FORWARD LOOKING STATEMENTS

Meta Financial Group, Inc.®, ("Meta Financial" or "the Company") and its wholly-owned subsidiaries, MetaBank™ (the "Bank"), and Meta Trust Company® ("Meta Trust" or the "Trust Company"), may from time to time make written or oral "forward-looking statements," including statements contained in its filings with the Securities and Exchange Commission ("SEC"), in its reports to shareholders, and in other communications by the Company, which are made in good faith by the Company pursuant to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995.

These forward-looking statements include statements with respect to the Company's beliefs, expectations, estimates, and intentions that are subject to significant risks and uncertainties, and are subject to change based on various factors, some of which are beyond the Company's control. Such statements address, among others, the following subjects: future operating results; customer retention; loan and other product demand; important components of the Company's balance sheet and income statements; growth and expansion; new products and services, such as those offered by MetaBank or Meta Payment Systems® ("MPS"), a division of MetaBank; credit quality and adequacy of reserves; technology; and our employees. The following factors, among others, could cause the Company's financial performance to differ materially from the expectations, estimates, and intentions expressed in such forward-looking statements: the strength of the United States economy in general and the strength of the local economies in which the Company conducts operations; the effects of, and changes in, trade, monetary, and fiscal policies and laws, including interest rate policies of the Federal Reserve Board; inflation, interest rate, market, and monetary fluctuations; the timely development of and acceptance of new products and services offered by the Company as well as risks (including litigation) attendant thereto and the perceived overall value of these products and services by users; the risks of dealing with or utilizing third-party vendors; the impact of changes in financial services' laws and regulations; technological changes, including but not limited to the protection of electronic files or databases; acquisitions; litigation risk in general, including but not limited to those risks involving the MPS division; the growth of the Company's business as well as expenses related thereto; changes in consumer spending and saving habits; and the success of the Company at managing and collecting assets of borrowers in default.

The foregoing list of factors is not exclusive. Additional discussions of factors affecting the Company's business and prospects are contained in the Company's periodic filings with the SEC. The Company expressly disclaims any intent or obligation to update any forward-looking statement, whether written or oral, that may be made from time to time by or on behalf of the Company or its subsidiaries.

GENERAL

The Company, a registered unitary savings and loan holding company, is a Delaware corporation, the principal assets of which are all the issued and outstanding shares of MetaBank, a federal savings bank. The Company was incorporated in 1993 as a unitary non-diversified savings and loan holding company that, on September 20 of that year, acquired all of the capital stock of MetaBank in connection with MetaBank's conversion from mutual to stock form of ownership. On September 30, 1996, the Company became a bank holding company for regulatory purposes upon its acquisition of MetaBank WC until its sale of MetaBank WC in March 2008, at which time the Company became a unitary savings and loan holding company again. Unless the context otherwise requires, references herein to the Company include Meta Financial and MetaBank, and all subsidiaries on a consolidated basis.

The following discussion focuses on the consolidated financial condition of the Company and its subsidiaries, at December 31, 2008, compared to September 30, 2008, and the consolidated results of operations for the three months ended December 31, 2008 and 2007. This discussion should be read in conjunction with the Company's consolidated financial statements, and notes thereto, for the year ended September 30, 2008.

CORPORATE DEVELOPMENTS AND OVERVIEW

The MPS division continued to demonstrate significant growth on a year-over-year basis. Fiscal first quarter 2009 MPS-related card fee income grew 177% as all primary product lines were higher than the same period in fiscal 2008. The division also continued to exhibit product innovation as 15 additional patents were filed during the quarter. Holiday-related gift card sales were strong with total MPS deposits growing $136.1 million, or 41.1%, during the quarter. In collaboration with one of MPS's tax preparation partners and supporting its strongest customers, MPS introduced a new credit-related product that functions in concert with the Meta-issued prepaid card.

