,605		$	73,626	$	19,395	$	(6,502	)	$	4,636		$	110,758	$	61,636

Payments Banking Corporate
Services/Other Total
Three Months Ended December 31, 2016
Interest income $ 2,912
$ 10,754
$ 8,909
$ 22,575
Interest expense —
544
2,198
2,742
Net interest income 2,912
10,210
6,711
19,833
Provision for loan losses 331
512
—
843
Non-interest income 19,024
1,072
(747 ) 19,349
Non-interest expense 22,080
5,845
8,828
36,753
Income (loss) before income tax expense (benefit) (475 ) 4,925
(2,864 ) 1,586

Total goodwill 87,320
11,578
—
98,898
Total assets 239,804
1,118,429
2,855,096
4,213,329
Total deposits 2,435,530
225,182
1,002,425
3,663,137

~~NOTE 9. NEW ACCOUNTING PRONOUNCEMENTS~~

~~Accounting Standards Update (“ASU”) No. 2016-13,~~ ~~Financial Instruments - Credit Losses (Topic 326): Measurement~~⁽¹⁾These revenues are not within the scope of ~~Credit Losses on Financial Instruments~~

This ASU requires organizations to replace the incurred loss impairment methodology with a methodology reflecting expected credit losses with considerations for a broader range of reasonable and supportable information to substantiate credit loss estimates. This ASU is effective for annual reporting periods beginning after December 15, 2019. The Company is currently undertaking a data analysis and is taking measures so that its systems capture data applicableTopic 606. Additional details are included in other footnotes to the ~~standard. In addition, the Company is undergoing a readiness assessment with an external consultant that began in the first quarter~~accompanying financial statements. The scope of ~~fiscal 2018.~~

~~ASU No. 2016-04,~~ ~~Extinguishment of Liabilities (Subtopic 405-20): Recognition of Breakage for Certain Prepaid Stored-Value Products~~

~~This ASU requires organizations to derecognize the deposit liabilities for unredeemed prepaid stored-value products (i.e. – breakage) consistent with breakage guidance in~~ Topic 606 ~~Revenue from Contracts with Customers.~~ ~~This ASU is effective~~explicitly excludes net interest income as well as many other revenues for ~~annual reporting periods beginning after December 15, 2017, and the Company expects the impact to the consolidated~~ financial ~~statements to be minimal.~~

~~ASU No. 2016-02,~~ ~~Leases (Topic 842): Amendments to the Leases Analysis~~

This ASU requires organizations to recognize lease assets and lease liabilities on the balance sheet, along with disclosing key information about leasing arrangements. This update is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period, and the Company has finalized its initial assessment of the ASU and expects that the standard will be immaterial to the consolidated financial statements with the Company's current leases.

~~ASU No. 2014-09,~~ ~~Revenue Recognition – Revenue from Contracts with Customers (Topic 606)~~

This ASU provides guidance on when to recognize revenue from contracts with customers. The objective of this ASU is to eliminate diversity in practice related to this topic and to provide guidance that would streamline and enhance revenue recognition requirements. The ASU defines five steps to recognize revenue, including identify the contract with a customer, identify the performance obligations in the contract, determine a transaction price, allocate the transaction price to the performance obligations and then recognize the revenue when or as the entity satisfies a performance obligation. This update is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period, and the Company is currently assessing all income streams, including different prepaid card programs so as to ascertain how breakage will be recognized under the standard.

~~ASU 2015-17,~~ ~~Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes~~

~~This ASU requires entities with a classified balance sheet to present all deferred tax~~ assets and liabilities, ~~as noncurrent. This update was effective for annual~~including loans, leases, and ~~interim periods in fiscal years beginning after December 15, 2016, and did not have an impact on the consolidated financial statements.~~securities.

~~ASU 2016-15,~~ ~~Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments~~

This ASU addresses eight classification issues related to the statement of cash flows including: debt prepayment or debt extinguishment costs, settlement of zero-coupon bonds, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, proceeds from the settlement of corporate-owned life insurance policies, including bank-owned life insurance policies, distributions received from equity method investees, beneficial interests in securitization transactions, and separately identifiable cash flows and application of the predominance principle. This update is effective for annual and interim periods in fiscal years beginning after December 15, 2017, and the Company expects the impact to the consolidated financial statements to be minimal.

~~ASU 2017-08,~~ ~~Receivables - Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities~~

This ASU requires entities to shorten the amortization period for certain callable debt securities held at a premium. Specifically, the amendments in this update require the premium to be amortized to the earliest call date. The amendments do not require an accounting change for securities held at a discount; the discount continues to be amortized to maturity. The amendments in this update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018, and is not expected to have a material impact on the consolidated financial statements.

~~ASU 2017-12,~~ ~~Receivables - Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities~~

This ASU targets improving the accounting treatment for hedging activities and provides more flexibility in defining what can be hedged, while reducing earnings volatility due to ineffective hedges, and minimizing documentation requirements. The ASU also offers the ability to reclassify prepayable debt securities from HTM to AFS and subsequently sell the securities, as long as the securities are eligible to be hedged. This update is effective for annual periods and interim periods in fiscal years beginning after December 15, 2018, with early adoption permitted in any interim period or fiscal year before the effective date. The Company early adopted ASU 2017-12 as of October 1, 2017. The Company reclassified certain prepayable debt securities from HTM to AFS during the first quarter of fiscal 2018. See Note 5 to the Notes to Condensed Consolidated Financial Statements for additional information on the securities reclassed.

~~ASU 2016-01,~~ ~~Financial Instruments (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities~~

This ASU allows equity investments that do not have a readily determinable fair value to be remeasured at fair value either upon the occurrence of an observable price change or upon identification of an impairment. The ASU also requires enhanced disclosure about those investments. The ASU simplifies the impairment assessment of equity investments without readily determinable fair values by requiring assessment for impairment qualitatively at each reporting period. Entities that are required to disclose the fair value of financial instruments measured at amortized cost on the balance sheet are required to use the exit price notion consistent with Topic 820, ~~Fair Value Measuremen~~t. This update will be effective for annual and interim periods in fiscal years beginning after December 15, 2017, with early adoption permitted. The Company is currently evaluating the potential impact of ASU 2016-01 on its consolidated financial statements.

~~NOTE 10. FAIR VALUE MEASUREMENTS~~

~~Accounting Standards Codification (“ASC”) 820,~~ ~~Fair Value Measurements~~ defines fair value, establishes a framework for measuring the fair value of assets and liabilities using a hierarchy system and requires disclosures about fair value measurement. It clarifies that fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the market in which the reporting entity transacts.

~~The fair value hierarchy is as follows:~~

~~Level 1 Inputs~~ ~~– Valuation is based upon quoted prices for identical instruments traded in active markets that the Company has the ability to access at measurement date.~~

~~Level 2 Inputs~~ – Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques for which significant assumptions are observable in the market.

~~Level 3 Inputs~~ – Valuation is generated from model-based techniques that use significant assumptions not observable in the market and are used only to the extent that observable inputs are not available. These unobservable assumptions reflect the Company’s own estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include use of option pricing models, discounted cash flow models and similar techniques.

~~Securities Available for Sale and Held to Maturity~~. Securities available for sale are recorded at fair value on a recurring basis and securities held to maturity are carried at amortized cost. Fair value measurement is based upon quoted prices, if available. If quoted prices are not available, fair values are measured using an independent pricing service. For both Level 1 and Level 2 securities, management uses various methods and techniques to corroborate prices obtained from the pricing service, including but not limited to reference to dealer or other market quotes, and by reviewing valuations of comparable instruments. The Company’s Level 1 securities include equity securities and mutual funds. Level 2 securities include U.S. Government agency and instrumentality securities, U.S. Government agency and instrumentality mortgage-backed securities, municipal bonds and corporate debt securities. The Company had no Level 3 securities at December 31, 2017 or September 30, 2017.

The fair values of securities are determined by obtaining quoted prices on nationally recognized securities exchanges (Level 1 inputs), or valuation based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model based valuation techniques for which significant assumptions are observable in the market (Level 2 inputs). The Company considers these valuations supplied by a third party provider which utilizes several sources for valuing fixed-income securities. These sources include Interactive Data Corporation, Reuters, Standard and Poor’s, Bloomberg Financial Markets, Street Software Technology, and the third party provider’s own matrix and desk pricing. The Company, no less than annually, reviews the third party’s methods and source’s methodology for reasonableness and to ensure an understanding of inputs utilized in determining fair value. Sources utilized by the third party provider include but are not limited to pricing models that vary based by asset class and include available trade, bid, and other market information. This methodology includes but is not limited to broker quotes, proprietary models, descriptive terms and conditions databases, as well as extensive quality control programs. Monthly, the Company receives and compares prices provided by multiple securities dealers and pricing providers to validate the accuracy and reasonableness of prices received from the third party provider. On a monthly basis, the Investment Committee reviews mark-to-market changes in the securities portfolio for reasonableness.

The following table summarizes the fair values of securities available for sale and held to maturity at December 31, 2017 and September 30, 2017. Securities available for sale are measured at fair value on a recurring basis, while securities held to maturity are carried at amortized cost in the consolidated statements of financial condition.

Fair Value At December 31, 2017
Available For Sale Held to Maturity
(Dollars in Thousands) Total Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3
Debt securities
Small business administration securities 56,948
—
56,948
—
—
—
—
—
Obligations of states and political subdivisions 14,610
—
14,610
—
4,342
—
4,342
—
Non-bank qualified obligations of states and political subdivisions 1,223,030
—
1,223,030
—
227,482
—
227,482
—
Asset-backed securities 95,823
—
95,823
—
—
—
—
—
Mortgage-backed securities 600,112
—
600,112
—
8,320
—
8,320
—
Total debt securities 1,990,523
—
1,990,523
—
240,144
—
240,144
—
Common equities and mutual funds 1,829
1,829
—
—
—
—
—
—
Total securities $ 1,992,352
$ 1,829
$ 1,990,523
$ —
$ 240,144
$ —
$ 240,144
$ —

Fair Value At September 30, 2017
Available For Sale Held to Maturity
(Dollars in Thousands) Total Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3
Debt securities
Small business administration securities 57,871
—
57,871
—
—
—
—
—
Obligations of states and political subdivisions —
—
—
—
19,368
—
19,368
—
Non-bank qualified obligations of states and political subdivisions 950,829
—
950,829
—
432,361
—
432,361
—
Asset-backed securities 96,832
—
96,832
—
—
—
—
—
Mortgage-backed securities 586,454
—
586,454
—
112,456
—
112,456
—
Total debt securities 1,691,986
—
1,691,986
—
564,185
—
564,185
—
Common equities and mutual funds 1,445
1,445
—
—
—
—
—
—
Total securities $ 1,693,431
$ 1,445
$ 1,691,986
$ —
$ 564,185
$ —
$ 564,185
$ —



(Dollars in thousands)	Payments				Banking						Corporate Services/Other						Consolidated Company
Nine Months Ended June 30,	2019		2018		2019			2018			2019			2018			2019			2018
Net interest income⁽¹⁾	$	38,238	$	15,900	$	168,107		$	49,794		$	(7,755	)	$	16,318		$	198,590		$	82,012
Noninterest income:
Refund transfer product fees	38,559		41,353		—			—			—			—			38,559			41,353
Tax advance product fees⁽¹⁾	34,757		35,739		—			—			—			—			34,757			35,739
Card fees	61,678		74,662		261			248			—			—			61,939			74,910
Rental income⁽¹⁾	5		—		30,162			—			—			—			30,167			—
Loan and lease fees⁽¹⁾	—		—		3,185			3,445			—			—			3,185			3,445
Bank-owned life insurance⁽¹⁾	—		—		—			—			1,901			1,952			1,901			1,952
Deposit fees	5,177		2,634		1,188			330			—			—			6,365			2,964
Gain (loss) on sale of securities available-for-sale, net⁽¹⁾	—		—		—			—			649			(1,198		)	649			(1,198		)
Gain on sale of loans and leases⁽¹⁾	—		—		3,865			—			—			—			3,865			—
Loss on foreclosed real estate⁽¹⁾	—		—		(185		)	(19		)	—			—			(185		)	(19		)
Other income⁽¹⁾	804		694		3,323			40			1,236			32			5,363			766
Total noninterest income	140,980		155,082		41,799			4,044			3,786			786			186,565			159,912
Revenue	$	179,218	$	170,982	$	209,906		$	53,838		$	(3,969	)	$	17,104		$	385,155		$	241,924

⁽¹⁾These revenues are not within the scope of Topic 606. Additional details are included in other footnotes to the accompanying financial statements. The scope of Topic 606 explicitly excludes net interest income as well as many other revenues for financial assets and liabilities, including loans, leases, and securities.

Following is a discussion of key revenues within the scope of Topic 606. The Company provides services to customers that have related performance obligations that must be completed to recognize revenue. Revenues are generally recognized immediately upon the completion of the service or over time as services are performed. Any services performed over time generally require that the Company renders services each period, therefore the Company measures progress in completing these services based upon the passage of time. Revenue from contracts with customers did not generate significant contract assets and liabilities.

Refund Transfer Product Fees

Refund transfer fees are specific to the tax products offered by Refund Advantage and EPS. These fees are for products, services such as payment processing, and product referral commissions. Software partner fees paid and/or incurred are recorded on a net basis. The Company’s obligation for product fees and commissions is satisfied at the time of the product delivery and obligation for payment processing is satisfied at the time of processing. The transaction price for such activity is based upon stand-alone fees within the terms and conditions. As of June 30, 2019, there were no receivables related to refund transfer fees, which reflect earned revenue with unconditional rights to payment for product fee income, while as of September 30, 2018, there were $827,039 of such receivables. All refund transfer fees are recorded within the Payments reporting segment.

~~Loans.~~Card Fees

Card fees relate to MPS, retail bank, Refund Advantage and EPS products. These fees are for products and services such as card activation, product support, processing, and servicing. The Company does not record loans at fair value on a recurring basis. However, if a loan is considered impaired, an allowance for loan losses is established. Once a loan is identified as individually impaired, management measures impairment in accordance with ASC 310, ~~Receivables~~.

~~The following table summarizes~~earns these fees based upon the ~~assets of the Company that were measured at fair value in the consolidated statements of financial condition on a non-recurring basis as of December 31, 2017 and September 30, 2017.~~

Fair Value At December 31, 2017
(Dollars in Thousands) Total Level 1 Level 2 Level 3
Foreclosed Assets, net 128
—
—
128
Total $ 128
$ —
$ —
$ 128

Fair Value At September 30, 2017
(Dollars in Thousands) Total Level 1 Level 2 Level 3
Foreclosed Assets, net 292
292
Total $ 292
$ —
$ —
$ 292

Quantitative Information About Level 3 Fair Value Measurements
(Dollars in Thousands) Fair Value at
December 31, 2017 Fair Value at
September 30, 2017 Valuation
Technique Unobservable Input Range of Inputs
Foreclosed Assets, net $ 128
292
Market approach
Appraised values ⁽¹⁾
4.00 - 10.00%


⁽¹⁾	~~The Company generally relies on external appraisers to develop this information. Management reduced the appraised value by estimating selling costs in a range of~~ 4% to ~~10%~~.

The following table discloses the Company’s estimated fair value amounts of its financial instruments as of the dates set forth below. It is management’s belief that the fair values presented below are reasonable based on the valuation techniques and data available to the Company as of December 31, 2017 and September 30, 2017, as more fully described below. The operations of the Company are managed from a going concern basis and not a liquidation basis. As a result, the ultimate value realized for the financial instruments presented could be substantially different when actually recognized over time through the normal course of operations. Additionally, a substantial portion of the Company’s inherent value is the Bank’s capitalization and franchise value. Neither of these components have been given consideration in the presentation of fair values below.

~~The following presents the carrying amount and estimated fair value of the financial instruments held by the Company at December 31, 2017 and September 30, 2017.~~

December 31, 2017
Carrying
Amount Estimated
Fair Value Level 1 Level 2 Level 3
(Dollars in Thousands)
Financial assets
Cash and cash equivalents $ 1,300,409
$ 1,300,409
$ 1,300,409
$ —
$ —

Securities available for sale 1,992,352
1,992,352
1,829
1,990,523
—
Securities held to maturity 243,492
240,144
—
240,144
—
Total securities 2,235,844
2,232,496
1,829
2,230,667
—

Loans receivable:

One to four family residential mortgage loans 203,967
205,413
—
—
205,413
Commercial and multi-family real estate loans 654,029
655,777
—
—
655,777
Agricultural real estate loans 61,303
61,257
—
—
61,257
Consumer loans 274,981
293,832
—
—
293,832
Commercial operating loans 56,516
56,520
—
—
56,520
Agricultural operating loans 24,696
24,506
—
—
24,506
CML insurance premium finance loans 235,671
235,530
—
—
235,530
Total loans receivable 1,511,163
1,532,835
—
—
1,532,835

Federal Home Loan Bank stock 57,443
57,443
—
57,443
—
Accrued interest receivable 21,089
21,089
21,089
—
—

Financial liabilities

Noninterest bearing demand deposits 2,779,645
2,779,645
2,779,645
—
—
Interest bearing demand deposits, savings, and money markets 185,376
185,376
185,376
—
—
Certificates of deposit 128,220
127,451
—
127,451
—
Wholesale non-maturing deposits 40,928
40,928
40,928
—
—
Wholesale certificates of deposit 379,476
379,101
—
379,101
—
Total deposits 3,513,645
3,512,501
3,005,949
506,552
—

Advances from Federal Home Loan Bank 210,000
210,002
—
210,002
—
Federal funds purchased 1,100,000
1,100,000
1,100,000
—
—
Securities sold under agreements to repurchase 3,339
3,339
—
3,339
—
Capital lease 1,922
1,922
—
1,922
—
Trust preferred securities 10,310
10,445
—
10,445
—
Subordinated debentures 73,382
75,750
—
75,750
—
Accrued interest payable 4,065
4,065
4,065
—
—

September 30, 2017
Carrying
Amount Estimated
Fair Value Level 1 Level 2 Level 3
(Dollars in Thousands)
Financial assets
Cash and cash equivalents $ 1,267,586
$ 1,267,586
$ 1,267,586
$ —
$ —

Securities available for sale 1,693,431
1,693,431
1,445
1,691,986
—
Securities held to maturity 563,529
564,185
—
564,185
—
Total securities 2,256,960
2,257,616
1,445
2,256,171
—

Loans receivable:

One to four family residential mortgage loans 196,706
196,970
—
—
196,970
Commercial and multi-family real estate loans 585,510
576,330
—
—
576,330
Agricultural real estate loans 61,800
61,584
—
—
61,584
Consumer loans 163,004
163,961
—
—
163,961
Commercial operating loans 35,759
35,723
—
—
35,723
Agricultural operating loans 33,594
32,870
—
—
32,870
CML insurance premium finance loans 250,459
250,964
—
—
250,964
Total loans receivable 1,326,832
1,318,402
—
—
1,318,402

Federal Home Loan Bank stock 61,123
61,123
—
61,123
—
Accrued interest receivable 19,380
19,380
19,380
—
—

Financial liabilities

Noninterest bearing demand deposits 2,454,057
2,454,057
2,454,057
—
—
Interest bearing demand deposits, savings, and money markets 169,557
169,557
169,557
—
—
Certificates of deposit 123,637
123,094
—
123,094
—
Wholesale non-maturing deposits 18,245
18,245
18,245
—
—
Wholesale certificates of deposits 457,928
457,509
—
457,509
—
Total deposits 3,223,424
3,222,462
2,641,859
580,603
—

Advances from Federal Home Loan Bank 415,000
415,003
—
415,003
—
Federal funds purchased 987,000
987,000
987,000
—
—
Securities sold under agreements to repurchase 2,472
2,472
—
2,472
—
Capital lease 1,938
1,938
—
1,938
—
Trust preferred securities 10,310
10,447
—
10,447
—
Subordinated debentures 73,347
76,500
—
76,500
—
Accrued interest payable 2,280
2,280
2,280
—
—

~~The following sets forth the methods and assumptions used in determining the fair value estimates for the Company’s financial instruments at December 31, 2017 and September 30, 2017.~~

~~CASH AND CASH EQUIVALENTS~~

~~The carrying amount of cash and short-term investments is assumed to approximate the fair value.~~

~~SECURITIES AVAILABLE FOR SALE AND HELD TO MATURITY~~

Securities available for sale are recorded at fair value on a recurring basis and securities held to maturity are carried at amortized cost. Fair values for investment securities are based on obtaining quoted prices on nationally recognized securities exchanges, or matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities, but rather by relying on the securities’ relationship to other benchmark quoted securities.

~~LOANS RECEIVABLE, NET~~

~~The fair value of loans is estimated using a historical or replacement cost basis concept (i.e.,~~ an entrance price concept). The fair value of loans was estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers and for similar remaining maturities. When using the discounting method to determine fair value, homogeneous loans with similarunderlying terms and conditions ~~were grouped together~~with each cardholder over the contract term. Agreements with the Company’s cardholders are considered daily service contracts as they are not fixed in duration. The Company’s obligation for card activation and ~~discounted~~product support fees is satisfied at ~~a target rate at which similar loans would be made to borrowers at December 31, 2017 or September 30, 2017. In addition, when computing~~ the ~~estimated fair value~~time of product delivery, while the obligation for ~~all loans, allowances~~processing and servicing is satisfied over the course of each month. The transaction price for ~~loan losses have been subtracted from~~such activity is based upon the ~~calculated fair value as a result~~stand-alone fees within the terms and conditions of the ~~discounted cash flow which approximates the fair value adjustment for the credit quality component.~~

~~FEDERAL HOME LOAN BANK (“FHLB”) STOCK~~

~~The fair value of FHLB stock is assumed~~cardholder agreements. Card fee revenue also includes income from sponsorships, associations and networks, and interchange income. Sponsorship income relates to ~~approximate book value since the Company is only able to redeem this stock at par value.~~

~~ACCRUED INTEREST RECEIVABLE~~

~~The carrying amount of accrued interest receivable is assumed to approximate the fair value.~~

~~DEPOSITS~~

The carrying values of non-interest bearing checking deposits, interest bearing checking deposits, savings, money markets, and wholesale non-maturing deposits are assumed to approximate fair value, since such deposits are immediately withdrawable without penalty. The fair value of time certificates of deposit and wholesale certificates of deposit were estimated by discounting expected future cash flows by the current rates offered on certificates of deposit with similar remaining maturities.

~~In accordance with ASC 825,~~ ~~Financial Instruments, no value has been assigned~~fees charged to the Company’s ~~long-term relationships~~ATM sponsorship partners, where the obligation is satisfied over the course of each month. Association and network income reflect incentives, performance bonuses and rebates with MasterCard and Visa. The obligation for such income is satisfied at the time when certain thresholds of transaction volume have been met. Interchange income is generated by cardholder activity, and therefore the Company’s obligations are satisfied as activity occurs. The transaction price for such activity is based on underlying rates and activity thresholds within the terms and conditions of the applicable agreements. Card fee revenue also includes breakage revenue. Breakage represents the estimated amount that will not be redeemed by the holder of unregistered, unused prepaid cards for goods or services. Breakage revenue is recognized ratably over the expected customer usage period and is an estimate based on cardholder behavior and breakage rates. Breakage is also impacted by escheatment laws. Card fees are recorded within the Payments and Banking reporting segments.

