EX-99.3 5 ex99_3.htm EXHIBIT 99.3

Exhibit 99.3

Meta Financial Group Inc., and Subsidiaries

Pro Forma Condensed Combined Financial Statements (Unaudited)

As previously announced, on September 8, 2015, Meta Financial Group, Inc. ("MFG”, “Meta”, or the “Company”) completed the acquisition of certain assets and liabilities of Fort Knox Financial Services Corporation and its subsidiary, Tax Product Services LLC (together “Fort Knox”).

The following unaudited pro forma condensed combined financial statements (the "Statements") are based on Meta’s historical financial statements and Fort Knox’s historical financial statements after giving effect to Meta’s purchase of Fort Knox (the “Acquisition”) using the purchase method of accounting.

The Statements are presented for illustrative purposes only and, therefore, are not necessarily indicative of the operating results that might have been achieved had the transaction occurred as of an earlier date, nor are they necessarily indicative of the operating results that may be achieved in the future.

The Statements, including the notes thereto, should be read in conjunction with:

• Meta’s Annual Report on Form 10-K for the year ended September 30, 2014 and Quarterly Report on Form 10-Q for the nine months ended June 30, 2015.

• Fort Knox’s audited historical consolidated financial statements for the years ended December 31, 2014 and unaudited historical consolidated financial statements as of June 30, 2015 and for the six months ended June 30, 2015, included as Exhibit 99.1 and Exhibit 99.2, respectively, to this Current Report on Form 8-K/A.
 
1

META FINANCIAL GROUP, INC. AND SUBSIDIARIES ("MFG")
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
(Dollars in Thousands, Except Share and Per Share Data)

   
Historical
   
Pro Forma
 
   
Year ended
September 30,
2014
   
Year ended
December 31,
2014
             
                 
   
MFG
   
Fort Knox
   
Adjustments
   
Combined
 
                 
Interest and dividend income:
               
Loans receivable, including fees
 
$
19,674
   
$
-
   
$
13
   
$
19,686
 
Mortgage-backed securities
   
15,343
     
-
     
-
     
15,343
 
Other investments
   
13,643
     
-
     
-
     
13,643
 
     
48,660
     
-
     
13
     
48,673
 
                                 
Interest expense
   
2,398
     
18
     
-
     
2,416
 
                                 
Net interest income
   
46,262
     
(18
)
   
13
     
46,257
 
                                 
Provision for loan losses
   
1,150
     
-
     
87
(6)
   
1,237
 
                                 
Net interest income after provision for loan losses
   
45,112
     
(18
)
   
(74
)
   
45,020
 
Non-interest income:
                               
Card fees
   
48,738
     
-
     
-
     
48,738
 
Tax Product Fee Income
   
-
     
23,159
     
(13
)(6)
   
23,146
 
Other income (loss)
   
3,000
     
-
     
-
     
3,000
 
Total non-interest income
   
51,738
     
23,159
     
(13
)
   
74,884
 
                                 
Non-interest expense:
                               
Compensation and benefits
   
38,155
     
5,009
     
-
     
43,164
 
Card processing expense
   
15,487
     
-
     
-
     
15,487
 
Occupancy and equipment expense
   
8,979
     
-
     
199
     
9,178
 
Legal and consulting expense
   
4,145
     
-
     
127
(6)
   
4,272
 
Tax product expense
   
-
     
9,878
     
-
     
9,878
 
Other expense
   
11,465
     
1,618
     
3,774
(7)
   
16,857
 
Total non-interest expense
   
78,231
     
16,505
     
4,101
     
98,836
 
                                 
Income before income tax expense
   
18,619
     
6,636
     
(4,188
)
   
21,068
 
                                 
Income tax expense
   
2,906
     
-
     
887
     
3,793
 
                                 
Net income
 
$
15,713
   
$
6,636
   
$
(5,074
)
 
$
17,275
 
                                 
Earnings per common share:
                               
Basic
 
$
2.57
   
$
-
   
$
-
   
$
2.39
 
Diluted
 
$
2.53
   
$
-
   
$
-
   
$
2.36
 
 
2

META FINANCIAL GROUP, INC. AND SUBSIDIARIES ("MFG")
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
June 30, 2015
(Dollars in Thousands)
 
   
Historical
   
Pro Forma
 
 
ASSETS
 
MFG
   
Fort Knox
   
Adjustments
   
Combined
 
                 
Cash and cash equivalents
 
$
20,405
   
$
11,655
   
$
(9,276
)(1)
 
$
22,784
 
Investment securities available-for-sale
   
562,810
     
-
     
-
     
562,810
 
Mortgage-backed securities available-for-sale
   
596,976
     
-
     
-
     
596,976
 
Investment securities held to maturity
   
262,578
     
-
     
-
     
262,578
 
Mortgage-backed securities held to maturity
   
69,057
     
-
     
-
     
69,057
 
Loans receivable - net of allowance for loan losses of
   
651,530
     
-
     
-
     
651,530
 
Goodwill
   
-
     
-
     
25,274
(3)
   
