NEW YORK--(BUSINESS WIRE)--Kroll Bond Rating Agency (KBRA) assigns a senior unsecured debt rating of BBB, subordinated debt rating of BBB-, and short-term debt rating of K3 to Fairmont, WV-based MVB Financial Corp. (NASDAQ: MVBF). Additionally, KBRA assigns deposit and senior unsecured debt ratings of BBB+, a subordinated debt rating of BBB, and short-term deposit and debt ratings of K2 to lead subsidiary MVB Bank, Inc. (“the bank”). The Outlook for all long-term ratings is Stable.
The ratings are underpinned by historically sound asset quality, highlighted by relatively stable NPA levels and low credit losses relative to peers. Additionally, KBRA considers MVBF’s differentiated business model favorably, highlighted by the build-out and growth in the fintech-oriented business focused upon niche industries, as this should provide both diversification in lower-cost funding as well as additional noninterest revenue opportunities, assuming the continued execution of strategy. KBRA also recognizes MVBF’s success in diversifying the lending business through growth in northern Virginia, notably lower risk C&I sectors. The rating is adversely impacted by MVBF’s regulatory capital profile and is reflective of a moderately higher risk-weighted asset density. This is partially offset, however, given the pending improvement in capital levels through the divestiture of MVB Mortgage and branch sales, which should provide a meaningful boost to capital. In this regard, KBRA expects capital levels to be managed in line with peer averages going forward. Additionally, while KBRA views favorably MVBF’s fintech focus in the business line’s ability to generate lower-cost deposits and fee revenue opportunities, we also note the limited duration of contracts, which could impact the durability of these deposits and associated revenue streams. Moreover, given that the fintech business is still maturing, duration and volatility of the deposits is unknown. Lastly, KBRA notes the integration risk associated with the formation of Intercoastal Mortgage, and relatedly, the potential impact on profitability of the combined company, which KBRA considers paramount to the ratings given the significant change in revenue and income generation structure for the bank.
KBRA continues to monitor the potential direct and indirect effects of the Coronavirus on the banking and other sectors. Please refer to our publication Coronavirus (COVID-19): U.S. Banks Stable Despite Uncertainties.
The ratings are based on KBRA’s Bank & Bank Holding Company Global Rating Methodology published on October 16, 2019.
Further information on key credit considerations, sensitivity analyses that consider what factors can affect these credit ratings and how they could lead to an upgrade or a downgrade, and ESG factors (where they are a key driver behind the change to the credit rating or rating outlook) can be found in the full rating report referenced above.
A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the U.S. Information Disclosure Form located here.
Information on the meaning of each rating category can be located here.
Further disclosures relating to this rating action are available in the U.S. Information Disclosure Form referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.
KBRA is a full-service credit rating agency registered as an NRSRO with the U.S. Securities and Exchange Commission. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a Credit Rating Provider and is a certified Credit Rating Agency (CRA) with the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency Europe Limited is registered with ESMA as a CRA.