Deposit Fees

Fees are earned on depository accounts for commercial and consumer customers and include fees for account services, overdraft services, safety deposit box rentals, and event-driven services (i.e. returned checks, ATM surcharge, card replacement, wire transfers, and stop pays). The Company’s obligation for event-driven services is satisfied at the time of the event when the service is delivered, while its obligation for account services is satisfied over the course of each month. The Company’s obligation for overdraft services is satisfied at the time of overdraft. The transaction price for such activity is based upon stand-alone fees within the terms and conditions of the deposit ~~customers (core value of deposits intangible) since such intangibles~~agreements. Deposit fees are ~~not financial instruments as defined under ASC 825.~~recorded within the Payments and Banking reporting segment.

~~ADVANCES FROM FHLB~~Principal vs Agent

The ~~fair value~~Payments reporting segment includes principal/agent relationships. Within this segment, MPS relationships are recorded on a gross basis within the income statement, as Meta is the principal in the contract, with the exception of ~~such advances was estimated by discounting~~association/network contracts and partner/processer contracts for prepaid cards, which are recorded on a net basis within the ~~expected future cash flows using current interest rates for advances~~income statement as Meta is the agent in these contracts. Also within this segment, Tax service relationships are recorded on a gross basis within the income statement, as Meta is the principal in the contract, with ~~similar terms~~the exception of contracts with software providers and ~~remaining maturities.~~merchants, which are recorded on a net basis within the income statement as Meta is the agent in these contracts.

~~FEDERAL FUNDS PURCHASED~~

~~The carrying amount of federal funds purchased is assumed to approximate the fair value.~~

~~SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE AND SUBORDINATED DEBENTURES~~

~~The fair value of these instruments was estimated by discounting the expected future cash flows using derived interest rates approximating market over the contractual maturity of such borrowings.~~

~~ACCRUED INTEREST PAYABLE~~

~~The carrying amount of accrued interest payable is assumed to approximate the fair value.~~

~~LIMITATIONS~~

Fair value estimates are made at a specific point in time and are based on relevant market information about the financial instrument. Additionally, fair value estimates are based on existing on- and off-balance sheet financial instruments without attempting to estimate the value of anticipated future business, customer relationships and the value of assets and liabilities that are not considered financial instruments. These estimates do not reflect any premium or discount that could result from offering the Company’s entire holdings of a particular financial instrument for sale at one time. Furthermore, since no market exists for certain of the Company’s financial instruments, fair value estimates may be based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with a high level of precision. Changes in assumptions as well as tax considerations could significantly affect the estimates. Accordingly, based on the limitations described above, the aggregate fair value estimates are not intended to represent the underlying value of the Company, on either a going concern or a liquidation basis.

NOTE ~~11. GOODWILL AND INTANGIBLE ASSETS~~14. FAIR VALUE MEASUREMENTS

Accounting Standards Codification (“ASC”) 820, Fair Value Measurements defines fair value, establishes a framework for measuring the fair value of assets and liabilities using a hierarchy system and requires disclosures about fair value measurement. It clarifies that fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the market in which the reporting entity transacts.

The fair value hierarchy is as follows:

Level 1 Inputs - Valuation is based upon quoted prices for identical instruments traded in active markets that the Company has the ability to access at measurement date.

Level 2 Inputs - Valuation is based upon (1) quoted prices for similar instruments in active markets, (2) quoted prices for identical or similar instruments in markets that are not active and (3) model-based valuation techniques for which significant assumptions are observable in the market.

Level 3 Inputs - Valuation is generated from model-based techniques that use significant assumptions not observable in the market and are used only to the extent that observable inputs are not available. These unobservable assumptions reflect the Company’s own estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include use of option pricing models, discounted cash flow models and similar techniques.

Debt Securities Available for Sale and Equity Securities. Debt securities available for sale and equity securities are recorded at fair value on a recurring basis and securities held to maturity are carried at amortized cost. Fair value measurement is based upon quoted prices, if available. If quoted prices are not available, fair values are measured using an independent pricing service. For both Level 1 and Level 2 securities, management uses various methods and techniques to corroborate prices obtained from the pricing service, including but not limited to reference to dealer or other market quotes, and by reviewing valuations of comparable instruments. The Company’s Level 1 securities include equity securities and mutual funds. Level 2 securities include U.S. Government agency and instrumentality securities, U.S. Government agency and instrumentality mortgage-backed securities, municipal bonds and corporate debt securities. The Company had no Level 3 securities at June 30, 2019 or September 30, 2018.

The following table summarizes the fair values of debt securities available for sale and equity securities at June 30, 2019 and September 30, 2018, as they are measured at fair value on a recurring basis.



	Fair Value At June 30, 2019
(Dollars in Thousands)	Total		Level 1		Level 2		Level 3
Debt securities AFS
SBA securities	$	193,066	$	—	$	193,066	$	—
Obligations of states and political subdivisions	875		—		875		—
Non-bank qualified obligations of states and political subdivisions	460,660		—		460,660		—
Asset-backed securities	307,296		—		307,296		—
Mortgage-backed securities	395,201		—		395,201		—
Total debt securities AFS	$	1,357,098	$	—	$	1,357,098	$	—
Common equities and mutual funds⁽¹⁾⁽²⁾	$	4,419	$	4,419	$	—	$	—

⁽¹⁾Equity securities at fair value are included within other assets on the consolidated statement of financial condition at June 30, 2019 and September 30, 2018.

⁽²⁾ASU 2016-01 adopted on October 1, 2018, on a prospective basis, removed equity securities from AFS category at June 30, 2019.



	Fair Value At September 30, 2018
(Dollars in Thousands)	Total		Level 1		Level 2		Level 3
Debt securities AFS
SBA securities	$	44,337	$	—	$	44,337	$	—
Obligations of states and political subdivisions	16,910		—		16,910		—
Non-bank qualified obligations of states and political subdivisions	1,109,885		—		1,109,885		—
Asset-backed securities	313,028		—		313,028		—
Mortgage-backed securities	364,065		—		364,065		—
Total debt securities AFS	1,848,225		—		1,848,225		—
Common equities and mutual funds⁽¹⁾	3,800		3,800		—		—
Total securities	$	1,852,025	$	3,800	$	1,848,225	$	—

⁽¹⁾Equity securities at fair value are included within other assets on the consolidated statement of financial condition at June 30, 2019 and September 30, 2018.

The Company ~~held~~did not transfer any AFS debt securities or equity securities between fair value hierarchy categories at June 30, 2019 or September 30, 2018.

Loans and Leases. The Company does not record loans and leases at fair value on a ~~total~~recurring basis. If a loan or lease is identified as individually impaired, management then measures impairment in accordance with ASC 310, Receivables. See Note 4 Loans and Leases, Net for further information.

The following table summarizes the assets of ~~$98.7 million~~the Company that were measured at fair value in the consolidated statements of ~~goodwill~~financial condition on a non-recurring basis as of ~~December 31, 2017.~~ June 30, 2019 and September 30, 2018.



	Fair Value At June 30, 2019
(Dollars in Thousands)	Total		Level 1		Level 2		Level 3
Impaired Loans and Leases, net
Asset based lending	$	83	$	—	$	—	$	83
Factoring	3,960		—		—		3,960
Commercial finance	4,043		—		—		4,043
Total National Lending	4,043		—		—		4,043
Total impaired loans and leases	4,043		—		—		4,043
Foreclosed assets, net	29,514		—		—		29,514
Total	$	33,557	$	—	$	—	$	33,557



	Fair Value At September 30, 2018
(Dollars in Thousands)	Total		Level 1		Level 2		Level 3
Impaired loans and leases, net
Asset based lending	$	57	$	—	$	—	$	57
Factoring	1,899		—		—		1,899
Lease financing	2,869		—		—		2,869
Commercial finance	4,825		—		—		4,825
Total National Lending	4,825		—		—		4,825
Total impaired loans and leases	4,825		—		—		4,825
Foreclosed assets, net	31,638		—		—		31,638
Total	$	36,463	$	—	$	—	$	36,463

Quantitative Information About Level 3 Fair Value Measurements

(Dollars in Thousands)

Fair Value at
June 30, 2019

Fair Value at
September 30, 2018

Valuation
Technique

Unobservable Input

Range of Inputs

Impaired loans and leases, net

4,043

4,825

Market approach

Appraised values⁽¹⁾

4.00 - 10.00%

Foreclosed assets, net

29,514

31,638

Market approach

Appraised values⁽¹⁾

4.00 - 30.00%

⁽¹⁾The ~~recorded goodwill was due~~Company generally relies on external appraisers to ~~two separate business combinations during fiscal 2015~~develop this information. Management reduced the appraised value by estimating selling costs and ~~two separate business combinations during~~other inputs in a range of 4% to 30%.

The following table discloses the ~~first quarter~~Company’s estimated fair value amounts of ~~fiscal 2017. The fiscal 2015 business combinations included $11.6 million of goodwill in connection with the purchase of substantially all~~its financial instruments as of the ~~commercial~~dates set forth below. It is management’s belief that the fair values presented below are reasonable based on the valuation techniques and data available to the Company as of June 30, 2019 and September 30, 2018, as more fully described below. The operations of the Company are managed from a going concern basis and not a liquidation basis. As a result, the ultimate value realized for the financial instruments presented could be substantially different when actually recognized over time through the normal course of operations. Additionally, a substantial portion of the Company’s inherent value is the Bank’s capitalization and franchise value. Neither of these components have been given consideration in the presentation of fair values below.

The following presents the carrying amount and estimated fair value of the financial instruments held by the Company at June 30, 2019 and September 30, 2018.



	June 30, 2019
(Dollars in Thousands)	Carrying Amount		Estimated Fair Value		Level 1		Level 2		Level 3
Financial assets
Cash and cash equivalents	$	100,732	$	100,732	$	100,732	$	—	$	—

Debt securities available for sale	1,357,098		1,357,098		—		1,357,098		—
Debt securities held to maturity	145,542		142,938		—		142,938		—
Equity securities⁽¹⁾	4,419		4,419		4,419		—		—
Total securities	1,507,059		1,504,455		4,419		1,500,036		—

Loans held for sale	62,839		62,839		—		62,839		—

Loans and leases:
Asset based lending	615,309		599,664		—		—		599,664
Factoring	320,344		316,278		—		—		316,278
Lease financing	341,957		338,804		—		—		338,804
Insurance premium finance	358,772		358,401		—		—		358,401
SBA/USDA	99,791		94,391		—		—		94,391
Other commercial finance	99,677		101,145		—		—		101,145
Commercial finance	1,835,850		1,808,683		—		—		1,808,683
Consumer credit products	155,539		156,539		—		—		156,539
Other consumer finance	164,727		160,239		—		—		160,239
Consumer finance	320,266		316,778		—		—		316,778
Tax services	24,410		8,985		—		—		8,985
Warehouse finance	250,003		250,053		—		—		250,053
Total National Lending	2,430,529		2,384,499		—		—		2,384,499
Commercial real estate and operating	877,412		867,725		—		—		867,725
Consumer one to four family real estate and other	256,853		258,359		—		—		258,359
Agricultural real estate and operating	61,169		59,270		—		—		59,270
Total Community Banking	1,195,434		1,185,354		—		—		1,185,354
Total loans and leases	3,625,963		3,569,853		—		—		3,569,853

Federal Home Loan Bank stock	17,236		17,236		—		17,236		—
Accrued interest receivable	19,722		19,722		19,722		—		—

Financial liabilities
Noninterest-bearing demand deposits	2,751,931		2,751,931		2,751,931		—		—
Interest-bearing demand deposits, savings, and money markets	278,585		278,585		278,585		—		—
Time certificates of deposits	116,698		116,657		—		116,657		—
Wholesale non-maturing deposits	216,598		216,598		216,598		—		—
Wholesale time certificates of deposits	1,411,402		1,412,931		—		1,412,931		—
Total deposits	4,775,214		4,776,702		3,247,114		1,529,588		—

Overnight federal funds purchased	135,000		135,000		135,000		—		—
Long-term Federal Home Loan Bank advances	110,000		110,578		—		110,578		—
Securities sold under agreements to repurchase	3,658		3,658		—		3,658		—
Capital leases	1,972		1,972		—		1,972		—
Trust preferred securities	13,661		13,879		—		13,879		—
Subordinated debentures	73,605		76,875		—		76,875		—
Other borrowings	18,482		18,307		—		18,307		—
Accrued interest payable	12,350		12,350		12,350		—		—

⁽¹⁾Equity securities at fair value are included within other assets on the consolidated statement of financial condition at June 30, 2019 and September 30, 2018.



	September 30, 2018
(Dollars in Thousands)	Carrying Amount		Estimated Fair Value		Level 1		Level 2		Level 3
Financial assets
Cash and cash equivalents	$	99,977	$	99,977	$	99,977	$	—	$	—

Securities available for sale	1,852,025		1,852,025		3,800		1,848,225		—
Securities held to maturity	172,154		160,974		—		160,974		—
Total securities	2,024,179		2,012,999		3,800		2,009,199		—

Loans held for sale	15,606		15,606		—		15,606		—

Loans and leases:
Asset based lending	477,917		477,471		—		—		477,471
Factoring	284,221		283,424		—		—		283,424
Lease financing	265,315		264,679		—		—		264,679
Insurance premium finance	337,877		337,212		—		—		337,212
SBA/USDA	59,374		61,072		—		—		61,072
Other commercial finance	85,145		83,111		—		—		83,111
Commercial finance	1,509,849		1,506,969		—		—		1,506,969
Consumer credit products	80,605		80,633		—		—		80,633
Other consumer finance	189,756		197,320		—		—		197,320
Consumer finance	270,361		277,953		—		—		277,953
Tax services	1,073		1,073		—		—		1,073
Warehouse finance	65,000		64,978		—		—		64,978
Total National Lending	1,846,283		1,850,973		—		—		1,850,973
Commercial real estate and operating	790,890		773,203		—		—		773,203
Consumer one to four family real estate and other	247,318		244,730		—		—		244,730
Agricultural real estate and operating	60,498		58,849		—		—		58,849
Total Community Banking	1,098,706		1,076,782		—		—		1,076,782
Total loans and leases	2,944,989		2,927,755		—		—		2,927,755

Federal Home Loan Bank stock	23,400		23,400		—		23,400		—
Accrued interest receivable	22,016		22,016		22,016		—		—

Financial liabilities
Noninterest-bearing demand deposits	2,405,274		2,405,274		2,405,274		—		—
Interest-bearing demand deposits, savings, and money markets	218,347		218,347		218,347		—		—
Time certificates of deposits	276,180		273,800		—		273,800		—
Wholesale non-maturing deposits	94,384		94,384		94,384		—		—
Wholesale time certificates of deposits	1,436,802		1,432,146		—		1,432,146		—
Total deposits	4,430,987		4,423,951		2,718,005		1,705,946		—

Overnight federal funds purchased	422,000		422,000		422,000		—		—
Securities sold under agreements to repurchase	3,694		3,694		—		3,694		—
Capital leases	1,876		1,876		—		1,876		—
Trust preferred securities	13,661		13,866		—		13,866		—
Subordinated debentures	73,491		75,563		—		75,563		—
Accrued interest payable	7,794		7,794		7,794		—		—

The following sets forth the methods and assumptions used in determining the fair value estimates for the Company’s financial instruments at June 30, 2019 and September 30, 2018.

CASH AND CASH EQUIVALENTS

The carrying amount of cash and short-term investments is assumed to approximate the fair value.

DEBT SECURITIES AVAILABLE FOR SALE AND EQUITY SECURITIES

Debt securities available for sale and equity securities are recorded at fair value on a recurring basis. Fair values for these investment securities are based on obtaining quoted prices on nationally recognized securities exchanges, or matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities, but rather by relying on the securities’ relationship to other benchmark quoted securities.

LOANS HELD FOR SALE

The carrying amount of loans held for sale is assumed to approximate the fair value.

LOANS AND LEASES, NET

Upon adoption of ASU 2016-01, the fair value of loans and leases were estimated using an exit price methodology. The exit price estimation of fair value is based on the present value of expected cash flows, which are based on the contractual terms of the loans, adjusted for prepayments and a discount rate based on the relative risk of the cash flows. Other considerations include the loan ~~portfolio~~type, remaining life of the loan and ~~related assets~~credit risk. In comparison, loan and lease fair values as of ~~AFS/IBEX~~September 30, 2018 were estimated on ~~December 2, 2014~~an entrance price methodology, which discounts future cash flows using the then-current rates at which a similar loan would be made to borrowers with similar credit ratings and ~~$25.4 million~~for the same remaining maturities. The fair value of ~~goodwill~~non-impaired loans and leases as of June 30, 2019 and September 30, 2018 are not comparable.

FEDERAL HOME LOAN BANK (“FHLB”) STOCK

The fair value of FHLB stock is assumed to approximate book value since the Company is only able to redeem this stock at par value.

ACCRUED INTEREST RECEIVABLE

The carrying amount of accrued interest receivable is assumed to approximate the fair value.

DEPOSITS

The carrying values of noninterest-bearing checking deposits, interest-bearing checking deposits, savings, money markets, and wholesale non-maturing deposits are assumed to approximate fair value since deposits are immediately withdrawable without penalty. The fair value of time certificate deposits and wholesale certificate deposits are estimated using a discounted cash flows calculation that applies the FHLB Des Moines curve to aggregated expected maturities of time deposits. In accordance with Subtopic 825-10, Financial Instruments, no value has been assigned to the Company’s long-term relationships with its deposit customers (core value of deposits intangible) since such intangible is not a financial instrument as defined under Subtopic 825-10.

ADVANCES FROM FHLB

The fair value of such advances was estimated by discounting the expected future cash flows using current interest rates for advances with similar terms and remaining maturities.

FEDERAL FUNDS PURCHASED

The carrying amount of federal funds purchased is assumed to approximate the fair value.

SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE, SUBORDINATED DEBENTURES AND OTHER BORROWINGS

The fair value of these instruments was estimated by discounting the expected future cash flows using derived interest rates approximating market over the contractual maturity of such borrowings.

ACCRUED INTEREST PAYABLE

The carrying amount of accrued interest payable is assumed to approximate the fair value.

LIMITATIONS

Fair value estimates are made at a specific point in ~~connection with~~time and are based on relevant market information about the ~~purchase~~financial instrument. Additionally, fair value estimates are based on existing on- and off-balance sheet financial instruments without attempting to estimate the value of ~~substantially all~~anticipated future business, customer relationships and the value of ~~the~~ assets and liabilities that are not considered financial instruments. These estimates do not reflect any premium or discount that could result from offering the Company’s entire holdings of Refund Advantage on September 8, 2015. The fiscal 2017 business combinations included $30.4 million of goodwill in connection with the purchase of substantially all of the assets of EPS Financial, LLC on November 1, 2016; and $31.4 million of goodwill in connection with the purchase of substantially all of the assets and specified liabilities of Specialty Consumer Services LP on December 14, 2016. The goodwill associated with these transactions is deductiblea particular financial instrument for ~~tax purposes.~~

~~The changes in the carrying amount~~sale at one time. Furthermore, since no market exists for certain of the Company’s ~~goodwill~~financial instruments, fair value estimates may be based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments and ~~intangible assets~~other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with a high level of precision. Changes in assumptions as well as tax considerations could significantly affect the estimates. Accordingly, based on the limitations described above, the aggregate fair value estimates are not intended to represent the underlying value of the Company, on either a going concern or a liquidation basis.

NOTE 15. SEGMENT REPORTING

An operating segment is generally defined as a component of a business for which discrete financial information is available and whose results are reviewed by the chief operating decision-maker. Operating segments are aggregated into reportable segments if certain criteria are met.

The Company reports its results of operations through the following three business segments: Payments, Banking, and Corporate Services/Other. The Meta Payment Systems and Tax Services divisions are reported in the Payments segment. The Community Banking, Commercial Finance and Consumer Finance divisions are reported in the Banking segment. Certain shared services, including the investment portfolio, wholesale deposits and borrowings, are included in the Corporate Services/Other segment.

The following tables present segment data for the Company for the three and nine months ended ~~December 31, 2017~~June 30, 2019 and ~~2016 were as follows:~~

2018, respectively.



