KBRA Affirms Ratings for Global Federal Credit Union; Revises Outlook to Stable

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 K3 for Anchorage, Alaska-based Global Federal Credit Union (dba Global Credit Union) (“Global” or “the credit union”). The Outlook for all long-term ratings is revised to Stable from Negative.

Key Credit Considerations

The revision to Stable Outlook is supported by the improved earnings profile driven by notable NIM expansion through 9M25 and stable credit costs, further aided by the closing of the acquisition of First Financial Northwest ("FFNW") in April 2025. The margin has been upheld by a strong core deposit base with the cost of deposits tracking well below peer averages at 1.57% for 3Q25, complemented by an asset sensitive balance sheet with 39% of the portfolio in shorter-duration auto loans that has allowed the earning asset base to reprice faster than other fixed rate loans. Combined with the acquisition of FFNW adding ~$1.2 billion of higher yielding loans, the margin improved roughly 20 bps from YE24 to 3.61%, driving a modest increase in ROA to 0.61% for 3Q25. That said, the earnings profile of the credit union is somewhat constrained by the elevated expense base representing ~3.3% of average assets; however, this is somewhat counterbalanced by a diversified revenue stream with noninterest income representing roughly 20% of revenue, despite management's strategic decision to modify the credit union's fee architecture in 4Q22 (eliminating NSF and significantly restructuring overdraft fees). Overall, Global’s earnings performance appears to have largely stabilized, marking a meaningful improvement from recent years’ performance. Prospectively, earnings should continue to benefit from the ongoing repricing of the earning asset base combined with management’s focus on reducing noncore funding utilization. Global’s net worth ratio tracked above peer levels in recent years given the inclusion of $110 million in subordinated debt. However, following the FFNW acquisition, the net worth ratio fell to 9.4%, though remains in line with historical levels. That said, the credit union maintains ~40 bp buffer above the well capitalized minimum for CCULR adopted credit unions (9.0%), which we view as adequate when considering that credit unions cannot perform aggressive capital management actions like dividends or stock buybacks in combination with management’s target of low-single digit growth going forward. KBRA expects the credit union to remained focused on rebuilding capital closer to pre-acquisition levels over the intermediate term. NCOs and NPAs have been impacted by the consumer-focused model, notably by auto and unsecured loans. In recent periods, the NPA ratio has increased to 1.09%; however, loss content remains well below GFC levels at 45 bps through 9M25, and loan loss reserves appear adequate at 1.22% of loans, covering consumer NPAs by nearly 100%. We also note that the loan portfolio is highly granular with an average loan size of just ~$23,300, reducing the possibility for large loan losses.

Rating Sensitivities

The revision to Stable Outlook reflects KBRA's view that a rating change is unlikely over the medium term. However, stable asset quality performance, improved earnings profile tracking more in line with higher rated peers, and capital levels more consistent with peers, could support positive rating momentum over time. Conversely, material deterioration in credit that weakens the profitability of the company, aggressive capital management, or a material increase in noncore funding could result in rating pressure.

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