NEW YORK--(BUSINESS WIRE)--Kroll Bond Rating Agency (KBRA) assigns a senior unsecured debt rating of BBB, a subordinated debt rating of BBB-, and a short-term debt rating of K3 for Port Orchard, Washington based Olympic Bancorp, Inc. (“OBI”, “Olympic” or “the company”). In addition, 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 for Kitsap Bank, the lead subsidiary. The Outlook for all long-term ratings is Stable.
Olympic’s ratings are supported by solid operating performance, driven principally by a favorable core net interest margin that benefits from significantly better than peer deposit costs (0.12% in 1Q20), as well as negligible credit costs. The company’s ROA tracking above 1% reflects a competitive dynamic driven by a balanced synergy between its enviable funding costs and comparatively higher yielding assets. Further, Olympic’s financial soundness is illustrated by its performance through the cycle, having been amongst a select group of banks that did not participate in TARP. The company’s ratings are constrained by a spread-reliant revenue stream with fee income sources generally contributing less than 20% of total revenues. Additionally, the company’s efficiency measure (in the low-70% range) appears higher-than-peer, largely stemming from its high touch service model, though partially attributable to relatively limited scale. That said, the company continues to focus on expense control. Also, the aggregate CRE exposure remains elevated, though manageable. Further, KBRA considers the company’s credit culture as conservative, with effective risk management practices in place that have supported solid long-term asset quality performance, executed by a seasoned management team. Olympic operates in a geographically narrow and economically uniform footprint that limits the company’s organic loan growth opportunities in some respects, while increasing the institution’s susceptibility to a regional economic downturn.
KBRA continues to monitor the potential direct and indirect effects of the coronavirus on the banking sector. Please refer to our publication U.S. Bank 1Q 2020 Ratings Compendium for our latest thoughts.
The ratings are based on KBRA’s Bank & Bank Holding Company Global Rating Methodology published on October 16, 2019.
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Disclosures
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.
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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.
