Edgar Filing: META FINANCIAL GROUP INC

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2009

o	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.®

(Exact name of registrant as specified in its charter)

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

121 East Fifth Street, Storm Lake, Iowa 50588

(Address of principal executive offices)

(712) 732-4117

(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 x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, 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 periods that the registrant was required to submit and post such files.) Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12-b2 of the Exchange Act. (Check one):

Large accelerated filer o		Accelerated filer o

Non-accelerated filer o		Smaller reporting company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

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 August 7, 2009:
Common Stock, $.01 par value		2,607,855 Common Shares

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META FINANCIAL GROUP, INC.

FORM 10-Q

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		Page No.

Part I. Financial Information

Item 1.	Financial Statements (Unaudited):

	Condensed Consolidated Statements of Financial Condition as of June 30, 2009 and September 30, 2008	1

	Condensed Consolidated Statements of Operations for the Three and Nine Months Ended June 30, 2009 and 2008	2

	Condensed Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended June 30, 2009 and 2008	3

	Condensed Consolidated Statements of Changes in Shareholders’ Equity for the Nine Months Ended June 30, 2009 and 2008	4

	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended June 30, 2009 and 2008	5

	Notes to Condensed Consolidated Financial Statements	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23

Item 3.	Quantitative and Qualitative Disclosure About Market Risk	38

Item 4T.	Controls and Procedures	40

Part II. Other Information

Item 1.	Legal Proceedings	41

Item 1A.	Risk Factors	41

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	41

Item 3.	Defaults Upon Senior Securities	41

Item 4.	Submission of Matters to a Vote of Security Holders	41

Item 5.	Other Information	41

Item 6.	Exhibits	41

Signatures		42

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META FINANCIAL GROUP, INC.

AND SUBSIDIARIES

Condensed Consolidated Statements of Financial Condition (Unaudited)

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

	June 30, 2009			September 30, 2008
				(As Restated)

ASSETS
Cash and cash equivalents	$	5,227		$	2,963
Federal funds sold	10,032			5,188
Investment securities available for sale	15,532			19,711
Mortgage-backed securities available for sale	271,395			184,123
Loans receivable - net of allowance for loan losses of $9,125 at June 30, 2009 and $5,732 at September 30, 2008	402,624			427,928
Federal Home Loan Bank Stock, at cost	6,787			8,092
Accrued interest receivable	3,465			4,497
Bond insurance receivable	4,143			6,098
Premises and equipment, net	22,432			21,992
Bank-owned life insurance	13,140			12,758
Foreclosed real estate and repossessed assets	2,500			—
Goodwill and intangible assets	2,508			2,206
MPS accounts receivable	47,208			50,046
Other assets	12,522			10,802

Total assets	$	819,515		$	756,404

LIABILITIES AND SHAREHOLDERS’ EQUITY

LIABILITIES
Non-interest-bearing checking	$	461,086		$	355,020
Interest-bearing checking	15,887			15,029
Savings deposits	9,994			9,394
Money market deposits	34,643			43,038
Time certificates of deposit	140,930			123,491
Total deposits	662,540			545,972
Advances from Federal Home Loan Bank	76,750			132,025
Securities sold under agreements to repurchase	8,356			5,348
Subordinated debentures	10,310			10,310
Accrued interest payable	607			578
Contingent liability	4,268			4,293
Accrued expenses and other liabilities	12,576			12,145
Total liabilities	775,407			710,671

SHAREHOLDERS’ EQUITY
Preferred stock, 800,000 shares authorized, no shares issued or outstanding	—			—
Common stock, $.01 par value; 5,200,000 shares authorized, 2,957,999 shares issued, 2,607,855 and 2,601,103 shares outstanding at June 30, 2009 and September 30, 2008, respectively	30			30
Additional paid-in capital	23,342			23,058
Retained earnings - substantially restricted	32,694			34,442
Accumulated other comprehensive (loss)	(5,284		)	(5,022		)
Treasury stock, 350,144 and 356,896 common shares, at cost, at June 30, 2009 and September 30, 2008, respectively	(6,674		)	(6,775		)
Total shareholders’ equity	44,108			45,733

Total liabilities and shareholders’ equity	$	819,515		$	756,404

See Notes to Condensed Consolidated Financial Statements.

