KBRA Assigns Ratings to PeoplesBancorp, MHC

NEW YORK--(BUSINESS WIRE)--KBRA assigns a senior unsecured debt rating of BBB, a subordinated debt rating of BBB-, and a short-term debt rating of K3 to PeoplesBancorp, MHC (“Peoples” or “the company”). 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 its subsidiary, PeoplesBank. The Outlook for all long-term ratings is Stable.

The ratings are supported by Peoples’ conservative risk profile, attributable to its mutual-like residential tilt and longstanding operating presence within stable markets, which has been stewarded by an experienced and capable management team. Furthermore, the company’s sound underwriting and monitoring practices within its complementary commercial lending verticals has facilitated solid credit quality over an extended period with an NCO ratio that has tracked below 0.2% over the past decade, and largely outperformed peers during the GFC, peaking at just 0.4% in 2012. These strengths are counterbalanced by the company’s sub-peer earnings power, which has limited internal capital generation. Although Peoples’ earnings have been extremely durable over a long period of time (ROA between 0.50% and 1.00% annually over the past 10 years), moderately higher loan (and RWA) growth more recently has principally offset capital augmentation through retained earnings, with the CET1 ratio being managed in the mid-10% range since 2019. While the impending acquisition of SSB Community Bancorp, MHC and associated loan marks are expected to weaken core capital in the near term, KBRA views the company’s ability to quickly rebuild capital towards its targeted levels while also maintaining its durable earnings profile on a go-forward basis as paramount to the ratings. Peoples has relied more heavily on FHLB borrowings and brokered deposits (~20% of total funding as of 2Q24) to supplement core deposit generation, driving up the loan-to-core deposit ratio to a recent high watermark of 116% as of 2Q24. Moving forward, the company plans to reduce wholesale funding usage as it curtails growth in its (deposit-lite) purchased loan portfolio and continues to emphasize core deposit generation.

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Methodologies

• Financial Institutions: Bank & Bank Holding Company Global Rating Methodology
• ESG Global Rating Methodology

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.

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 Information Disclosure Form(s) 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 Information Disclosure Form(s) referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.

About KBRA

Kroll Bond Rating Agency, LLC (KBRA) is a full-service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. Kroll Bond Rating Agency Europe Limited is registered as a CRA with the European Securities and Markets Authority. Kroll Bond Rating Agency UK Limited is registered as a CRA with the UK Financial Conduct Authority. 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.

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