Meta Financial discloses IT control weakness tied to recently acquired bank

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Meta Financial Group in Sioux Falls, S.D., disclosed that it is dealing with a material weakness in internal controls.

The $6.1 billion-asset company said in its quarterly filing Wednesday that the issue is tied to Crestmark Bancorp, which it bought in August 2018 for $316 million. Meta said it discovered deficiencies tied to “inappropriate user access” to information technology applications.

The issues included “untimely completion of user access reviews on certain systems, instances of users having access rights beyond what appeared to be needed, and instances of user access not being appropriately added or removed from certain systems,” the filing said. Meta noted that the deficiencies “did not result in any known material misstatement” in its financial reporting.

Meta said it is evaluating IT governance and controls, updating access procedures and training personnel to heighten their focus on access controls.

Michael Perito, an analyst at Keefe, Bruyette & Woods, said in a note to clients that it is unlikely that the issue will have a financial impact on Meta.

“As a much smaller and privately held institution” before the acquisition, “it is not necessarily surprising that Crestmark's IT controls weren't up to Meta's standards," Perito said. "Our initial take is that this should be a fairly easy problem to rectify as Meta continues to integrate Crestmark's operating platform."

Meta recently reported quarterly profit of $29.3 million. Its revenue increased by 80% from a year earlier, to $110.8 million.

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