META FINANCIAL GROUP INC. Management’s Discussion and Analysis of Financial Position and Operating Results (Form 10-K)

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This section should be read in conjunction with the following parts of this Form
10-K: Part I, Item 1 "Business," Part II, Item 7A, "Quantitative and Qualitative
Disclosures About Market Risk," and Part II, Item 8 "Financial Statements and
Supplementary Data."

GENERAL

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

EXECUTIVE SUMMARY

Business Development Highlights for Fiscal Fourth Quarter 2021 and Full Fiscal Year 2021

• Name it Visa the card issuer, in collaboration with Blackhawk Network, to
Excluded workers’ funds, a New York State Department of Labor program that provides one-time payments to some New Yorkers who have lost income due to COVID-19.

•Recognized a net unrealized gain of $4.1 million on a prior investment in
MoneyLion Inc. ("MoneyLion") following the completion of its de-SPACing process
and listing on the New York Stock Exchange on September 22, 2021.

• Expansion of our financing of renewable energy, originally $ 101.1 million for fiscal year 2021, resulting in $ 26.5 million in total net investment tax credits.

•Announced a new share repurchase program and repurchased 234,297 shares during
the 2021 fiscal fourth quarter, at an average price of $51.18, reflecting the
momentum of the business and confidence in the Company's strategy and growth
trajectory. An additional 1,252,145 shares were repurchased subsequent to
September 30, 2021 through November 18, 2021.

•Bradley C. Hanson, President and Chief Executive Officer of the Company retired
from his positions at Meta Financial and MetaBank. He will remain on the
Company's Board until the next annual stockholders' meeting, expected to take
place in February 2022. He also will serve as a Strategic Advisor to Meta on
industry and partner relations until the end of 2022. The Board appointed Brett
L. Pharr as Chief Executive Officer and Anthony M. Sharett as President of Meta
Financial Group and MetaBank effective October 1, 2021.

Financial Highlights for the 2021 Fiscal Fourth Quarter
Total revenue for the fourth quarter was $120.2 million, an increase of $14.9
million compared to the same quarter in fiscal 2020, primarily driven by higher
net interest income, payments fee income and $4.1 million in other income
related to the MoneyLion valuation.

Net interest income for the fourth quarter was $70.7 million, an increase of
$6.2 million compared to $64.5 million in the fourth quarter last year. Net
interest margin ("NIM") improved to 4.35% for the fourth quarter from 3.77%
during the same period of last year, chiefly due to the decrease of cash
associated with the Company's participation in the EIP program, as well as an
increase in commercial and warehouse finance loans and leases.

Total gross loans and leases at September 30, 2021 increased $293.7 million, to
$3.61 billion, or 9%, compared to September 30, 2020 and increased $112.6
million, or 3%, when compared to June 30, 2021. The increase was primarily
driven by growth in commercial finance, and consumer finance loans partially
offset by a decrease in community bank loans, which was driven by a loan sale of
$75.1 million during the quarter.

Subsequent Events
Management has evaluated and identified subsequent events that occurred after
September 30, 2021. See Note 25. Subsequent Events for details on these events.


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FINANCIAL CONDITION
At September 30, 2021, the Company's total assets increased by $598.6 million to
$6.69 billion compared to September 30, 2020, primarily due to an increase of
$596.8 million in investment securities available for sale.

Total cash and cash equivalents was $314.0 million at September 30, 2021,
decreasing from $427.4 million at September 30, 2020, primarily resulting from
the withdraw of EIP related deposits. The Bank has been working with other banks
to transfer these temporary deposits off the balance sheet. Otherwise, the
Company maintains its cash investments primarily in interest-bearing overnight
deposits with the FHLB of Des Moines and the FRB. At September 30, 2021, the
Company did not have any federal funds sold.

The total investment portfolio increased $560.9 million, or 41%, to $1.92
billion at September 30, 2021, compared to $1.36 billion at September 30, 2020,
as purchases exceeded maturities and principal pay downs. The Company's
portfolio of securities customarily consists primarily of MBS, which have
expected lives much shorter than the stated final maturity, non-bank qualified
obligations of states and political subdivisions, which mature in approximately
15 years or 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 September 30, 2021 were issued by a
U.S. Government agency or instrumentality. Of the total MBS at September 30,
2021, $1.02 billion, at fair value, were classified as available for sale, and
$3.7 million, at cost, were classified as held to maturity. Of the total
investment securities at September 30, 2021, $847.9 million, at fair value, were
classified as available for sale and $52.9 million, at cost, were classified as
held to maturity. During the fiscal year ended September 30, 2021, the Company
purchased $1.04 billion of investment securities.

Loans held for sale at September 30, 2021 totaled $56.2 million, decreasing
from $183.6 million at September 30, 2020. This decrease was primarily driven by
a portion of the retained Community Bank loan portfolio transferred to loans
held for sale at September 30, 2020 compared to none at September 30, 2021.

The Company's total loans and leases increased $293.7 million, or 9%, to $3.61
billion at September 30, 2021, from $3.31 billion at September 30, 2020. The
increase was primarily driven by growth in the commercial finance, tax services,
and warehouse finance portfolios partially offset by the continued decrease in
community banking loan balances. See Note 5 to the "Notes to Consolidated
Financial Statements" of this Annual Report on Form 10-K.