	Payments		Banking		Corporate Services/Other			Total
Three Months Ended June 30, 2019
Net interest income (expense)	$	15,232	$	60,043	$	(8,307	)	$	66,968
Provision for loan and lease losses	914		8,198		—			9,112
Noninterest income	28,402		13,583		1,805			43,790
Noninterest expense	17,559		33,233		21,676			72,468
Income (loss) before income tax expense (benefit)	25,161		32,195		(28,178		)	29,178

Total assets	196,257		4,169,351		1,735,464			6,101,072
Total goodwill	87,145		220,796		—			307,941
Total deposits	2,795,009		297,861		1,682,344			4,775,214

2017 2016
(Dollars in Thousands)
Goodwill
Balance as of September 30, $ 98,723
$ 36,928
Acquisitions during the period —
61,970
Write-offs during the period —
—
Balance as of December 31, $ 98,723
$ 98,898



	Payments		Banking		Corporate Services/Other			Total
Nine Months Ended June 30, 2019
Net interest income (expense)	$	38,238	$	168,107	$	(7,755	)	$	198,590
Provision for loan and lease losses	24,883		26,646		—			51,529
Noninterest income	140,980		41,799		3,786			186,565
Noninterest expense	71,098		109,598		76,320			257,016
Income (loss) before income tax expense (benefit)	83,237		73,662		(80,289		)	76,610

Total assets	196,257		4,169,351		1,735,464			6,101,072
Total goodwill	87,145		220,796		—			307,941
Total deposits	2,795,009		297,861		1,682,344			4,775,214

Trademark⁽¹⁾

Non-Compete⁽²⁾

Customer
Relationships⁽³⁾

All Others⁽⁴⁾
Total
Intangibles
Balance as of September 30, 2017 $ 10,051
$ 1,782
$ 31,707
$ 8,638
$ 52,178
Acquisitions during the period —
—
—
38
38
Amortization during the period (159 ) (132 ) (1,160 ) (230 ) (1,681 )
Write-offs during the period —
—
—
(14 ) (14 )
Balance as of December 31, 2017 $ 9,892
$ 1,650
$ 30,547
$ 8,432
$ 50,521

Gross carrying amount $ 10,990
$ 2,480
$ 57,810
$ 10,540
$ 81,820
Accumulated amortization (1,098 ) (830 ) (17,015 ) (1,565 ) (20,508 )
Accumulated impairment —
—
(10,248 ) (543 ) (10,791 )
Balance as of December 31, 2017 $ 9,892
$ 1,650
$ 30,547
$ 8,432
$ 50,521

⁽¹⁾ ~~Book amortization period of 5-15 years. Amortized using the straight line and accelerated methods.~~

⁽²⁾ ~~Book amortization period of 3-5 years. Amortized using the straight line method.~~

⁽³⁾ ~~Book amortization period of 10-30 years. Amortized using the accelerated method.~~

⁽⁴⁾ ~~Book amortization period of 3-20 years. Amortized using the straight line method.~~



	Payments		Banking		Corporate Services/Other			Total
Three Months Ended June 30, 2018
Net interest income	$	6,298	$	18,077	$	4,036		$	28,411
Provision for loan losses	1,189		4,126		—			5,315
Noninterest income	31,307		1,318		600			33,225
Noninterest expense	27,796		7,172		14,085			49,053
Income (loss) before income tax expense (benefit)	8,620		8,097		(9,449		)	7,268

Total assets	190,437		1,623,715		2,355,007			4,169,159
Total goodwill	87,145		11,578		—			98,723
Total deposits	2,641,838		241,572		638,223			3,521,633



	Payments		Banking		Corporate Services/Other			Total
Nine Months Ended June 30, 2018
Net interest income	$	15,900	$	49,794	$	16,318		$	82,012
Provision for loan losses	20,335		4,391		—			24,726
Noninterest income	155,082		4,044		786			159,912
Noninterest expense	99,592		20,723		41,277			161,592
Income (loss) before income tax expense (benefit)	51,055		28,724		(24,173		)	55,606

Total assets	190,437		1,623,715		2,355,007			4,169,159
Total goodwill	87,145		11,578		—			98,723
Total deposits	2,641,838		241,572		638,223			3,521,633

Trademark⁽¹⁾

Non-Compete⁽²⁾

Customer
Relationships⁽³⁾

All Others⁽⁴⁾
Total
Intangibles
Balance as of September 30, 2016 $ 5,149
$ 127
$ 20,590
$ 3,055
$ 28,921
Acquisitions during the period 5,480
2,210
32,230
6,156
46,076
Amortization during the period (120 ) (86 ) (1,193 ) (126 ) (1,525 )
Write-offs during the period —
—
—
—
—
Balance as of December 31, 2016 $ 10,509
$ 2,251
$ 51,627
$ 9,085
$ 73,472

Gross carrying amount $ 10,970
$ 2,510
$ 58,270
$ 9,711
$ 81,461
Accumulated amortization (461 ) (259 ) (6,643 ) (626 ) (7,989 )
Balance as of December 31, 2016 $ 10,509
$ 2,251
$ 51,627
$ 9,085
$ 73,472

⁽¹⁾ ~~Book amortization period of 15 years. Amortized using the straight line and accelerated methods.~~

⁽²⁾ ~~Book amortization period of 3 years. Amortized using the straight line method.~~

⁽³⁾ ~~Book amortization period of 10-30 years. Amortized using the accelerated method.~~

⁽⁴⁾ ~~Book amortization period of 3-20 years. Amortized using the straight line method.~~

The estimated amortization expense of intangible assets assumes no activities, such as acquisitions, which would result in additional amortizable intangible assets. Estimated amortization expense of intangible assets in the remaining nine months of fiscal 2018 and subsequent fiscal years is as follows:

(Dollars in Thousands)
Remaining in 2018 $ 6,028
2019 7,151
2020 5,753
2021 5,184
2022 4,262
2023 3,625
Thereafter 18,518
Total anticipated intangible amortization $ 50,521

The Company tests intangible assets for impairment at least annually or more often if conditions indicate a possible impairment. There were no impairments to intangible assets during the three months ended December 31, 2017 or 2016. The annual goodwill impairment test for fiscal 2018 will be conducted at September 30, 2018.

~~NOTE 12. INCOME TAXES~~

Income tax expense for the fiscal 2018 first quarter was $5.7 million, resulting in an effective tax rate of 54.9%, compared to $0.3 million, or an effective tax rate of 21.6%, for the fiscal 2017 first quarter.

The Tax Cuts and Jobs Act (the "Tax Act") was signed into law on December 22, 2017. The Tax Act has a significant impact on the U.S. corporate income tax regime by lowering the U.S. corporate tax rate from 35 percent to 21 percent effective for taxable years beginning on or after January 1, 2018 in addition to implementing numerous other changes. U.S. GAAP requires that the impact of tax legislation be recognized in the period in which the law was enacted.

As a result of the Tax Act, the Company remeasured its deferred tax assets and deferred tax liabilities during its fiscal 2018 first quarter, resulting in additional income tax expense of $3.6 million. As the Company’s fiscal year end ends on September 30, the statutory corporate rate for fiscal 2018 will be prorated to 24.53 percent.

In December 2017, the Securities and Exchange Commission staff issued Staff Accounting Bulletin No. 118 (SAB 118), which provides guidance regarding how a company is to reflect provisional amounts when necessary information is not yet available, prepared or analyzed sufficiently to complete its accounting for the effect of the changes in the Tax Act. The income tax expense of $3.6 million recorded during the fiscal 2018 first quarter represents all known and estimable impacts of the Tax Act and is a provisional amount based on the Company’s current best estimate. This provisional amount incorporates assumptions made based upon the Company’s current interpretations of the Tax Act and may change as the Company receives additional clarification and implementation guidance, and as data becomes available allowing for a more accurate scheduling of the deferred tax assets and liabilities, including those related to items potentially impacted by the Tax Act such as fixed assets and employee compensation. Adjustments to this provisional amount through December 22, 2018 will be included in income from operations as an adjustment to tax expense in future periods.

~~NOTE 13. REGULATORY MATTERS~~

On January 5, 2015, the Federal Deposit Insurance Corporation (“FDIC”) published industry guidance in the form of Frequently Asked Questions (“FAQs”) with respect to the categorization of deposit liabilities as “brokered” deposits. On November 13, 2015, the FDIC issued for comment updated and annotated FAQs, and on June 30, 2016, the FDIC finalized the FAQs. The Company believes that the final FAQs do not materially impact the processes that it uses to identify, accept and report brokered deposits. On April 26, 2016, the FDIC issued a final rule to amend how small banks (less than $10 billion in assets that have been FDIC insured for at least five years) are assessed for deposit insurance (the "Final Rule"). The Final Rule imposes higher assessments for banks that the FDIC believes present higher risk profiles. The Final Rule became effective with the Bank's December 2016 assessment invoice, which the Company received in March 2017.

Due to the Bank’s status as a "well-capitalized" institution under the FDIC's prompt corrective action regulations, and further with respect to the Bank’s financial condition in general, the Company does not at this time anticipate that either the FAQs or the Final Rule will have a material adverse impact on the Company’s business operations. However, should the Bank ever fail to be well-capitalized in the future, as a result of failing to meet the well-capitalized requirements, or the imposition of an individual minimum capital requirement or similar formal requirements, then, notwithstanding that the Bank has capital in excess of the well-capitalized minimum requirements, the Bank would be prohibited, absent waiver from the FDIC, from utilizing brokered deposits (i.e., may not accept, renew or rollover brokered deposits), which could produce serious adverse effects on the Company’s liquidity, and financial condition and results of operations. Similarly, should the Bank’s financial condition in general deteriorate, future FDIC assessments could have a material adverse effect on the Company.

NOTE ~~14.~~16. SUBSEQUENT EVENTS

On January 2, 2018, a deed in lieu of foreclosure was executed on the collateral for a large, well-collateralized loan relationship. Upon execution of the deed in lieu, the Company took ownership of the properties serving as collateral and transferred the loans to foreclosed real estate and repossessed assets. If, as expected, the properties are sold prior

Management has evaluated subsequent events that occurred after June 30, 2019. During this period, up to the ~~end~~filing date, management did not identify any material subsequent events that would require recognition or disclosure in our consolidated financial statements as of the agreed-upon receivership period set forth in the settlement agreement, the Company will be entitled to all principal, note interest, legal and other fees and expenses. After the receivership period ends, if the properties are not sold, the Company will be entitled to the fair value of the properties.

On January 9, 2018, the Company announced that it entered into a definitive merger agreement with Crestmark Bancorp, Inc. (“Crestmark”), the holding company of Crestmark Bank, whereby the Company will acquire Crestmark in an all-stock transaction.

~~Pursuant to the terms of the merger agreement, at the effective time of the merger, Crestmark will merge with and into the Company, and Crestmark Bank will merge with and into MetaBank (the "Bank").~~

Under the terms of the merger agreement, Crestmark shareholders will receive 2.65 shares of the Company's common stock for each share of Crestmark common stock. The aggregate value of the acquisition consideration, based on the closing price of Meta Financial shares on January 8, 2018 of $91.35, would have been $320.6 million. Giving effect to the transaction, existing shareholders of the Company are expected to own approximately 75%, and Crestmark shareholders are expected to own approximately 25%, of the outstanding shares of the Company.

On January 25, 2018, the Company announced that the Bank entered into a three-year program agreement with Liberty Lending, LCC ("Liberty"), whereby the Bank will provide personal loans to Liberty customers. Under the agreement, the Bank expects to originate between $500 million and $1 billion in personal loans during the term of the program. The loan products contemplated under this agreement will be closed-end installment loans ranging from $3,500 to $45,000 in principal amount with lengths of between 13 and 60 months. The Bank expects to begin providing such loans as early as the third quarter of fiscal 2018. The Bank has the contractual right to sell these loans or ~~interests in the loans. The agreement marks the entry point~~ for the ~~Company into a direct-to-consumer credit business.~~quarter ended June 30, 2019.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

META FINANCIAL GROUP, INC®.

AND SUBSIDIARIES

FORWARD LOOKING STATEMENTS

Meta Financial Group, Inc.®, (“~~Meta Financial”~~Meta” or “the Company” or “us”) and its wholly-owned subsidiary, MetaBank® (the “Bank” or “MetaBank”), may from time to time make written or oral “forward-looking statements,” including statements contained in this Quarterly Report on Form 10-Q, in ~~its~~the Company's other filings with the Securities and Exchange Commission (“SEC”), in its reports to stockholders, and in other communications by the Company and the Bank, which are made in good faith by the Company pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995.

You can identify forward-looking statements by words such as “may,” “hope,” “will,” “should,” “expect,” “plan,” “anticipate,” “intend,” “believe,” “estimate,” “predict,” “potential,” “continue,” “could,” “future,” or the negative of those terms, or other words of similar meaning or similar expressions. You should carefully read statements that contain these words because they discuss our future expectations or state other “forward-looking” information. These forward-looking statements are based on information currently available to us and assumptions about future events, and include statements with respect to the Company’s beliefs, expectations, estimates, and intentions, which 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 risks, uncertainties and other factors may cause our actual growth, results of operations, financial condition, cash flows, performance and business prospects and opportunities to differ materially from those expressed in, or implied by, these forward-looking statements. Such statements may address, among others, the following subjects: future operating results; our ability to remediate the material weakness in our internal controls over financial reporting and otherwise maintain effective internal controls over financial reporting; customer retention; loan and other product demand; important components of the Company's statements of financial condition and operations; growth and expansion; new products and services, such as those offered by ~~the Bank~~MetaBank or the Company's Payments divisions (which ~~includes~~include Meta ~~Payments~~Payment Systems, ~~(“MPS”) and its tax-related financial solutions divisions:~~ Refund Advantage, EPS Financial ~~(“EPS”)~~ and Specialty Consumer ~~Services (“SCS”))~~Services); credit quality and adequacy of reserves; technology; and the Company's employees. The following factors, among others, could cause the Company's financial performance and results of operations to differ materially from the expectations, estimates, and intentions expressed in such forward-looking statements: the risk that the transaction with Crestmark may not occur on a timely basis or at all; the parties’ ability to obtain regulatory approvals and approval of their respective shareholders, and otherwise satisfy the other conditions to closing, on a timely basis or at all; the risk that the businesses of the Company and MetaBank, on the one hand, and Crestmark and Crestmark Bank, on the other hand, may not be combined successfully, or such combination may take longer, be more difficult, time-consuming or costly to accomplish than expected;maintaining our executive management team; the expected growth opportunities, beneficial synergies and/or operating efficiencies from the ~~proposed transaction with~~ Crestmark acquisition may not be fully realized or may take longer to realize than expected; customer losses and business disruption ~~following the announcement or consummation of the proposed transaction; potential litigation relating~~related to the ~~proposed merger transaction; the risk that the Company may incur~~Crestmark acquisition; unanticipated or unknown losses orand liabilities ~~if it completes~~may be incurred by the ~~proposed transaction with~~Company following the Crestmark acquisition; the costs, risks and ~~Crestmark Bank;~~effects on the ~~risk that~~Company of the ongoing federal investigation and bankruptcy proceedings involving DC Solar Solutions, Inc., DC Solar Distribution, Inc., and their affiliates, including the potential financial impact of those matters on the net book value of Company assets leased to DC Solar Distribution and the Company’s ~~preliminary analysis~~ability to recognize certain investment tax credits associated with such assets, and the results of the ~~impact~~Company’s review of its due diligence processes with respect to the ~~Tax Act may be incorrect;~~Company’s alternative energy assets; factors relating to the Company’s share repurchase program; actual changes in interest rates and the Fed Funds rate; additional changes in tax laws; the risk that the Bank may be unable to originate between $500 million and $1 billion in personal loans during the three-year term of the program agreement with Liberty Lending, LLC; the risk that we are unable to recoup a significant portion of the lost earnings associated with the non-renewal of the agreement with H&R Block through agreements with new tax partners and expanded relationships with existing tax partners; the risk that loan production levels and other anticipated benefits related to the agreement with Jackson Hewitt Tax Service®, as extended, may not be as much as anticipated; maintaining our executive management team; the strength of the United States' economy, in general, and the strength of the local economies in which the Company conducts operations; risks relating to the recent U.S. government shutdown and any potential future government shutdown, including any adverse impact on our ability to originate or sell SBA/USDA loans and any delay by the Internal Revenue Service in processing taxpayer refunds, thereby increasing the cost to us of our refund advance loans; the effects of, and changes in, trade, monetary, and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System (the “Federal Reserve”), as well as efforts of the United States Congress and the United States Treasury in conjunction with bank regulatory agencies to stimulate the economy and protect the financial system; inflation, ~~interest rate,~~ market, and monetary fluctuations; the timely and efficient development of, and acceptance of, new products and services offered by the Company or its strategic partners, as well as risks (including reputational and litigation) attendant thereto, and the perceived overall value of these products and services by users; the risks of dealing with or utilizing third parties, including, in connection with the Company’s refund advance business, the risk of reduced volume of refund advance loans as a result of reduced customer demand for or acceptance of usage of ~~the Company’s~~Meta’s strategic partners’ refund advance products; any actions which may be initiated by our regulators in the future; the impact of changes in financial services laws and regulations, including, but not limited to, laws and regulations relating to the tax refund industry and the insurance premium finance industry; our relationship with our primary regulators, the Office of the Comptroller of the Currency ~~(“OCC”)~~ and the Federal Reserve, as well as the Federal Deposit Insurance Corporation, ~~(“FDIC”),~~ which insures ~~the Bank’s~~MetaBank’s deposit accounts up to applicable limits; technological changes, including, but not limited to, the protection of electronic files or databases; acquisitions; litigation risk, in general, including, but not limited to, those risks involving ~~the Bank's~~MetaBank's divisions; the growth of the Company’s business, as well as expenses related thereto; continued maintenance by ~~the Bank~~MetaBank of its status as a well-capitalized institution, particularly in light of our growing deposit base, a portion of which has been characterized as ~~“brokered”;~~“brokered;” changes in consumer spending and saving habits; and the success of the Company at maintaining its high quality asset level and managing and collecting assets of borrowers in default should problem assets increase.

The foregoing list of factors is not exclusive. We caution you not to place undue reliance on these forward-looking statements. The forward-looking statements included in this Quarterly Report speak only as of the date hereof. All subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Additional discussions of factors affecting the Company’s business and prospects are included under the caption "Risk Factors" and in other sections of the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, ~~2017~~2018 and in other filings made with the SEC. The Company expressly disclaims any intent or obligation to update any forward-looking statements, whether written or oral, that may be made from time to time by or on behalf of the Company or its subsidiaries, whether as a result of new information, changed circumstances or future events or for any other reason.

GENERAL

The Company, a registered unitary savings and loan holding company, is a Delaware corporation, the principal assets of which are all the issued and outstanding shares of the Bank, a federal savings bank. Unless the context otherwise requires, references herein to the Company include Meta ~~Financial~~ and the Bank, and all direct or indirect subsidiaries of Meta ~~Financial~~ on a consolidated basis.

The Company’s common stock trades on the NASDAQ Global Select Market under the symbol “CASH.”

The following discussion focuses on the consolidated financial condition of the Company at ~~December 31, 2017,~~June 30, 2019, compared to September 30, ~~2017,~~2018, and the consolidated results of operations for the three and nine months ended ~~December 31, 2017~~June 30, 2019 and ~~2016.~~2018. This discussion should be read in conjunction with the Company’s consolidated financial statements, and notes thereto, for the year ended September 30, ~~2017~~2018 and the related management's discussion and analysis of financial condition and results of operations contained in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, ~~2017.~~2018.

~~BUSINESS DEVELOPMENTS~~EXECUTIVE SUMMARY

In January ~~9, 2018,~~2019, the Company announced three key elements to its near-term plan that ~~it entered into a definitive merger agreement with Crestmark Bancorp, Inc. (“Crestmark”),~~management expects will enhance long-term value for shareholders. The three key initiatives within the ~~holding company~~plan are as follows:

1) Increase the percentage of ~~Crestmark Bank, whereby~~balance sheet funding from core deposits;

2) Optimize the ~~Company will acquire Crestmark in an all-stock transaction.~~

~~Pursuant to the terms~~interest-earning asset mix of the ~~merger agreement, at the effective time of the merger, Crestmark will merge with~~balance sheet; and into the Company, and Crestmark Bank will merge with and into MetaBank. As of September 30, 2017, the Bank had $5.2 billion in assets and $1.3 billion in total loans and, on a pro forma consolidated basis, the combined company would have had approximately $6.4 billion in assets and $2.2 billion in loans and leases, or 34% of total assets, with lending operations throughout the U.S.

Under the terms of the merger agreement, Crestmark shareholders will receive 2.65 shares of the Company's common stock for each share of Crestmark common stock. The aggregate value of the acquisition consideration, based on the closing price of Meta Financial shares on January 8, 2018, of $91.35, would have been $320.6 million. Giving effect to the transaction, existing shareholders of the Company are expected to own approximately 75%, and Crestmark shareholders are expected to own approximately 25%, of the outstanding shares of the Company.

Crestmark, through Crestmark Bank, is a commercial lender offering asset-based loans, equipment finance leases and government guaranteed loans to small and mid-sized businesses across the US. Crestmark focuses on working with a broad range of industries, including manufacturing, transportation and health care. Crestmark will operate as a division of MetaBank and will continue to operate from its offices in Troy, Michigan.3) Improve operating efficiencies.

On January 25, 2018, the Company announced that MetaBank entered into a three year program agreement with Liberty Lending, LLC ("Liberty"), whereby MetaBank will provide personal loans to Liberty customers. Under the agreement, the Bank expects to originate between $500 million and $1 billion in personal loans during the term of the program. The loan products contemplated under this agreement will be closed-end installment loans ranging from $3,500 to $45,000 in principal amount with lengths of between 13 and 60 months. The Bank expects to begin providing such loans as early as the third quarter of fiscal 2018. The Bank has the contractual right to sell these loans or interests in the loans. The agreement marks the entry point for the Company into a direct-to-consumer credit business.

As previously disclosed, on October 11, 2017, the Company completed the purchase of a $73.0 million, seasoned, floating rate, private student loan portfolio. All loans are indexed to one-month LIBOR. The portfolio is serviced by ReliaMax Lending Services LLC and insured by ReliaMax Surety Company. This portfolio purchase builds on the Company's existing student loan platform.

~~OVERVIEW OF FINANCIAL PERFORMANCE~~

The Company recorded net income of ~~$4.7~~$29.3 million, or ~~$0.48~~$0.75 per diluted share, for the ~~three months~~quarter ended ~~December 31, 2017, compared~~June 30, 2019, comparing favorably to net income of ~~$1.2~~$6.8 million, or ~~$0.14~~$0.23 per diluted share, that was recorded for the ~~three months ended December 31, 2016,~~fiscal 2018 third quarter. Total revenue for the fiscal 2019 third quarter was $110.8 million, compared to $61.6 million for the same quarter in fiscal 2018, an increase of ~~275%~~80%. ~~Included~~The improvement in ~~the 2018 fiscal first quarter~~revenue and net income was ~~an additional, non recurring income tax expense~~driven primarily by the Company's improved earning asset mix in connection with the acquisition of ~~$3.6 million from a reduction~~Crestmark in the ~~value~~fourth quarter of ~~certain deferred tax assets~~fiscal 2018.

The continued growth in loans and leases during the third quarter of fiscal 2019, along with the continued optimization of the earning asset mix of the balance sheet, led to net interest income of $67.0 million and net interest margin ("NIM") of 5.07% and net interest margin, tax-equivalent ("NIM, TE") of 5.15%. The Company's average gross loans and leases increased by $2.04 billion, or 131%, while average noninterest-bearing deposits increased by $244.5 million, or 10%, when compared to the same period in fiscal 2018. Management anticipates that NIM will continue to expand over time as the Company continues to grow and optimize the loan and lease portfolio along with leveraging growth from its Payments division's low-cost deposits.

Noninterest income for the quarter ended June 30, 2019 increased to $43.8 million. Contributing to the increase were increases in rental income, gain on sale of loans and leases, other income, and deposit fees. For the quarter ended June 30, 2019, noninterest expense was $72.5 million. The increase in noninterest expense over the prior year fiscal third quarter was primarily due to the addition of the Crestmark division as a result of the ~~Tax Cuts and Jobs Act (the "Tax Act") signed into law on December 22, 2017. The 2018 fiscal first quarter pre-tax results included a $1.0 million loss on sale of investments and $1.3 million of~~Crestmark acquisition, expenses. The 2018 fiscal first quarter pre-tax results also included $1.7 million in amortization of intangible assets and $1.3 million in non-cash stock-related compensation associated with executive officer employment agreements.

~~Net interest income~~which was ~~$26.2 million~~not present in the ~~2018~~comparable quarter in the prior fiscal ~~first quarter, an increase of $6.4 million, or 32%, compared to~~year.

The Company announced during the ~~first~~second quarter of fiscal ~~2017. This increase was primarily~~2019 that its Board of Directors authorized a ~~result~~share repurchase program to repurchase up to 2,000,000 shares of ~~high credit quality loan growth in both~~ the ~~commercial insurance premium finance loan portfolio and community banking loan portfolio, as well as~~Company's outstanding common stock. During the purchased floating rate student loans. Also contributing to the improvement were increases in higher yielding securities balances, primarily due to highly-rated tax-exempt municipal securities at relatively high tax equivalent yields and a continuing improvement in the overall interest-earning asset mix.

Card fee income increased $6.8 million, or 37%, for the 2018 fiscal first quarter when compared to the same quarter in 2017. This increase was due to residual fees related to a wind down of two of our non-strategic programs. The Company expects fiscal year 2018 total card fee income to be between $95.0 million and $101.0 million and expects total card processing expense to be between $23.0 million and $27.0 million.

