KBRA Affirms Ratings for EverBank Financial Corp

KBRA affirms the senior unsecured debt rating of BBB+, the subordinated debt rating of BBB, and the short-term debt rating of K2 for Jacksonville, FL-based EverBank Financial Corp (“the company”). In addition, KBRA affirms the deposit and senior unsecured debt ratings of A-, the subordinated debt rating BBB+, and the short-term deposit and debt ratings of K2 for its primary subsidiary, EverBank, National Association ("the bank"). The Outlook for all long-term ratings is Stable.

Key Credit Considerations

The bank’s ratings are tied to its peer-like regulatory capital levels and more diversified loan portfolio over time, which has the potential to improve both profitability and deposit funding dynamics via direct customer relationships. Earnings performance at the bank has generally trailed rated peer comparisons because of the high cost of funds, including deposits, and limited sources of noninterest (or fee) income. Noninterest-bearing deposits constitute a low percentage of total deposits. The long-term outlook for earnings performance is favorable, as the loan portfolio mix-shift evolves, and various operating efficiencies are realized. Credit risk has been managed well, historically, helped by the bank’s high proportion of residential loans – which are backed by substantial owners’ equity – and a generally favorable macroeconomic backdrop.

The bank’s overall deposit funding continues to exhibit a high proportion of market-rate, interest-bearing deposits, in addition to sizeable single name or related depositor concentrations (although these deposits are generally insured or backed with bank pledge of assets). Net uninsured deposits account for 15% of total deposits. Positively, contingent sources of funding appear ample, primarily consisting of FHLB borrowing capacity.

The bank’s regulatory capital ratios have been managed in line with rated peers in recent periods. Consolidated CET1 declined in 2Q24 due to the growth in RWA and a substantial common stock dividend of $203 million. Holding company preferred dividends totaled $22 million though 1H24. Liquidity at the parent company remains substantial. There is no double leverage at the parent company currently.

Rating Sensitivities

Positive rating momentum could develop over time, if the bank’s various strategic and operational executional objectives are realized, earnings performance improves on a sustained basis, and bank regulatory capital ratios are maintained at least at rated peer levels. Conversely, negative rating action at the bank would most likely emanate from adverse loan quality development that caused earnings to further weaken versus rated peers. The BHC ratings are tied to the bank’s, given the reliance on its earnings (bank assets substantially equals parent’s assets); key rating sensitivities at the parent company encompass leverage, fixed charge coverage, and liquidity ratios.

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