Commercial finance loans increased $417.5 million, or 18% to $2.73 billion at
September 30, 2021 compared to September 30, 2020. Consumer finance loans, tax
services loans and warehouse finance loans increased $28.7 million, $7.3
million, and $126.6 million at September 30, 2021, respectively, compared to
September 30, 2020.

Community banking loans decreased $286.4 million, or 59%, at September 30, 2021
compared to September 30, 2020, primarily attributable to loan portfolio sales
along with continued principal payments and payoffs. As of September 30, 2021,
the Company had no community banking loans classified as held for sale. See Note
3 and Note 5 to the "Notes to Consolidated Financial Statements," which are
included in Part II, Item 8 "Financial Statements and Supplementary Data" of
this Annual Report on Form 10-K.

Through the Bank, the Company owns stock in the FHLB due to the Bank's
membership and participation in this banking system as well as stock in the
Federal Reserve Bank. The FHLB requires a level of stock investment based on a
pre-determined formula. The Company's investment in these stocks increased $1.3
million, or 5%, to $28.4 million at September 30, 2021 from $27.1 million at
September 30, 2020, resulting from the purchase of FHLB membership stock.

Total end-of-period deposits increased 11% to $5.51 billion at September 30,
2021, compared to $4.98 billion at September 30, 2020. The increase in
end-of-period deposits was primarily driven by an increase in
noninterest-bearing deposits of $661.6 million, partially offset by a decrease
in wholesale deposits of $269.1 million. The increase in noninterest-bearing
deposits was driven by government stimulus-related dollars loaded on various
partner cards. As of September 30, 2021, EIP program card balances outstanding
totaled $1.64 billion, of which only $69.8 million was on Meta's balance sheet
with the remainder being held by other banks.

The Company's total borrowings decreased $5.4 million, or 5%, from $98.2 million
at September 30, 2020 to $92.8 million at September 30, 2021. See Note 13 to the
"Notes to Consolidated Financial Statements," which are included in Part II,
Item 8 "Financial Statements and Supplementary Data" of this Annual Report on
Form 10-K.


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At September 30, 2021, the Company's stockholders' equity totaled $871.9
million, an increase of $24.6 million, from $847.3 million at September 30,
2020. The increase was primarily attributable to growth in retained earnings and
an increase in additional paid-in capital. The Company and Bank remained above
the federal regulatory minimum capital requirements at September 30, 2021,
continued to be classified as well-capitalized, and in good standing with the
regulatory agencies. See Note 18 to the "Notes to Consolidated Financial
Statements," which is included in Part II, Item 8 "Financial Statements and
Supplementary Data" of this Annual Report on Form 10-K.

RESULTS OF OPERATIONS
The Company's results of operations are dependent on net interest income,
provision for credit losses, noninterest income, noninterest expense and income
tax expense. Net interest income is the difference, or spread, between the
average yield on interest-earning assets and the average rate paid on
interest-bearing liabilities. The interest rate spread is affected by
regulatory, economic and competitive factors that influence interest rates, loan
and lease demand and deposit flows. Notwithstanding that a significant amount of
the Company's deposits, primarily those attributable to the payments division,
pay relatively low rates of interest or none at all, the Company, like other
financial institutions, is subject to interest rate risk to the extent that its
interest-earning assets mature or reprice at different times, or on a different
basis, than its interest-bearing liabilities. The provision for credit losses is
the adjustment to the allowance for credit losses balance for the applicable
period. The allowance for credit losses represents management's estimate of
current credit losses expected to be incurred by the loan and lease portfolio
over the life of each financial asset as of the balance sheet date.

The Company's noninterest income is derived primarily from tax product fees,
prepaid cards, credit products, deposit and ATM fees attributable to the
payments division and fees charged on bank loans, leases and transaction
accounts. Noninterest income is also derived from rental income, net gains on
the sale of securities, net gains on the sale of loans and leases, as well as
the Company's holdings of bank-owned life insurance. This income is offset by
noninterest expenses, such as compensation and occupancy expenses associated
with additional personnel and office locations, as well as card processing
expenses and tax product expenses attributable to the payments division.
Noninterest expense is also impacted by acquisition-related expenses, operating
lease equipment depreciation expense, occupancy and equipment expenses,
regulatory expenses, and legal and consulting expenses.