The traditional bank segment is continuing to build its customer base from the previous expansion in the growing metropolitan areas of Sioux Falls, South Dakota and Des Moines, Iowa. The Bank has added seven branches in approximately the past seven years in these markets. The Bank focuses primarily on establishing lending and deposit relationships with commercial businesses and commercial real estate developers in these communities. The Bank currently operates 13 retail banking branches: in Brookings (1) and Sioux Falls (4), South Dakota, in Des Moines (6) and Storm Lake (2), Iowa and a non-retail service branch in Memphis, Tennessee.

The Company's stock trades on the NASDAQ Global Market under the symbol "CASH."

FINANCIAL CONDITION

As of December 31, 2008, the Company's assets grew by $101.8 million, or 13.4%, to $859.1 million compared to $757.3 million at September 30, 2008. The increase in assets was reflected primarily in increases in the Company's net cash and cash equivalents and to a lesser extent in mortgage-backed securities and loan portfolios, offset in part by decreases in the Company's investment in federal funds sold, investment securities available for sale, FHLB Stock and MPS accounts receivable.

Total cash and cash equivalents and federal funds sold were $129.4 million at December 31, 2008, an increase of $121.2 million from $8.2 million at September 30, 2008. The increase primarily was the result of the Company's excess liquidity due to an increase in deposits, primarily at MPS. In general, the Company maintains its cash investments in interest-bearing overnight deposits with various correspondent banks. Federal funds sold deposits may be maintained at the FHLB of Des Moines, IA or various commercial banks, including, but not limited to the following: CitiBank, JP Morgan Chase, LaSalle Bank, M&I Bank, BNP Paribas, Bank of America and Bankers Bank, with assets in excess of $1.0 billion. At December 31, 2008 the Company held $227,000 in federal funds sold with the majority of the cash being held in overnight deposit at the Federal Reserve Bank of Chicago.

The total of mortgage-backed securities and investment securities available for sale, increased $8.1 million, or 4.0%, to $211.9 million at December 31, 2008, as investment purchases exceeded related maturities, sales, and principal paydowns. The Company's portfolio of securities available for sale consists primarily of mortgage-backed securities, which have relatively short expected lives. Approximately 40% of the mortgage-backed securities have balloons which further limit maturity extension risk. During the three month period ended December 31, 2008, the Company purchased $15.1 million of mortgage-backed securities with average lives of four years and stated finals of approximately ten years.

The Company's portfolio of net loans receivable increased $15.4 million, or 3.6%, to $443.3 million at December 31, 2008. This increase primarily relates to growth of $9.1 million in commercial real estate and $18.7 million

from the consumer loan portfolio. The increase in the consumer loan portfolio is directly related to the growth of the previously mentioned MPS line of credit program with one of its tax preparation partners. Offsetting the above increases was a decrease in commercial business and agricultural operating loans of $9.4 million and an increase in the allowance for loan losses of $2.0 million primarily related to the above mentioned growth of MPS credit-related programs.

FHLB stock, at cost, decreased $4.3 million primarily due to decreased borrowings with the FHLB of Des Moines, IA.

MPS accounts receivable decreased $38.5 million to $11.5 million at December 31, 2008 from $50.0 million at September 30, 2008. The decrease was primarily related to a decrease in prepaid card funding in transit items at MPS.

Total deposits increased $165.6 million, or 30.3%, to $711.6 million at December 31, 2008. The Company continues to grow its low- and no-cost deposit portfolio as a result of new and existing program growth at MPS. Prepaid card deposits and checking deposits were up $136.1 million, or 41.1%, at December 31, 2008, as compared to September 30, 2008. A portion of this increase results from seasonal gift card deposits that remain unspent and were not present at September 30, 2008.

Total borrowings decreased $63.5 million, or 43.0%, much of which is due to the influx of deposits at the end of the quarter, from $147.7 million at September 30, 2008 to $84.2 million at December 31, 2008.

At December 31, 2008, the Company's shareholders' equity totaled $48.0 million, up $1.2 million from $46.8 million at September 30, 2008. The increase was related to 2009 year-to-date net income (see "Results of Operations" below) and a favorable change in the accumulated other comprehensive loss on the Company's available for sale portfolio partially offset by the payment of dividends on the Company's common stock. At December 31, 2008, MetaBank continues to exceed regulatory requirements for classification as well-capitalized institution.