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META FINANCIAL GROUP, INC.

AND SUBSIDIARIES

Condensed Consolidated Statements of Operations (Unaudited)

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

	Three Months Ended						Nine Months Ended
	June 30,						June 30,
	2009			2008			2009			2008
										(As Restated)
Interest and dividend income:
Loans receivable, including fees	$	5,625		$	6,290		$	19,533		$	19,167
Mortgage-backed securities	2,652			2,390			7,457			6,236
Other investments	188			491			735			2,562
	8,465			9,171			27,725			27,965
Interest expense:
Deposits	1,211			1,813			4,184			6,268
FHLB advances and other borrowings	910			1,367			2,792			4,216
	2,121			3,180			6,976			10,484
Net interest income	6,344			5,991			20,749			17,481

Provision for loan losses	6,277			125			18,676			195

Net interest income after provision for loan losses	67			5,866			2,073			17,286

Non-interest income:
Card fees	15,677			7,509			63,763			24,466
Loan fees	212			213			542			618
Deposit fees	189			250			567			621
Bank-owned life insurance income	124			126			382			372
Gain on sale of securities available for sale, net	204			—			213			—
Gain on sale of membership equity interests, net	515			318			515			525
Loss on sale of REO	(208		)	—			(208		)	—
Other income	162			113			247			342
Total non-interest income	16,875			8,529			66,021			26,944

Non-interest expense:
Card processing expense	7,102			3,569			27,213			11,670
Compensation and benefits	8,218			6,601			23,999			18,769
Occupancy and equipment expense	1,996			1,732			5,849			4,772
Legal and consulting expense	690			996			2,735			2,225
Data processing expense	498			386			1,770			968
Marketing	349			246			1,161			984
Other expense	2,102			1,610			6,430			4,893
Total non-interest expense	20,955			15,140			69,157			44,281

Loss from continuing operations before income tax benefit	(4,013		)	(745		)	(1,063		)	(51		)

Income tax benefit from continuing operations	(1,431		)	(335		)	(329		)	(54		)

Income (loss) from continuing operations	(2,582		)	(410		)	(734		)	3

Gain on sale from discontinued operations before taxes	—			—			—			2,309
Income from discontinued operations before taxes	—			—			—			76
Income tax expense from discontinued operations	—			—			—			1,574

Income from discontinued operations	—			—			—			811

Net income (loss)	$	(2,582	)	$	(410	)	$	(734	)	$	814

Basic earnings per common share:
Income (loss) from continuing operations	$	(0.99	)	$	(0.16	)	$	(0.28	)	$	—
Income from discontinued operations	—			—			—			0.31
Net income (loss)	$	(0.99	)	$	(0.16	)	$	(0.28	)	$	0.31

Diluted earnings per common share:
Income (loss) from continuing operations	$	(0.99	)	$	(0.16	)	$	(0.28	)	$	—
Income from discontinued operations	—			—			—			0.31
Net income (loss)	$	(0.99	)	$	(0.16	)	$	(0.28	)	$	0.31

Dividends declared per common share:	$	0.13		$	0.13		$	0.39		$	0.39

See Notes to Condensed Consolidated Financial Statements.

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META FINANCIAL GROUP, INC.®

AND SUBSIDIARIES

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

(Dollars in Thousands)

	Three Months Ended						Nine Months Ended
	June 30,						June 30,
	2009			2008			2009			2008
										(As Restated)

Net income (loss)	$	(2,582	)	$	(410	)	$	(734	)	$	814

Other comprehensive loss:
Change in net unrealized losses on securities available for sale	(435		)	(5,207		)	(631		)	(1,407		)
Gains realized in net income	204			318			213			525
	(231		)	(4,889		)	(418		)	(882		)
Deferred income tax effect	(86		)	(1,824		)	(156		)	(329		)
Total other comprehensive loss	(145		)	(3,065		)	(262		)	(553		)
Total comprehensive income (loss)	$	(2,727	)	$	(3,475	)	$	(996	)	$	261

See Notes to Condensed Consolidated Financial Statements.