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Average Balances, Interest Rates and Yields
The following table presents, for the periods indicated, the 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 adjustments have been made
in yields on interest-bearing assets and NIM. Nonaccruing loans and leases have
been included in the table as loans or leases carrying a zero yield.
                                                                                                          Fiscal Year Ended September 30,
                                                           2021                                                        2020                                                         2019
                                     Average             Interest                                 Average             Interest                                Average             Interest
                                   Outstanding           Earned /            Yield /            Outstanding           Earned /            Yield /           Outstanding           Earned /            Yield /
(Dollars in Thousands)               Balance               Paid              Rate (1)             Balance               Paid             Rate (1)             Balance               Paid              Rate (1)
Interest-earning assets:
Cash and fed funds sold           $ 1,919,760          $   3,709                 0.19  %       $ 1,236,027          $   2,824                0.23  %       $   128,507          $   3,494                 2.72  %
Mortgage-backed securities            728,884             12,155                 1.67  %           367,869              9,028                2.45  %           393,322             11,390                 2.90  %
Tax exempt investment securities      281,573              4,004                 1.80  %           434,262              7,477                2.18  %           852,381             20,742                 3.08  %
Asset-backed securities               388,458              5,340                 1.37  %           319,258              7,636                2.39  %           299,777             10,705                 3.57  %
Other investment securities           239,283              4,566                 1.91  %           198,924              4,748                2.39  %           164,451              4,870                 2.96  %
Total investments                   1,638,198             26,065                 1.66  %         1,320,313             28,889                2.34  %         1,709,931             47,707                 3.11  %
Commercial finance                  2,549,335            188,855                 7.41  %         2,100,464            169,189                8.05  %         1,717,869            169,941                 9.89  %
Consumer finance                      248,757             19,940                 8.02  %           254,293             19,808                7.79  %           341,176             29,965                 8.78  %
Tax services                          214,835              7,321                 3.41  %           148,650              6,390                4.30  %           110,503              8,193                 7.41  %
Warehouse finance                     330,224             21,262                 6.44  %           292,952             17,919                6.12  %           188,483             11,826                 6.27  %

Community banking                     375,258             18,702                 4.98  %           975,618             47,822                4.90  %         1,180,594             54,603                 4.63  %
Total loans and leases              3,718,409            256,080                 6.89  %         3,771,977            261,128                6.92  %         3,538,625            274,528                 7.76  %
Total interest-earning assets       7,276,367          $ 285,854                 3.94  %         6,328,317          $ 292,841                4.66  %         5,377,063          $ 325,729                 6.16  %
Noninterest-earning assets            849,141                                                      881,314                                                     875,124
Total assets                      $ 8,125,508                                                  $ 7,209,631                                                 $ 6,252,187

Interest-bearing liabilities:
Interest-bearing checking         $   254,236          $       -                    -  %       $   189,704          $     259                0.14  %       $   136,069          $     356                 0.26  %
Savings                                81,619                 16                 0.02  %            50,888                 18                0.03  %            53,434                 38                 0.07  %
Money markets                          58,656                204                 0.35  %            57,573                422                0.73  %            60,719                419                 0.69  %
Time deposits                          13,081                139                 1.06  %            61,837              1,226                1.98  %           149,220              2,830                 1.90  %
Wholesale deposits                    150,213              1,234           
     0.82  %         1,081,935             20,691                1.91  %         1,772,092             43,005                 2.43  %
Total interest-bearing deposits       557,805              1,593                 0.29  %         1,441,937             22,616                1.57  %         2,171,534             46,648                 2.15  %
Overnight fed funds purchased               6                  -                 0.25  %           183,438              2,804                1.53  %           300,203              7,484                 2.49  %
FHLB Advances                               -                  -                    -  %           106,093              2,638                2.49  %            42,712              1,037                 2.43  %
Subordinated debentures                73,886              4,507                 6.10  %            73,718              4,618                6.26  %            73,561              4,647                 6.32  %
Other borrowings                       21,549                763                 3.54  %            28,696              1,127                3.93  %            44,097              1,706                 3.87  %
Total borrowings                       95,441              5,270                 5.52  %           391,945             11,187                2.85  %           460,573             14,874                 3.23  %
Total interest-bearing
liabilities                           653,246              6,863                 1.05  %         1,833,882             33,803                1.84  %         2,632,107             61,522                 2.34  %
Noninterest-bearing deposits        6,440,830                  -                    -  %         4,396,132                  -                   -  %         2,685,502                  -                    -  %
Total deposits and
interest-bearing liabilities        7,094,115          $   6,863                 0.10  %         6,230,014          $  33,803                0.54  %         5,317,609          $  61,522                 1.16  %
Other noninterest-bearing
liabilities                           189,841                                                      143,772                                                     132,901
Total liabilities                   7,283,956                                                    6,373,786                                                   5,450,510
Shareholders' equity                  841,552                                                      835,845                                                     801,677
Total liabilities and
shareholders' equity              $ 8,125,508                                                  $ 7,209,631                                                 $ 6,252,187
Net interest income and net
interest rate spread including
noninterest-bearing deposits                           $ 278,992                 3.84  %                            $ 259,038                4.12  %                            $ 264,207                 5.00  %

Net interest margin                                                              3.83  %                                                     4.09  %                                                      4.91  %
Tax equivalent effect                                                            0.01  %                                                     0.03  %                                                      0.11  %
Net interest margin, tax
equivalent (2)                                                                   3.84  %                                                     4.12  %                                                      5.02  %


(1) Tax rate used to arrive at the TEY for the fiscal years ended September 30,
2021, 2020, and 2019 was 21%.
(2) 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. Management of the Company
believes 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.


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Rate / Volume Analysis
The following table presents, for the periods presented, the dollar amount of
changes in interest income and interest expense for major components of
interest-earning assets and interest-bearing liabilities. The table
distinguishes between the change related to higher outstanding balances and the
change due to the levels and volatility of interest rates. For each category of
interest-earning assets and interest-bearing liabilities, information is
provided on changes attributable to (i) changes in volume (i.e., changes in
volume multiplied by old rate) and (ii) changes in rate (i.e., changes in rate
multiplied by old volume). For purposes of this table, changes attributable to
both rate and volume that cannot be segregated have been allocated
proportionately to the change due to volume and the change due to rate.

