KBRA Affirms Ratings for PeoplesBancorp, MHC

KBRA affirms the senior unsecured debt rating of BBB, the subordinated debt rating of BBB-, and the short-term debt rating of K3 for Holyoke, Massachusetts-based PeoplesBancorp, MHC (“Peoples” or “the company”). In addition, KBRA affirms the deposit and senior unsecured debt ratings of BBB+, the subordinated debt rating of BBB, and the short-term deposit and debt ratings of K2 for lead subsidiary, PeoplesBank. The Outlook for all long-term ratings is Stable.

Key Credit Considerations

The ratings are supported by the company's solid track record of credit performance and stable earnings profile, despite profitability that remains below rated-peer averages. Earnings remain comparatively modest, with ROA of 0.53% for 1H26, reflecting higher funding costs and a sizable residential mortgage portfolio (45% of total loans as of 2Q26), which carries comparatively lower yield and constrains the margin. However, noninterest income provides some earnings diversification, representing 16% of revenue and remaining generally in-line with rated peers. While the residential mortgage concentration weighs on profitability, its lower-risk profile, together with Peoples' conservative operating posture as a mutual institution, has supported favorable credit performance over time. NCO activity in recent years has remained modest at 0.15% for 1H26 and largely concentrated within consumer loans, particularly the solar loan portfolio, which represents a relatively small portion of total loans and remains in runoff. Delinquencies have also remained modest and relatively stable.

The company maintains a durable deposit base, though an elevated concentration of CDs (20% of total funding) and moderate reliance on wholesale funding (16% of funding) contribute to a moderately higher cost of funds relative to rated peers at 2.25% as of 2Q26. Liquidity remains sufficient for the company’s risk profile, with on-balance-sheet liquidity, net of pledged securities, representing roughly 9% of total assets at 2Q26 and, together with contingent funding sources, provided ~1.6x coverage of uninsured deposits. Capital ratios continue to trail rated peers but have gradually improved following the SSB Community Bancorp, MHC merger, which reduced the CET1 ratio to 10.5% as of 1Q25. Since then, CET1 has increased to 10.9% as of 2Q26 and is expected to continued improving over time, supported by relatively stable earnings and measured asset growth.

Rating Sensitivities

A rating upgrade is unlikely over the intermediate term, barring an exogenous event. Conversely, significant deterioration in asset quality, including loss rates above rated-peer averages that materially impact profitability, or a widening of the gap between the company’s capital ratios and rated-peer averages, could result in negative rating action.

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