Non-performing Assets and Allowance for Loan Losses

Generally, when a loan becomes delinquent 90 days or more or when the collection of principal or interest becomes doubtful, the Company will place the loan on a non-accrual status and, as a result of this action, previously accrued interest income on the loan is taken out of current income. The loan will remain on non-accrual status until the loan has been brought current or until other circumstances occur that provide adequate assurance of full repayment of interest and principal.

At December 31, 2008, the Company's loan portfolio exhibited stable credit quality with 30+ day delinquencies of $15.5 million, or 3.42% of total loans compared to $17.1 million, or 3.93% of total loans, at September 30, 2008.

At December 31, 2008, commercial and multi-family real estate 30+ day delinquencies totaled $5.5 million, or 1.20% of total loans. This compares to $6.9 million or 1.59% of total loans at September 30, 2008. Multi-family and commercial real estate loans generally present different risks than loans secured by one-to-four family residences, including, but not limited to, the concentration of principal in a limited number of loans and borrowers, the effect of general economic conditions on income producing properties and the higher level of difficulty of evaluating and monitoring these types of loans.

At December 31, 2008, commercial business 30+ day delinquencies totaled $8.7 million, or 1.92% of total loans. This compares to $9.0 million, or 2.08% of total loans, at September 30, 2008. Risks being associated with commercial business lending include, but are not limited to: payments on loans are typically dependent on the cash flows derived from the operation or management of the business to which the loan is made. Repayment of

such loans may also be affected by factors outside the control of the business, such as unforeseen changes in economic conditions for the business, the industry in which the business operates or the general economic environment.

At December 31, 2008, there were no agricultural loans delinquent 30+ days. This compares to $221,000, or 0.05% of total loans, at September 30, 2008. Agricultural lending also typically involves larger loan amounts. In addition, payments on loans are dependent on the successful operation or management of the farm property securing the loan or for which an operating loan is utilized. The success of the loan may also be affected by factors outside the control of the agricultural borrower, such as the weather and grain and livestock prices.

The Company believes that the level of allowance for loan losses at December 31, 2008 adequately reflects potential risks related to these loans; however there can be no assurance that all loans will be fully collectible or that the present level of the allowance will be adequate in the future. See "Allowance for Loan Losses."

The table below sets forth the amounts and categories of non-performing assets in the Company's loan portfolio. Foreclosed assets include assets acquired in settlement of loans. Balances related to discontinued bank operations have been eliminated for all periods presented.

                                                         Non-Performing Assets As Of
                                                   December 31, 2008     September 30, 2008
                                                            (Dollars in Thousands)

Non-Accruing Loans:
1-4 Family                                        $             1,085    $               942
Commercial & Multi Family                                       6,308                  1,302
Agricultural Real Estate                                            -                     12
Consumer                                                            1                      1
Commercial Business                                             9,068                    538
Total                                                          16,462                  2,795

Accruing Loans Delinquent 90 Days or More:                          -                  4,600
Total                                                               -                  4,600

Restructured Loans:
Agricultural Operating                                              -                    121
Total                                                               -                    121

Foreclosed Assets:
Consumer                                                           15                      -
Commercial Business                                               550                      -
Total                                                             565                      -

Total Non-Performing Assets                       $            17,027    $             7,516
Total as a Percentage of Total Assets                            1.98 %                 0.99 %

The 2009 first quarter increase in non-performing loans related to one commercial borrower that the Company believes participated in a fraud on the Bank and other banks, as first disclosed in the Company's June 30, 2008 Quarterly Report on Form 10-Q. The Company had increased its allowance for loan losses by $1.8 million for this matter during the quarter ending September 30, 2008. While the Company's non-performing loan balance increased during the first quarter of fiscal 2009 due to this borrower, overall credit quality remained stable during the period.

