KBRA Affirms Ratings for First Mutual Holding Co.

12 Jan 2024   |   New York


KBRA affirms the senior unsecured debt rating of BBB, the subordinated debt rating of BBB-, and the short-term debt rating of K3 for Lakewood, Ohio-based First Mutual Holding Co. ("FMHC" 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 its primary subsidiary, First Federal Savings and Loan Association of Lakewood ("FFL" or "the bank"). The Outlook for all long-term ratings is Stable.

The ratings are supported by FMHC’s experienced management team that executes a well-defined strategy within the parameters of a moderate risk appetite, as well as the company’s continued cost saving synergies among affiliates. In addition, the bank’s asset quality reflects solid performance, including a below peer NPA ratio and exhibiting de minimis net credit losses on a multi-year basis.

Reflected by trends in recent years, the bank’s overall earnings performance is closely tied to the mortgage banking environment with YTD3Q23 earnings more closely aligned with pre-pandemic levels, as the fiscal policy normalized. The modest NIM compression in recent quarters is primarily tied to the interest rate risk imbalance that emanated from the lower-risk and lower-yielding loan portfolio (65% are fixed rate) and the sharply increased funding cost.

FFL’s capital ratios declined from historically stable levels and now are slightly below rated peers, driven by weakened earnings and meaningful loan growth (YTD3Q23 growth rate of 10%, although the majority of which are residential mortgages). However, the negative trend is likely to be reversed as a result of limited RWA growth.

The ratings are also constrained by the limited on- and off-balance sheet flexibility, as evidenced by the below-peer level of investment securities portfolio (8% of total assets) as well as the above-peer level of asset encumbrance (68% of total assets are pledged).

To access rating and relevant documents, click here.

Click here to view the report.



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.

Doc ID: 1002975

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