Total tax product fee income increased $1.5 million, or 242%, from $0.6 million for the three months ended December 31, 2016 to $2.1 million for the three months ended December 31, 2017. This increase was primarily due to the volume of pre-season tax advance loans originated during the firstthird quarter of fiscal 2018 compared to the first quarter of fiscal 2017. All of these loans are being held during fiscal 2018, as opposed to the previous year when many of these loans were sold, which also contributed to the increase.

The Company's 2018 fiscal first quarter average assets grew to $4.12 billion, compared to $3.49 billion in the 2017 first quarter, an increase of 18%, primarily driven by growth in loan and securities balances.

Total loans receivable, net of allowance for loan losses, increased $393.2 million, or 36%, at December 31, 2017, compared to December 31, 2016. This increase was primarily related to growth in commercial real estate loans of $213.5 million, or 48%, growth in consumer loans of $101.8 million, or an increase of 59%, of which $56.7 million was attributable to the Company's purchased student loan portfolios and $44.0 million was related to refund advance loans, growth in commercial insurance premium finance loans of $56.2 million, or an increase of 31%, and growth in residential mortgage loans of $31.1 million, or an increase of 18%. The growth in net loans receivable from December 31, 2016 to December 31, 2017 was partially offset by an $11.6 million decrease, or a 12% decrease, in total agricultural loans. Excluding all purchased student loan portfolios and refund advance loans, total loans receivable, net of allowance for loan losses, at December 31, 2017 were up $293.1 million, or 30%, compared to the same period of the prior year. At December 31, 2017, community banking loans increased $223.3 million, or 29%, compared to December 31, 2016.

~~Payments division average deposits increased $295.2 million, or 15%, for the 2018 fiscal first quarter when compared to the same quarter of 2017.~~

Non-performing assets (“NPAs”) were 0.61% of total assets at December 31, 2017, compared to 0.05% at December 31, 2016. The increase in NPAs was primarily related to a large, well-collateralized agricultural loan relationship being more than 90 days past due, which was still accruing at December 31, 2017. On January 2, 2018, a deed in lieu of foreclosure was executed on the collateral for this relationship upon which2019, the Company ~~took ownership~~repurchased 1,574,734 shares under the share repurchase program at an average price of ~~the properties serving as collateral~~$27.31, for a total of $43.0 million. The program became effective May 1, 2019 and ~~transferred the loans~~is scheduled to foreclosed real estate and repossessed assets. If, as expected, the properties are sold prior to the end of the agreed-upon receivership period set forth in the settlement agreement, the Company will be entitled to all principal, note interest, legal and other fees and expenses. After the receivership period ends, if the properties are not sold, the Company will be entitled to the fair value of the properties, which the Company believes to be significantly in excess of all principal, note interest, legal and other fees and expenses. Atexpire on September 30, 2017, NPAs were 0.72% of total assets. The decrease in NPAs from September 30, 2017 to December 30, 2017 was primarily due to the payoff of a $7.0 million nonperforming agricultural loan relationship during the first quarter of fiscal 2018.2021.

FINANCIAL CONDITION

At ~~December 31, 2017,~~June 30, 2019, the Company’s total assets increased by ~~$189.6~~$266.0 million, or 4%5%, to ~~$5.42~~$6.10 billion compared to ~~$5.23~~$5.84 billion at September 30, ~~2017. The increase in assets was~~2018, primarily due to an increase in loans ~~receivable.~~and leases, while partially being offset by a decrease in the investment portfolio.

Total cash and cash equivalents ~~were $1.30 billion~~was $100.7 million at ~~December 31, 2017,~~June 30, 2019, an increase of ~~$32.8 million, or 3%~~1%, from ~~$1.27 billion~~$100.0 millionat September 30, ~~2017. Similar to September 30, 2017, the Company also temporarily repositioned the balance sheet at the end of the 2018 fiscal first quarter to prepare for the upcoming seasonal tax lending activity.~~

2018. The Company maintains its cash investments primarily in interest-bearing overnight deposits with the FHLB of Des Moines and the Federal Reserve Bank.

The total ~~of mortgage-backed securities (“MBS”) and~~ investment ~~securities~~portfolio decreased ~~$21.1~~$517.3 million, or 1%26%, to ~~$2.24~~$1.50 billion at ~~December 31, 2017,~~June 30, 2019, compared to ~~$2.26~~$2.02 billion at September 30, ~~2017,~~2018, as maturities, sales, and principal pay downs exceeded purchases. The Company’s portfolio of ~~investment~~ securities ~~and MBS securities~~customarily consists primarily of ~~U.S. Government agency and instrumentality~~ MBS, which have ~~relatively short~~ expected lives ~~U.S. Government related asset backed securities, U.S. Government agency or instrumentality collateralized housing related municipal securities, and high quality~~much shorter than the stated final maturity, non-bank qualified obligations of states and political subdivisions (“NBQ”), which mature in approximately 15 years or ~~less.~~less, and other tax exempt municipal mortgage related pass through securities which have average lives much shorter than their stated final maturities. All MBS held by the Company at June 30, 2019 were issued by a U.S. Government agency or instrumentality. Of the total MBS, ~~$600.1~~$395.2 million, at fair value, were classified as available for sale, and ~~$8.5~~$7.4 million, at cost, were classified as held to maturity. Of the total investment securities, ~~$1.39 billion~~$961.9 million, at fair value, were classified as available for sale and ~~$235.0~~$138.1 million, at cost, were classified as held to maturity. During the ~~three month~~nine-month period ended ~~December 31, 2017,~~June 30, 2019, the Company purchased ~~$105.3~~$297.5 million of investment securities available for sale ~~no MBS securities,~~ and no investment securities held to maturity with the available for sale investment security purchases consisting primarily of Ginnie Mae (“GNMA”) convertible and collateralized municipal housing securities and other municipal housing securities fully collateralized by U.S. agency and instrumentalityor MBS securities.

During the first quarter of fiscal 2018, the Company early adopted Accounting Standard Update ("ASU") 2017-12, "Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities." Due to the early adoption of the ASU, the Company transferred $204.7 million of investment securities and $101.3 million of MBS from HTM to AFS during the first quarter of fiscal 2018. This change allows for enhanced balance sheet management and provides the opportunity for more liquidity, should it be needed.

The Company’s portfolio of ~~net~~gross loans ~~receivable~~and leases increased ~~$182.4~~by $681.0 million, or ~~14%~~23%, to ~~$1.50~~$3.63 billion at ~~December 31, 2017,~~June 30, 2019, from ~~$1.32~~$2.94 billionat September 30, ~~2017. This increase was primarily attributable to a $112.0 million increase in consumer~~2018.

National Lending loans ~~largely due to the student loan portfolio purchases~~ and ~~refund advance loans, a $68.5~~leases increased $584.2 million, or ~~12%, increase in~~32% to $2.43 billion at June 30, 2019 compared to September 30, 2018. Within the National Lending portfolios, commercial real estate loans, a $20.8 million, or 58%, increase in commercial operating loans, and a $7.3 million, or 4%, increase in residential mortgage loans, offset in part by a $14.8 million, or 6%, decrease in commercial insurance premium finance loans and ~~a $9.4~~leases increased $326.0 million, ~~or 10%, decrease in total agricultural~~warehouse finance portfolio increased $185.0 million, consumer finance portfolio increased $49.9 million, and the tax services loans ~~during the three months ended December 31, 2017. Excluding the purchased student loan portfolios and refund advances, total loans receivable, net of allowance for loan losses, would have~~ increased ~~$72.2~~$23.3 million ~~or 6%, from~~at June 30, 2019 compared to September 30, ~~2017 to December 31, 2017.~~2018. Community ~~banking~~Banking loans increased $61.5 million, or 7%, during this period. Of the $654.0 million in commercial and multi-family real estate loans at December 31, 2017, $129.9 million were considered high-volatility commercial real estate (“HVCRE”) loans. While such HVCRE loans are risk-weighted at 150% rather than 100%, as is customary for non-HVCRE commercial loans, the increase to the Company’s risk-weighted assets continues to be inconsequential in terms of the Company’s capital ratios.

~~Total deposits increased $290.2~~grew $96.7 million, or 9%, at ~~December 31, 2017,~~June 30, 2019 compared to ~~$3.51~~September 30, 2018, primarily due to growth in commercial real estate loans.

As of June 30, 2019, the remaining balance of acquired loans and leases from the Crestmark acquisition was $402.4 million and the remaining balances of the credit and interest rate mark discounts related to the acquired loans and leases held for investment were $6.8 million and $3.2 million, respectively, while the remaining balance of the interest rate mark premium related to the acquired loans held for sale was $0.7 million. On August 1, 2018, the Company acquired loans and leases from the Crestmark acquisition totaling $1.06 billion and recorded related credit and interest rate mark discounts of $12.3 million and $6.0 million, respectively.

Through the Bank, the Company owns stock in the FHLB due to the Bank’s membership and participation in this banking

system. The FHLB requires a level of stock investment based on a pre-determined formula. The Company’s investment in such stock decreased $6.2 million, or 26%, to $17.2 million at June 30, 2019, from ~~$3.22 billion~~$23.4 million at September 30, ~~2017,~~2018. The decrease in FHLB stock directly correlates with lower short-term borrowings balances at June 30, 2019 compared to September 30, 2018.

Total end-of-period deposits increased $344.2 million, or 8%, at June 30, 2019 to $4.78 billion as compared to September 30, 2018, primarily related to ~~an increase~~increases of ~~$325.6~~$346.7 million in ~~non-interest bearing~~noninterest-bearing deposits, ~~an increase of $17.1~~$96.8 million in wholesale deposits and $46.2 million in interest-bearing checking ~~deposits and a $4.6 million increase in certificates of deposit.~~deposits. The increase in total deposits was partially offset by a decrease of ~~$55.8~~$159.5 million in ~~wholesale deposits. Deposits attributable to the Payments segment increased by $331.8 million, or 14%, to $2.77 billion at December 31, 2017, compared to $2.44 billion at September 30, 2017.~~ certificates of deposit.

The average balance of total deposits and interest-bearing liabilities was ~~$3.62~~$5.37 billion for the ~~three month~~nine-month period ended ~~December 31, 2017,~~June 30, 2019, compared to ~~$3.06~~$3.83 billionfor the same period inof the prior fiscal year. The average balance of ~~non-interest bearing~~noninterest-bearing deposits for the ~~three month~~nine-month period ended ~~December 31, 2017~~June 30, 2019 increased ~~by$272.3~~by $233.6 million, or ~~13%~~9%, to ~~$2.33~~$2.72 billion compared to the same period in the prior year.

~~Total~~

The Company's total borrowings decreased ~~$91.1~~$158.3 million, or 6%31%, from ~~$1.49 billion~~$514.7 million at September 30, ~~2017~~2018 to ~~$1.40 billion~~$356.4 million at ~~December 31, 2017,~~June 30, 2019, primarily due to a decrease in short-term borrowings. During the third quarter of ~~federal funds purchased. At September 30, 2017 and December 31, 2017,~~fiscal 2019, the ~~Company's cash balances were much higher than normal due to~~Company replaced a ~~temporary repositioning of the balance sheet at those dates as part~~portion of its ~~preparations for the 2018 tax season.~~short-term borrowings with new long-term borrowings of $110.0 million. The Company’s ~~overnight federal funds purchased fluctuates~~short-term borrowings fluctuate on a daily basis due to the nature of a portion of its ~~non-interest bearing~~noninterest-bearing deposit base, primarily related to payroll processing timing with a higher volume of ~~overnight federal funds purchased~~short-term borrowings on Monday ~~through Wednesday,~~and Tuesday, which are typically paid down ~~on Thursday and Friday. Secondarily,~~throughout the week. This predictable fluctuation may be augmented near a ~~portion~~month-end by a prefunding of certain ~~programs are pre-funded, typically in the final week~~programs. The Company also has an available no-fee line of ~~the month and the corresponding deposits are received typically on the first day~~credit with JP Morgan of ~~the following month causing a temporary increased need for overnight borrowings. Accordingly, our level of borrowings may fluctuate significantly on any particular quarter end date.~~$25.0 million with no funds advanced at June 30, 2019.

At ~~December 31, 2017,~~June 30, 2019, the Company’s stockholders’ equity totaled ~~$437.7~~$822.9 million, an increase of ~~$3.2~~$75.2 million, from ~~$434.5~~$747.7 million at September 30, ~~2017.~~2018. The increase was attributable to net earnings, ~~and~~ an increase in additional paid-in capital ~~offset by~~and a change in accumulated other comprehensive ~~income and cash dividends paid.~~income. At ~~December 31, 2017,~~June 30, 2019, the Bank continued to exceed all regulatory requirements for classification as a well‑capitalized institution. See “Liquidity and Capital Resources” for further information.

Non-performing Assets and Allowance for Loan and Lease Losses

Generally, ~~for the majority of loan segments,~~ when a loan or lease becomes delinquent 90 days or more ~~(210 days or more for commercial insurance premium finance loans),~~ or when the collection of principal or interest becomes doubtful, the Company will place the loan or lease on a non-accrual status and, as a result, previously accrued interest income on the loan or lease is reversed against current income. The loan or lease will generally remain inon a non-accrual status until six months of good payment history has been established or management believes the ~~loan becomes current~~financial status of the borrower has been significantly restored. Certain relationships in the table below are over 90 days past due and ~~has demonstrated a sustained period~~still accruing. The Company considers these relationships as being in the process of ~~satisfactory performance, typically after six months.~~

~~Consumer~~collection. Insurance premium finance loans, consumer finance and tax ~~advance~~services loans ~~originated through the Company's tax divisions,~~ are ~~interest and fee free to the consumer. Due to the nature of consumer advance loans, it typically takes no more than three e-file cycles, the period of time between scheduled IRS payments, from~~generally not placed on non-accrual status, but are instead written off when the ~~return is accepted to collect. In the event~~collection of ~~default, MetaBank has no recourse with the tax consumer. Generally, when the refund advance loan becomes delinquent for 180 days~~principal and interest become doubtful.

Loans and leases, or ~~more, or~~portions thereof, are charged off when collection of principal becomes ~~doubtful, the Company will~~doubtful. Generally, this is associated with a delay or shortfall in payments of greater than 210 days for insurance premium finance, 180 days for tax and other specialty lending loans, 120 days for consumer credit products and 90 days for other loans. Action is taken to charge off ERO loans if such loans have not been collected by the ~~loan balance.~~end of June and taxpayer advance loans if such loans have not been collected by the end of the calendar year. Non-accrual loans and troubled debt restructurings are generally considered impaired.

The Company believes that the level of allowance for loan and lease losses at ~~December 31, 2017~~June 30, 2019 was appropriate and reflected probable losses related to these ~~loans;~~loans and leases; however, there can be no assurance that all loans and leases will be fully collectible or that the present level of the allowance will be adequate in the future. See “Allowance for Loan and Lease Losses” below.

The table below sets forth the amounts and categories of non-performing assets in the Company’s portfolio as of the dates set forth below. Foreclosed assets include assets acquired in settlement of loans.



	Non-Performing Assets As Of
	June 30, 2019			September 30, 2018
	(Dollars in Thousands)
Non-performing loans and leases
Non-accruing loans and leases:
Asset based lending	$	5,654		$	—
Factoring	4,846			—
Lease financing	1,936			2,864
SBA/USDA	259			—
Commercial finance	12,695			2,864
Total National Lending	12,695			2,864
Consumer one-to-four family real estate and other	233			—
Total Community Banking	233			—
Total	12,928			2,864

Accruing loans and leases delinquent 90 days or more:
Asset based lending	180			94
Lease financing	4,225			726
Insurance premium finance	1,679			2,981
Commercial finance	6,084			3,801
Consumer credit products	703			147
Other consumer finance	1,083			2,237
Consumer finance	1,786			2,384
Tax services	—			1,073
Total National Lending	7,870			7,258
Consumer one-to-four family real estate and other	—			79
Total Community Banking	—			79
Total	7,870			7,337

Total non-performing loans and leases	20,798			10,201

Other assets
Non-performing operating leases	703			—

Foreclosed and repossessed assets:
Commercial finance	1,392			1,626
Consumer one-to-four family real estate and other	—			90
Agricultural real estate and operating	28,122			29,922
Total	29,514			31,638

Total other assets	30,217			31,638

Total non-performing assets	$	51,015		$	41,839
Total as a percentage of total assets	0.84		%	0.72		%

Non-Performing Assets As Of
December 31, 2017 September 30, 2017
Non-Performing Loans (Dollars in Thousands)

Non-Accruing Loans:
Commercial and Multi-Family Real Estate 284
685
Total ⁽¹⁾
284
685

Accruing Loans Delinquent 90 Days or More

1-4 Family Real Estate 234
—
Agricultural Real Estate 27,818
34,198
Consumer 1,624
1,406
Agricultural Operating —
97
CML Insurance Premium Finance 3,194
1,205
Total 32,870
36,906

Total Non-Performing Loans 33,154
37,591

Other Assets
Foreclosed Assets:
1-4 Family Real Estate —
62
Commercial and Multi-Family Real Estate 128
230
Total 128

292

Total Other Assets $ 128

$ 292

Total Non-Performing Assets $ 33,282

$ 37,883
Total as a Percentage of Total Assets 0.61 % 0.72 %
Total Non-Performing Assets as a Percentage of Total Assets - excluding insured loans⁽²⁾
0.58 % 0.70 %

⁽¹⁾During the three-month period ended December 31, 2017, the Company had $1.1 million of loans modified as troubled debt restructurings ("TDRs") and no loans modified as TDRs during the three-month period ended September 30, 2017. In addition, the Company had $1.6 million and $0.5 million of TDRs performing in accordance with their terms at each of the periods ended December 31, 2017 and September 30, 2017.

⁽²⁾~~Excludes from non-performing assets the student loans that are insured by ReliaMax Surety Company.~~

At ~~December 31, 2017,~~June 30, 2019, non-performing loans and leases totaled ~~$33.2~~$20.8 million, representing ~~2.19%~~0.57% of total loans and leases, compared to ~~$37.6~~$10.2 million, or ~~2.83%~~0.35% of total loans and leases at September 30, ~~2017. This decrease in non-performing loans was primarily due to the payoff of a $7.0 million nonperforming agricultural loan relationship during the first quarter of fiscal~~ 2018.

Classified Assets. Federal regulations provide for the classification of loans, leases, and other assets such as debt and equity securities considered by our primary regulator, the OCC, to be of lesser quality as “substandard,” “doubtful” or ~~“loss.~~“loss,” with each such classification dependent on the facts and circumstances surrounding the assets in question. An asset is considered “substandard” if it is inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. “Substandard” assets include those characterized by the “distinct possibility” that the Bank will sustain “some loss” if the deficiencies are not corrected. Assets classified as “doubtful” have all of the weaknesses inherent in those classified “substandard,” with the added characteristic that the weaknesses present make “collection or liquidation in full,” on the basis of currently existing facts, conditions and values, “highly questionable and improbable.” Assets classified as “loss” are those considered “uncollectible” and of such minimal value that their continuance as assets without the establishment of a specific loss reserve is not warranted.

General allowances represent loss allowances which have been established to recognize the inherent risk associated with lending activities, but which, unlike specific allowances, have not been allocated to particular problem assets. When assets are classified as “loss,” the Bank is required either to establish a specific allowance for losses equal to 100% of that portion of the asset so classified or to ~~charge-off~~charge off such amount. The Bank’s determinations as to the classification of its assets and the amount of its valuation allowances are subject to review by its regulatory authorities, which may order the establishment of additional general or specific loss allowances.

On the basis of management’s review of its loans, leases, and other assets, at ~~December 31, 2017,~~June 30, 2019, the Company had classified ~~$40.4~~$35.0 million of its assets as substandard and did not classify any assets as doubtful or loss. At September 30, ~~2017,~~2018, the Company classified ~~$40.6~~$24.6 million of its assets as substandard and did not classify any assets as doubtful or loss.

Allowance for Loan and Lease Losses. The allowance for loan and lease losses is established through a provision for loan and lease losses based on management’s evaluation of the risk inherent in its loan and lease portfolio and changes in the nature and volume of its loan and lease activity, including those loans ~~which~~and leases that are being specifically monitored by management. Such evaluation, which includes a review of loans and leases for which full collectability may not be reasonably assured, ~~involves~~includes consideration of, among other matters, the estimated fair value of the underlying collateral, economic conditions, historical loan and lease loss experience and other factors that warrant recognition in providing for an appropriate loan and lease loss allowance.

Management closely monitors economic developments both regionally and nationwide, and considers these factors when assessing the appropriateness of its allowance for loan and lease losses. The current economic environment continues to show signs of ~~improvement~~stability in the Bank’s markets. The Bank’s average loss rates over the past three years were low relative to industry averages for ~~community banking loans were relatively low compared to peers, but were~~such years, offset, in the case of fiscal 2016, with a higher agricultural loss rate ~~in fiscal year 2016~~ driven by the ~~charge off~~charge-off of one relationship. The Bank does not believe it is likely ~~that~~ these low loss conditions will continue indefinitely. Although the Bank’s four market areas have indirectly benefited from a stable agricultural market, the market has become slightly stressed as commodity prices have generally remained lower than a few years ago. Management believes the low commodity pricesEach loan and ~~adverse weather conditions have the potential to negatively impact the economies of our agricultural markets. The improving economic conditions have also kept the~~lease segment is evaluated using both historical loss ~~rates on the national lending loans~~factors as well as other qualitative factors, in order to determine the ~~tax service loans relatively low, although management realizes that these low loss conditions may not continue.~~

~~At December 31, 2017,~~amount of risk the Company had established an allowance for loan losses totaling $8.9 million, compared to $7.5 million at September 30, 2017. This increase was primarily due to the additional provision expense related to loans originated by our tax services divisions. During the three months ended December 31, 2017, the Company recorded a provision for loan losses of $1.1 million, partially offset by $0.3 million of net recoveries, compared to $0.1 million~~of net charge offs for the three months ended December 31, 2016.~~ believes exists within that segment.

Management believes that, based on a detailed review of the loan and lease portfolio, historic loan and lease losses, current economic conditions, the size of the loan and lease portfolio and other factors, the level of the allowance for loan and lease losses at ~~December 31, 2017~~June 30, 2019 reflected an appropriate allowance against probable losses from the ~~loan~~lending portfolio. Although the Company maintains its allowance for loan and lease losses at a level ~~that~~ it considers to be ~~adequate,~~appropriate, investors and others are cautioned that there can be no assurance that future losses will not exceed estimated amounts, or that additional provisions for loan and lease losses will not be required in future periods.

~~The allowance for loan losses reflects management’s best estimate of probable losses inherent in the portfolio based on currently available information.~~ In addition, to the ~~factors mentioned above, future additions to~~Company’s determination of the allowance for loan and lease losses ~~may become necessary based upon changing economic conditions, increased~~is subject to review by the OCC, which can require the establishment of additional general or specific allowances.