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META FINANCIAL GROUP, INC.®

AND SUBSIDIARIES

Condensed Consolidated Statements of Changes in Shareholders’ Equity (Unaudited)

For the Nine Months Ended June 30, 2009 and 2008 (As Restated)

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

	Common Stock		Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive (Loss), Net of Tax			Unearned Employee Stock Ownership Plan Shares			Treasury Stock			Total Shareholders’ Equity

Balance, September 30, 2007	$	30	$	21,958		$	36,805		$	(3,345	)	$	(377	)	$	(6,973	)	$	48,098

Cash dividends declared on common stock ($.39 per share)	—		—			(1,005		)	—			—			—			(1,005		)

Issuance of 14,089 common shares from treasury stock due to exercise of stock options	—		(2		)	—			—			—			164			162

Stock compensation	—		324			—			—			—			—			324

4,252 common shares committed to be released under the ESOP	—		200			—			—			286			—			486

Change in net unrealized losses on securities available for sale	—		—			—			(553		)	—			—			(553		)

Net income for nine months ended June 30, 2008	—		—			814			—			—			—			814

Balance, June 30, 2008	$	30	$	22,480		$	36,614		$	(3,898	)	$	(91	)	$	(6,809	)	$	48,326

Balance, September 30, 2008	$	30	$	23,058		$	34,442		$	(5,022	)	$	—		$	(6,775	)	$	45,733

Cash dividends declared on common stock ($.39 per share)	—		—			(1,014		)	—			—			—			(1,014		)

Issuance of 5,200 common shares from treasury stock due to issuance of restricted stock	—		(101		)	—			—			—			101			—

Stock compensation	—		385			—			—			—			—			385

Change in net unrealized losses on securities available for sale	—		—			—			(262		)	—			—			(262		)

Net loss for nine months ended June 30, 2009	—		—			(734		)	—			—			—			(734		)

Balance, June 30, 2009	$	30	$	23,342		$	32,694		$	(5,284	)	$	—		$	(6,674	)	$	44,108

See Notes to Condensed Consolidated Financial Statements.

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META FINANCIAL GROUP, INC.®

AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (Unaudited)

(Dollars in Thousands)

	Nine Months Ended June 30,
	2009			2008
				(As Restated)
Cash flows from operating activities:
Net income (loss)	$	(734	)	$	814
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Effect of contribution to employee stock ownership plan	—			486
Depreciation, amortization and accretion, net	3,875			2,368
Provision for loan losses	18,676			195
(Gain) loss on sale of other	143			(79		)
(Gain) on sale of available for sale securities, net	(213		)	—
(Gain) on sale of membership equity interests, net	(515		)	(525		)
Net change in accrued interest receivable	1,032			186
Net change in other assets	2,904			(5,498		)
Net change in accrued interest payable	29			(232		)
Net change in accrued expenses and other liabilities	406			(24,405		)
Net cash provided by (used in) operating activities-continuing operations	25,603			(26,690		)
Net cash provided by operating activities-discontinued operations	—			6,029
Net cash provided by (used in) operating activities	25,603			(20,661		)

Cash flow from investing activities:
Purchase of securities available for sale	(156,114		)	(102,790		)
Net change in federal funds sold	(4,844		)	74,615
Proceeds from sales of securities available for sale	10,848			—
Proceeds from maturities and principal repayments of securities available for sale	60,727			27,469
Loans purchased	(52,070		)	(15,487		)
Net change in loans receivable	56,263			(52,657		)
Proceeds from sales of foreclosed real estate	—			596
Net change in Federal Home Loan Bank stock	1,305			(4,223		)
Proceeds from the sale of premises and equipment	2			102
Purchase of premises and equipment	(3,076		)	(4,348		)
Other, net	(52		)	615
Net cash used in investing activities-continuing operations	(87,011		)	(76,108		)
Net cash provided by investing activities-discontinued operations	—			17,598
Net cash used in investing activities	(87,011		)	(58,510		)