25,274
 
Other assets
   
146,627
     
632
     
21,836
(3)
   
169,095
 
                                 
Total assets
 
$
2,309,983
   
$
12,288
   
$
37,834
   
$
2,360,104
 
                                 
LIABILITIES AND STOCKHOLDERS’ EQUITY
                               
                                 
LIABILITIES
                               
Non-interest-bearing checking
 
$
1,321,213
   
$
-
   
$
-
   
$
1,321,213
 
Interest-bearing checking
   
37,832
     
-
     
-
     
37,832
 
Savings deposits
   
36,481
     
-
     
-
     
36,481
 
Money market deposits
   
38,718
     
-
     
-
     
38,718
 
Time certificates of deposit
   
78,963
     
-
     
-
     
78,963
 
Total deposits
   
1,513,207
     
-
     
-
     
1,513,207
 
Federal funds purchased
   
526,000
     
-
     
-
     
526,000
 
Accrued expenses and other liabilities
   
61,506
     
2,012
     
2,263
(4)
   
65,780
 
Total liabilities
   
2,100,713
     
2,012
     
2,263
     
2,104,987
 
                                 
STOCKHOLDERS’ EQUITY
                               
Common stock
   
70
     
1
     
10
(5)(2)
   
81
 
Additional paid-in capital
   
120,273
     
-
     
50,353
(5)(2)
   
170,626
 
Retained earnings
   
94,625
     
10,275
     
(14,792
)(5)
   
90,108
 
Accumulated other comprehensive income (loss)
   
(5,388
)
   
-
     
-
     
(5,388
)
Treasury stock
   
(310
)
   
-
     
-
     
(310
)
Total stockholders’ equity
   
209,270
     
10,276
     
35,571
     
255,117
 
                                 
Total liabilities and stockholders’ equity
 
$
2,309,983
   
$
12,288
   
$
37,834
   
$
2,360,104
 
 
See Notes to Condensed Consolidated Financial Statements.
 
3

META FINANCIAL GROUP, INC. AND SUBSIDIARIES ("MFG")
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
(Dollars in Thousands, Except Share and Per Share Data)
 
   
Nine Months Ended
June 30, 2015
 
   
Historical
   
Pro Forma
 
                 
   
MFG
   
Fort Knox
   
Adjustments
   
Combined
 
                 
Interest and dividend income:
               
Loans receivable, including fees
 
$
21,561
   
$
-
   
$
-
   
$
21,561
 
Mortgage-backed securities
   
10,798
     
-
     
-
     
10,798
 
Other investments
   
12,885
     
-
     
-
     
12,885
 
     
45,244
     
-
     
-
     
45,244
 
                                 
Interest expense
   
1,727
     
4
     
-
     
1,731
 
                                 
Net interest income
   
43,517
     
(4
)
   
-
     
43,513
 
                                 
Provision (recovery) for loan losses
   
1,341
     
-
     
-
     
1,341
 
                                 
Net interest income after provision for loan losses
   
42,176
     
(4
)
   
-
     
42,172
 
                                 
Non-interest income:
                               
Card fees
   
40,607
     
-
     
-
     
40,607
 
Tax Product Fee Income
   
-
     
22,883
     
(97
)(6)
   
22,786
 
Other income (loss)
   
2,461
     
-
     
97
     
2,558
 
Total non-interest income
   
43,068
     
22,883
     
-
     
65,951
 
                                 
Non-interest expense:
                               
Compensation and benefits
   
34,324
     
4,916
     
-
     
39,240
 
Card processing
   
12,374
     
-
     
-
     
12,374
 
Occupancy and equipment
   
8,304
     
-
     
168
(6)
   
8,472
 
Legal and consulting
   
3,333
     
-
     
336
(6)
   
3,669
 
Tax product expense
   
-
     
9,103
     
-
     
9,103
 
Other expense
   
11,970
     
1,511
     
2,436
(7)
   
15,917
 
Total non-interest expense
   
70,305
     
15,530
     
2,941
     
88,775
 
                                 
Income before income tax expense
   
14,939
     
7,349
     
(2,941
)
   
19,347
 
                                 
Income tax expense
   
1,523
     
-
     
1,604
(8)
   
3,127
 
                                 
Net income
 
$
13,416
   
$
7,349
   
$
(4,545
)
 
$
16,220
 
                                 
Earnings per common share:
                               
Basic
 
$
2.05
   
$
-
   
$
-
   
$
2.12
 
Diluted
 
$
2.03
   
$
-
   
$
-
   
$
2.10
 
                                 
Weighted-average common shares issued and outstanding:
                               
Basic
   
6,551,222
     
-
     
1,116,260
(9)(2)
   
7,667,482
 
Diluted
   
6,616,450
     
-
     
1,116,260
(9)(2)
   
7,732,710
 
 
4

NOTE 1. BASIS OF PRESENTATION

The unaudited pro forma condensed combined financial statements have been derived from Meta’s historical consolidated financial statements and Fort Knox’s historical consolidated financial statements. Certain financial statement line items included in Fort Knox’s historical presentation have been reclassified to conform to the corresponding financial statement line items included in Meta’s historical presentation. The reclassification of these items has no impact on the historical net income or stockholders’ equity reported by Meta or Fort Knox.