At June 30, 2019, the Company had established an allowance for loan ~~balances or changes~~and lease losses totaling $43.5 million, compared to $13.0 million at September 30, 2018. The increase in the ~~underlying collateral~~Company's allowance for loan and lease losses was driven primarily by increases in the allowance of $15.4 million in tax services loans, $11.0 million in the commercial finance portfolio, and $3.5 million in consumer finance loans. The change in the tax services portfolio was driven by additional provision expense related to loan originations by the Company's tax services division. Growth in the commercial finance portfolio was largely attributable to the Crestmark division while the increase in consumer finance is related to the Company now taking on all of the risk of the student loan ~~portfolio. In addition, our regulators have~~portfolio, as the ~~ability to order us to increase our allowance.~~portfolio is no longer insured.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The Company’s financial statements are prepared in accordance with ~~U.S.~~ GAAP. The financial information contained within these financial statements is, to a significant extent, based on approximate measures of the financial effects of transactions and events that have already occurred. Management has identified its critical accounting policies, which are those policies that, in management's view, are most important in the ~~policies described below as Critical Accounting Policies.~~portrayal of our financial condition and results of operations, and include those for the allowance for loan and lease losses, goodwill and identifiable intangible assets. These policies involve complex and subjective decisions and assessments. Some of these estimates may be uncertain at the time they are made, could change from period to period, and could have a material impact on the financial statements. ~~This~~A discussion ~~and analysis should be read in conjunction with~~of the Company’s ~~financial statements~~critical accounting policies and estimates can be found in the ~~accompanying notes presented in Part II, Item 8 “Consolidated Financial Statements and Supplementary Data” of its~~Company's Annual Report on Form 10-K for the year ended September 30, ~~2017, and information contained herein.~~

~~Allowance for Loan Losses~~. The Company’s allowance for loan loss methodology incorporates a variety of risk considerations, both quantitative and qualitative, in establishing an allowance for loan loss that management believes is appropriate at each reporting date. Quantitative factors include the Company’s historical loss experience, delinquency and charge-off trends, collateral values,2018. There were no significant changes ~~in nonperforming loans, and other factors. Quantitative factors also incorporate known information about individual loans, including borrowers’ sensitivity~~ to interest rate movements. Qualitative factors include the general economic environment in the Company’s markets, including economic conditions throughout the Midwest and, in particular, the state of certain industries. Size and complexity of individual credits in relation to loan structure, existing loanthese critical accounting policies and ~~pace~~estimates during the first nine months of portfolio growth are other qualitative factors that are considered in the methodology. Although management believes the levels of the allowance at both December 31, 2017 and September 30, 2017 were adequate to absorb probable losses inherent in the loan portfolio, a decline in local economic conditions or other factors could result in losses in excess of the applicable allowance.

~~Goodwill and Intangible Assets~~. Each quarter, the Company evaluates the estimated useful lives of its amortizable intangible assets and whether events or changes in circumstances warrant a revision to the remaining periods of amortization. In accordance with ASC 350, ~~Intangibles – Goodwill and Other~~, recoverability of these assets is measured by comparison of the carrying amount of the asset to the future undiscounted cash flows the asset is expected to generate. If the asset is considered to be impaired, the amount of any impairment is measured as the difference between the carrying value and the fair value of the impaired asset.

~~In addition, goodwill and intangible assets are tested annually as of our~~ fiscal year end for impairment or more often if conditions indicate a possible impairment. Determining the fair value of a reporting unit involves the use of significant estimates and assumptions. These estimates and assumptions include revenue growth rates and operating margins used to calculate future cash flows, risk-adjusted discount rates, future economic and market conditions, comparison of the Company’s market value to book value and determination of appropriate market comparables. Actual future results may differ from those estimates.2019.

Assumptions and estimates about future values and remaining useful lives of the Company’s intangible and other long-lived assets are complex and subjective. They can be affected by a variety of factors, including external factors such as industry and economic trends, and internal factors such as changes in the Company’s business strategy and internal forecasts. Although the Company believes the historical assumptions and estimates used are reasonable and appropriate, different assumptions and estimates could materially impact the reported financial results.

Customer relationship, trademark, and non-compete intangibles are amortized over the periods in which the asset is expected to meaningfully contribute to the business as a whole, using either the present value of excess earnings or straight line amortization, depending on the nature of the intangible asset. Patents are estimated to have a useful life of 20 years, beginning on the date the patent application is originally filed. Thus, patents are amortized based on the remaining useful life once granted. Periodically, the Company reviews the intangible assets for events or circumstances that may indicate a change in recoverability of the underlying basis.

~~Deferred Tax Assets~~. The Company accounts for income taxes according to the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using the enacted tax rates applicable to income for the years in which those temporary differences are expected to be recovered or settled. Deferred tax assets are recognized subject to management’s judgment that realization is more-likely-than-not. An estimate of probable income tax benefits that will not be realized in future years is required in determining the necessity for a valuation allowance.

~~Security Impairment~~. Management monitors the investment securities portfolio for impairment on a security by security basis. Management has a process in place to identify securities that could potentially have a credit impairment that is other-than-temporary. This process involves the length of time and extent to which the fair value has been less than the amortized cost basis, review of available information regarding the financial position of the issuer, monitoring the rating of the security, monitoring changes in value, cash flow projections, and the Company’s intent to sell a security or whether it is more likely than not the Company will be required to sell the security before the recovery of its amortized cost which, in some cases, may extend to maturity. To the extent we determine that a security is deemed to be other-than-temporarily impaired, an impairment loss is recognized. If the Company intends to sell a security or it is more likely than not that the Company would be required to sell a security before the recovery of its amortized cost, the Company recognizes an other-than-temporary impairment in earnings for the difference between amortized cost and fair value. If we do not expect to recover the amortized cost basis, we do not plan to sell the security and if it is not more likely than not that the Company would be required to sell a security before the recovery of its amortized cost, the recognition of the other-than-temporary impairment is bifurcated. For those securities, the Company separates the total impairment into a credit loss component recognized in earnings, and the amount of the loss related to other factors is recognized in other comprehensive income net of taxes.

The amount of the credit loss component of a debt security impairment is estimated as the difference between amortized cost and the present value of the expected cash flows of the security. The present value is determined using the best estimate of cash flows discounted at the effective interest rate implicit to the security at the date of purchase or the current yield to accrete an asset- backed or floating rate security. Cash flow estimates for trust preferred securities are derived from scenario-based outcomes of forecasted default rates, loss severity, prepayment speeds and structural support.

~~Level 3 Fair Value Measurement~~. U.S. GAAP requires the Company to measure the fair value of financial instruments under a standard which describes three levels of inputs that may be used to measure fair value. Level 3 measurement includes significant unobservable inputs that reflect the Company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation. Although management believes that it uses a best estimate of information available to determine fair value, due to the uncertainty of future events, the approach includes a process that may differ significantly from other methodologies and still produce an estimate that is in accordance with U.S. GAAP.

RESULTS OF OPERATIONS

General. The Company recorded net income of ~~$4.7~~$29.3 million, or ~~$0.48~~$0.75 per diluted share, for the three months ended ~~December 31, 2017,~~June 30, 2019, compared to net income of ~~$1.2~~$6.8 million, or ~~$0.14~~$0.23 per diluted share, for the three months ended December 31, 2016. Included in the 2018 fiscal first quarter net income was an income tax expense of $3.6 million from a reduction in the value of certain deferred tax assets as a result of the Tax Act signed into law on December 22, 2017 (see non-interest expense section for further discussion). The 2018 fiscal first quarter pre-tax results included a $1.0 million loss on sale of investments and $1.3 million of acquisition expenses. The 2018 fiscal first quarter pre-tax results also included $1.7 million in amortization of intangible assets and $1.3 million in non-cash stock-related compensation associated with executive officer employment agreements.June 30, 2018. Total revenue for the fiscal ~~2018 first~~2019 third quarter was ~~$55.5~~$110.8 million, compared to ~~$39.2~~$61.6 million for the same quarter in fiscal ~~2017,~~2018, an increase of ~~$16.3 million, or 42%,~~80%. The increase in net income and revenue was primarily due to the improvement in net interest income, attributable to the acquisition of Crestmark in the fourth quarter of fiscal 2018, along with an enhanced interest-earning asset mix.

The Company recorded net income of $76.8 million, or $1.95 per diluted share, for the nine months ended June 30, 2019, compared to $42.9 million, or $1.47 per diluted share, for the same period in fiscal year 2018. Total revenue for the nine months ended June 30, 2019 was $385.2 million, compared to $241.9 million for the same period of the prior year, an increase in interest from commercial insurance premium finance and community banking loans, card fee income, as well as the student loan purchases and income from tax-exempt securities (included in other investment securities), and growth in tax product fee income.of 59%.

~~Seasonality~~. In the industries for electronic payments processing and tax refund processing, companies commonly experience seasonal fluctuations in revenue. For example, in recent years, the Company's results of operations for the first half of each fiscal year have been favorably affected by large numbers of taxpayers electing to receive their tax refunds via direct deposit on our pre-paid cards, which caused their operating revenues to be typically higher in the first half of those years than they were in the corresponding second half of those years. Meta's tax business is expected to continue to generate the vast majority of its revenues in the Company's fiscal second quarter, with some additional revenues in the third quarter, while most expenses are spread throughout the year with some elevated expenses in the December and March quarters. Management expects the Company's revenue to continue to be based on seasonal factors that affect the electronic payments processing and tax refund processing industries as a whole. The Company and its tax preparation partners rely on the Internal Revenue Service (the “IRS”), technology, and employees when processing and preparing tax refunds and tax-related products and services.

Net Interest ~~Income~~.Income. Net interest income for the fiscal ~~2018 first~~2019 third quarter increased by ~~$6.4~~$38.6 million, or ~~32%~~136%, to ~~$26.2~~$67.0 million from ~~$19.8~~$28.4 million for the same quarter in ~~2017,~~fiscal 2018, primarily due to ~~significant increases~~growth in ~~the community banking~~ loan ~~portfolio, commercial insurance premium finance loan portfolio,~~ and ~~the purchased student loan portfolios. Growth in investment security~~lease balances ~~also contributed to the~~as well as an increase in ~~net interest income. Additionally, the overall increase was driven by a better mix~~loan and ~~higher percentage of loans as a percentage of interest-earning assets, with loan yields driving a sizable increase due in part to the recently acquired student loan portfolios and their floating rate~~lease yields. The quarterly average outstanding balance of loans ~~from all sources~~and leases as a percentage of interest-earning assets for the quarter ended June 30, 2019 increased to 68%, from ~~30%~~40% for the quarter ended June 30, 2018, while the quarterly average balance of total investments as ~~of the end of the first fiscal quarter of 2017 to 37% as of the end of the first fiscal quarter of 2018. In addition, lower-yielding agency Mortgage-Backed Securities ("MBS") decreased from 21%~~a percentage of interest-earning assets decreased to 31% from 58% over that same period.

For the nine months ended June 30, 2019, net interest income was $198.6 million compared to $82.0 million for the same period in the prior year. This increase was primarily due to an enhanced interest-earning asset mix related to the acquired loans and leases in the Crestmark division, along with continued growth in the National Lending and Community Banking loan and lease portfolios.

Net interest margin was 5.07% in the fiscal ~~first~~2019 third quarter, an increase of ~~2017 compared to 18% of interest-earning assets for the same quarter in 2018. Net interest income for the fiscal 2018 first quarter was up $1.7 million~~213 basis points from ~~the Company's fiscal 2017 fourth quarter, as anticipated, primarily due to a better mix of earning assets.~~

~~Net interest margin, tax equivalent (“NIM”) increased from 2.90% in the fiscal 2017 first quarter to 3.06%~~2.94% in the fiscal 2018 ~~first~~third quarter. NIM,TE was 5.15% in the fiscal 2019 third quarter, an increase of 192 basis points from 3.23%in the fiscal 2018 third quarter. The ~~reported 3.06%~~increases in NIM ~~reflects~~and NIM, TE in the ~~lowered corporate prorated tax rate on~~fiscal 2019 third quarter, compared to the ~~Company's tax-exempt municipal portfolio. Had corporate tax rates remained at previous rates, excluding changes resulting from~~same period of the ~~Tax Act,~~prior year, were primarily attributable to higher net loan and lease yields attained through the ~~reported~~Crestmark division.

For the nine months ended June 30, 2019, NIM ~~of 3.06% would have been 3.26%. The reported NIM of 3.06%~~ was ~~also impacted by 16~~4.90%, increasing 213 basis points ~~due to tax service loans and wholesale deposits.~~from 2.77% during the comparable prior year period. NIM, TE for the nine months ended June 30, 2019 was 5.02%, an increase of 196 basis points for the same period of the prior year.

The overall reported tax equivalent yield (“TEY”) on average earning ~~asset yields~~assets increased by 31244 basis points to ~~3.55%~~6.26% when comparing the fiscal ~~2018 first~~2019 third quarter to the ~~2017 first quarter, which~~same period of the prior fiscal year. The improvement was driven primarily by the Company's improved earning asset mix, ~~with~~which reflects increased ~~exposure to its high-quality commercial insurance premium finance, student, and community banking loan portfolios. The increase~~balances in ~~TEY continues to highlight~~ the ~~beneficial tailwind provided by this rotation among earning assets. The reported 3.55% TEY on earning assets reflects the lowered corporate prorated tax rate on the Company's tax-exempt municipal~~National Lending portfolio. ~~Had corporate tax rates remained at previous rates, excluding changes resulting from the adoption of the Tax Act, reported TEY on earning assets would have been 3.75%.~~

The fiscal ~~2018 first~~2019 third quarter TEY on the securities portfolio ~~increased~~decreased by ~~one~~two basis ~~point~~points to 3.09% compared to the same period of the prior year fiscal first quarter, primarily due to the continued shift in new investments being made in higher-yielding investment securities, primarily mortgage-related, tax-exempt municipal securities rather than traditional agency MBS securities. The TEY ~~on the securities portfolio~~ of 2.93% for the first fiscal quarter of 2018 reflects the lowered corporate prorated tax rate on the Company's tax-exempt municipal portfolio. Had corporate tax rates remained at previous rates, excluding changes resulting from the adoption of the Tax Act, reported securities portfolio yield would have been 3.25%3.11%.

The Company’s average interest-earning assets for the fiscal ~~2018 first~~2019 third quarter increased by ~~$539.4 million,~~$1.43 billion, or ~~17%~~37%, to ~~$3.76~~$5.30 billion, up from ~~$3.22 billion during~~ the ~~same~~comparable quarter ~~of the last fiscal year,~~in 2018. The increase was primarily ~~from~~attributable to growth in the Company's average loan ~~portfolios~~ and ~~tax-exempt investments~~lease portfolio of $2.04 billion, of which $1.88 billion was related to an increase in National Lending loans and leases and $159.9 million was related to Community Banking loans. This increase was partially offset by a decrease in total investment securities of ~~$436.8~~$633.3 million, which decreased as the Company continued to utilize sales of securities and ~~$236.3 million, respectively.~~cash flow from its amortizing securities portfolio to fund loan growth.

The Company’s average balance of total deposits and interest-bearing liabilities was $5.14 billion for the ~~2018 first fiscal quarter increased $556.7 million, or 18%,~~three-month period ended June 30, 2019, compared to ~~$3.62 billion from $3.06~~$3.70 billion for the same ~~quarter of~~period in the prior ~~fiscal year.~~year, representing an increase of 39%. This increase was primarily due to ~~an increase~~increases in ~~non-interest-bearing deposits of $272.3 million, an increase in Federal Home Loan Bank advances of $248.9 million and an increase in~~average wholesale deposits of ~~$126.7~~$1.07 billion, average noninterest-bearing deposits of $244.5 million, ~~offset by a decrease in federal funds purchased~~average time deposits of ~~$132.1~~$67.8 million, average interest-bearing checking of $39.7 million, and the average balance of total borrowings of $20.5 million. ~~Average quarterly deposits in the Payments segment increased in the fiscal 2018 first quarter by $295.2 million, or 15%, from the same period last year.~~

Overall, the Company's cost of funds for all deposits and borrowings averaged ~~0.51%~~1.14% during the fiscal ~~2018 first~~2019 third quarter, compared to ~~0.36%~~0.62% for the ~~2017 first~~2018 third fiscal quarter. This increase was primarily due to ~~increases~~a rise in ~~wholesale deposits,~~short-term interest rates affecting overnight borrowing rates, ~~and higher average overall funding balances due to the Company's utilization of more of its capital during non-tax season with higher investment balances and~~other wholesale funding, and ~~in preparation to hold more tax loans on~~ the ~~balance sheet. Notwithstanding this increase,~~interest-bearing time deposits acquired by the Company ~~believes that its growing, low-cost deposit base gives it a distinct and significant competitive advantage over most banks, and even more so if interest rates continue to rise, because~~in connection with the ~~Company anticipates that its~~Crestmark acquisition in the fourth quarter of fiscal 2018. The Company's overall cost of deposits ~~will likely remain relatively low, increasing less than at many other banks. At December 31, 2017 and 2016, low-cost checking deposits represented 83% and 70%~~was 0.90%in the 2019 fiscal third quarter, compared to 0.29% in the same quarter of ~~total deposits, respectively.~~2018.

The following tables present, for the periods indicated, the Company’s total dollar amount of interest income from average interest-earning assets and the resulting yields, as well as the interest expense on average interest-bearing liabilities, expressed both in dollars and rates. ~~Tax equivalent~~Tax-equivalent adjustments have been made in yield on ~~interest bearing~~interest-bearing assets and net interest margin. Non-accruing loans and leases have been included in the table as loans carrying a zero yield.


Three Months Ended December 31,	2017						2016
Three Months Ended June 30,													2019						2018
(Dollars in Thousands)	Average Outstanding Balance		Interest Earned / Paid		Yield / Rate ⁽¹⁾		Average Outstanding Balance		Interest Earned / Paid		Yield / Rate⁽²⁾		Average Outstanding Balance		Interest Earned / Paid		Yield / Rate⁽¹⁾		Average Outstanding Balance		Interest Earned / Paid		Yield / Rate⁽²⁾
Interest-earning assets:
Cash & fed funds sold	$	100,321	$	607	2.40	%	$	186,565	$	391	0.83	%	$	80,100	$	521	2.61	%	$	57,164	$	388	2.72	%
Mortgage-backed securities	673,411		3,758		2.21	%	689,617		3,320		1.91	%	421,725		3,063		2.91	%	617,815		3,950		2.56	%
Tax exempt investment securities	1,408,552		8,698		3.25	%	1,172,252		6,902		3.59	%	690,732		4,058		2.98	%	1,373,444		8,635		3.34	%
Asset-backed securities	93,631		765		3.24	%	117,928		695		2.34	%	307,581		2,701		3.52	%	189,389		1,537		3.25	%
Other investment securities	80,035		586		2.91	%	87,029		589		2.69	%	199,681		1,557		3.13	%	72,381		538		2.98	%
Total investments	2,255,629		13,807		2.93	%	2,066,826		11,506		2.92	%	1,619,719		11,379		3.09	%	2,253,029		14,660		3.11	%
Community banking loans⁽³⁾	958,222		10,466		4.33	%	762,559		8,169		4.25	%
Tax services loans	12,378		—		—	%	5,573		—		—	%
Commercial insurance premium finance loans	244,380		2,799		4.54	%	181,422		2,078		4.54	%
Student loans and other	191,510		3,178		6.58	%	20,129		431		8.50	%
National lending loans⁽⁴⁾	435,891		5,977		5.44	%	201,551		2,509		4.94	%
Total loans	1,406,490		16,443		4.64	%	969,684		10,678		4.37	%
Total commercial finance													1,775,905		44,332		10.01	%	299,676		3,813		5.10	%
Total consumer finance													364,633		8,178		9.00	%	208,937		3,717		7.13	%
Total tax services													45,142		—		—	%	22,268		—		—	%
Total warehouse finance													223,546		3,491		6.26	%	—		—		—	%
National Lending loans and leases													2,409,226		56,001		9.32	%	530,881		7,530		5.69	%
Community Banking loans													1,189,912		13,731		4.63	%	1,030,016		11,526		4.49	%
Total loans and leases													3,599,138		69,732		7.77	%	1,560,897		19,056		4.90	%
Total interest-earning assets	$	3,762,441	$	30,857	3.55	%	$	3,223,075	$	22,575	3.24	%	5,298,957		$	81,632	6.26	%	3,871,090		$	34,104	3.82	%
Non-interest-earning assets	360,508						267,947
Noninterest-earning assets													820,474						369,200
Total assets	$	4,122,949					$	3,491,022					$	6,119,431					$	4,240,290

Interest-bearing liabilities:
Interest-bearing checking	$	71,448	$	50	0.28	%	$	38,229	$	39	0.40	%	$	137,950	$	85	0.25	%	$	98,235	$	54	0.22	%
Savings	53,084		8		0.06	%	50,528		7		0.06	%	54,247		9		0.07	%	59,546		10		0.07	%
Money markets	47,899		27		0.22	%	47,605		21		0.18	%	58,782		107		0.73	%	46,742		28		0.24	%
Time deposits	128,496		366		1.13	%	131,169		259		0.78	%	128,165		633		1.98	%	60,373		167		1.11	%
Wholesale deposits	483,878		1,434		1.18	%	357,224		612		0.68	%	1,521,594		9,561		2.52	%	453,885		2,005		1.77	%
Total interest-bearing deposits	784,805		1,885		0.95	%	624,755		938		0.60	%	1,900,738		10,395		2.19	%	718,781		2,264		1.26	%
Overnight fed funds purchased	139,152		525		1.50	%	271,272		392		0.57	%	363,857		2,368		2.61	%	402,088		2,041		2.04	%
FHLB advances	268,913		937		1.38	%	20,043		141		2.80	%	54,341		324		2.39	%	—		—		—	%
Subordinated debentures	73,359		1,113		6.02	%	73,223		1,111		6.02	%	73,583		1,163		6.34	%	73,430		1,102		6.02	%
Other borrowings	22,982		201		3.47	%	15,580		160		4.06	%	40,653		414		4.08	%	36,408		286		3.15	%
Total borrowings	504,406		2,776		2.18	%	380,118		1,804		1.88	%	532,434		4,269		3.22	%	511,926		3,429		2.69	%
Total interest-bearing liabilities	1,289,211		4,661		1.43	%	1,004,873		2,742		1.08	%	2,433,172		14,664		2.42	%	1,230,707		5,693		1.86	%
Non-Interest Bearing Deposits	2,328,159		—		—	%	2,055,842		—		—	%
Noninterest-bearing deposits													2,710,288		—		—	%	2,465,750		—		—	%
Total deposits and interest-bearing liabilities	$	3,617,370	$	4,661	0.51	%	$	3,060,715	$	2,742	0.36	%	5,143,460		$	14,664	1.14	%	3,696,457		$	5,693	0.62	%
Other non-interest bearing liabilities	71,398						78,219
Other noninterest-bearing liabilities													149,207						98,973
Total liabilities	3,688,768						3,138,934						5,292,667						3,795,430
Shareholders' equity	434,181						352,088						826,764						444,860
Total liabilities and shareholders' equity	$	4,122,949					$	3,491,022					$	6,119,431					$	4,240,290
Net interest income and net interest rate spread including non-interest bearing deposits			$	26,196	3.04	%			$	19,833	2.88	%
Net interest income and net interest rate spread including noninterest-bearing deposits															$	66,968	5.12	%			$	28,411	3.21	%

Net interest margin					2.76	%					2.44	%					5.07	%					2.94	%
Net interest margin, tax equivalent⁽⁵⁾					3.06	%					2.90	%
Tax-equivalent effect																	0.08	%					0.29	%
Net interest margin, tax-equivalent⁽³⁾																	5.15	%					3.23	%

⁽¹⁾ Tax rate used to arrive at the TEY for the three months ended ~~December 31, 2017~~June 30, 2019 was ~~24.53%~~21%.

