CASH 2017 Annual Report

69 Data encryption technology has not been perfected and vigilance in MPS’ information technology systems is costly. The Bank and its divisions hold holds sensitive business and personal information with respect to the products and services it offers. This information, which is generally digitally encrypted, is passed along various technology channels, including the Internet. Althoughwe encrypt its customer and other sensitive information and expend significant financial and personnel resources to maintain the integrity of its technology networks and the confidentiality of nonpublic customer information, because such information may travel on public technology and other non-secure channels, the confidential information is potentially susceptible to hacking and other illegal intrusions. Were such a security breach to occur, the provision of products and services to our customers would be impaired. In addition, were a breach to occur, we could incur significant fines from the electronic funds associations involved, or from federal and/or state regulators, and be subject to other prohibitions, as well as extensive litigation fromcommercial parties and consumers affected by such breach. Such actions would have a material adverse effect on our financial condition and results of operations. Unclaimed funds represented by unused value on the cards presents compliance and other risks. The concept of escheatment involves the reporting and delivery of property to states that is abandoned when its rightful owner cannot be readily located and/or identified. In the context of prepaid cards, the funds in connection with such cards can sometimes be “abandoned” or unused for the relevant period of time set forth in each applicable state’s abandoned property laws. MPS utilizes automated programs to ensure its operations are compliant with such applicable laws and regulations. There appears, however, to be a movement among some state regulators to interpret definitions in escheatment statutes and regulations in a manner that is more aggressive. Should such state regulators choose to do so, they may initiate collection or other litigation action against prepaid card issuers for unreported abandoned property. Such actions may seek to assess fines and penalties. MPS Revenue Concentration. MPS works with a large number of business partners to derive its revenue. The Company believes four of its partners have reached a size that, should these partners’ business with the Company end or there is a significant decrease in revenues associated with any of these business relationships, the earnings attributable to them would have a material effect on the financial results of the Company. ATM fraud is becoming both more sophisticated and more prevalent. Although the Bank has not been the subject of any widespread or concerted ATM attack, ATM fraud has shown a marked increase and threats to the network of entities that comprise ATM networks continue. It is estimated that global losses fromATM skimming alone are over $2 billion annually and are expected to grow. Although most ATM fraud continues to involve skimming (whereby a skimmer reads a debit card's encoded mag stripe and a camera records the PIN that is entered by a customer), new frauds including those perpetrated by Wi-Fi scanners and the cracking of encryption software, are being perpetrated against global banks and their customers. The Bank continues to monitor these developments and has a program in place to monitor for debit and credit card fraud. Even with such policies and procedures in place, however, there can be no assurance that the Bank, its customers or the ATM networks in which it participates will not be the victims of an ATM-based crime. Item 1B. Unresolved Staff Comments Not applicable. Item 2. Properties The Company's home office is located at 5501 South Broadband Lane in Sioux Falls, South Dakota. The Bank is a federally chartered savings bank which operates 10 full-service branch banking offices in four market areas: Storm Lake and Des Moines, Iowa and Brookings and Sioux Falls, South Dakota, one non-retail service branch in Memphis, Tennessee, and seven non-branch offices located in South Dakota, Texas, California, Kentucky, and Pennsylvania. The non-branch offices are related to the following divisions of MetaBank: MPS, Refund Advantage, EPS Financial, SCS, and AFS/IBEX. Our MPS division offers prepaid cards, along with other payment industry products and services with operations in two offices in Sioux Falls, South Dakota. Refund Advantage and EPS Financial offer tax payment industry products and services nationwide, with offices located in Louisville, Kentucky, and Easton, Pennsylvania. SCS provides consumer credit services through its propriety underwriting model with an office located in Hurst, Texas. Our AFS/IBEX division provides nationwide commercial insurance premium financing for business and insurance agencies and has two agency offices, one in Dallas, Texas, and one in Newport Beach, California.