Cash flows from financing activities:
Net change in checking, savings, and money market deposits	99,129			46,792
Net change in time deposits	17,439			(25,274		)
Net change in advances from Federal Home Loan Bank	(55,275		)	44,525
Net change in securities sold under agreements to repurchase	3,008			53,168
Cash dividends paid	(1,014		)	(1,005		)
Stock compensation	385			324
Proceeds from exercise of stock options	—			162
Net cash provided by financing activities-continuing operations	63,672			118,692
Net cash used in financing activities-discontinued operations	—			(33,210		)
Net cash provided by provided by financing activities	63,672			85,482

Net change in cash and cash equivalents	2,264			6,311

Cash and cash equivalents at beginning of period	2,963			20,903
Cash and cash equivalents at end of period	$	5,227		$	27,214

Supplemental disclosure of cash flow information
Cash paid during the period for:
Interest	$	6,947		$	11,794
Income taxes	2,607			—

Supplemental schedule of non-cash investing and financing activities:
Loans transferred to foreclosed real estate	$	3,755		$	278
Cash received on sale of commercial bank	—			8,224

See Notes to Condensed Consolidated Financial Statements.

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META FINANCIAL GROUP, INC. ®

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

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, 2008 included in Meta Financial Group, Inc.’s (the “Company”) Annual Report on Form 10-K/A filed with the Securities and Exchange Commission on July 6, 2009. Accordingly, footnote disclosures, which would substantially duplicate the disclosure 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 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 interim period ended June 30, 2009, are not necessarily indicative of the results expected for the year ending September 30, 2009.

NOTE 2. DISCONTINUED BANK OPERATIONS

Sale of MetaBank West Central

On November 29, 2007, the Company entered into an agreement to sell MetaBank West Central (“MetaBank WC”). On March 28, 2008 the Company consummated the sale of MetaBank WC to Anita Bancorporation (Iowa). MetaBank WC had three offices in Stuart, Casey, and Menlo, Iowa and was a state chartered commercial bank whose primary federal regulator was the Federal Reserve Bank of Chicago. The transaction involved the sale of the stock of MetaBank WC for approximately $8.2 million and generated a pre-tax gain on sale of $2.3 million. The activity related to Meta Bank WC is accounted for as discontinued operations.

Activities related to discontinued bank operations have been recorded separately with prior period amounts reclassified as discontinued operations on the condensed consolidated statements of operations and cash flows. The notes to the condensed consolidated financial statements have also been adjusted to eliminate the effect of discontinued bank operations.

NOTE 3. ALLOWANCE FOR LOAN LOSSES

At June 30, 2009 the Company’s allowance for loan losses was $9.1 million, an increase of $3.4 million from $5.7 million at September 30, 2008. During the nine months ended June 30, 2009 the Company recorded a provision for loan losses of $18.7 million. $8.1 million related to the Company’s Meta Payment Systems® (“MPS”) division, of which $7.9 million relates to the start-up and completion of loan originations offered in collaboration with MPS’ tax preparation partner. This program is now complete with all appropriate accounts charged off, consistent with our policy. There are no loan balances or allowance remaining for this program. During the nine months ended June 30, 2009 the Company also recorded a provision for loan losses in the amount of $10.5 million primarily due to the failure of five commercial borrowers to repay their respective loans, one of which the Company believes committed fraud. As disclosed in the Company’s 8-K filing of October 8, 2008, a borrower of the Bank has likely participated in a fraud on the Bank and other banks. Based on the Bank’s

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investigation at the time, it concluded that, as of September 30, 2008, it was appropriate to establish an allowance for loan losses of $1.8 million. After a subsequent review was completed on April 20, 2009, the Bank concluded that a $1.3 million increase to the loan loss allowance was warranted for the three months ended March 31, 2009. Additionally, upon further review, the Bank concluded that a $1.8 million increase to the loan loss allowance was warranted for the three months ended June 30, 2009. The increases were attributable to lower collateral values caused in large part by weaker economic conditions and a deterioration in the commercial real estate market. Potential total losses range from $2.1 million to $6.0 million with an expected loss of $4.9 million. Of the $4.9 million provided for, $3.1 million has been charged off.

