KBRA Affirms Ratings for Mutual Bancorp

KBRA affirms the senior unsecured debt rating of BBB, the subordinated debt rating of BBB-, and the short-term debt rating of K3 for Hyannis, Massachusetts-based Mutual Bancorp (“Mutual” 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 subsidiary, Cape Cod Five Cents Savings Bank (“the bank”). The Outlook for all long-term ratings is Stable.

Key Credit Considerations

Mutual Bancorp’s ratings are supported by the company’s diversified footprint, as well as the enhanced loan portfolio and deposit mix resulting from the acquisition of Fidelity Co-operative Bank ("Fidelity"). Earnings have faced pressure amid the high-interest rate environment (ROA of 0.57% as of 1H25), reflecting a high concentration (70% of total loans) in long duration, lower yielding (~25 years with WAY of 4.34%) residential mortgages, which has slowed the repricing higher of the loan portfolio. To help offset this concentration risk, management has implemented floating-rate interest swaps on both the loan book and wholesale borrowings, supporting margin improvement in 1H25 (2.79%), though we acknowledge that it remains below similarly rated peers. The earnings profile also benefits from solid fee revenue generation — particularly from wealth management and retail services—which has averaged 19% of total operating revenue over the past five years. While Mutual has historically exhibited a comparatively higher efficiency ratio, noninterest expense is contained at 2.5% of average assets.

Mutual has exhibited conservative credit management, evidenced by minimal credit losses, with an average net charge-off ratio of 0.0% over the past five years and a peak of just 19 basis points in 2009. However, it is of note that the company experienced an uptick in NCOs during 3Q25 related to a borrower fraud event at Fidelity on a ~$30 million loan. Nonetheless, KBRA acknowledges the key departures which have occurred at Fidelity and believes that the credit profile is now underpinned by a seasoned senior and mid-level management team with deep knowledge of the market and extensive banking experience. Despite maintaining a lower loan loss reserve relative to similarly rated peers (0.55% vs. 1.16%), the ratings are bolstered by strong capital levels, reflected in a CET1 ratio of 13% at 2Q25, partly due to a lower-risk loan mix (risk-weighted density of 63%). Given the merger announcement of Bluestone Bank, increasing market share in Massachusetts and further diversifying the loan and deposit mixes, capital metrics are expected to further decline. However, management expects the ROA to return to levels commensurate with peers by YE26, which will improve retained earnings and return capital metrics to levels in line with similarly rated peers.

Rating Sensitivities

Positive rating movement is not expected over the intermediate term, though continued credit quality outperformance, sustained solid capital metrics, and an improvement in earnings to become more in line with peers would be viewed positively. A rating downgrade is unlikely, though any material deterioration in the credit or liquidity profile, or a more aggressive stance with capital management may negatively pressure the ratings.

To access ratings and relevant documents, click here.

Methodologies