                                                                                    Fiscal Year Ended September 30,
                                                            2021 vs. 2020                                                     2020 vs. 2019
                                        Increase /             Increase /              Total              Increase /             Increase /              Total
                                        (Decrease)             (Decrease)           Increase /            (Decrease)             (Decrease)           Increase /
(Dollars in Thousands)                 Due to Volume           Due to Rate          (Decrease)           Due to Volume           Due to Rate          (Decrease)
Interest-earning assets:
Cash and fed funds sold              $        1,408          $       (523)         $      885          $        5,181          $     (5,851)         $     (670)
Mortgage-backed securities                    6,711                (3,584)              3,127                    (704)               (1,658)            

(2,362)

Tax-exempt investment securities             (2,323)               (1,150)             (3,473)                 (8,310)               (4,955)            (13,265)
Asset-backed securities                       1,423                (3,720)             (2,297)                    659                (3,726)             (3,069)
Other investment securities                     865                (1,045)               (180)                    919                (1,041)               (122)
Total investments                             6,845                (9,668)             (2,823)                 (8,999)               (9,819)            (18,818)
Commercial finance                           34,013               (14,347)             19,666                  34,015               (34,767)               (752)
Consumer finance                               (441)                  573                 132                  (7,033)               (3,124)            (10,157)
Tax services                                  2,440                (1,509)                931                   2,292                (4,095)             (1,803)
Warehouse finance                             2,362                   981               3,343                   6,396                  (303)              6,093

Community banking                           (29,872)                  752             (29,120)                 (9,902)                3,121              (6,781)
Total loans and leases                       (3,784)               (1,264)             (5,048)                 17,364               (30,764)            (13,400)
Total interest-earning assets        $        4,469          $    (11,455)         $   (6,986)         $       13,546          $    (46,434)         $   32,888

Interest-bearing liabilities:
Interest-bearing checking            $           66          $       (324)         $     (258)         $          110          $       (207)         $      (97)
Savings                                           8                    (9)                 (1)                     (2)                  (18)                (20)
Money markets                                     8                  (226)               (218)                    (22)                   25                   3
Time deposits                                  (684)                 (404)             (1,088)                 (1,727)                  123              (1,604)
Wholesale deposits                          (11,698)               (7,759)            (19,457)                (14,450)               (7,864)            (22,314)
Total interest-bearing deposits              (9,025)              (11,997)            (21,022)                (13,327)              (10,705)            (24,032)
Overnight fed funds purchased                (1,527)               (1,278)             (2,805)                 (2,346)               (2,334)             (4,680)
FHLB Advances                                (1,319)               (1,319)             (2,638)                  1,575                    26               1,601
Subordinated debentures                          10                  (122)               (112)                     10                   (39)                (29)
Other borrowings                               (261)                 (103)               (364)                   (604)                   25                (579)
Total borrowings                            (12,000)                6,082              (5,918)                 (2,072)               (1,615)             (3,687)

Total interest-bearing liabilities $ (21,025) $ (5,915)

$ (26,940) $ (15 399) $ (12,320) $ (27,719)

Net effect on net interest income $ 25,494 $ (5,540)

       $   19,954          $       28,945          $    (34,114)         $    5,169


Comparison of operating results for the years ended
September 30, 2021 and September 30, 2020

General

The Company recorded net income of $141.7 million, or $4.38 per diluted share,
for the fiscal year ended September 30, 2021, compared to $104.7 million, or
$2.94 per diluted share, for the fiscal year ended September 30, 2020, an
increase of $37.0 million. Total revenue for fiscal 2021 was $549.9 million,
compared to $498.8 million for fiscal 2020, an increase of 10%. The increases in
net income and revenue was primarily due to an increase in noninterest income
and a decrease in provision for credit losses, partially offset by an increase
in non-interest expense.


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Net Interest Income
Net interest income for fiscal 2021 increased by $20.0 million, or 8%, to $279.0
million from $259.0 million for the same period of the prior year. The increase
in net interest income was mainly attributable to the continued optimization of
our earning asset and liability mix, which included a decrease in interest
expense of 80% to $6.9 million for fiscal 2021, from $33.8 million for the same
period of the prior year. The decrease in interest expense was primarily driven
by a significant increase in noninterest-bearing deposits, which lessened the
Company's need to rely on wholesale deposits during fiscal 2021.

NIM was 3.83% for fiscal 2021, a decrease of 26 basis points from 4.09% in
fiscal 2020. The decrease in NIM in fiscal 2021, compared to the same period of
the prior year was primarily attributable to the increase in noninterest-bearing
deposit balances related to government stimulus-related dollars. This increase
in deposit balances also led to excess cash balances held at the Federal Reserve
during fiscal 2021, which yielded approximately 10 basis points in interest
income, and increased the quarterly average of interest-earning assets compared
to previous periods. This increase of lower-yielding cash balances resulted in a
drag to the overall yield on total interest-earning assets during the current
period.