During the three months ended June 30, 2009, the Company recorded a provision for loan losses in the amount of $773,000 primarily related to the MPS tax loan portfolio and $5.5 million related to the various commercial borrowers mentioned above. The Company’s total net charge-offs for the three months ended June 30, 2009 were $8.4 million, of which $8.0 million was related to MPS and previously provided for. Further discussion of this change in the allowance is included in “Non-performing Assets and Allowance for Loan Loss” in Management’s Discussion and Analysis.

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NOTE 4. EARNINGS PER COMMON SHARE (“EPS”)

Basic EPS is computed by dividing income (loss) available to common shareholders (the numerator) by the weighted average number of common shares outstanding (the denominator) during the period. Shares issued during the period and shares reacquired during the period are weighted for the portion of the period that they were outstanding. Diluted EPS shows the dilutive effect of additional common shares issuable pursuant to stock option agreements.

A reconciliation of the income (loss) and common stock share amounts used in the computation of basic and diluted EPS for the three and nine months ended June 30, 2009 and 2008 is presented below. See Note 11 to the Notes to Condensed Consolidated Financial Statements.

Three Months Ended June 30,	2009			2008
(Dollars in Thousands, Except Share and Per Share Data)

Earnings
Loss from continuing operations	$	(2,582	)	$	(410	)
Discontinued operations, net of tax	—			—
Net loss	$	(2,582	)	$	(410	)

Basic EPS
Weighted average common shares outstanding	2,602,655			2,596,479
Less weighted average unallocated ESOP and nonvested shares	(5,000		)	(18,976		)
Weighted average common shares outstanding	2,597,655			2,577,503

Earnings Per Common Share
Loss from continuing operations	$	(0.99	)	$	(0.16	)
Discontinued operations, net of tax	—			—
Net loss	$	(0.99	)	$	(0.16	)

Diluted EPS
Weighted average common shares outstanding for basic earnings per common share	2,597,655			2,577,503
Add dilutive effect of assumed exercises of stock options, net of tax benefits	—			—
Weighted average common and dilutive potential common shares outstanding	2,597,655			2,577,503

Earnings Per Common Share
Loss from continuing operations	$	(0.99	)	$	(0.16	)
Discontinued operations, net of tax	—			—
Net loss	$	(0.99	)	$	(0.16	)

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Nine Months Ended June 30,	2009			2008
(Dollars in Thousands, Except Share and Per Share Data)				(As Restated)

Earnings
Income (loss) from continuing operations	$	(734	)	$	3
Discontinued operations, net of tax	—			811
Net income (loss)	$	(734	)	$	814

Basic EPS
Weighted average common shares outstanding	2,602,655			2,602,655
Less weighted average unallocated ESOP and nonvested shares	(5,000		)	(19,422		)
Weighted average common shares outstanding	2,597,655			2,583,233

Earnings Per Common Share
Income (loss) from continuing operations	$	(0.28	)	$	—
Discontinued operations, net of tax	—			0.31
Net income (loss)	$	(0.28	)	$	0.31

Diluted EPS
Weighted average common shares outstanding for basic earnings per common share	2,597,655			2,583,233
Add dilutive effect of assumed exercises of stock options, net of tax benefits	—			31,340
Weighted average common and dilutive potential common shares outstanding	2,597,655			2,614,573

Earnings Per Common Share
Income (loss) from continuing operations	$	(0.28	)	$	—
Discontinued operations, net of tax	—			0.31
Net income (loss)	$	(0.28	)	$	0.31

Stock options totaling 10,200 and 28,567 were not considered in computing diluted EPS for the three and nine months ended June 30, 2009, respectively, because they were not dilutive. Stock options totaling 311,572 and 125,018 were not considered in computing diluted EPS for the three and nine months ended June 30, 2008, respectively, because they were not dilutive.