⁽²⁾ Tax rate used to arrive at the TEY for the three months ended ~~December 31, 2016~~June 30, 2018 was ~~35%~~24.53%.

^{(3) Previously stated Retail Bank loans have been renamed as Community Banking Loans}

~~(4) Previously stated Specialty Finance Loans have been renamed as National Lending Loans~~

~~(5)~~ Net interest margin expressed on a ~~fully taxable equivalent~~fully-taxable-equivalent basis ("Net interest margin, ~~tax equivalent"~~tax-equivalent") is a non-GAAP financial measure. The tax-equivalent adjustment to net interest income recognizes the estimated income tax savings when comparing taxable and tax-exempt assets and adjusting for federal and state exemption of interest income. We believe that it is a standard practice in the banking industry to present net interest margin expressed on a ~~fully taxable equivalent~~fully-taxable-equivalent basis, and accordingly believe the presentation of this non-GAAP financial measure may be useful for peer comparison purposes.



Nine Months Ended June 30,	2019						2018
(Dollars in Thousands)	Average Outstanding Balance		Interest Earned / Paid		Yield / Rate ⁽¹⁾		Average Outstanding Balance		Interest Earned / Paid		Yield / Rate⁽²⁾
Interest-earning assets:
Cash & fed funds sold	$	148,751	$	2,989	2.69	%	$	96,496	$	1,717	2.38	%
Mortgage-backed securities	392,395		8,622		2.94	%	644,578		11,755		2.44	%
Tax exempt investment securities	952,501		17,999		3.20	%	1,404,571		26,333		3.32	%
Asset-backed securities	297,316		8,090		3.64	%	131,705		3,522		3.58	%
Other investment securities	150,888		3,301		2.93	%	75,877		1,662		2.93	%
Total investments	1,793,101		38,012		3.19	%	2,256,731		43,272		3.07	%
Total commercial finance	1,662,322		125,566		10.10	%	266,310		9,691		4.87	%
Total consumer finance	327,700		21,697		8.85	%	206,263		10,043		6.51	%
Total tax services	140,515		8,206		7.81	%	146,071		833		0.76	%
Total warehouse finance	168,081		7,912		6.29	%	—		—		—	%
National Lending loans and leases	2,298,618		163,382		9.50	%	618,644		20,567		4.44	%
Community Banking loans	1,175,667		40,519		4.61	%	986,902		32,777		4.44	%
Total loans and leases	3,474,285		203,900		7.85	%	1,605,546		53,344		4.44	%
Total interest-earning assets	5,416,137		$	244,902	6.16	%	3,958,773		$	98,333	3.61	%
Noninterest-earning assets	877,130						394,451
Total assets	$	6,293,267					$	4,353,224

Interest-bearing liabilities:
Interest-bearing checking	$	129,656	$	220	0.23	%	$	90,055	$	155	0.23	%
Savings	54,643		28		0.07	%	57,397		27		0.06	%
Money markets	56,987		263		0.62	%	47,814		82		0.23	%
Time deposits	160,740		2,229		1.85	%	102,636		877		1.14	%
Wholesale deposits	1,832,237		32,990		2.41	%	540,193		5,965		1.48	%
Total interest-bearing deposits	2,234,264		35,731		2.14	%	838,095		7,106		1.13	%
Overnight fed funds purchased	287,985		5,485		2.55	%	315,359		4,244		1.80	%
FHLB advances	18,114		324		2.39	%	91,392		947		1.39	%
Subordinated debentures	73,543		3,486		6.34	%	73,394		3,329		6.07	%
Other borrowings	43,690		1,286		3.93	%	26,343		695		3.53	%
Total borrowings	423,332		10,581		3.34	%	506,488		9,215		2.43	%
Total interest-bearing liabilities	2,657,595		46,312		2.33	%	1,344,583		16,321		1.62	%
Noninterest-bearing deposits	2,715,870		—		—	%	2,482,274		—		—	%
Total deposits and interest-bearing liabilities	5,373,465		$	46,312	1.15	%	3,826,857		$	16,321	0.57	%
Other noninterest-bearing liabilities	128,924						85,626
Total liabilities	5,502,389						3,912,483
Shareholders' equity	790,878						440,741
Total liabilities and shareholders' equity	$	6,293,267					$	4,353,224
Net interest income and net interest rate spread including noninterest-bearing deposits			$	198,590	5.01	%			$	82,012	3.04	%

Net interest margin					4.90	%					2.77	%
Tax-equivalent effect					0.12	%					0.29	%
Net interest margin, tax-equivalent⁽³⁾					5.02	%					3.06	%

(1) Tax rate used to arrive at the TEY for the nine months ended June 30, 2019 was 21%.

(2) Tax rate used to arrive at the TEY for the nine months ended June 30, 2018 was 24.53%.

(3) Net interest margin expressed on a fully-taxable-equivalent basis ("Net interest margin, tax-equivalent") is a non-GAAP financial measure. The tax-equivalent adjustment to net interest income recognizes the estimated income tax savings when comparing taxable and tax-exempt assets and adjusting for federal and state exemption of interest income. We believe that it is a standard practice in the banking industry to present net interest margin expressed on a fully-taxable-equivalent basis, and accordingly believe the presentation of this non-GAAP financial measure may be useful for peer comparison purposes.

Provision for Loan and Lease Losses. The Company recorded a ~~$1.1~~$9.1 million and a $51.5 million provision for loan and lease losses infor the ~~three month period~~three- and nine-month periods ended ~~December 31, 2017,~~June 30, 2019, respectively, as compared to a ~~$0.8~~$5.3 million and a $24.7 million provision for loan and lease losses infor the ~~three month period~~three- and nine-month periods ended December 31, 2016. The provision during the three months ended December 31, 2017 was primarily due to the additional provision expense related to tax services loans as well as growth in the loan portfolio. SeeJune 30, 2018, respectively. Also see Note 34 to the Condensed Consolidated Financial ~~Statements.~~Statements included in this quarterly report.

~~Non-Interest~~Noninterest Income. ~~Non-interest~~Noninterest income for the fiscal ~~2018 first~~2019 third quarter increased by ~~$10.0~~$10.6 million, or ~~51%~~32%, to ~~$29.3~~$43.8 million from ~~$19.3~~$33.2 million for the same period in the prior fiscal year, largely due to increases in rental income of $9.4 million, gain on sale of loans and leases of $1.9 million, other income of $1.6 million, and deposit fees of $1.2 million. Partially offsetting the increase in noninterest income, card fee income decreased $3.3 million and total tax product fee income decreased $0.6 million from the same quarter of the prior fiscal year. The increases in rental income, other income and gain on sale of loans and leases were largely attributable to the Crestmark acquisition.

Noninterest income for the nine months ended June 30, 2019 was $186.6 million, an increase of $26.7 million, or 17%, from the same period in the prior fiscal year. This increase was ~~largely~~primarily due to ~~increases~~an increase in ~~card fee~~rental income, other income, deposit fees, and an increase in gain on sale of ~~$6.8~~investment securities.

Noninterest Expense. Noninterest expense increased $23.4 million, or ~~37%~~48%, to $72.5 million for the 2019 fiscal third quarter, compared to the same quarter in 2018. This increase was primarily caused by increases of $10.7 million in compensation and ~~tax product fee income of $1.5~~benefits expense, $6.0 million ~~or 242%.~~in operating lease equipment depreciation expense, and $3.7 million in other expense. Increases in intangible amortization expense, occupancy and equipment, and legal and consulting also contributed to the increase in noninterest expense. The increase in ~~card fee income was primarily driven by residual fees related to wind-downs from two of our non-strategic programs. The increase in tax product fee income~~compensation and benefits expense was primarily due to the ~~volume~~addition of ~~pre-season tax advance loans originated during~~Crestmark division employees, and new hires in the ~~first quarter~~second half of fiscal 2018 ~~compared to~~in support of Meta's National Lending and other business initiatives.

Noninterest expense for the ~~first quarter of fiscal 2017. All of these loans are also being held during fiscal 2018, as opposed to the previous year when many of these loans were sold, which also contributed to the increase.~~

~~Non-Interest Expense. Non-interest expense~~nine months ended June 30, 2019 increased ~~$7.3~~by $95.4 million, or ~~20%~~59%, to ~~$44.0~~$257.0 million ~~for the first quarter of fiscal year 2018, as~~ compared to ~~$36.8 million for~~ the same period in ~~2017.~~the prior fiscal year. This increase was ~~largely~~primarily caused by ~~a $4.5 million increase~~increases in compensation and benefits expense, ~~a $1.0 million increase in card processing~~other expense, ~~and a $0.9 million increase in~~impairment expense, intangible amortization expense, occupancy and ~~equipment.~~equipment, and legal and consulting expense.

Income Tax. The increase in compensation expense was primarily due to a full quarter of expenses related to the EPS and SCS acquisitions, both of which closed during the first quarter of fiscal 2017, along with increased staffing to support the Company's growing business initiatives. The integration of EPS and SCS allowed the Company ~~to gain scale in the~~recorded an income tax ~~services divisions during fiscal 2017 and the Company expects to gain further efficiencies during fiscal 2018.~~

~~Income Tax. Income tax expense~~benefit for the fiscal ~~2018 first~~2019 third quarter ~~was $5.7~~of $1.2 million, resulting in an effective tax rate of ~~54.9%~~(3.97%), compared to ~~$0.3~~an income tax expense of $0.5 million, or an effective tax rate of ~~21.6%~~6.55%, for the ~~2017~~ fiscal ~~first~~2018 third quarter. ~~The increase~~Investment tax credits related to solar leases and future originations in fiscal 2019 will be recognized ratably based on income over the ~~effective tax rate is primarily due to a non-recurring income tax expense of approximately $3.6 million from a reduction in the value of certain deferred tax assets as a result~~duration of the ~~Tax Act.~~current fiscal year. The ~~Company will continue to analyze the financial~~timing and impact of future solar tax credits are expected to vary from period to period, and Meta intends to undertake only those tax credit opportunities that meet the ~~Tax Act. As the Company’s fiscal year end falls on September 30, the statutory corporate rate for fiscal 2018 will be prorated to 24.53%.~~ Company's underwriting and return criteria.

LIQUIDITY AND CAPITAL RESOURCES

The Company’s primary sources of funds are deposits, derived principally through its Payments divisions, and to a lesser extent through its Community Banking division borrowings, principal and interest payments on loans and mortgage-backed securities, and maturing investment securities. In addition, the Company utilizes wholesale deposit sources to provide temporary funding when necessary or when favorable terms are available. While scheduled loan repayments and maturing investments are relatively predictable, deposit flows and early loan repayments are influenced by the level of interest rates, general economic conditions and competition. The Company uses its capital resources principally to meet ongoing commitments to fund maturing certificates of deposits and loan commitments, to maintain liquidity, and to meet operating expenses. At ~~December 31, 2017,~~June 30, 2019, the Company had commitments to originate and purchase loans and unused lines of credit totaling ~~$349.5 million.~~$1.01 billion. The Company believes that loan repayments and other sources of funds will be adequate to meet its foreseeable short- and long-term liquidity needs.

In July 2013, the Company’s primary federal regulator, the Federal Reserve and the Bank’s primary federal regulator, the OCC, approved final rules (the “Basel III Capital Rules”) establishing a new comprehensive capital framework for U.S. banking ~~organizations.~~organizations, which replaced earlier frameworks adopted in 1988 ("Basel I") and 2004 (Basel II). The Basel III Capital Rules generally implement the Basel Committee on Banking Supervision’s (the “Basel Committee”) December 2010 final capital framework referred to as “Basel III” for strengthening international capital standards. The Basel III Capital Rules substantially revised the risk-based capital requirements applicable to financial institution holding companies and their depository institution subsidiaries, including us and the Bank, as compared to U.S. general risk-based capital rules. The Basel III Capital Rules revised the definitions and the components of regulatory capital, as well as addressed other issues affecting the numerator in banking institutions’ regulatory capital ratios. The Basel III Capital Rules also addressed asset risk weights and other matters affecting the denominator in banking institutions’ regulatory capital ratios and replaced the existing general risk-weighting approach, which was derived from the Basel Committee’s 1988 “Basel I” capital accords, with a more risk-sensitive approach based, in part, on the “standardized approach” in the Basel Committee’s 2004 “Basel II” capital accords. In addition, the Basel III Capital Rules implemented certain provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act, including the requirements of Section 939A to remove references to credit ratings from the federal agencies’ rules. The Basel III Capital Rules became effective for us and the Bank on January 1, 2015, subject to phase-in periods for certain of their components and other provisions.

Pursuant to the Basel III Capital Rules, the Company and the Bank, respectively, are subject to ~~new~~ regulatory capital adequacy requirements promulgated by the Federal Reserve and the OCC. Failure by the Company or Bank to meet minimum capital requirements could result in certain mandatory and discretionary actions by our regulators that could have a material adverse effect on our consolidated financial statements. ~~Prior to January 1, 2015, the Bank was subject to capital requirements under Basel I and there were no capital requirements for the Company.~~ Under the capital requirements and the regulatory framework for prompt corrective action, the Company and the Bank must meet specific capital guidelines that involve quantitative measures of the Company’s and the Bank’s assets, liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices. The Company’s and the Bank’s capital amounts and classifications are also subject to qualitative judgments by regulators about components, risk weightings and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Company and the Bank to maintain minimum ratios (set forth in the table below) of total risk-based capital and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined), and a leverage ratio consisting of Tier 1 capital (as defined) to average assets (as defined). At ~~December 31, 2017,~~June 30, 2019, both the Bank and the Company exceeded federal regulatory minimum capital requirements to be classified as well-capitalized under the prompt corrective action requirements. The Company and the Bank took the accumulated other comprehensive income (“AOCI”) opt-out election; under the rule, non-advanced approach banking organizations were given a one-time option to exclude certain AOCI components.

The tables below include certain non-GAAP financial measures that are used by investors, analysts and bank regulatory agencies to assess the capital position of financial services companies. Management reviews these measures along with other measures of capital as part of its financial analysis.

Minimum
Requirement to Be
Minimum Well Capitalized
Requirement For Under Prompt
Capital Adequacy Corrective Action
At December 31, 2017 Company Bank Purposes Provisions

Tier 1 leverage ratio 7.68 % 9.61 % 4.00 % 5.00 %
Common equity Tier 1 capital ratio 12.93
16.71
4.50
6.50
Tier 1 capital ratio 13.38
16.71
6.00
8.00
Total qualifying capital ratio 16.99
17.11
8.00
10.00




					Minimum to be		Minimum to be
					Adequately		Well Capitalized
					Capitalized Under		Under Prompt
					Prompt Corrective		Corrective Action
At June 30, 2019	Company		Bank		Action Provisions		Provisions

Tier 1 leverage capital ratio	8.05	%	9.37	%	4.00	%	5.00	%
Common equity Tier 1 capital ratio	10.19		12.22		4.50		6.50
Tier 1 capital ratio	10.55		12.27		6.00		8.00
Total capital ratio	13.22		13.26		8.00		10.00

The following table provides certain non-GAAP financial measures used to compute certain of the ratios included in the table above, as well as a reconciliation of such non-GAAP financial measures to the most directly comparable financial measure in accordance with GAAP:

Standardized Approach (1)
December 31, 2017
(Dollars in Thousands)

Total equity $ 437,705
Adjustments:

LESS: Goodwill, net of associated deferred tax liabilities 95,705
LESS: Certain other intangible assets 40,417
LESS: Net deferred tax assets from operating loss and tax credit carry-forwards —
LESS: Net unrealized gains (losses) on available-for-sale securities 5,782
Common Equity Tier 1 ⁽¹⁾
295,801
Long-term debt and other instruments qualifying as Tier 1 10,310
LESS: Additional tier 1 capital deductions —
Total Tier 1 capital 306,111
Allowance for loan losses 9,058
Subordinated debentures (net of issuance costs) 73,382
Total qualifying capital 388,551



	Standardized Approach⁽¹⁾ June 30, 2019
	(Dollars in Thousands)
Total stockholders' equity	$	822,901
Adjustments:
LESS: Goodwill, net of associated deferred tax liabilities	302,850
LESS: Certain other intangible assets	53,249
LESS: Net deferred tax assets from operating loss and tax credit carry-forwards	13,858
LESS: Net unrealized gains (losses) on available-for-sale securities	2,329
LESS: Noncontrolling interest	3,508
Common Equity Tier 1 Capital ⁽¹⁾	447,107
Long-term borrowings and other instruments qualifying as Tier 1	13,661
Tier 1 minority interest not included in common equity tier 1 capital	2,119
Total Tier 1 Capital	462,887
Allowance for loan and lease losses	43,641
Subordinated debentures (net of issuance costs)	73,605
Total Capital	580,133

⁽¹⁾ Capital ratios were determined using the Basel III capital rules that became effective on January 1, 2015. Basel III revised the definition of capital, increased minimum capital ratios, and introduced a minimum common equity tier 1 capital ratio; those changes are being fully phased in through the end of 2021.

The following table provides a reconciliation of tangible common equity and tangible common equity excluding AOCI, each of which is used in calculating tangible book value data, to Total Stockholders' ~~Equity.~~Equity at June 30, 2019. Each of tangible common equity and tangible common equity excluding AOCI is a non-GAAP financial measure that is commonly used within the banking industry.


	December 31, 2017		June 30, 2019
	(Dollars in Thousands)		(Dollars in Thousands)
Total Stockholders' Equity	$	437,705	$	822,901
LESS: Goodwill	98,723		307,941
LESS: Intangible assets	50,521		56,153
Tangible common equity	288,461		458,807
LESS: AOCI	5,782		2,308
Tangible common equity excluding AOCI	282,679		456,499

Due to the predictable, quarterly cyclicality of MPS deposits in conjunction with tax season business activity, management believes that a six-month capital calculation is a useful metric to monitor the Company’s overall capital management process. As such, the Bank’s six-month average Tier 1 leverage ratio, Common equity Tier 1 capital ratio, Tier 1 capital ratio, and Total qualifying capital ratio as of December 31, 2017 were 9.75%, 18.17%, 18.17%, and 18.60%, respectively.

~~Beginning~~Since January 1, 2016, ~~Basel III implemented a requirement for all banking organizations~~the Company and the Bank have been required to maintain a capital conservation buffer above the minimum risk-based capital requirements in order to avoid certain limitations on capital distributions, stock repurchases and discretionary bonus payments to executive officers. The capital conservation buffer is exclusively composed of Common Equity Tier 1 capital, and it applies to each of the three risk-based capital ratios but not the leverage ratio. The implementation of the capital conservation buffer ~~began~~by annual increments finished on January 1, ~~2016, which increased or will increase~~2019, so that the ~~three risk-based capital ratios by 0.625% each year through 2019, at which point the~~required Common Equity Tier 1 risk-based, Tier 1 risk-based and total risk-based capital ratios ~~were or will be~~with the buffer are currently 7.0%, 8.5% and 10.5%, respectively.

Based on current and expected continued profitability and subject to continued access to capital markets, we believe that the Company and the Bank will continue to meet ~~targeted~~the capital ~~ratios~~conservation buffer of 2.5% in addition to required ~~by the revised requirements, as they become effective.~~minimum capital ratios.

CONTRACTUAL OBLIGATIONS

See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations-Contractual Obligations" in the Company’s Annual Report on Form 10-K for its fiscal year ended September 30, ~~2017~~2018 for a summary of our contractual obligations as of September 30, ~~2017.~~2018. There were no material changes outside the ordinary course of our business in contractual obligations from September 30, ~~2017~~2018 through ~~December 31, 2017.~~June 30, 2019.

OFF-BALANCE SHEET FINANCING ARRANGEMENTS

For discussion of the Company’s off-balance sheet financing arrangements as of ~~December 31, 2017,~~June 30, 2019, see Note 612 to our consolidated financial statements included in Part I, Item 1 “Financial Statements” of this Quarterly Report on Form 10-Q. Depending on the extent to which the commitments or contingencies described in Note 612 occur, the effect on the Company’s capital and net income could be significant.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

MARKET RISK

The Company derives a portion of its income from the excess of interest collected over interest paid. The rates of interest the Company earns on assets and pays on liabilities generally are established contractually for a period of time. Market interest rates change over time. Accordingly, the Company’s results of operations, like those of most financial institutions, are impacted by changes in interest rates and the interest rate sensitivity of its assets and liabilities. The risk associated with changes in interest rates and the Company’s ability to adapt to these changes is known as interest rate risk and is the Company’s only significant “market” risk.

The Company monitors and measures its exposure to changes in interest rates in order to comply with applicable government regulations and risk policies established by the Board of Directors, and in order to preserve stockholder value. In monitoring interest rate risk, the Company analyzes assets and liabilities based on characteristics including size, coupon rate, repricing frequency, maturity date and likelihood of prepayment.

If the Company’s assets mature or reprice more rapidly or to a greater extent than its liabilities, then economic value of equity and net interest income would tend to increase during periods of rising rates and decrease during periods of falling interest rates. Conversely, if the Company’s assets mature or reprice more slowly or to a lesser extent than its liabilities, then economic value of equity and net interest income would tend to decrease during periods of rising interest rates and increase during periods of falling interest rates.

The Company currently focuses lending efforts toward originating and purchasing competitively priced adjustable-rate and fixed-rate loan products with short to intermediate terms to maturity, and may originate loans with terms longer than five years for borrowers that have a strong credit profile and typically lower loan-to-value ratios. This approach allows the Company to better maintain a portfolio of loans that will have less sensitivity to changes in the level of interest rates, while providing a reasonable spread to the cost of liabilities used to fund the loans.

The Company’s primary objective for its investment portfolio is to provide a source of liquidity for the Company. In addition, the investment portfolio may be used in the management of the Company’s interest rate risk profile. The investment policy generally calls for funds to be invested among various categories of security types and maturities based upon the Company’s need for liquidity, desire to achieve a proper balance between minimizing risk while maximizing yield, the need to provide collateral for borrowings, and the need to fulfill the Company’s asset/liability management goals.

The Company’s cost of funds responds to changes in interest rates due to the relatively short-term nature of its wholesale deposit portfolio and ~~due to~~ the relatively short-term nature of its borrowed funds. The Company believes that its growing portfolio of longer duration, low-cost deposits generated from its prepaid division provides a stable and profitable funding vehicle, but also subjects the Company to greater risk in a falling interest rate environment than it would otherwise have without this portfolio. This risk is due to the fact that, while asset yields may decrease in a falling interest rate environment, the Company cannot significantly reduce interest costs associated with these deposits, which thereby ~~compresses~~compress the Company’s net interest margin. As a result of the Company’s interest rate risk exposure in this regard, the Company has elected not to enter into any new longer-term wholesale borrowings, and generally has not emphasized longer-term time deposit products.

