KBRA Assigns Ratings to Independent Bank Corporation
Kroll Bond Rating Agency (KBRA) assigns a senior unsecured debt rating of BBB, subordinated debt rating of BBB-, and short-term debt rating of K3 for Grand Rapids, Michigan-based Independent Bank Corporation (NASDAQ: IBCP) (“Independent” or “the company”). In addition, KBRA assigns deposit and senior unsecured debt ratings of BBB+, a subordinated debt rating of BBB, and short-term deposit and debt ratings of K2 for Independent Bank, the lead subsidiary. The Outlook for all long-term ratings is Stable.
IBCP’s ratings are supported by above peer median NIM and improved containment of core operating expenses over time. While the company’s noninterest income contribution has accounted for a high proportion of total revenue in the last several quarters, the nonmortgage-related fee represents a more average level of total revenue. Liquidity for Independent is ample; IBCP’s comparatively low-cost funding profile, a primary driver of the company’s durable NIM, includes limited noncore funding utilization. Conservative underwriting practices in combination with the benign credit environment in recent years have resulted in nominal portfolio losses and healthy asset quality metrics for IBCP over the medium term. Independent’s ratings are counterbalanced by the company’s concentrated footprint compared to larger regional peers. Nonetheless, KBRA positively notes IBCP’s relative loan portfolio granularity and diversification of the book by category and industry. Independent’s conservative approach to capital management is also additive to the ratings, especially considering the uncertain economic climate related to COVID-19. However, KBRA notes that the company has only modest phase 1 direct exposure to industries impacted by COVID-19, which is viewed as manageable overall. IBCP is led by a seasoned management team with significant industry experience at larger financial institutions that appears prepared to successfully navigate the current and forthcoming challenging economic and operating environment, in KBRA’s opinion.
KBRA continues to monitor the potential direct and indirect effects of the coronavirus on the banking and other sectors. Please refer to our publication Coronavirus (COVID-19): U.S. Banks Stable Despite Uncertainties.
The ratings are based on KBRA’s Bank & Bank Holding Company Global Rating Methodology published on October 16, 2019.
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 U.S. Information Disclosure Form 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 U.S. Information Disclosure Form referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.
KBRA is a full-service credit rating agency registered as an NRSRO with the U.S. Securities and Exchange Commission. 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 and is a certified Credit Rating Agency (CRA) with the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency Europe Limited is registered with ESMA as a CRA.