Classified assets. Federal regulations provide for the classification of loans and other assets such as debt and equity securities considered by the OTS to be of lessor quality as "substandard", "doubtful" or "loss." An asset is considered "substandard" if it is inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. "Substandard" assets include those characterized by the "distinct possibility" that the savings association will sustain "some loss" if the deficiencies are not corrected. Assets classified as "doubtful" have all the weaknesses inherent in those classified as "substandard," with the added characteristic that the weaknesses present make "collection or liquidation in full," on the basis of currently existing facts, conditions and values, "highly questionable and improbable." Assets classified as "loss" are those considered "uncollectible" and of such minimal value that their continuance as assets without the establishment of a specific reserve is not warranted. When assets are classified as either substandard or doubtful, the Bank may establish general allowances for loan losses in an amount deemed prudent by management. General allowances represent loss allowances which have been established to recognize the inherent risk associated with lending activities, but which, unlike specific allowances, have not been allocated to particular problem assets. When assets are classified as "loss," the Bank is required either to establish a specific allowance for loan losses equal to 100% of that portion of the asset so classified or to charge-off such amount. The Bank's determination as to the classification of its assets and the amount of its valuation allowances are subject to review by its regulatory authorities, who may require the establishment of additional general or specific loss allowances. The discovery of additional information in the future may also affect both the level of classification and the amount of loss allowances.

On the basis of management's review of its loans and other assets, at December 31, 2008, the Company had classified a total of $3.3 million of its assets as substandard, $13.3 million as doubtful and none as loss. This compares to classifications at September 30, 2008 of $15.8 million as substandard, $88,000 as doubtful and none as loss.

Allowance for loan losses. The Company establishes its provision for loan losses, and evaluates the adequacy of its allowance for loan losses based upon a systematic methodology consisting of a number of factors including, among others, historic loss experience, the overall level of classified assets and non-performing loans, the composition of its loan portfolio and the general economic environment within which the Company and its borrowers operate.

Management closely monitors economic developments both regionally and nationwide, and considers these factors when assessing the adequacy of its allowance for loan losses. While the Company has no direct exposure to sub-prime mortgage loans, management reiterates and restates its concern that developments in the sub-prime mortgage market may have a direct effect on residential real estate prices and an indirect effect on the economy in general. In addition, the economic slowdown is straining the financial condition of some borrowers. Management therefore believes that future losses in the residential portfolio may be somewhat higher than historical experience. Over the past six years, loss rates in the commercial and multi-family real estate market have remained moderate. Management concludes that future losses in this portfolio may be somewhat higher than recent historical experience, excluding loan losses related to fraud by borrowers. On the other hand, current trends in agricultural markets continue to be mostly positive. Higher commodity prices as well as higher yields have created strong economic conditions for most farmers. Nonetheless, management still expects that future losses in this portfolio, which have been very low, could be higher than recent historical experience. Management believes that the slowdown in economic growth during this fiscal year may also negatively impact consumers' repayment capacities. Additionally, a sizable portion of the Company's consumer loan portfolio is secured by residential real estate, as discussed above, and is an area to be closely monitored by management in view of its stated concerns. Recent weather-related events, such as flooding, have occurred in the Bank's markets. However, this has not resulted in any material impairment to the loans originated by the Bank.

Management believes that, based on a detailed review of the loan portfolio, historic loan losses, current economic conditions, the size of the loan portfolio, and other factors, the current level of the allowance for loan losses at December 31, 2008 reflects an adequate allowance against probable losses from the loan portfolio. Although the

Company maintains its allowance for loan losses at a level that it considers to be adequate, investors and others are cautioned that there can be no assurance that future losses will not exceed estimated amounts, or that additional provisions for loan losses will not be required in future periods. In addition, the Company's determination of the allowance for loan losses is subject to review by its regulatory agencies, which can require the establishment of additional general or specific allowances.

At December 31, 2008, the Company has established an allowance for loan losses totaling $7.7 million, or 47% of non-performing loans, compared to $5.7 million, or 76% of non-performing loans at September 30, 2008.

The following table sets forth an analysis of the activity in the Company's allowance for loan losses for the three months ended December 31, 2008 and 2007.