The overall reported tax equivalent yield ("TEY") on average interest-earning
assets decreased by 72 basis points to 3.94% when comparing fiscal 2021 to
fiscal 2020. The reduction was driven primarily by an increase in low-yielding
cash held at the Federal Reserve, along with an overall lower rate environment.
The yield on the commercial finance portfolio decreased by 64 basis points and
the tax services portfolio decreased by 89 basis points while the yield on the
warehouse finance portfolio increased by 32 basis points. The fiscal 2021 TEY on
the securities portfolio decreased by 68 basis points to 1.66% as compared to
the same period of the prior year.

The Company's average interest-earning assets for fiscal 2021 increased $948.1
million, or 15%, to $7.28 billion, from $6.33 billion during fiscal 2020. The
increase was primarily attributable to increases in average cash balances of
$683.7 million and total average investment securities of $317.9 million,
partially offset by a decrease in average loan and lease balances of $53.6
million. The increase in average cash balances was due to an increase in
noninterest-bearing deposit balances related to government stimulus-related
dollars. The decrease in the Company's average loan and lease balances was
driven by a reduction $600.4 million in community banking loans partially offset
by increases of $448.9 million, $66.2 million, and $37.3 million in commercial
finance, tax services, and warehouse finance loans, respectively.

The Company's average balance of total deposits and interest-bearing liabilities
increased $864.1 million, or 14%, to $7.09 billion during fiscal 2021, from
$6.23 billion during fiscal 2020. This increase was primarily due to increases
in average noninterest-bearing deposits of $2.04 billion, partially offset by a
decrease in average wholesale deposits of $931.7 million and a decrease in the
average balance of total borrowings of $296.5 million.

Overall, the Company's cost of funds for all deposits and borrowings averaged
0.10% during fiscal 2021, compared to 0.54% during fiscal 2020. The cost of
deposits was 0.01% during fiscal 2021, compared to 0.12% during fiscal 2020.
This decrease was primarily due to a decrease in the average balance of
overnight borrowings and FHLB advances as well as an increase in the average
balance of the Company's noninterest-bearing deposits. The Company believes that
its growing, lower-cost deposit base gives it a distinct and significant
competitive advantage, and even more so if interest rates rise, because the
Company anticipates that its cost of funds will likely remain relatively low,
increasing less than at many other banks.

Provision for Credit Losses
Effective October 1, 2020, the Company adopted the CECL accounting standard,
which required a day one entry to increase the allowance for credit losses in
the amount of $12.8 million. The entry did not have a direct impact to the
provision for credit losses at the time of adoption. During fiscal 2021, the
Company recorded $49.8 million in provision for credit losses, compared to $64.8
million in fiscal 2020. The decrease in provision was largely attributable to
the build in reserves during the prior year stemming from the COVID-19 pandemic.
Also see Note 5 to the Consolidated Financial Statements included in this Annual
Report on Form 10-K.

Noninterest Income
Noninterest income increased by $31.1 million, or 13%, to $270.9 million for
fiscal 2021 from $239.8 million for fiscal 2020. The increase in noninterest
income was primarily driven by tax advance fee income and payments fee income.
The payments fee income was aided by an increase in activity related to
government stimulus programs.


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Noninterest Expense
Noninterest expense increased by $24.6 million, or 8%, to $343.7 million for
fiscal 2021 from $319.1 million for fiscal 2020. This increase in noninterest
expense was primarily driven by an increase in compensation expense of $14.8
million and in legal and consulting expense of $10.5 million. CEO transition
expenses of $1.3 million related to accelerated vesting of CEO shares and
associated professional expenses also contributed to the year-over-year change.

Income Tax Expense
The Company recorded an income tax expense of $10.7 million for fiscal 2021,
resulting in an effective tax rate of 6.8%, compared to an income tax expense of
$5.7 million and an effective tax rate of 4.9%, in fiscal 2020. The increase in
recorded income tax expense during the period was primarily due to an increase
in taxable income. The Company originated $101.1 million in solar leases for the
2021 fiscal year, compared to $77.8 million during the 2020 fiscal year.
Investment tax credits related to solar leases are recognized ratably based on
income throughout each fiscal year. The 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 Company's
underwriting and return criteria.

Comparison of operating results for the years ended
September 30, 2020, and September 30, 2019

A comparison of the 2020 results with the 2019 results and other 2019 information not included in this document can be found in the Company’s Annual Report on Form 10-K: Part II, Section 7, “Discussion and management’s analysis of the financial position and operating results ”filed November 30, 2020.

Nonperforming Assets and Allowance for Credit Losses
At September 30, 2021, nonperforming assets, consisting of nonaccruing loans and
leases, accruing loans and leases delinquent 90 days or more, foreclosed real
estate, repossessed property, and nonperforming operating leases, totaled $61.8
million, or 0.92% of total assets, compared to $48.0 million, or 0.79% of total
assets, at September 30, 2020. The increase in NPAs was primarily attributable
to one $14.9 million relationship in the community bank portfolio along with
increases in tax services and commercial finance loans, partially offset by a
reduction of foreclosed and repossessed assets. As of September 30, 2021, the
Company had nonaccruing loans and leases totaling $34.2 million and foreclosed
and repossessed assets of approximately $2.1 million.

