Ladies and gentlemen, thank you for standing by and welcome to the Meta Financial Group Fiscal Year 2019 Second Quarter Investor Conference Call. During the presentation, all participant lines will be in 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 Brittany Elsasser, Director of Investor Relations. Please go ahead.

Thank you and welcome to Meta's conference call and webcast to discuss our financial results for the second fiscal quarter ended March 31, 2019 released earlier this afternoon. Additional information, including the earnings release and investor presentation, may be found on our website at metafinancialgroup.com. President and CEO, Brad Hanson and Executive Vice President and CFO, Glen Herrick will be sharing some prepared remarks today before we open up the call for questions. Today's call may contain forward-looking statements, including statements related to Meta and its operating subsidiaries, which may generally be identified as describing the company's future plans, objectives or goals. We caution you not to place undue reliance on these forward-looking statements, which are subject to risks and uncertainties that could cause actual results or outcomes to differ materially from those currently anticipated or that we otherwise discuss today. These forward-looking statements are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. For further information about the factors that could affect Meta's future results, please see the company's most recent annual and quarterly reports filed on Forms 10-K and 10-Q and its other filings with the Securities and Exchange Commission. Forward-looking statements speak only as of the date on which they are made. Meta expressly disclaims any intent or obligation to update any forward-looking statements on behalf of the company or its subsidiaries whether as a result of new information, changed circumstances, future events or for any other reason. At this time, I would like to turn the call over to President and CEO, Brad Hanson.

Thank you, Brittany. We are pleased to report our results for second quarter of fiscal year 2019, including GAAP earnings of $32.1 million or $0.81 per diluted share. As Glen will discuss further, adjusting for the previously disclosed executive transition agreement costs and impact of the DC solar leaseback, core EPS came in at a $1.10 per diluted share for the fiscal second quarter. Last quarter, we announced a plan to address our top priorities for the company. As a reminder, we identified three initiatives to build upon for a profitable growth and drive additional shareholder value, including increasing the percentage of balance sheet funding from core deposits, optimizing the earnings asset mix of the balance sheet and improving operating efficiencies. In the fiscal second quarter, average non-interest bearing deposits grew by 11% over the prior year's quarter average, reflecting targeted efforts to enhance deposit opportunities with our existing payment partners. Next, lower investment portfolio balances resulting from ongoing cash flow from Amortizing securities and strategic sales combined with commercial loan growth continue to drive a more potent earning asset mix. Net interest margin expansion this quarter was 46 basis points over the previous quarter to 5.06%. Focusing on our tax service division. This year we offered a new refund advanced product featuring larger individual loan amounts available with a fixed interest rate in addition to our traditional no fee refund advance product. The new interest bearing refund advanced product was well received by consumers and further expanded our tax product solutions, while generating incremental interest income. Turning to refund transfers, while the number of our RTs processed trended lower relative to last year, we were able to realize higher margins primarily due to the mix of business. Overall, our net income contribution from the tax business was up 5% compared to the March quarter of 2018. I'd like to take this opportunity to thank our entire team for their efforts in producing another successful tax season for Meta. Now I'd like to spend a few minutes discussing our leadership team. In my first few months as CEO, I have focused on better aligning our existing management structure, while also building a broader executive team. We've been fortunate to strengthen and extend our leadership team by adding seasoned senior leaders in consumer lending, risk management and our governance areas. I expect these new leaders to work alongside an already talented management team leveraging the breadth of our franchise to drive profitable growth and bring great value to our customers and shareholders alike. Now I'd like to turn it over to Glen Herrick our CFO to provide a review of our fiscal 2019 second quarter financial results.

