Morningstar DBRS Places Coast Capital Savings Federal Credit Union's BBB (high) Long-Term Issuer Rating Under Review With Developing Implications Following Merger Announcement

DBRS Limited (Morningstar DBRS) placed its credit ratings on Coast Capital Savings Federal Credit Union (Coast Capital or the Credit Union), including the Credit Union's Long-Term Issuer Rating of BBB (high), Under Review with Developing Implications. The credit rating action follows Coast Capital's announcement on April 3, 2025, that it intends to merge with Prospera Credit Union and Sunshine Coast Credit Union.

KEY CREDIT RATING CONSIDERATIONS
The Under Review with Developing Implications designation reflects Morningstar DBRS' view that there is insufficient information to properly assess the announced merger's implications for Coast Capital's credit ratings. Once more clarity on the post-transaction credit profile and pro forma performance becomes available, Morningstar DBRS will evaluate the transaction's impact on the Credit Union's operating model, financial performance, risk profile, funding and liquidity, and capitalization. Completion of the transaction is subject to successful member votes by the credit unions and the required regulatory approvals, including that of the Office of the Superintendent of Financial Institutions.

Following the merger, the combined credit union is expected to have more than $38.6 billion in assets under administration; 2,500 employees; 730,000 members; and 70 branches across British Columbia on the Lower Mainland, Vancouver Island, the South Sunshine Coast, and the Okanagan. The combined credit union is expected to have increased scale, advance investments, and enhanced digital banking technology and tools, particularly benefitting members and businesses as they move and grow outside British Columbia.

CREDIT RATING DRIVERS
When sufficient information is available, Morningstar DBRS may take one of the following actions:

If Morningstar DBRS believes that the merger would not lead to a credit rating change, it would confirm the current credit ratings with Stable trends and would remove the Under Review with Developing Implications status.

If Morningstar DBRS views the completion of the potential merger as having a material positive and sustainable impact on Coast Capital's operating model, risk profile, funding and liquidity, and/or capitalization, it would place the credit ratings Under Review with Positive Implications.

If Morningstar DBRS views the completion of the potential merger as having a material negative impact on Coast Capital's credit profile, it would place the credit ratings Under Review with Negative Implications.

CREDIT RATING RATIONALE
Morningstar DBRS placed the credit ratings Under Review with Developing Implications because there is insufficient information to properly assess the announced merger's credit implications. Morningstar DBRS will evaluate the transaction's impact on the Credit Union once more clarity on the post-transaction credit profile and pro forma performance becomes available.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS
Environmental, social, and governance (ESG) considerations had a relevant effect on the credit analysis.

Social (S) Factors
The following Social factor had a relevant effect on the credit analysis: Morningstar DBRS views the Social Impact of Products and Services ESG subfactor as credit positive for the credit ratings, but does not affect the assigned credit ratings or trends. As a credit union, Coast Capital operates a membership-based community banking model where the social aspect of its activities strengthens its franchise. As a result, this factor is incorporated into the Credit Union's Franchise Strength grid grades.

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

A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (August 13, 2024) at https://dbrs.morningstar.com/research/437781.

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

The principal methodology is the Global Methodology for Rating Banks and Banking Organisations (June 4, 2024), https://dbrs.morningstar.com/research/433881. In addition, Morningstar DBRS uses the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (August 13, 2024), https://dbrs.morningstar.com/research/437781 in its consideration of ESG factors.

The credit rating methodologies used in the analysis of this transaction can be found at: https://dbrs.morningstar.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 https://dbrs.morningstar.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.

Morningstar DBRS 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.

For more information on Morningstar DBRS' policy regarding the solicitation status of credit ratings, please refer to the Credit Ratings Global Policy, which can be found in the Morningstar DBRS Understanding Ratings section of the website (https://dbrs.morningstar.com/understanding-ratings).

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

For more information on this credit or on this industry, visit https://dbrs.morningstar.com.

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