                              Three Months Ended
                                 December 31,
(Dollars in Thousands)         2008         2007

Beginning balance           $    5,732    $  4,493
Provision for loan losses        2,129        (130 )
Charge-offs                       (121 )       (25 )
Recoveries                           1          32
Ending balance              $    7,741    $  4,370

The allowance for loan losses reflects management's best estimate of probable losses inherent in the portfolio based on currently available information. In addition to the factors mentioned above, future additions to the allowance for loan losses may become necessary based upon changing economic conditions, increased loan balances or changes in the underlying collateral of the loan portfolio.

CRITICAL ACCOUNTING POLICIES

The Company's financial statements are prepared in accordance with GAAP. The financial information contained within these statements is, to a significant extent, financial information that is based on approximate measures of the financial effects of transactions and events that have already occurred. Based on its consideration of accounting policies that involve the most complex and subjective decisions and assessments, management has identified its most critical accounting policies to be those related to the allowance for loan losses and asset impairment judgments including the recoverability of goodwill.

The Company's allowance for loan loss methodology incorporates a variety of risk considerations, both quantitative and qualitative, in establishing an allowance for loan loss that management believes is appropriate at each reporting date. Quantitative factors include the Company's historical loss experience, delinquency and charge-off trends, collateral values, changes in nonperforming loans, and other factors. Quantitative factors also incorporate known information about individual loans, including borrowers' sensitivity to interest rate movements. Qualitative factors include the general economic environment in the Company's markets, including economic conditions throughout the Midwest and, in particular, the state of certain industries. Size and complexity of individual credits in relation to loan structure, existing loan policies, and pace of portfolio growth are other qualitative factors that are considered in the methodology. As the Company adds new products and increases the complexity of its loan portfolio, it will enhance its methodology accordingly. Management may have reported a materially different amount for the provision for loan losses in the statement of operations to change the allowance for loan losses if its assessment of the above factors were different. This discussion and analysis should be read in conjunction with the Company's financial statements and the accompanying notes

presented in Part II, Item 8 "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K, as well as the portion of this Management's Discussion and Analysis section entitled "Asset Quality." Although management believes the levels of the allowance as of both December 31, 2008 and September 30, 2008 were adequate to absorb probable losses inherent in the loan portfolio, a decline in local economic conditions or other factors could result in increasing losses.

Goodwill represents the excess of acquisition costs over the fair value of the net assets acquired in a purchase acquisition. Goodwill is tested, at a minimum, annually for impairment.

RESULTS OF OPERATIONS

General. Including discontinued operations, the Company recorded net income of $673,000, or $0.26 per diluted share, for the three months ended December 31, 2008 compared to a net loss of $740,000, or $0.29 per diluted share, for the same period in fiscal year 2008. Net earnings in the current period were primarily impacted by increased income from card fees from all of MPS' primary programs and services, loan growth and a higher net interest income. Offsetting these factors, in part, were higher operating expenses at MPS due to increases in new programs and cards issued, adding to product development capacity and an increased provision for loan losses due to the start-up of one of MPS's credit-related programs described below.

Net interest income. Net interest income from continuing operations for the first quarter of fiscal year 2009 increased by $900,000, or 17.0%, to $6.2 million from $5.3 million for the same period in the prior fiscal year. Net interest margin remained consistent at 3.49% for both of the first quarter of fiscal year 2009 and 2008. The increase in net interest income is primarily attributable to a decrease in rates paid on interest-bearing liabilities from 2.39% for the first quarter of 2008 to 1.40% for the first quarter of 2009. Both asset yields and liability costs decreased over the period; however, both an increase in interest-earning assets and a more favorable deposit mix contributed to less of a margin impact as reduced funding costs outpaced lower asset yields. As of December 31, 2008, low- and no-cost checking deposits represented 70.7% of total deposits in the current quarter compared to 63.7% for the same quarter a year ago. The increase was driven by a 41.1% growth in MPS deposits. Average non-interest-bearing deposits as a percent of total average deposits and interest-bearing liabilities was 54.2% in the current quarter compared to 46.0% for the same quarter a year ago.

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