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NOTE 5. COMMITMENTS AND CONTINGENCIES

At June 30, 2009 and September 30, 2008, the Company had outstanding commitments to originate and purchase loans totaling $54.8 million and $64.2 million, respectively. It is expected that outstanding loan commitments will be funded with existing liquid assets. At June 30, 2009, the Company had no commitments to purchase or sell securities available for sale.

Legal Proceedings

With reference to the prior disclosure in the Company’s quarterly report for the period ended March 31, 2009, the First Federal Bank Littlefield Texas ssb, formerly known as First Federal Savings and Loan Association, Littlefield, Texas v. MetaBank, formerly known as First Federal Savings Bank of the Midwest lawsuit was settled on May 26, 2009. The Coreplus Federal Credit Union v. MetaBank matter was dismissed without prejudice on March 18, 2009.

Other than the matters set forth above, there are no other material pending legal proceedings to which the Company or its subsidiaries is a party other than ordinary routine litigation to their respective businesses.

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NOTE 6. STOCK OPTION PLAN

The Company maintains 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 Stock Option Committee of the Board of Directors based on the performance of the award recipients or other relevant factors.

In accordance with SFAS No. 123(R), compensation expense for share based awards is recorded over the vesting period at the fair value of the award at the time of grant. The exercise price of options or fair value of nonvested shares granted under the Company’s incentive plans is equal to the fair market value of the underlying stock at the grant date. The Company assumes no projected forfeitures on its stock based compensation, since actual historical forfeiture rates on its stock based incentive awards has been negligible.

A summary of option activity for the nine months ended June 30, 2009 is presented below:

	Number of shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Yrs)	Aggregate Intrinsic Value
	(Dollars in Thousands, Except Share and Per Share Data)

Options outstanding, September 30, 2008	514,328		$	23.85	7.53	$	329
Granted	23,000		14.77
Exercised	—		—
Forfeited or expired	(500	)	22.05
Options outstanding, June 30, 2009	536,828		$	23.46	7.14	$	58

Options exercisable, June 30, 2009	424,470		$	22.55	6.77	$	1

A summary of nonvested share activity for the nine months ended June 30, 2009 is presented below:

	Number of Shares		Weighted Average Fair Market Value At Grant
	(Dollars in Thousands, Except Share and Per Share Data)

Nonvested shares outstanding, September 30, 2008	12,500		$	32.93
Granted	5,200		16.00
Vested	(5,200	)	16.00
Forfeited or expired	—		—
Nonvested shares outstanding, June 30, 2009	12,500		$	32.93

As of June 30, 2009, stock based compensation expense not yet recognized in income totaled $378,923 which is expected to be recognized over a weighted average remaining period of 0.97 years.

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NOTE 7. SEGMENT INFORMATION

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 has determined that it has two reportable segments. The first reportable segment, Traditional Banking, consists of its banking subsidiary, MetaBank. MetaBank operates as a traditional community bank providing deposit, loan and other related products to individuals and small businesses, primarily in the communities where their offices are located. The second reportable segment, Meta Payment Systems® (“MPS”), is a division of MetaBank. MPS provides a number of products and services to financial institutions and other businesses. These products and services include issuance of prepaid debit cards, sponsorship of ATMs into the debit networks, credit programs, ACH origination services, gift card programs, rebate programs, travel programs and tax related programs. Other programs are in the process of development. The remaining grouping under the caption “All Others” consists of the operations of Meta Financial Group, Inc. and Meta Trust Company® and inter-segment eliminations. MetaBank WC is accounted for as discontinued bank operations. It is reported as part of the traditional banking segment and has been separately classified to show the effect of continuing operations. Transactions between affiliates, the resulting revenues of which are shown in the intersegment revenue category, are conducted at market prices, meaning prices that would be paid if the companies were not affiliates. The following tables present segment data for the Company for the three and nine months ended June 30, 2009 and 2008, respectively. See Note 11 to the Notes to Condensed Consolidated Financial Statements.