The unaudited pro forma condensed combined balance sheet as of June 30, 2015 combines Meta’s historical consolidated balance sheet as of June 30, 2015 with Fort Knox’s historical consolidated balance sheet as of June 30, 2015, giving effect to the Acquisition as if it had been completed on June 30, 2015.

The unaudited pro forma condensed combined statements of operations for the year ended September 30, 2014 combines Meta’s historical consolidated statement of operations for the year ended September 30, 2014 with Fort Knox’s historical consolidated statement of operations for the year ended December 31, 2014, giving effect to the Acquisition as if each of the entities had been combined at the earliest date presented for their respective fiscal years.

The unaudited pro forma condensed combined statements of operations for the nine months ended June 30, 2015 combines Meta’s historical consolidated statement of operations for the nine months ended June 30, 2015 with Fort Knox’s historical consolidated statement of operations for the nine month period ended June 30, 2015 giving effect to the Acquisition as if it had been completed on October 1, 2014.

NOTE 2. PRELIMINARY PURCHASE PRICE ALLOCATION

Our preliminary estimates of the purchase price allocation to the assets acquired and liabilities assumed are based on their estimated fair values using currently available information and assumptions. The allocation is dependent upon certain valuations and other studies which are not complete.  Accordingly, the pro forma adjustments are preliminary, have been made solely for the purpose of providing the Statements, and are subject to revision based on a final determination of fair value as of the date of the Acquisition.  Meta expects to complete the final purchase price allocation no later than twelve months following the closing date of the Acquisition.
 
5

Preliminary allocation of the estimated purchase price was as follows:

   
June 30, 2015
 
   
(in thousands)
 
Assets:
   
Cash and cash equivalents
   
2,379
 
Prepaid expenses and other assets
   
474
 
Property and equipment, net
   
158
 
Intangible assets
   
24,119
 
Goodwill
   
25,274
 
Total assets
 
$
52,404
 
         
Liabilities:
       
Accounts payable and other liabilities
   
2,012
 
Total liabilities:
 
$
2,012
 
         
Total estimated purchase price
 
$
50,392
 

Cash and cash equivalents; prepaid expenses and other assets and accounts payable and other liabilities are short term in nature, and, accordingly, we believe their carrying amounts approximate their fair values. The net book value of property and equipment is also expected to approximate its fair value and any adjustments are not expected to be material.
 
6

The identifiable intangible assets of $24.1 million consist primarily of customer lists and trademark names. The fair value and estimated useful lives of the intangible assets are as follows:

Intangible assets
 
Estimated Useful Life
   
Fair Value
 
   
(In years)
   
(In thousands)
 
         
Customer relationships
   
12-15
   
$
18,800
 
Software
   
3
     
87
 
Trademark
   
15
     
4,950
 
Non-Compete
   
3
     
40
 
Lease Intangible
   
6.3
     
242
 
                 
           
$
24,119
 

NOTE 3. PRO FORMA ADJUSTMENTS

Pro forma adjustments are attributable to the Acquisition and include the following:

1. Represents cash retained by Fort Knox in accordance with the Purchase Agreement related to the Acquisition.
2. Represents issuance of 535,000 shares of our common stock in private placements to raise additional capital of approximately $26 million.
3. Represents Meta’s preliminary estimated fair value of identifiable intangible assets and goodwill resulting from the Acquisition.
4. Represents accrual of Acquisition transaction costs and income taxes.
5. Represents the elimination of the historical ownership of Fort Knox shareholders and issuance of shares of our common stock as part of the purchase price consideration to Fort Knox shareholders.
6. Represents reclassification to conform Fort Knox’s historical financial results to Meta’s presentation.
7. Represents amortization expense associated with identifiable intangible assets acquired.  See discussion in Note 2 above. The amount of this adjustment may change as Meta finalizes the purchase price allocation. The amount also includes Acquisition transaction costs.
8. Represents income tax expense attributable to Fort Knox’s income before income taxes.  Fort Knox was previously organized as a Subchapter S corporation, and thus it did not recognize federal or state income taxes.
9. Represents the issuance of 581,260 shares of our common stock to the previous shareholders of Fort Knox.

NOTE 4. PRO FORMA EARNINGS PER COMMON SHARE

Our pro forma basic and diluted earnings per common share is based on the weighted average number of shares of our common stock outstanding during each period, after giving effect to the Acquisition.
 
 
7