KBRA Affirms Ratings for GreenState Credit Union

KBRA affirms the deposit and senior unsecured debt ratings of BBB-, the subordinated debt rating of BB+, and the short-term deposit and debt ratings of K3 for North Liberty, Iowa-based GreenState Credit Union (“GCU”). The Outlook for all long-term ratings is Stable.

Key Credit Considerations

The ratings are supported by ongoing progress of the new leadership team's plan to strengthen the balance sheet and improve profitability over the past year, with early signs of stabilization across several performance metrics. Notably, profitability has marked a clear reversal from the operating losses recorded in 2023 and multiple quarters of 2024 with ROA improving to 0.24% for 9M25. Prior to the new management team, a "sales culture" period generated significant growth that outstripped the CU’s organic funding base, relying heavily on non-core funding. In contrast, current leadership has moderated loan growth and prioritized reducing reliance on higher-cost nonmember deposits, which, combined with the rate cuts in late 2024 and 2H25, have supported a decline in the cost of deposits. The incremental improvement in the funding profile paired with increasing earning asset yields has contributed to 45 bps of NIM expansion through 9M25 to 2.19%. Going forward, management remains focused on improving the funding model by continuing to reduce non-member deposits while meaningfully expanding the member deposit base. Elsewhere, asset quality remains pressured with an NPA ratio of 1.80%, largely tied to pre-2024 vintages; however, NCOs have moderated to 0.43% from YE24 highs. The loan portfolio has shifted towards lower-risk consumer assets as management has de-emphasized commercial loan growth, with 1–4 family residential mortgages representing 51% of the portfolio, up from 38% a year ago. As credit quality normalizes through problem asset resolution and NIM benefits from an easing rate environment, paired with cost efficiency initiatives, management anticipates meaningful earnings inflection supported by ongoing strategic execution over the longer term. Additionally, GCU has maintained a stable regulatory capital profile, reflected by a net worth ratio of 9.3% and the total risk-based capital ratio of 11.3%. Management has emphasized a priority of capital preservation and expects to gradually strengthen capital levels, targeting a net worth ratio around 10% by 2030, driven by improving profitability, stable asset quality, and further de-risking of the balance sheet.

Rating Sensitivities

Improvement in asset quality, reduced reliance on wholesale funding, sustained improvement in profitability trends, and the strengthening of core capital measures could facilitate positive rating momentum over the longer term. Conversely, continued credit deterioration impacting earnings, aggressive capital management, or a material increase in noncore funding sources could result in rating pressure.

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Methodologies