The Board of Directors and relevant government regulations establish limits on the level of acceptable interest rate risk at the Company, to which management adheres. There can be no assurance, however, that, in the event of an adverse change in interest rates, the Company’s efforts to limit interest rate risk will be successful.

Interest Rate Risk (“IRR”)

Overview. The Company actively manages interest rate risk, as changes in market interest rates can have a significant impact on reported earnings. The Bank, like other financial institutions, is subject to interest rate risk to the extent that its interest-bearing liabilities mature or reprice more rapidly than its interest-earning assets. The Company's interest rate risk ~~process~~analysis is designed to compare income and economic valuation simulations in market scenarios designed to alter the direction, magnitude and speed of interest rate changes, as well as the slope of the yield curve. The Company does not currently engage in trading activities to control interest rate risk although it may do so in the future, if deemed necessary, to help manage interest rate risk.

Earnings at risk and economic value ~~analysis.~~analyses. As a continuing part of its financial strategy, the Bank considers methods of managing an asset/liability mismatch consistent with maintaining acceptable levels of net interest income. In order to monitor interest rate risk, the Board of Directors has created an ~~Investment~~Asset Liability Committee whose principal responsibilities are to assess the Bank’s asset/liability mix and implement strategies that will enhance income while managing the Bank’s vulnerability to changes in interest rates.

The Company uses two approaches to model interest rate risk: Earnings at Risk (“EAR analysis”) and Economic Value of Equity (“EVE analysis”). Under EAR analysis, net interest income is calculated for each interest rate scenario to the net interest income forecast in the base case. EAR analysis measures the sensitivity of interest-sensitive earnings over a one-year minimum time horizon. The results are affected by projected rates, prepayments, caps and floors. Management exercises its best ~~judgement~~judgment in making assumptions regarding events that management can influence, such as non-contractual deposit re-pricing, as well as events outside of management's control, such as customer behavior on loan and deposit activity and the effect that competition has on both loan and deposit pricing. These assumptions are subjective and, as a result, net interest income simulation results will differ from actual results due to the timing, magnitude, and frequency of interest rate changes, changes in market conditions, customer behavior and management strategies, among other factors. We perform various sensitivity analyses on assumptions of deposit attrition and deposit ~~re-pricing. Market-implied~~re-pricing, as well as market-implied forward rates and various likely and extreme interest rate scenarios, ~~can be used for EAR analysis. These likely and extreme scenarios can include~~including rapid and gradual interest rate ramps, rate shocks and yield curve twists.

The EAR analysis used in the following table reflects the required analysis used no less than quarterly by management. It models -200, -100, +100, +200, +300, and +400 basis point parallel shifts in market interest rates over the next one-year period. Due to the current low level of interest rates, only a -100 and -200 basis point parallel ~~shift is~~shifts are represented.

The Company was within Board policy limits for all interest rate scenarios ~~using the snapshot~~ as of ~~December 31, 2017 as required by regulation.~~June 30, 2019. The table below shows the results of the scenarios as of ~~December 31, 2017:~~

~~Net Sensitive Earnings at Risk~~June 30, 2019:

Net Sensitive Earnings at Risk
Balances as of December 31, 2017 Standard (Parallel Shift) Year 1
Net Interest Income at Risk%
-100 +100 +200 +300 +400
Basis Point Change Scenario -7.4 % 3.3 % 5.5 % 7.4 % 9.4 %
Board Policy Limits -8.0 % -8.0 % -10.0 % -15.0 % -20.0 %



Net Sensitive Earnings at Risk
		Change in Interest Income/Expense for a given change in interest rates
		Over / (Under) Base Case Parallel Shift
(Dollars in thousands)	Book Value	-200		-100		Base		100		200		300		400
Total Interest-Sensitive Income	5,161,411	263,554		284,232		306,880		329,113		350,310		370,893		391,473
Total Interest-Sensitive Expense	2,292,395	23,527		35,702		48,132		60,551		72,664		84,779		96,897
Net Interest-Sensitive Income	2,869,016	240,027		248,530		258,748		268,562		277,646		286,114		294,576

Percentage Change from Base	—	-7.2	%	-3.9	%	—	%	3.8	%	7.3	%	10.6	%	13.8	%
Board Policy Limits	—	-12.0	%	-8.0	%	—	%	-8.0	%	-10.0	%	-15.0	%	-20.0	%

The EAR analysis reported at ~~December 31, 2017~~June 30, 2019, shows that in all rising rate scenarios, more assets than liabilities would reprice over the modeled one-year period.

IRR is a snapshot in time. The Company’s business and deposits are very predictably cyclical on a weekly, monthly and yearly basis. The Company’s static IRR results could vary depending on which day of the week and timing in relation to certain payrolls, as well as time of the month in regard to early funding of certain programs, when this snapshot is taken. The Company’s overnight federal funds purchased fluctuates on a predictable daily and monthly basis due to fluctuations in a portion of its ~~non-interest bearing~~noninterest-bearing deposit base, primarily related to payroll processing and timing of when certain programs are prefunded and when the funds are received. ~~Fiscal first quarter 2018 results do not necessarily show the typical effect of day of week cyclicality due to the temporary repositioning of the balance sheet, as previously noted.~~

Owing to the snapshot nature of IRR, as is required by regulators, in concert with the Company’s predictable weekly, monthly and yearly fluctuating deposit base and overnight borrowings, the results produced by static IRR analysis are not necessarily representative of what management, the Board of Directors, and others would view as the Company’s true IRR positioning. Management and the Board are aware of and understand these typical borrowing and deposit fluctuations as well as the point in time nature of IRR analysis and anticipated an outcome where the Company may temporarily be outside of Board policy limits based on a snapshot analysis.

For management to better understand the IRR position of the Bank, an alternative IRR analysis was completed whereby all December 31, 2017 values were utilized with the exception of overnight borrowings, non-interest bearing deposits, brokered deposits, cash due from banks, non-earning assets, and non-paying liabilities. To diminish potential issues documented above, quarterly average balances were utilized for overnight borrowings, non-interest-bearing deposits, brokered deposits and cash due from banks. Non-earning assets and non-paying liabilities were used to balance the balance sheet. Management believes this view on IRR, while still subject to some yearly cyclicality, more accurately portrays the Bank's IRR position. As noted in the below chart, the alternative EAR results are more normalized and slightly improved in the -100 interest rate shock compared to the static results, as timing issues in deposits and overnight borrowings are diminished and lower balances in cash and due from banks are observed.

~~The Company was within policy limits as of December 31, 2017 in all scenarios utilizing the alternative IRR scenario run. The table below highlights those results:~~

~~Alternative Net Sensitive Earnings at Risk~~

Net Sensitive Earnings at Risk
Alternative IRR Results Standard (Parallel Shift) Year 1
Net Interest Income at Risk%
-100 +100 +200 +300 +400
Basis Point Change Scenario -5.5 % 0.9 % 0.6 % — % -0.5 %
Board Policy Limits -8.0 % -8.0 % -10.0 % -15.0 % -20.0 %

The alternative EAR analysis reported at December 31, 2017 shows that in an increasing +100 and +200 interest rate environment, more assets than liabilities would reprice over the modeled one-year period. However, in the +300 scenario the results are more neutral to changes in interest rates, and in the +400 interest rate scenario, more liabilities (primarily due to overnight federal funds purchased) than assets would reprice over the modeled one-year period.

The alternative IRR results were somewhat lower in regard to the change in net interest income at risk percentages as compared to the fiscal 2018 first quarter alternative IRR results which resulted from higher average borrowings and an increased average interest-bearing deposit base. The Company anticipates solid EAR results in a rising rate environment due to continued commercial insurance premium finance loan growth, the addition of adjustable rate loans and securities, continued growth of non-interest bearing MPS deposits, and the sustained execution on its strategic plan.

~~Net Sensitive Earnings at Risk as of December 31, 2017~~

Balances as of December 31, 2017
% of Change in Interest Income/Expense
for a given change in interest rates
Total Earning Total Earning Over / (Under) Base Case Parallel Shift
Basis Point Change Scenario Assets (in $000's) Assets -100 Base +100 +200 +300 +400
Total Loans 1,509,141
30.2 % 65,404
70,803
75,956
80,981
85,966
91,142
Total Investments (non-TEY) and other Earning Assets 3,484,181
69.8 % 59,605
78,231
94,619
109,695
124,544
139,321
Total Interest-Sensitive Income 4,993,322
100.0 % 125,009
149,033
170,575
190,676
210,509
230,463
Total Interest-Bearing Deposits 734,000
35.8 % 6,482
8,244
12,439
16,634
20,829
25,024
Total Borrowings 1,315,261
64.2 % 7,543
20,878
34,212
47,547
60,883
74,234
Total Interest-Sensitive Expense 2,049,262
100.0 % 14,025
29,122
46,651
64,181
81,711
99,258

~~Alternative Net Sensitive Earnings at Risk~~

Alternative IRR Results
% of Change in Interest Income/Expense
for a given change in interest rates
Total Earning Total Earning Over / (Under) Base Case Parallel Shift
Basis Point Change Scenario Assets (in $000's) Assets -100 Base +100 +200 +300 +400
Total Loans 1,509,141
39.4 % 65,404
70,803
75,956
80,981
85,966
91,142
Total Investments (non-TEY) and other Earning Assets 2,323,118
60.6 % 52,958
59,952
64,692
68,099
71,273
74,350
Total Interest-Sensitive Income 3,832,259
100.0 % 118,362
130,755
140,648
149,080
157,238
165,492
Total Interest-Bearing Deposits 797,475
65.4 % 7,402
9,193
13,747
18,301
22,855
27,409
Total Borrowings 421,370
34.6 % 2,468
6,739
11,011
15,282
19,566
23,860
Total Interest-Sensitive Expense 1,218,845
100.0 % 9,870
15,932
24,758
33,583
42,421
51,269

The Company believes that its growing portfolio of ~~non-interest bearing~~noninterest-bearing deposits provides a stable and profitable funding vehicle and a significant competitive advantage in a rising interest rate environment, as the Company’s cost of funds ~~will~~would likely remain ~~relatively~~ low, with less of an increase in the cost of funds expected relative to many other banks. When unable to match loan growth to deposit growth, the Company continues to execute its investment strategy of primarily purchasing NBQ municipal bonds and agency MBS, however, the Bank reviews opportunities to add diverse, high quality securities at attractive relative rates when opportunities present themselves. The NBQ municipal bonds are tax exempt and as such have a tax equivalent yield higher than their book yield. The tax equivalent yield calculation for NBQ municipal bonds uses the Company’s cost of funds as one of its components. With the Company’s large volume of non-interest bearing deposits, the tax equivalent yield for these NBQ municipal bonds is higher than a similar term investment in other investment categories of similar risk and higher than most other banks can realize and sustain on the same or similar instruments. The above interest income figures are quoted on a pre-tax basis which is particularly notable due to the size of the Company’s tax-exempt municipal portfolio.

Under EVE analysis, the economic value of financial assets, liabilities and off-balance sheet instruments, is derived under each rate scenario. The economic value of equity is calculated as the difference between the estimated market value of assets and liabilities, net of the impact of off-balance sheet instruments.

The EVE analysis used in the following table reflects the required analysis used no less than quarterly by management. It models immediate -200, -100, +100, +200, +300 and +400 basis point parallel shifts in market interest rates. Due to the current low level of interest rates, only a -100 and -200 basis point parallel ~~shift is~~shifts are represented.

The Company was within Board policy limits for all scenarios. The table below shows the results of the scenarios as of ~~December 31, 2017:~~June 30, 2019:

Economic Value Sensitivity as of ~~December 31, 2017~~June 30, 2019

Balances as of December 31, 2017 Standard (Parallel Shift)
Economic Value of Equity at Risk%
-100 +100 +200 +300 +400
Basis Point Change Scenario -4.1 % -1.3 % -4.8 % -9.3 % -12.7 %
Board Policy Limits -10.0 % -10.0 % -20.0 % -30.0 % -40.0 %



	Standard (Parallel Shift)
	Economic Value of Equity at Risk%
	-200		-100		100		200		300		400
Percentage Change from Base	-12.9	%	-5.2	%	2.5	%	3.5	%	3.6	%	3.6	%
Board Policy Limits	-20.0	%	-10.0	%	-10.0	%	-20.0	%	-25.0	%	-35.0	%

The EVE at risk reported at ~~December 31, 2017~~June 30, 2019 shows that as interest rates increase, the economic value of equity position will ~~decrease from the base, primarily due to the degree of the economic value of its base asset size in relation to the economic value of its base liability size.~~be relatively neutral. When viewing total asset versus total liability economic value, projected total assets are affected similarly on a percentage basis as compared to projected total liabilities in a rising rate environment.

~~The Company was within policy limits in all scenarios utilizing the alternative IRR scenario run for management purposes. The table below highlights those results:~~

~~Alternative Economic Value Sensitivity~~

Alternative IRR Results Standard (Parallel Shift)
Economic Value of Equity at Risk%
-100 +100 +200 +300 +400
Basis Point Change Scenario -0.9 % -3.8 % -9.3 % -15.5 % -20.5 %
Board Policy Limits -10.0 % -10.0 % -20.0 % -30.0 % -40.0 %

The EVE at risk reported using the alternative methodology used for management purposes shows that if interest rates increase immediately, the economic value of equity position will decrease from the base, partially due to the degree of the economic value of its base asset size in relation to the economic value of its base liabilities size.

~~Detailed Economic Value Sensitivity~~

The following table details the economic value sensitivity to changes in market interest rates at December 31, 2017, for loans, investments, deposits, borrowings, and other assets and liabilities (dollars in thousands). The analysis reflects that in the +100 and +200 rising rate scenarios, total assets are marginally less sensitive than total liabilities, while in the +300 and +400, total assets are marginally more sensitive than total liabilities. Asset sensitivity is offset by the non-interest bearing deposits.

Balances as of December 31, 2017
% of Change in Economic Value
for a given change in interest rates
Book Total Over / (Under) Base Case Parallel Shift
Basis Point Change Scenario Value (in $000's) Assets -100 +100 +200 +300 +400
Total Loans 1,500,279
28 % 2.0 % -2.0 % -4.1 % -6.0 % -7.9 %
Total Investment 3,484,181
64 % 2.3 % -3.2 % -6.6 % -9.9 % -12.8 %
Other Assets 420,792
8 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 %
Assets 5,405,252
100 % 2.1 % -2.6 % -5.4 % -8.1 % -10.4 %
Interest Bearing Deposits 734,000
15 % 1.7 % -1.5 % -3.0 % -4.3 % -5.5 %
Non-Interest Bearing Deposits 2,783,941
57 % 5.7 % -5.1 % -9.7 % -13.8 % -17.5 %
Total Borrowings & Other Liabilities 1,363,650
28 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 %
Liabilities 4,881,591
100 % 3.2 % -2.9 % -5.5 % -7.8 % -10.0 %

~~Detailed Alternative Economic Value Sensitivity~~

The following is EVE at risk reported using the alternative methodology used for management purposes, for loans, investments, deposits, borrowings, and other assets and liabilities (dollars in thousands). The analysis reflects that in rising interest rate scenarios, the total assets are slightly more sensitive in regard to economic value sensitivity.

Alternative IRR Results
% of Change in Economic Value
for a given change in interest rates
Book Total Over / (Under) Base Case Parallel Shift
Basis Point Change Scenario Value (in $000's) Assets -100 +100 +200 +300 +400
Total Loans 1,500,279
28 % 2.0 % -2.0 % -4.1 % -6.0 % -7.9 %
Total Investment 2,323,118
43 % 3.5 % -4.9 % -9.9 % -14.9 % -19.2 %
Other Assets 1,581,855
29 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 %
Assets 5,405,252
100 % 2.1 % -2.6 % -5.4 % -8.1 % -10.4 %
Interest Bearing Deposits 797,475
16 % 1.1 % -1.0 % -1.9 % -2.8 % -3.7 %
Non-Interest Bearing Deposits 2,333,111
48 % 5.8 % -5.1 % -9.7 % -13.8 % -17.5 %
Total Borrowings & Other Liabilities 1,751,006
36 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 %
Liabilities 4,881,591
100 % 2.7 % -2.4 % -4.5 % -6.5 % -8.2 %

Certain shortcomings are inherent in the method of analysis discussed above and as presented in the tables above. For example, although certain assets and liabilities may have similar maturities or periods to repricing, they may react in different degrees to changes in market interest rates. Also, the interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market interest rates, while interest rates on other types may lag behind changes in market rates. Additionally, certain assets, such as adjustable rate mortgage loans, have features that restrict changes in interest rates on a short-term basis and over the life of the asset. Furthermore, although management has estimated changes in the levels of prepayments and early withdrawal in these rate environments, such levels would likely deviate from those assumed in calculating the tables above. Finally, the ability of some borrowers to service their debt may decrease in the event of an interest rate increase.

Item 4. Controls and Procedures.

CONTROLS AND PROCEDURES

Any control system, no matter how well designed and operated, can provide only reasonable (not absolute) assurance that its objectives will be met. Furthermore, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in a cost-effective control system, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected.

DISCLOSURE CONTROLS AND PROCEDURES

The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s “disclosure controls and procedures”, as such term is defined in Rules 13a –- 15(e) and 15d –- 15(e) of the Securities Exchange Act of 1934 (“Exchange Act”) as of the end of the period covered by ~~the~~this quarterly report.

Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, at ~~December 31, 2017,~~June 30, 2019, the Company’s disclosure controls and procedures were not effective to provide reasonable assurance that (i) the information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (ii) information required to be disclosed by us in our reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. The ineffectiveness of the Company's disclosure controls and procedures was due to a material weakness identified in the Company's internal controls over financial reporting, which is described below. A material weakness is a deficiency, or a combination of deficiencies, in internal controls over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company's annual or interim financial statements will not be prevented or detected on a timely basis.

In the third fiscal quarter of 2019, the Company identified a material weakness in the control environment of the Crestmark division, which was acquired by the Company on August 1, 2018. Several deficiencies were identified in the Company's control environment that were primarily related to inappropriate user access specific to information technology ("IT") applications used by the Crestmark division and lack of completeness of certain review procedures with respect to such user access. The user access issues included untimely completion of user access reviews on certain systems, instances of users having access rights beyond what appeared to be needed, and instances of user access not being appropriately added or removed from certain systems. The lack of completeness of certain review procedures was, in many cases, due to a completeness control not being documented, meaning that subject reports had not been compared to the source document to determine all required data was included in the report. These deficiencies did not result in any known material misstatement to the Company's annual or interim financial statements to date following the Crestmark acquisition. Accordingly, management determined the aggregation of these deficiencies represents a material weakness in internal controls over financial reporting on the basis that they could result in a misstatement potentially impacting the Company's financial statement accounts and disclosures that would not be prevented or detected on a timely basis. Also, the IT deficiencies could impact maintaining effective segregation of duties, as well as the effectiveness of IT-dependent controls relating to the financial statements. In addition, these deficiencies could affect the IT controls and underlying data that support the effectiveness of system-generated reports.

REMEDIATION PLAN FOR REPORTED MATERIAL WEAKNESS

The Company is engaged in implementing a remediation plan to address the material weakness described above and is committed to maintaining a strong internal controls environment. To address the material weakness, the Company is in the process of re-evaluating IT governance and controls, updating procedures related to access management, and training IT personnel, with a focus on controls related to user access over IT systems. The Company is also ensuring review procedures at the Crestmark division are being performed with complete populations of data. Management believes that the measures described above will effectively remediate the identified material weakness and strengthen the Company’s internal controls over financial reporting. However, we cannot assure you that these steps will remediate such weakness or whether additional actions will be required or the timing or costs of any such additional actions. Because the reliability of the internal controls process requires repeatable execution, the successful remediation of this material weakness will require review and evidence of effectiveness prior to management concluding that the controls are effective. Management believes that remediation efforts will be completed during the fourth quarter of fiscal 2019. If not remediated, however, these deficiencies could result in material misstatements to the Company's consolidated financial statements.

INTERNAL ~~CONTROL~~CONTROLS OVER FINANCIAL REPORTING

With the participation of the Company’s management, including its Chief Executive Officer and Chief Financial Officer, the Company conducted an evaluation of the Company’s internal ~~control~~controls over financial reporting to determine whether any changes occurred during the Company’s fiscal quarter ended ~~December 31, 2017,~~June 30, 2019, that have materially affected, or are reasonably likely to materially affect, the Company’s internal ~~control~~controls over financial reporting. Based on such evaluation, management concluded that, as of the end of the period covered by this report, there have not been any changes in the Company’s internal ~~control~~controls over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company’s internal ~~control~~controls over financial ~~reporting.~~reporting except as set forth above.

META FINANCIAL GROUP, INC.

PART II - OTHER INFORMATION

FORM 10-Q

Item 1. Legal Proceedings. – - See “Legal Proceedings” under Note 612 to the Notes to Condensed Consolidated Financial Statements, which is incorporated herein by reference.

I~~tem~~

Item 1A. Risk Factors. - A description of our risk factors can be found in "Item 1A. Risk Factors" included in our Annual Report on Form 10-K for the fiscal year ended September 30, ~~2017.~~2018. There were no material changes to those risk factors during the ~~three~~nine months ended ~~December 31, 2017,~~June 30, 2019, except that the ~~following~~first risk factor is hereby added and the remaining risk factors are hereby ~~added:~~amended and restated in their entirety as follows:

There are risks associated with the proposed transaction with Crestmark and Crestmark Bank, including the receipt of required shareholder and regulatory approvals and timing for completion of the transactions contemplated thereby.

~~We recently announced that we and MetaBank have entered into a definitive agreement and plan of merger with Crestmark and its wholly-owned subsidiary, Crestmark Bank, whereby we will acquire Crestmark~~Our investments in an all-stock transaction. The transaction remains subject to approval of our stockholders and Crestmark’s shareholders, regulatory approvals and other closing conditions. It is possible that one or more of the closing conditionscertain tax-advantaged projects may not ~~be satisfied or that it~~generate returns as anticipated and may take an extended amount of time until they are. Accordingly, there is a risk that the proposed transaction may not be completed on a timely basis or at all, which could have adverse effects on the market price of our common stock and our operating results. Furthermore, the transaction involves a number of other risks and uncertainties, including, but not limited to, the following:

~~the businesses may not be combined successfully, or such combination may take longer, be more difficult, time-consuming or costly to accomplish than expected;~~

~~the risk that the expected growth opportunities, beneficial synergies and/or operating efficiencies from the proposed transaction may not be fully realized or may take longer to realize than expected;~~

~~customer losses and business disruption in connection with and following the acquisition;~~

~~potential litigation relating to the transaction;~~

~~the risk that the Company may incur unanticipated or unknown losses or liabilities if it completes the proposed transaction; and~~

~~potential adverse effects on the market price of our common stock caused by the sale of such stock held by former Crestmark shareholders following the transaction.~~

~~Any of the foregoing risks or similar risks could~~ have an adverse impact on our ~~business.~~ results of operations.