	Traditional			Meta Payment
	Banking(1)			Systems®			All Others			Total

Three Months Ended June 30, 2009
Interest income	$	6,776		$	1,661		$	28		$	8,465
Interest expense	1,828			148			145			2,121
Net interest income (loss)	4,948			1,513			(117		)	6,344
Provision for loan losses	5,504			773			—			6,277
Non-interest income	1,141			15,700			34			16,875
Non-interest expense	4,358			16,319			278			20,955
Income (loss) from continuing operations before tax	(3,773		)	121			(361		)	(4,013		)
Income tax expense (benefit)	(1,350		)	34			(115		)	(1,431		)
Income (loss) from continuing operations	$	(2,423	)	$	87		$	(246	)	$	(2,582	)

Inter-segment revenue (expense)	$	2,177		$	(2,177	)	$	—		$	—
Total assets	352,931			465,124			1,460			$	819,515
Total deposits	220,670			442,187			(317		)	$	662,540

(1) For the three months ended June 30, 2009 there was no information to report on MetaBank WC.

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	Traditional			Meta Payment
	Banking(1)			Systems®			All Others			Total

Three Months Ended June 30, 2008 (As Restated)
Interest income	$	6,992		$	2,766		$	(587	)	$	9,171
Interest expense	3,275			240			(335		)	3,180
Net interest income (loss)	3,717			2,526			(252		)	5,991
Provision for loan losses	125			—			—			125
Non-interest income	939			7,583			7			8,529
Non-interest expense	4,763			10,429			(52		)	15,140
Income (loss) from continuing operations before tax	(232		)	(320		)	(193		)	(745		)
Income tax expense (benefit)	(109		)	(128		)	(98		)	(335		)
Income (loss) from continuing operations	$	(123	)	$	(192	)	$	(95	)	$	(410	)

Inter-segment revenue (expense)	$	1,761		$	(1,761	)	$	—		$	—
Total assets	447,682			331,295			1,905			780,882
Total deposits	224,499			320,589			(592		)	544,496

(1) For the three months ended June 30, 2009 there was no information to report on MetaBank WC.

	Traditional			Meta Payment
	Banking(1)			Systems®			All Others			Total

Nine Months Ended June 30, 2009
Interest income	$	19,773		$	7,866		$	86		$	27,725
Interest expense	5,715			778			483			6,976
Net interest income (loss)	14,058			7,088			(397		)	20,749
Provision for loan losses	10,527			8,149			—			18,676
Non-interest income	2,113			63,833			75			66,021
Non-interest expense	14,007			54,185			965			69,157
Income (loss) from continuing operations before tax	(8,363		)	8,587			(1,287		)	(1,063		)
Income tax expense (benefit)	(3,046		)	3,156			(439		)	(329		)
Income (loss) from continuing operations	$	(5,317	)	$	5,431		$	(848	)	$	(734	)

Inter-segment revenue (expense)	$	6,253		$	(6,253	)	$	—		$	—
Total assets	352,931			465,124			1,460			819,515
Total deposits	220,670			442,187			(317		)	662,540

(1) For the nine months ended June 30, 2009 there was no information to report on MetaBank WC.

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	Traditional			Meta Payment
	Banking			Systems®			All Others			Total

Nine Months Ended June 30, 2008 (As Restated)
Interest income	$	18,252		$	9,658		$	55		$	27,965
Interest expense	9,023			855			606			10,484
Net interest income (loss)	9,229			8,803			(551		)	17,481
Provision for loan losses	195			—			—			195
Non-interest income	2,215			24,621			108			26,944
Non-interest expense	13,367			30,556			358			44,281
Income (loss) from continuing operations before tax	(2,118		)	2,868			(801		)	(51		)
Income tax expense (benefit)	(740		)	994			(308		)	(54		)
Income (loss) from continuing operations	$	(1,378	)	$	1,874		$	(493	)	$	3

Inter-segment revenue (expense)	$	4,432		$	(4,432	)	$	—		$	—
Total assets	447,682			331,295			1,905			$	780,882
Total deposits	224,499			320,589			(592		)	$	544,496

	West Central
Nine Months Ended June 30, 2008 (As Restated)
Net interest income	$	262
Provision for loan losses	(57		)
Non-interest income, including gain on sale	2,440
Non-interest expense	374
Income from discontinued operations before tax	2,385
Income tax expense	1,574
Income from discontinued operations	$	811

