Kroll Bond Rating Agency affirmed the senior unsecured debt rating of BBB+, subordinated debt rating of BBB and short-term debt rating of K2 for Sioux Falls, S.D.-based Meta Financial Group Inc.
The rating agency also affirmed the deposit and senior unsecured debt ratings of A-, subordinated debt rating of BBB+, and short-term deposits and debt ratings of K2 for the company's unit, MetaBank. The outlook for all long-term ratings was revised to stable from negative.
Kroll said the outlook revision is based on the company's more defined strategy that includes its acquisition of Troy, Mich.-based Crestmark Bancorp Inc. and the integration of its higher-risk loan portfolio. The rating agency also noted the company's enhanced balance sheet and streamlined business activities following the sale of MetaBank's community bank division.
Kroll said the ratings are supported by the company's highly diversified earnings profile, with generally 45%-55% of revenues coming from noninterest income.
Factors that constrain the ratings are the company's below-average credit quality metrics and a net charge-off ratio over 1% for 2019, according to the rating agency. It also took into account Meta Financial Group's relatively high-cost operating model due to the company's continued investments in technology and product development within its nonbank divisions.