The Company maintains an allowance for credit losses because it is probable that
some loans and leases may not be repaid in full. At September 30, 2021, the
Company had an allowance for credit losses of $68.3 million as compared to $56.2
million at September 30, 2020. The increase was driven by a $18.3 million
increase in the commercial finance portfolio and a $3.7 million increase in the
consumer lending portfolio. These increases were driven by the year-over-year
loan growth and the adoption of the CECL accounting standard, which required a
day one entry to increase the allowance for credit losses in the amount of $12.8
million effective October 1, 2020. The increases noted above were partially
offset by a $10.0 million reduction within the retained community banking
portfolio, as the balance in community bank loans declined.

The following table presents the Company’s allowance for credit losses as a percentage of its total loans and leases.

From the period ended

                               September 30, 2021    June 30, 2021      March 31, 2021    December 31, 2020  October 1, 2020(1)  September 30, 2020
Commercial finance                         1.77  %            1.73  %            1.77  %             1.88  %            1.85  %              1.30  %
Consumer finance                           2.91  %            3.80  %            4.70  %             4.39  %            4.31  %              1.64  %
Tax services                               0.02  %           58.99  %           12.90  %             1.53  %            0.06  %              0.06  %
Warehouse finance                          0.10  %            0.10  %            0.10  %             0.10  %            0.10  %              0.10  %
Community banking                          6.16  %            4.36  %            4.03  %             4.01  %            3.37  %              4.59  %
Total loans and leases                     1.89  %            2.61  %            2.71  %             2.10  %            2.08  %              1.70  %


(1) Represents the Company's allowance coverage ratio upon the adoption of the
Accounting Standards Update 2016-13 using September 30, 2020 loan and lease and
allowance balances plus the CECL allowance adjustment..


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Allowance for credit losses as a percentage of the total loan and lease
portfolio was 1.89% at September 30, 2021, compared to 1.70% at September 30,
2020. This increase was driven primarily by the adoption of the CECL accounting
standard noted above. The CECL methodology requires loss estimates for the
remaining estimated life of the assets to be measured using historical loss
data, adjustments for current conditions, and adjustments for reasonable and
supportable forecasts of future economic conditions, which led to the increase
in the ACL as of the October 1, 2020 adoption date.

During fiscal year 2021, the Company had net charge-offs of $50.6 million, of
which $33.3 million were related to the tax services portfolio. During fiscal
year 2020, the Company had net charge-offs of $37.7 million, of which $22.0
million were related to the tax services portfolio. The charge-offs within the
tax services portfolio were fully reserved for.

Management closely monitors economic developments both regionally and
nationwide, and considers these factors when assessing the appropriateness of
its allowance for credit losses. The Company continued to assess each of its
loan and lease portfolios during the fiscal fourth quarter and increased its
allowance for credit losses as a percentage of total loans and leases in the
community bank and commercial finance portfolios primarily as a result of the
ongoing COVID-19 pandemic, as noted above. Tax services coverage rates were
driven only by typical seasonal activity and are not expected to be materially
impacted by COVID-19 as the tax lending season is now complete. The Company
expects to continue to diligently monitor the allowance for credit losses and
adjust as necessary in future periods to maintain an appropriate and supportable
level.

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 credit losses at September 30, 2021 reflected an appropriate allowance
against inherent credit losses from the lending portfolio. Although the Company
maintains its allowance for credit 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 and lease losses will not be required in future periods. In
addition, the Company's determination of the allowance for credit losses is
subject to review by the OCC, which can require the establishment of additional
general or specific allowances.

Management's periodic review of the allowance for credit losses is based on
various subjective and objective factors, including the Company's past loss
experience, known and inherent risks in the portfolio, adverse situations that
may affect the borrower's ability to repay, the estimated value of any
underlying collateral and current economic conditions. While management may
allocate portions of the allowance for specifically identified problem loan and
lease situations, the majority of the allowance is based on both subjective and
objective factors related to the overall loan and lease portfolio and is
available for any loan and lease charge-offs that may occur. As stated
previously, there can be no assurance future losses will not exceed estimated
amounts, or that additional provisions for credit losses will not be required in
future periods. In addition, the Bank is subject to review by the OCC, which has
the authority to require management to make changes to the allowance for credit
losses, and the Company is subject to similar review by the Federal Reserve. In
determining the allowance for credit losses, the Company specifically identifies
loans and leases it considers as having potential collectability problems. The
Company believes these loans and leases possess weaknesses that merit additional
analysis in establishing the allowance for credit losses. All other loans and
leases are evaluated by applying estimated loss ratios to various pools of loans
and leases. The Company then analyzes other applicable qualitative factors (such
as economic conditions) in determining the aggregate amount of the allowance
needed.

At September 30, 2021, $8.9 million of the allowance for credit losses was
allocated to loans and leases individually evaluated for credit losses. See Note
5 of the "Notes to Consolidated Financial Statements," which is included in Part
II, Item 8 "Financial Statements and Supplementary Data" of this Annual Report
on Form 10-K. At September 30, 2020, $5.1 million of the allowance for credit
losses was allocated to impaired loans and leases.

The Company maintains an internal loan and lease review and classification
process which involves multiple officers of the Company and is designed to
assess the general quality of credit underwriting and to promote early
identification of potential problem loans and leases. All loan officers are
charged with the responsibility of risk rating all loans and leases in their
portfolios and updating the ratings, positively or negatively, on an ongoing
basis as conditions warrant.


