KBRA Affirms Ratings for Beacon Financial Corporation

KBRA affirms the senior unsecured debt rating of BBB, the subordinated debt rating of BBB-, and the short-term debt rating of K3 for Beacon Financial Corporation (NYSE: BBT)(“the company”). Additionally, 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 its subsidiary, Beacon Bank and Trust. The Outlook for all long-term ratings is Stable.

BBT’s ratings are supported by its size and scope, operating within the attractive New England region with meaningful market share across its operating markets, including the Boston and Providence MSAs. Following the merger between Berkshire Hills Bancorp, Inc. and Brookline Bancorp, Inc., the combined entity rebranded as BBT and now operates as the fourth-largest Boston-based bank. Since the completion of the merger, the company has leveraged its position within its markets to grow core deposits, strengthening its funding base and reducing reliance on wholesale funding. Core deposit growth was complemented by a de-leveraging of the balance sheet via asset sales ($176 million in securities and $400 million in residential mortgage loans) to reduce FHLB borrowings and brokered deposits by approximately $0.8 billion in 4Q25.

Funding costs remain broadly in line with the rated peer average despite operating in relatively higher-cost markets. Management expects the funding profile to improve further over time, with the loan-to-deposit ratio likely to remain in the low-90% range. BBT’s above-average NIM, partially supported by accretion income, contributes to stronger earnings relative to peers, with operating ROAA exceeding 1.0% in each of the first two quarters following the merger. However, revenues remain highly spread-dependent, with noninterest income expected to represent only 10%–15% of total revenues over the medium term.

Asset quality remains a constraint to the ratings, as credit losses are expected to track above the rated peer average through 2026. This is primarily driven by credit stress in lending segments the company has recently exited, including fitness equipment leasing and vehicle leases through Eastern Funding. These exposures already carry significant reserves, and credit costs are expected to trend closer to peer levels over the near term as troubled assets are resolved. Capital ratios, which benefited from BBT’s early adoption of the new FASB rule regarding PCD loans in 4Q25, remain slightly below the rated peer average, with a CET1 ratio of 11.0%. Management expects modest capital build throughout 2026.

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