We ~~have also incurred,~~invest in certain tax-advantaged investments that support renewable energy resources. Our investments in these projects are designed to generate a return in part through the realization of federal and ~~will incur, significant expenses~~state income tax credits, and other tax benefits, over specified time periods. We are subject to the risk that previously recorded tax credits, which remain subject to recapture by taxing authorities based on compliance features required to be met at the project level, may fail to meet certain government compliance requirements and may not be able to be realized. For example, as previously disclosed, we previously recognized $7.9 million of investment tax credits between fiscal year 2017 and 2018 associated with the ~~proposed transaction with Crestmark, including fees of professional advisors.~~

~~Additional information regarding~~MSGs subject to the ~~risks and uncertainties associated~~transactions with the ~~proposed transaction with Crestmark~~DC Solar entities. We are aware that the DC Solar entities, including their principals, are subjects of ongoing federal investigations involving allegations of fraudulent misconduct. While we continue to gather information about the situation, there can be no assurances that such tax credits will not be ~~contained~~subject to recapture in the ~~registration statement on Form S-4, which will include a joint proxy statement and prospectus, that we intend~~future. See Note 3. Acquisitions to ~~file with~~ the ~~SEC in connection with the proposed transaction.~~

Program agreements that the Company and the Bank have entered into, and expect to enter into from time to time in the future, with third parties to market and service consumer loans originated by the Bank may subject the Bank to claims from regulatory agencies and other third parties that, if successful, could negatively impact MetaBank’s ongoing and future business.

On January 25, 2018, the Company announced that the Bank had entered into a lending program with Liberty Lending, LLC, an unaffiliated third party (“Liberty”), whereby Liberty will market and service unsecured consumer loans underwritten and originated by the Bank. See “Item 2. Management’s Discussion and Analysis ofCondensed Consolidated Financial ~~Condition and Results of Operations - Business Developments”~~Statements included herein for further information regarding the ~~Bank’s program agreement~~transactions with ~~Liberty.~~ these DC Solar entities and related matters.

The ~~Company expects~~risk of not being able to realize, or of subsequently incurring a recapture of, the ~~Bank to enter into similar program agreements with~~tax credits and other ~~third parties to market and service loans originated by the Bank, from time to time~~tax benefits depends on various factors, some of which are outside our control, including changes in the ~~future. Certain types~~applicable tax code, as well as the continued economic viability of the project and project operator. Further, while we engage in due diligence review both prior to the initial investment and on an ongoing basis, our due diligence review may not identify relevant issues or risks that may adversely impact our ability to realize these ~~arrangements have been challenged both in the courts and in regulatory actions. In~~tax credits or other tax benefits. The possible inability to realize these actions, plaintiffs have generally argued that the “true lender” is the marketer and that the intent of such lending program is to evade state usury and loan licensing laws. Other cases have also included other claims, including racketeeringtax credits and other state law claims, in their challenge of such programs. There can be no assurance that lawsuits or regulatory actions in connection with any such lending programs the Bank enters into will not be brought in the future. If a regulatory agency, consumer advocate group or other third party were to bring an action against the Bank or any of the third parties with which the Bank operates such lending programs, such as Liberty, and such actions were successful, such an outcome couldtax benefits may have a ~~material adverse effect~~negative impact on ~~the Bank~~our financial results.

We incur significant costs and ~~the Company.~~

~~Agreements with Liberty Lending~~demands upon management and ~~others whereby the Bank will originate~~accounting and ~~hold unsecured consumer loans, may result in increased exposure to credit risk and fraud and may present certain additional risks.~~

Although the Bank has offered unsecured consumer loans to its customers through its brick-and-mortar branch network, the Bank’s entry into program agreements with other third parties to market and service loans originated by the Bank, suchfinance resources as ~~its recently announced program agreement with Liberty, represents a new area of the consumer credit market for the Bank, which presents potential increased credit risks. As~~ a result of complying with the ~~loans originated under such program being unsecured,~~laws and regulations affecting public companies; if we fail to maintain proper and effective internal controls, our ability to produce accurate and timely financial statements could be impaired, which could harm our operating results, our ability to operate our business and our reputation.

As an SEC reporting company, we are required to, among other things, maintain a system of effective internal control over financial reporting, which requires annual management and independent registered public accounting firm assessments of the effectiveness of our internal controls. Ensuring that we have adequate internal financial and accounting controls and procedures in place so that we can produce accurate financial statements on a timely basis is a costly and time-consuming effort that needs to be re-evaluated frequently. We have historically dedicated a significant amount of time and resources to implement our internal financial and accounting controls and procedures. Substantial work may continue to be required to further implement, document, assess, test, and, if necessary, remediate our system of internal controls. We may also need to retain additional finance and accounting personnel in the ~~event~~future.

Control failures, including failures in our controls over financial reporting, could result from human error, fraud, breakdowns in information and computer systems, lapses in operating processes, or natural or man-made disasters. If a ~~borrower does not repay the loan in accordance with its terms~~significant control failure or ~~otherwise defaults on the loan, the Bank~~business interruption were to occur, it could materially damage our financial condition and results of operations. We may not be able to ~~recover from~~foresee, prevent, mitigate, reverse, or repair the ~~borrower~~negative effects of such failures or interruptions.

Moreover, we rely heavily upon information systems and other operating technologies to conduct and manage our business. To the extent that our technology fails to keep up with our changing environment, we may be unable to conduct and manage our business effectively. Any technical failure or interruption could harm our risk management and profitability and could adversely impact our financial condition and results of operations.

We identified control deficiencies in our internal controls over financial reporting related to the Crestmark division's information technology control environment. Specifically, these control deficiencies were in the areas of user access to applications used by the Crestmark division and lack of completeness of certain review procedures with respect to such user access. These control deficiencies were evaluated, both individually and in the aggregate, and management identified the aggregation of these deficiencies as a material weakness in our internal controls, as described more fully in “Item 4. Controls and Procedures” of Part I of this quarterly report. These control deficiencies could result in a misstatement of any of our financial statement accounts and disclosures that, in turn, could result in a material misstatement of our annual or interim final statements that may not be prevented or detected. In addition, other control deficiencies of this or a similar nature may be identified in the future.

If we are unable to correct the material weakness or deficiencies in internal controls over financial reporting in a timely manner or if future instances of an ~~amount sufficient~~ineffective control environment exist, our ability to ~~pay any remaining balance on~~record, process, summarize and report financial information accurately and within the ~~loan. See “If~~time periods specified in the ~~Company’s actual loan losses exceed~~rules and forms of the ~~Company’s allowance for loan losses,~~SEC could be adversely affected, and we may be unable to comply with the ~~Company’s net income will decrease.” We may also become~~periodic reporting requirements of the SEC. This failure, which could cause our investors to lose confidence in our reported financial information, could subject us to investigation and sanction by the SEC or other regulatory authorities and to claims by ~~regulatory agencies~~stockholders, which could impose significant additional costs on us, divert our management's attention and generally, materially, and adversely impact our business and financial condition. Additionally, our common stock listing on the NASDAQ Global Select Market could be suspended or terminated, and our stock price could materially suffer. See also Item 4. Controls and Procedures in Part I of this quarterly report.

Crestmark’s business presents a heightened degree of operational and credit risks to the Bank.

Crestmark’s focus on asset-based loans and other ~~third parties~~forms of commercial financing subjects Crestmark and, therefore, the Bank to the potential for fraud by borrowers regarding the value of underlying collateral. As a result, the Bank may assume different or greater lending risks than other commercial lenders in connection with the commercial products and services offered through the Crestmark division. Even routine funding transactions expose the Bank to credit risk in the event of default of its counterparty or client. In addition, credit risk related to products and services offered by the Crestmark division may be exacerbated when the collateral held by the Bank cannot be realized upon or is liquidated at prices insufficient to recover the full amount due under the financial instrument. Lastly, the use of and reliance on information systems specific to Crestmark’s business increases the operational risk of this recently acquired business. We define operational risk as the risk arising from inadequate or failed processes, people, and/or systems, including those emanating from external sources. While operational risk is inherent in all of our business activities, processes, and systems, the operational risk of the Crestmark division is elevated due to the ~~conduct~~material weakness identified during the quarter ended June 30, 2019, which is described in Item 4. Controls and Procedures in Part I of ~~the third parties with which the Bank operates such lending programs if such conduct does not comply with applicable laws in connection with marketing and servicing loans under the program.~~this quarterly report.

Item 2. Unregistered Sales of Securities and Use of Proceeds.

(a) None

(b) None

Meta's Board of Directors authorized a 2,000,000 share repurchase program that is scheduled to expire on September 30, 2021. The share repurchase program was announced on March 26, 2019 and became effective on May 1, 2019. The table below sets forth information regarding repurchases of our common stock during the third fiscal quarter of 2019.



Period	Total Number of Shares Repurchased⁽¹⁾	Average Price Paid per Share⁽¹⁾⁽²⁾		Total Number of Shares Repurchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares that may yet be Repurchased Under the Program
April 1 to 30	—	$	—	—	—
May 1 to 31	820,251	26.80		820,098	1,179,902
June 1 to 30	754,972	27.73		754,636	425,266
Total	1,575,223			1,574,734

⁽¹⁾ These columns also reflect shares acquired in satisfaction of the tax withholding obligations of holders of restricted stock unit awards, which vested during the quarter, and shares repurchased pursuant to Rule 10b5-1 under the Securities Exchange Act of 1934.

⁽²⁾ The average price paid per share is calculated on a trade date basis for all open market transactions and excludes commissions and other transaction expenses.

Item 6. Exhibits.



Exhibit Number	Description

~~2.1~~	Agreement and Plan of Merger, dated as of January 9, 2018, by and among Meta Financial Group, Inc., MetaBank, Crestmark Bancorp, Inc. and Crestmark Bank, filed on January 9, 2018 as an exhibit to the Registrant’s Current Report on Form 8-K, is incorporated herein by reference.

~~3.1~~	~~Certificate of Incorporation, as amended~~

~~10.1~~	Amended and Restated Meta Financial Group, Inc. 2002 Omnibus Incentive Plan, as amended, filed on January 24, 2018 as an exhibit to the Registrant’s Current Report on Form 8-K, is incorporated herein by reference.

31.1	Section 302 certification of Chief Executive Officer.

31.2	Section 302 certification of Chief Financial Officer.

32.1	Section 906 certification of Chief Executive Officer.

32.2	Section 906 certification of Chief Financial Officer.

101.INS	Instance Document

101.SCH	XBRL Taxonomy Extension Schema Document

101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF	XBRL Taxonomy Extension Definition Linkbase Document

101.LAB	XBRL Taxonomy Extension Label Linkbase Document

101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

META FINANCIAL GROUP, INC.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



	META FINANCIAL GROUP, INC.

Date: ~~February~~August 7, ~~2018~~2019	By:	/s/ ~~J. Tyler Haahr~~Bradley C. Hanson
		~~J. Tyler Haahr, Chairman of the Board~~Bradley C. Hanson,
		~~and~~President, Chief Executive Officer and Director

Date: ~~February~~August 7, ~~2018~~2019	By:	/s/ Glen W. Herrick
		Glen W. Herrick, Executive Vice President
		and Chief Financial Officer

6471



	Three Months Ended December 31,
	2017			2016
Net income	$	4,670		$	1,244

Other comprehensive income (loss):
Change in net unrealized loss on securities	(7,480		)	(45,268		)
Losses realized in net income	1,010			1,234
	(6,470		)	(44,034		)
LESS: Deferred income tax effect	(3,086		)	(16,092		)
Total other comprehensive loss	(3,384		)	(27,942		)
Total comprehensive income (loss)	$	1,286		$	(26,698	)



	1-4 Family Real Estate			Commercial and Multi-Family Real Estate		Agricultural Real Estate			Consumer		Commercial Operating		Agricultural Operating			CML Insurance Premium Finance			Unallocated		Total
	(Dollars in Thousands)
Three Months Ended December 31, 2017
Allowance for loan losses:
Beginning balance	$	803		$	2,670	$	1,390		$	6	$	158	$	1,184		$	796		$	527	$	7,534
Provision (recovery) for loan losses	(118		)	364		(210		)	297		690		(380		)	51			374		1,068
Charge offs	(31		)	—		—			—		—		—			(129		)	—		(160		)
Recoveries	—			—		—			367		46		—			7			—		420
Ending balance	$	654		$	3,034	$	1,180		$	670	$	894	$	804		$	725		$	901	$	8,862

Ending balance: individually evaluated for impairment	—			—		—			—		—		—			—			—		—
Ending balance: collectively evaluated for impairment	654			3,034		1,180			670		894		804			725			901		8,862
Total	$	654		$	3,034	$	1,180		$	670	$	894	$	804		$	725		$	901	$	8,862

Loans:
Ending balance: individually evaluated for impairment	95			707		—			61		—		1,052			—			—		1,915
Ending balance: collectively evaluated for impairment	203,872			653,322		61,303			274,920		56,516		23,644			235,671			—		1,509,248
Total	$	203,967		$	654,029	$	61,303		$	274,981	$	56,516	$	24,696		$	235,671		$	—	$	1,511,163



	Accruing and Non-accruing Loans											Nonperforming Loans
December 31, 2017	30-59 Days Past Due		60-89 Days Past Due		> 89 Days Past Due		Total Past Due		Current		Total Loans Receivable	> 89 Days Past Due and Accruing	Non-accrual balance		Total
	(Dollars in Thousands)
1-4 Family Real Estate	$	106	$	—	$	234	$	340	$	203,627	203,967	234	$	—	$	234
Commercial and Multi-Family Real Estate	—		284		—		284		653,745		654,029	—	284		284
Agricultural Real Estate	—		—		27,818		27,818		33,485		61,303	27,818	—		27,818
Consumer	4,192		2,015		1,624		7,831		267,150		274,981	1,624	—		1,624
Commercial Operating	—		—		—		—		56,516		56,516	—	—		—
Agricultural Operating	—		—		—		—		24,696		24,696	—	—		—
CML Insurance Premium Finance	1,594		592		3,194		5,380		230,291		235,671	3,194	—		3,194
Total	$	5,892	$	2,891	$	32,870	$	41,653	$	1,469,510	1,511,163	32,870	$	284	$	33,154



Available For Sale
At December 31, 2017	AMORTIZED COST		GROSS UNREALIZED GAINS		GROSS UNREALIZED (LOSSES)			FAIR VALUE
	(Dollars in Thousands)
Debt securities
Small business administration securities	56,602		349		(3		)	56,948
Obligations of states and political subdivisions	14,513		123		(26		)	14,610
Non-bank qualified obligations of states and political subdivisions	1,212,661		16,079		(5,710		)	1,223,030
Asset-backed securities	93,486		2,337		—			95,823
Mortgage-backed securities	606,338		198		(6,424		)	600,112
Total debt securities	1,983,600		19,086		(12,163		)	1,990,523
Common equities and mutual funds	1,298		532		(1		)	1,829
Total available for sale securities	$	1,984,898	$	19,618	$	(12,164	)	$	1,992,352



At September 30, 2017	AMORTIZED COST		GROSS UNREALIZED GAINS		GROSS UNREALIZED (LOSSES)			FAIR VALUE
	(Dollars in Thousands)
Debt securities
Small business administration securities	57,046		825		—			57,871
Non-bank qualified obligations of states and political subdivisions	938,883		14,983		(3,037		)	950,829
Asset-backed securities	94,451		2,381		—			96,832
Mortgage-backed securities	588,918		1,259		(3,723		)	586,454
Total debt securities	1,679,298		19,448		(6,760		)	1,691,986
Common equities and mutual funds	1,009		436		—			1,445
Total available for sale securities	$	1,680,307	$	19,884	$	(6,760	)	$	1,693,431



Held to Maturity
At December 31, 2017	AMORTIZED COST		GROSS UNREALIZED GAINS		GROSS UNREALIZED (LOSSES)			FAIR VALUE
	(Dollars in Thousands)
Debt securities
Obligations of states and political subdivisions	$	4,341	$	26	$	(25	)	$	4,342
Non-bank qualified obligations of states and political subdivisions	230,683		336		(3,537		)	227,482
Mortgage-backed securities	8,468		—		(148		)	8,320
Total held to maturity securities	$	243,492	$	362	$	(3,710	)	$	240,144



	Number of Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Yrs)	Aggregate Intrinsic Value
	(Dollars in Thousands, Except Per Share Data)
Options outstanding, September 30, 2017	75,757	$	22.62	2.28	$	4,225
Granted	—	—		—	—
Exercised	—	—		—	—
Forfeited or expired	—	—		—	—
Options outstanding, December 31, 2017	75,757	$	22.62	2.03	$	5,305

Options exercisable, December 31, 2017	75,757	$	22.62	2.03	$	5,305



	Number of Shares		Weighted Average Fair Value at Grant
(Dollars in Thousands, Except Per Share Data)
Nonvested (restricted) shares outstanding, September 30, 2017	304,526		$	86.96
Granted	42,181		85.03
Vested	(61,161	)	83.55
Forfeited or expired	—		—
Nonvested (restricted) shares outstanding, December 31, 2017	285,546		$	87.40



	Fair Value At December 31, 2017
	Available For Sale								Held to Maturity
(Dollars in Thousands)	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
Debt securities
Small business administration securities	56,948		—		56,948		—		—		—		—		—
Obligations of states and political subdivisions	14,610		—		14,610		—		4,342		—		4,342		—
Non-bank qualified obligations of states and political subdivisions	1,223,030		—		1,223,030		—		227,482		—		227,482		—
Asset-backed securities	95,823		—		95,823		—		—		—		—		—
Mortgage-backed securities	600,112		—		600,112		—		8,320		—		8,320		—
Total debt securities	1,990,523		—		1,990,523		—		240,144		—		240,144		—
Common equities and mutual funds	1,829		1,829		—		—		—		—		—		—
Total securities	$	1,992,352	$	1,829	$	1,990,523	$	—	$	240,144	$	—	$	240,144	$	—



	Fair Value At September 30, 2017
	Available For Sale								Held to Maturity
(Dollars in Thousands)	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
Debt securities
Small business administration securities	57,871		—		57,871		—		—		—		—		—
Obligations of states and political subdivisions	—		—		—		—		19,368		—		19,368		—
Non-bank qualified obligations of states and political subdivisions	950,829		—		950,829		—		432,361		—		432,361		—
Asset-backed securities	96,832		—		96,832		—		—		—		—		—
Mortgage-backed securities	586,454		—		586,454		—		112,456		—		112,456		—
Total debt securities	1,691,986		—		1,691,986		—		564,185		—		564,185		—
Common equities and mutual funds	1,445		1,445		—		—		—		—		—		—
Total securities	$	1,693,431	$	1,445	$	1,691,986	$	—	$	564,185	$	—	$	564,185	$	—



	Trademark⁽¹⁾			Non-Compete⁽²⁾			Customer Relationships⁽³⁾			All Others⁽⁴⁾			Total
Intangibles
Balance as of September 30, 2017	$	10,051		$	1,782		$	31,707		$	8,638		$	52,178
Acquisitions during the period	—			—			—			38			38
Amortization during the period	(159		)	(132		)	(1,160		)	(230		)	(1,681		)
Write-offs during the period	—			—			—			(14		)	(14		)
Balance as of December 31, 2017	$	9,892		$	1,650		$	30,547		$	8,432		$	50,521

Gross carrying amount	$	10,990		$	2,480		$	57,810		$	10,540		$	81,820
Accumulated amortization	(1,098		)	(830		)	(17,015		)	(1,565		)	(20,508		)
Accumulated impairment	—			—			(10,248		)	(543		)	(10,791		)
Balance as of December 31, 2017	$	9,892		$	1,650		$	30,547		$	8,432		$	50,521



	(Dollars in Thousands)
Remaining in 2018	$	6,028
2019	7,151
2020	5,753
2021	5,184
2022	4,262
2023	3,625
Thereafter	18,518
Total anticipated intangible amortization	$	50,521



							Minimum
							Requirement to Be
					Minimum		Well Capitalized
					Requirement For		Under Prompt
					Capital Adequacy		Corrective Action
At December 31, 2017	Company		Bank		Purposes		Provisions

Tier 1 leverage ratio	7.68	%	9.61	%	4.00	%	5.00	%
Common equity Tier 1 capital ratio	12.93		16.71		4.50		6.50
Tier 1 capital ratio	13.38		16.71		6.00		8.00
Total qualifying capital ratio	16.99		17.11		8.00		10.00



Net Sensitive Earnings at Risk
Balances as of December 31, 2017	Standard (Parallel Shift) Year 1
	Net Interest Income at Risk%
	-100		+100		+200		+300		+400
Basis Point Change Scenario	-7.4	%	3.3	%	5.5	%	7.4	%	9.4	%
Board Policy Limits	-8.0	%	-8.0	%	-10.0	%	-15.0	%	-20.0	%



Net Sensitive Earnings at Risk
Alternative IRR Results	Standard (Parallel Shift) Year 1
	Net Interest Income at Risk%
	-100		+100		+200		+300		+400
Basis Point Change Scenario	-5.5	%	0.9	%	0.6	%	—	%	-0.5	%
Board Policy Limits	-8.0	%	-8.0	%	-10.0	%	-15.0	%	-20.0	%



Balances as of December 31, 2017
		% of		Change in Interest Income/Expense for a given change in interest rates
	Total Earning	Total Earning		Over / (Under) Base Case Parallel Shift
Basis Point Change Scenario	Assets (in $000's)	Assets		-100	Base	+100	+200	+300	+400
Total Loans	1,509,141	30.2	%	65,404	70,803	75,956	80,981	85,966	91,142
Total Investments (non-TEY) and other Earning Assets	3,484,181	69.8	%	59,605	78,231	94,619	109,695	124,544	139,321
Total Interest-Sensitive Income	4,993,322	100.0	%	125,009	149,033	170,575	190,676	210,509	230,463
Total Interest-Bearing Deposits	734,000	35.8	%	6,482	8,244	12,439	16,634	20,829	25,024
Total Borrowings	1,315,261	64.2	%	7,543	20,878	34,212	47,547	60,883	74,234
Total Interest-Sensitive Expense	2,049,262	100.0	%	14,025	29,122	46,651	64,181	81,711	99,258



Balances as of December 31, 2017
		% of		Change in Economic Value for a given change in interest rates
	Book	Total		Over / (Under) Base Case Parallel Shift
Basis Point Change Scenario	Value (in $000's)	Assets		-100		+100		+200		+300		+400
Total Loans	1,500,279	28	%	2.0	%	-2.0	%	-4.1	%	-6.0	%	-7.9	%
Total Investment	3,484,181	64	%	2.3	%	-3.2	%	-6.6	%	-9.9	%	-12.8	%
Other Assets	420,792	8	%	0.0	%	0.0	%	0.0	%	0.0	%	0.0	%
Assets	5,405,252	100	%	2.1	%	-2.6	%	-5.4	%	-8.1	%	-10.4	%
Interest Bearing Deposits	734,000	15	%	1.7	%	-1.5	%	-3.0	%	-4.3	%	-5.5	%
Non-Interest Bearing Deposits	2,783,941	57	%	5.7	%	-5.1	%	-9.7	%	-13.8	%	-17.5	%
Total Borrowings & Other Liabilities	1,363,650	28	%	0.0	%	0.0	%	0.0	%	0.0	%	0.0	%
Liabilities	4,881,591	100	%	3.2	%	-2.9	%	-5.5	%	-7.8	%	-10.0	%