Thank you, Brad, and good afternoon, everyone. As Brad mentioned, for the second quarter of fiscal 2019 we reported GAAP net income of $32.1 million, an increase of 2% over the same period in the prior year, as earnings per share reached $0.81 per diluted share. Notably, results for the quarter included the previously disclosed executive transition agreement cost of $6.1 million on a pre-tax basis and $0.12 per share after tax, as well as the $0.17 per share after tax earnings impact related to DC Solar, which I'll discuss in greater detail later. Excluding these charges, adjusted core EPS came in at a $1.10 for the quarter. Earnings growth from the prior year quarter was largely driven by an increase in net interest income related to progress in optimizing the asset mix of our balance sheet, led by the ongoing growth of the commercial finance loan portfolio. Gross loans and leases increased $107 million to $3.4 billion at March 31, up 3% from December 31. Our national lending portfolios more than quadrupled year-over-year, led by our acquisition of Crestmark. On a sequential quarter basis the commercial finance portfolio grew $48 million or 3%. Our consumer loan portfolio grew by $32 million, driven by $80 million of new originations during the quarter from our two consumer credit programs. There were $42 million of consumer loans held for sale as of March 31. In an effort to further optimize our earning asset mix, we sold lower yielding investment securities during the quarter, reducing our average holdings by 15% on a linked quarter basis and replace them with higher yielding loans. On top of that, we grew average non-interest bearing deposits by 11% compared to the same quarter in the prior fiscal year with average non-interest bearing deposits representing 53% of total…

Thanks Glen. To recap, we are pleased with our results for the fiscal second quarter and the progress we've made against our three key initiatives of growing our core deposit base, optimizing our earning asset mix and improving our operating efficiencies. Related to our continued commitment to maximize operating efficiencies, we recently implemented a plan to more effectively allocate resources and moderate hiring, which should curb non-interest expense growth over time. Going forward, we will continue to evaluate our businesses and initiatives to ensure that we are devoting the appropriate resources to those that drive the most value to the company and shareholders over the long term. That completes our prepared remarks. So I'll ask Glen to join me for Q&A. Operator, please open the line for any questions.

[Operator Instructions] And our first question comes from Michael Perito with KBW.

So I do apologize, I got on a little late, so had to go here - I missed some of the prepared remarks. So I apologize if you answered this already. But the card fee line, I want to start at 23 - little over $23 million, how much benefit was in there from the tax business as we try to think about how that line item might map out over the back half of the fiscal year?

Hi, Mike, this is Glen. It's hard to pinpoint exactly what comes from tax. Before we had a tax payment processing business, there was seasonality in the March quarter as certainly our customers have GPR cards would use them for their tax refunds and get those loaded on there and spend. But we do see the seasonality during the March season and that continued on a year-over-year basis.

And then the - on the expense side. Brad, I mean, you mentioned trying to curtail some of the growth a little bit and some hire - somewhat hire increase maybe. I guess, when we try to think about how that translates to the financials. I mean, my guess is, there'll be maybe more of an impact to that in fiscal 2020. But I mean is that something that we should think about as being able to drive the efficiency ratio down year-over-year, 2020 and 2019. I mean, is that going to help kind of enable that type of profitability improvement?

Yeah. We believe that will be the case. It's more being disciplined and planning better around our resource needs. Then it is, saying a peer hiring free's or anything like that. We're just trying to be as thoughtful as we can and make sure that we're hiring what is necessary to manage the business appropriately and effectively, but not just hiring without - in the phase of growth without any kind of prudent process. And we think that kind of discipline will help to enhance our efficiency ratios going forward.

Our next question comes from Steve Moss with B. Riley FBR.

I guess on the provision expense here for the quarter, if you - ignoring the tax piece, it was around $10 million or $11 million. Just kind of wondering, I mean, obviously, you have the purchase accounting runoff. I'm just kind of wondering what that is in isolation - reasonably good run rate. Was there anything in terms of just building for the reserve outside of purchase accounting?

No, I think overall it's pretty good run rate as we grow the loan portfolio. Again, with the purchase accounting we're having to build from scratch for the majority of the commercial finance portfolios, as well as albeit at a smaller level the consumer loan portfolios, new originations we're building from scratch, but it's not a bad run rate for the near future.

And then just thinking about the margin here going forward. Still getting adjusted to the new globe that changed the presentation here with the margin going up. Just kind of - excluding tax, if you could help with what your expectations will be for the third quarter?