Inter-segment revenue (expense)	$	175
Total assets	—
Total deposits	—

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NOTE 8. NEW ACCOUNTING PRONOUNCEMENTS

In March 2008, the FASB issued FASB Statement No. 161, Disclosures about Derivative Instruments and Hedging Activities (“SFAS No. 161”). SFAS No. 161 is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity’s financial position, financial performance, and cash flows. The Company adopted SFAS 161 effective January 1, 2009. The adoption of SFAS 161 did not have a significant effect on the Company’s consolidated financial statements.

In April 2009, the FASB issued FASB Staff Position FAS 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly (“FSP FAS 157-4”). FSP FAS 175-4 provides additional guidance for estimating fair value in accordance with SFAS No. 157, when the volume and level of activity for the asset or liability have significantly decreased. FSP FAS 157-4 also provides guidance on identifying circumstances that indicate a transaction is not orderly. FSP FAS 157-4 is effective for financial statements issued after June 15, 2009. The adoption of FSP FAS 157-4 did not have a significant effect on the Company’s consolidated financial statements.

In April 2009, the FASB issued FASB Staff Position FAS 115-2 and FAS 124-2, Recognition and Presentation of Other-Than-Temporary Impairments (“FSP FAS 115-2 and FAS 124-2”). FSP FAS 115-2 and FAS 124-2 amend the other-than-temporary impairment guidance in U.S. GAAP for debt securities to make the guidance more operational and to improve the presentation and disclosure of other-than-temporary impairments on debt and equity securities in the financial statements. FSP FAS 115-2 and FAS 124-2 does not amend existing recognition and measurement guidance related to other-than-temporary impairment of equity securities. FSP FAS 115-2 and FAS 124-2 are effective for financial statements issued after June 15, 2009. The adoption of FSP FAS 115-2 and FAS 124-2 did not have a significant effect on the Company’s consolidated financial statements.

In April 2009, the FASB issued FASB Staff Position FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial Instruments (“FSP FAS 107-1 and APB 28-1”). FSP FAS 107-1 and APB 28-1 amends FASB Statement No. 107, Disclosures about Fair Value of Financial Instruments, to require disclosures about fair value of financial instruments for interim reporting periods of publicly traded companies as well as in annual financial statements. FSP FAS 107-1 and APB 28-1 also amend APB Opinion No. 28, Interim Financial Reporting, to require those disclosures in summarized financial information at interim reporting periods. FSP FAS 107-1 and APB 28-1 are effective for financial statements issued after June 15, 2009. The Company adopted FSP FAS 107-1 and APB 28-1 beginning June 30, 2009 with no material impact on the Company’s financial position, results of operation or cash flows.

NOTE 9. FAIR VALUE MEASUREMENTS

Effective October 1, 2008, the Company adopted the provisions of SFAS No. 157, Fair Value Measurements. SFAS No. 157 defines fair value, establishes a framework for measuring the fair value of assets and liabilities using a hierarchy system and expands 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.

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Level 2 Inputs — Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in active 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.

A description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below. These valuation methodologies were applied to all of the Company’s financial assets and liabilities carried at fair value effective October 1, 2008.

Securities Available for Sale. Securities available for sale are recorded at fair value on a recurring basis. 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. Level 1 securities include those traded on an active exchange, such as the New York Stock Exchange, as well as U.S. Treasury and other U.S. government and agency securities that are traded by dealers or brokers in active over-the-counter markets. The Company had no Level 1 securities at June 30, 2009. Level 2 securities include agency mortgage-backed securities and private collateralized mortgage obligations, municipal bonds and corporate debt securities.

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The following table summarizes the assets of the Company for which fair values are determined on a recurring basis as of June 30, 2009.

	Fair Value at June 30, 2009
(Dollars in Thousands)	Total		Level 1		Level 2		Level 3

Securities available for sale	$	286,927	$	—	$	286,927	$	—

Included in securities available for sale are trust preferred securities as follows:

At June 30, 2009