DBRS Morningstar Assigns Subordinated Debt Rating of BBB with a Stable Trend to First West Credit Union’s Subordinated Notes

DBRS Limited (DBRS Morningstar) assigned a Subordinated Debt Rating of BBB with a Stable trend to First West Credit Union’s (First West or the Credit Union) 9.186% Subordinated Notes (the Notes). The $150 million Notes issuance has a maturity date of August 9, 2033, and will be a direct unsecured debt obligation of the Credit Union ranking subordinate to all secured and unsecured and unsubordinated debt of First West. The assigned rating is equal to the Credit Union’s Long-Term Issuer Rating of BBB (high) with a Stable trend less one notch, consistent with DBRS Morningstar’s framework for notching of bank obligations.

CREDIT RATING DRIVERS
The rating of the Notes will move in tandem with First West’s Long-Term Issuer Rating. Over the longer term, DBRS Morningstar will upgrade First West’s Long-Term Issuer Rating if the Credit Union is able to further strengthen its franchise through a sustained increase in membership resulting in a material improvement in earnings while maintaining a conservative risk profile.

Conversely, a downgrade of First West’s Long-Term Issuer Rating would result in a downgrade of the Notes. DBRS Morningstar would downgrade the Credit Union’s Long-Term Issuer Rating in the event of a material and sustained weakness in loan performance resulting in a significant increase in loan losses and weakened financial performance.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE (ESG) CONSIDERATIONS
Social (S) Factors
DBRS Morningstar finds that the Social Impact of Products and Services ESG subfactor is relevant to the credit rating but does not affect the assigned rating or trend. First West plays an integral role in providing banking services to local communities and funding to small and medium-size businesses and underbanked areas. First West operates on a community banking model where the social aspect of its activities strengthens the franchise, without the requirement or need to maximize profitability. As a result, DBRS Morningstar incorporated this factor into First West’s Franchise Strength grid grades.

There were no Environmental/Governance factors that had a significant or relevant effect on the credit analysis.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/416784 (July 4, 2023).

Notes:
All figures are in Canadian dollars unless otherwise noted.

The principal methodology is the Global Methodology for Rating Banks and Banking Organisations (June 22, 2023; https://www.dbrsmorningstar.com/research/415978). In addition, DBRS Morningstar uses the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (July 4, 2023; https://www.dbrsmorningstar.com/research/416784), in its consideration of ESG factors.

All DBRS Morningstar credit rating methodologies can be found at: https://www.dbrsmorningstar.com/about/methodologies.

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found on the issuer page at www.dbrsmorningstar.com

The credit rating was initiated at the request of the rated entity.

The rated entity or its related entities did participate in the credit rating process for this credit rating action.

DBRS Morningstar had access to the accounts, management and other relevant internal documents of the rated entity or its related entities in connection with this credit rating action.

This is a solicited credit rating.

The conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. DBRS Morningstar’s outlooks and credit ratings are under regular surveillance.

For more information on this credit or on this industry, visit www.dbrsmorningstar.com

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