Meta Financial reported earnings last month that were full of a lot of good things and a few not so good things. First the positives:
- MPS Fee Income up 109% yoy
- MPS average deposits up 38% yoy
- MPS earned a profit in the seasonally weakest quarter
- Cost of deposits continues to decline
And then the negatives:
- Non Performing assets increased to 2.41% of total assets from 0.99% last year
- $6.3m loan loss provision causing a large loss for the bank
Visually, here’s the growth at MPS. Note that this is a seasonally weak quarter, and the leveling off of growth is more a testament of how successful the tax season programs were as opposed to a decline this quarter. If you look back at prior years, we always see a decline in Q3.
The tangible book value of the bank now sits at $15.98 per share, so the stock is trading above book value. Throwing all the numbers into my spreadsheet, I think the stock is worth between $40 and $65 per share, depending on what growth you expect from MPS and what multiple you put on the earnings. Obviously this value is almost entirely made up of future earnings, and there is a risk to the downside if they raise additional capital or of their book of loans continues to worsen.
So while the MPS division continues to perform incredibly well, the same can not be said for the bank. There have been a lot of stories about the impending crash for commercial real estate, and Meta Financial definitely has commercial real estate exposure. Therefore, despite the excellent performance of the MPS division, I have sold some of my personal position in CASH. It still remains a very large holding, however it’s about a third as big as it was about a month ago.
Disclosure: Long CASH.Please see full disclaimer.
Tags: Meta Financial