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The level of potential problem loans and leases is another predominant factor in
determining the relative level of risk in the loan and lease portfolio and in
determining the appropriate level of the allowance for credit losses. Potential
problem loans and leases are generally defined by management to include loans
and leases rated as substandard by management that are not considered
nonperforming (i.e., non-accrual loans and leases and accruing troubled debt
restructurings), but there are circumstances that create doubt as to the ability
of the borrower to comply with repayment terms. The decision of management to
include performing loans and leases in potential problem loans and leases does
not necessarily mean that the Company expects losses to occur, but that
management recognizes a higher degree of risk associated with these loans and
leases. The loans and leases that have been reported as potential problem loans
and leases are predominantly commercial loans and leases covering a diverse
range of businesses and real estate property types.

The Company revised its credit administration policies and reviewed its loan
portfolio to better align with OCC guidance for national banks, a process that
began during the quarter ending June 30, 2021 and was completed as of September
30, 2021. These credit policy revisions had an impact on the loan and lease risk
ratings, resulting in downgrades of certain credits in several categories. The
Company's loan and collateral management practices have proven effective in
managing losses during previous economic cycles; and while management expects
this process will result in setting a new baseline for portfolio metrics going
forward, management does not believe it indicates a deterioration in expected
performance of the portfolio. At September 30, 2021, potential problem loans and
leases totaled $276.7 million compared to $67.9 million at September 30, 2020.

Liquidity and capital resources

The Company's primary sources of funds are deposits, derived principally through
its payments division, borrowings, principal and interest payments on loans and
leases 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 deposit and loan commitments, to maintain liquidity, and to meet operating
expenses.

The Bank is required by regulation to maintain sufficient liquidity to ensure its safe and healthy operations. In the opinion of management, the Bank complies with this requirement.

Liquidity management is both a daily and long-term function of the Company's
management strategy. The Company adjusts its investments in liquid assets based
upon management's assessment of (i) expected loan demand, (ii) the projected
availability of purchased loan products, (iii) expected deposit flows, (iv)
yields available on interest-bearing deposits and (v) the objectives of its
asset/liability management program. Excess liquidity is generally invested in
interest-earning overnight deposits and other short-term government agency or
instrumentality obligations. If the Company requires funds beyond its ability to
generate them internally, it has additional borrowing capacity with the FHLB and
other wholesale funding sources. The Company is not aware of any facts that
would be reasonably likely to have a material adverse impact on the Company's
liquidity or its ability to borrow additional funds.

The primary investing activities of the Company are the origination of loans and
leases and the purchase of securities. During the fiscal years ended
September 30, 2021, 2020 and 2019, the Company originated loans and leases
totaling $12.62 billion, $9.79 billion and $10.97 billion, respectively.
Purchases of loans and leases totaled $311.3 million, $151.4 million, and $278.1
million during the fiscal years ended September 30, 2021, 2020 and 2019. During
the fiscal years ended September 30, 2021, 2020 and 2019, the Company purchased
MBS and other securities in the amount of $1.04 billion, $297.8 million and
$653.2 million, respectively. Of these purchases, there were no securities
designated as held to maturity in fiscal 2021, 2020 and 2019.

At September 30, 2021, the Company had unfunded loan and lease commitments of
$1.22 billion. See Note 19 to the "Notes to Consolidated Financial Statements,"
which is included in Part II, Item 8 "Financial Statements and Supplementary
Data" of this Annual Report on Form 10-K. Certificates of deposit scheduled to
mature in one year or less at September 30, 2021 totaled $31.1 million, of which
$23.3 million were wholesale time deposits and $7.8 million were non-wholesale
time deposits. Management believes that loan repayment and other sources of
funds will be adequate to meet the Company's foreseeable short- and long-term
liquidity needs.

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The following table summarizes the Company's significant contractual obligations
at September 30, 2021.
                                                            Less Than 1                                                       More Than 5
(Dollars in Thousands)                     Total               Year              1 to 3 Years           3 to 5 Years             Years
Time deposits                           $   9,091          $    7,839          $       1,252          $           -          $         -
Wholesale time deposits                    23,409              23,310                     99                      -                    -
Long-term debt                             92,834                 398                  4,795                 73,980               13,661

Operating leases                           45,071               4,687                  8,332                  7,126               24,926
Total                                   $ 170,405          $   36,234          $      14,478          $      81,106          $    38,587



During July 2001, the Company's unconsolidated trust subsidiary, First Midwest
Financial Capital Trust I, sold $10.3 million in floating-rate cumulative
preferred securities. Proceeds from the sale were used to purchase trust
preferred securities of the Company, which mature in 2031, and are redeemable at
any time after five years. The capital securities are required to be redeemed on
July 25, 2031; however, the Company has the option to redeem them earlier.

In 2016, the Company made a public offer of $ 75.0 million of its subordinated bonds at a fixed-variable rate at 5.75% due August 15, 2026. The Debentures may be redeemed in whole or in part at par by the Company on any interest payment date from August 15, 2021, with regulatory approval.