Sure. We're obviously very pleased with where our margins at early part of the thesis - the main thesis of putting these two companies together, Meta and Crestmark. And so we did call out, there is 10 basis points from tax advance loans that we did not have a year ago, that contributed to the margin. And we would not expect to have that in the non-tax quarters going forward. So there's 10 basis points assistance there, plus we called out the purchase accounting mark accretion, that's 18 basis points in this quarter, that will trend down over time as the purchase portfolio amortizes. And so, there's some headwinds there, not being said though as we continue to run down securities portfolio and replace it primarily with commercial finance loans, we'll get some pickup. So kind of back into arrange that line.

[Operator Instructions] Our next question comes from Frank Schiraldi with Sandler O'Neill.

Just on the consumer finance business, wondering if you could give any updated thoughts on where you would anticipate balances could be by year-end 2019?

Well, we haven't given that specific guidance, but we've said that we're going to manage that to a maximum of 15% of our balance sheet. And we think there's plenty of headroom in those numbers to be able to effectively manage a program, a consumer lending program going forward. So we'll be ramping up to that over the next - through the rest of this year and into next year and beyond.

And then in terms of the tax business, it was a good result I thought this year, right in the middle of what you guys were looking for. I don't know what your thoughts are for the 2020 season. I mean, you have a range out there for earnings. So, I figured I'd ask, is it going to be sort of a similar expectation now that those businesses maybe have matured a bit do you think for the 2020 season or what you think about how we should think about modeling that?

Based on what we know today, Frank, things could change between now and next tax season. But the client - the overall taxpayers, especially the primary clientele that we're providing services to. The IRS is reporting that those are flat to up low single digits year-over-year. We think we have - the partners we want today in tax were not looking for that to be our high growth area in this company. We like some of the synergies it provides though in the payments and card business. But again, too early to tell, but as we said in press, strategic and what we've said previously, we're looking forward to be a nice contributor of earnings, but not a large growth area for us. All of which would be factored into our '20 guidance.

And then just finally on the card fees, just a follow-up there. In terms of seasonality, is March still the strongest quarter for the card fee revenue line?

Yes.

Our next question comes from Daniel Cardenas, Raymond James.

Maybe just if you could help a little bit with how I should be thinking about your tax rate on a go forward basis. Obviously, you had a benefit in the quarter. As we look forward, do we kind of return back to kind of a 17%, 18% tax rate?

So, our statutory rate is 21%. We have a small and winding down municipal portfolio, mini bond portfolio and then the tax rate will be impacted by how active alternative energy credits are going forward. What we've guided to based on the pipeline that we see today is, we would expect to run in the mid single digits for tax rate.

And then given the building capital base this quarter year, you announced stock repurchase plan which I believe becomes active next week. What's your appetite for stock repurchases given current valuation levels and growth expectations?

Sure. We continue to manage capital in a shareholder friendly way. We intend to have a strong balance sheet and strong capital positions and with a focus on maximizing shareholder value. We're certainly - we announced this stock buyback authorization as a tool to do that and where we see value and where we're comfortable with capital levels we would expect to have those discussions with the board about the timing and at what levels we would consider buying back shares.

But nothing predetermined at this time, nor has been a decision to actually buy back stock or not at this time.

And then maybe just in terms of streamlining the tax business. Have you finished that process or is there still some work that needs to be done?

There is a little bit of work that needs to be done. You have a finite time to complete a project like, that you can't move back the launch date for tax season. So there were - as we came to the end of the cycle last year, we did have to implement a few manual processes and things that work through the season. Now we've planned to close the gap on going forward and continue to gain some more efficiencies through that going forward. But most of the work was done, but there still is ongoing work that needs to be completed.

And that concludes the question-and-answer session. I will now turn the call back to CEO, Brad Hanson.

Well, thank you. I'd like to close by thanking everyone for participating in Meta's quarterly investor call. We truly appreciate your support and thank you for the time you took to listen to us today. Have a great evening.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program and you may now disconnect. Everyone have a great day.