Pathward Financial, Inc.

Ladies and gentlemen, thank you for standing by, and welcome to the Metta Financial Group fourth quarter and fiscal year 2021 investor conference call. During the presentation, all participants will be in a listen-only mode. Following the prepared remarks, we will conduct a question and answer session. As a reminder, this conference call is being recorded. I would now like to turn the conference call over to your host, Brittany Kelly-Alsasser, Director of Investor Relations. Please go ahead.

Thank you. I would like to welcome everyone to the Metta Financial Group conference call and webcast, where CEO Brett Farr, President Anthony Charette, and CFO Glenn Herrick will discuss the results of our fourth fiscal quarter and year-ended September 30, 2021. Additional information, including the earnings release and investor presentation, may be found on our website at mettafinancialgroup.com. As a reminder, our comments may include forward-looking statements. Those statements are subject to risks and uncertainties that could cause actual and anticipated results to differ. The company undertakes no obligation to update any forward-looking statements. Please refer to the cautionary language in the earnings release, investor presentation, and in Meta's filings with the Securities and Exchange Commission including our most recent filings for additional information covering factors that could cause actual results to differ materially from the forward-looking statements. Additionally, today we may be discussing certain non-GAAP financial measures on this conference call. References to non-GAAP measures are only provided to assist you in understanding META's results and performance trends. Reconciliations for such non-GAAP measures are included within the appendix of the investor presentation. Now I will turn the call over to Brett Farr.

Thank you everyone for joining us this afternoon. Before we discuss the results for the fourth quarter in fiscal 2021, I want to thank Brad Hanson for his contributions to META for nearly 20 years. His efforts, together with those of our team, built the leadership position that META enjoys today. Under Brad's direction, META was an early entrant in the payments industry and pioneered banking as a service. During the period he was CEO, Meta expanded the range of financial services we offer to our partners, and the company significantly outperformed the S&P 500 and Russell 2000 indices. Brad surrounded himself with talented executives and created a strong leadership team. We benefit from the deep bench of experienced and highly qualified senior-level executives he attracted. who are executing our strategy and taking the company forward. At the same time, I also want to recognize Brad's commitment to META's mission of financial inclusion for all, which has powered our business and inspired our ESG and DE&I efforts. To facilitate a smooth transition, Brad will serve as a strategic advisor to META and the Board until the end of 2022. Brad will remain on the Mehta Financial Group board until the next annual stockholders meeting, which we expect will take place in February 2022. Having completed the leadership transition to Anthony and myself, our board affirms that Mehta's corporate strategy and mission remain the same. Our strategy will continue to center around optimizing three key metrics. Our mix of earning assets with an ongoing emphasis on growing our portfolio of higher return assets maintaining a high percentage of lower cost stable core deposits, and continuing to improve operating efficiencies and simplify the way we run our business. Turning to our results during fiscal year 2021, Meta generated revenue of $550 million and net income of $141.7 million, or $4.38 per share. The fiscal year 2021 earnings per share represent an increase of 49% over fiscal year 2020. We are pleased to have achieved a return on average assets of 1.74%, despite the large cash balances held due to our participation in the U.S. government's Economic Impact Payment Program, and we recorded a return on average equity of 16.84%. Our banking as a service pipeline has never been stronger, and we serve as the backbone for financial technology companies and others who offer innovative financial services while supporting our established partners with their programs. We believe Meta is well-positioned to continue generating value for all stakeholders as we execute our strategy and build upon our ESG and DE&I efforts. I'd now like to provide an update on our process to better align our credit administration policies with OCC guidance for national banks, which we discussed last quarter. During the fourth quarter, we completed our review of our loan portfolio and established a new baseline for portfolio metrics going forward. This resulted in the downgrade of certain credits in several categories. but these downgrades do not indicate a deterioration in these credits' expected performance. Further, these changes do not reflect an increase in overall credit risk for past or future periods, and we do not expect any increase in losses as a result of these one-time administrative adjustments to risk ratings. I want to reiterate, our loan and collateral management practices have proven effective in managing losses through economic cycles over the last 20 years. Excluding approximately $1.5 million of professional expenses to assist with the comprehensive review of our portfolio and set this new baseline, the impact to our financial position is minimal. Following the end of the fourth quarter, we had a couple positive developments I'd like to brief you on. In October, we sold $30 million of legacy community banking loans to Central Bank. and have agreements in place to sell approximately $161 million more. Following the sales, the legacy community bank portfolio will be less than $8 million as these sales will wind down nearly all of our legacy community bank loan portfolio. Included in the loan sales are approximately $108 million of substandard and doubtful loans of which $15 million are non-accrual loans as of September 30, 2021, representing 39% of substandard and doubtful loan and lease balances and 44% of non-accrual balances. We expect community bank balances to be zero at the end of the first fiscal quarter of 2022, and this will mark the successful conclusion of the first phase of our ongoing efforts to deploy our capital in higher return assets. The net pre-tax impact of the sales will be recognized in the first fiscal quarter of 2022 and is expected to be roughly break-even. In summary, META performed well in fiscal 2021 as we recorded record earnings and executed efficiently on our strategy and made progress against our three key initiatives. We are well positioned as we head into the next fiscal year. Let me now turn the call over to our new president, Anthony Charette.