Through the Crestmark Acquisition, consummated in the fourth quarter of fiscal
2018, the Company acquired $3.4 million in floating rate capital securities due
to Crestmark Capital Trust I, a 100%-owned nonconsolidated subsidiary of the
company. The subordinated debentures bear interest at LIBOR plus 3.00%, have a
stated maturity of 30 years and are redeemable by the Company at par, with
regulatory approval. See Note 10 to the "Notes to Consolidated Financial
Statements," which is included in Part II, Item 8 "Financial Statements and
Supplementary Data" of this Annual Report on Form 10-K.

The Company and the Bank met regulatory requirements for classification as
well-capitalized institutions at September 30, 2021. Based on current and
expected continued profitability and subject to continued access to capital
markets, management believes that the Company and the Bank will continue to meet
the capital conservation buffer of 2.5% in addition to required minimum capital
ratios. See Note 18 to the "Notes to Consolidated Financial Statements," which
is included in Part II, Item 8 "Financial Statements and Supplementary Data" of
this Annual Report on Form 10-K.

The payment of dividends and repurchase of shares have the effect of reducing
stockholders' equity. Prior to authorizing such transactions, the Board of
Directors considers the effect the dividend or repurchase of shares would have
on liquidity and regulatory capital ratios.

No assurance can be given that our regulators will consider our liquidity level,
or our capital level, though substantially in excess of current rules pursuant
to which the Company and the Bank are considered "well-capitalized," to be
sufficiently high in the future.

Impact of new accounting standards

See note 1 to the consolidated financial statements for information on recently published accounting pronouncements.

Critical accounting estimates

The Company's financial statements are prepared in accordance with 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
the policies described below as Critical Accounting Estimates. 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.

Allowance for Credit Losses
The Company's allowance for credit losses methodology estimates expected credit
losses over the life of each financial asset as of the balance sheet date.

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For the loan and lease portfolio, the Company measures credit loss on
individually evaluated loans based on the fair value of the collateral less
estimated selling costs if collateral dependent or based on the present value of
expected future cash flows discounted at the loan or lease initial effective
interest rate if not collateral dependent. The majority of the Company's loans
and leases subject to individual evaluation are considered collateral dependent.
Only loans and leases that are on nonaccrual status or are designated as a TDR
are subject to individual evaluation. All other loans and leases are evaluated
collectively for credit loss by pooling loans and leases based on similar risk
characteristics. The collective evaluation of expected losses in all commercial
finance portfolios is based on a cohort loss rate and adjustments for
forward-looking information, including industry and macroeconomic forecasts. The
cohort loss rate is a life of loan loss rate that immediately reverts to
historical loss information for the remaining maturity of the financial asset.
Management has elected to use a twelve-month reasonable and supportable forecast
for forward-looking information. Factors utilized in the determination of the
allowance include historical loss experience, current and forecasted economic
conditions, and measurement date credit characteristics such as product type,
delinquency, and industry. The unfunded credit commitments depend on these same
factors, as well as estimates of lines of credit usage. The collective
evaluation of expected credit losses for certain consumer lending portfolios
utilize different methodologies when estimating expected credit losses. The
Company's student loan portfolio utilizes a roll-rate historical loss rate and
adjustments for forward-looking information, including macroeconomic conditions.
Management has elected to use a twelve-month reasonable and supportable forecast
with an immediate reversion to historical loss rates. Factors utilized in the
determination of the allowance include historical loss experience, current and
forecasted economic conditions, and measurement date credit characteristics
including delinquency.

Investment debt securities held to maturity include implicit and explicit
guarantees by government agencies and have an expected zero risk of loss,
therefore no provision for credit loss for debt securities held to maturity has
been included in the Company's Consolidated Statement of Operations. Investment
debt securities available for sale are recorded at fair value and are assessed
quarterly for credit loss. Any such credit loss is recorded in the Company's
Provision for Credit Loss on the Company's Consolidated Statement of Operations.
Non-credit related losses are recorded in Other Comprehensive Income in the
Company's Consolidated Statement of Condition.

Although management believes the levels of the allowance for credit losses at
September 30, 2021 and September 30, 2020 are adequate to absorb expected credit
losses in the financial assets evaluated, a decline in local economic conditions
or other factors could result in increasing losses.

Goodwill and Identifiable Intangible Assets
The Company accounts for business combinations under the acquisition method of
accounting in accordance with ASC 805, Business Combinations. Under the
acquisition method, the Company records assets acquired, including identifiable
intangible assets, liabilities assumed, and any non-controlling interest in the
acquired business at their fair values as of the acquisition date. Any
acquisition-related transaction costs are expensed in the period
incurred. Results of operations of the acquired entity are included in the
Consolidated Statements of Operations from the date of acquisition. Any
measurement-period adjustments are recorded in the period the adjustment is
identified.

The excess of consideration paid over the fair value of the net assets acquired
is recorded as goodwill. Determining the fair value of assets acquired,
including identifiable intangible assets, liabilities assumed, and any
noncontrolling interest often requires the use of significant estimates and
assumptions. This may involve estimates based on third-party valuations, such as
appraisals, or internal valuations based on discounted cash flow analyses or
other valuation techniques such as estimates of attrition, inflation, asset
growth rates, discount rates, multiples of earnings or other relevant
factors. In addition, the determination of the useful lives over which an
intangible asset will be amortized is subjective. See Note 10. Goodwill and
Intangibles to the Consolidated Financial Statements for further information.
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