KBRA affirms TowneBank ratings, keeps stable outlook

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KBRA affirms TowneBank ratings

Highlights

KBRA affirms TowneBank's deposit and senior unsecured debt ratings at A-, subordinated debt at BBB+, short-term ratings at K2, all with a Stable outlook.
TowneBank completed three acquisitions adding $3.8 billion in assets, enhancing market share in Hampton Roads, Richmond, and the Carolinas, with noninterest income exceeding 30% of revenue.
TowneBank's CET1 ratio declined to about 11.4% due to acquisitions, but earnings, asset sales ($250 million on April 3, 2026), and a special $65 million dividend (April 23, 2026) are expected to support capital rebuilding.

Ratings rationale and acquisition backdrop

As reported by Kroll Bond Rating Agency, KBRA affirms TowneBank's deposit and senior unsecured debt ratings at A-, its subordinated debt rating at BBB+, and its short-term deposit and debt ratings at K2, with a Stable outlook on all long-term ratings.

The agency says the Portsmouth, Virginia-based bank benefits from a high-quality franchise built on a longstanding market presence, experienced management and a conservative, relationship-driven model. It also points to strong competitive positions in key growth markets, including a leading deposit franchise in Hampton Roads, where TowneBank ranks first with an approximate 34% market share. Noninterest-bearing deposits represent about 30% of total deposits, supporting the bank's funding profile.

KBRA says TowneBank completed three strategic bank acquisitions over the past year, adding about $3.8 billion in assets. Village Bank expands its Richmond footprint, Old Point Financial adds scale in Hampton Roads and trust services, and Dogwood State Bank broadens the bank's presence across the Carolinas.

Profitability, asset quality and capital outlook

KBRA says the ratings are also supported by consistent earnings, with return on assets between 0.9% and 1.0% in each of the last three years, and by a diversified fee income stream. Noninterest income accounts for more than 30% of total revenue, which the agency says compares favorably with peers, while expected mid-single-digit loan growth, continued net interest margin expansion and acquisition benefits support the earnings outlook.

The agency describes asset quality as a hallmark of TowneBank's franchise, citing minimal net charge-offs, low credit costs and disciplined underwriting. KBRA says the bank's private banking focus, diversified loan portfolio, proactive risk management and robust credit administration should help keep overall credit costs low, and it does not expect the SBA portfolio acquired through the Dogwood deal to become a meaningful future growth driver.

Capital remains another focus after the recent acquisitions reduced the CET1 ratio to about 11.4% from historical levels above 12%. KBRA says stronger earnings, greater scale and operating synergies are expected to support capital generation, while TowneBank's April 3, 2026 sale of its Resort Property Management segment for $250 million, followed by an April 23, 2026 special dividend of roughly $65 million, also strengthens capital. The agency says positive rating momentum could emerge if profitability remains strong and capital rebuilds toward the 12.5% to 13.0% range, while weaker earnings or a departure from conservative capital management could create negative rating pressure.

KBRA’s rating affirmation for Valley National Bancorp highlighted a Stable outlook alongside improving balance-sheet and credit metrics. Our earlier coverage noted that the agency pointed to declining CRE concentration, consistently low net charge-offs, solid core deposit growth with reduced brokered funding, and capital support from an equity raise that helped keep CET1 in the 10.5%–11.0% range.

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