KBRA Affirms Ratings for BancPlus Corporation

KBRA affirms the senior unsecured debt rating of BBB, the subordinated debt rating of BBB-, and the short-term debt rating of K3 for Ridgeland, MS-based BancPlus Corporation ("BancPlus" or “the company”). In addition, KBRA affirms the deposit and senior unsecured debt ratings of BBB+, the subordinated debt rating of BBB, and the short-term deposit and debt ratings of K2 for lead subsidiary, BankPlus. The Outlook for all long-term ratings is Stable.

Key Credit Considerations

BancPlus’ ratings remain supported by a comparatively favorable operating performance with average ROA tracking at ~1.0% from 2019-1H24 which continues to benefit from very low credit costs, a solid core deposit base, and peer leading levels of noninterest income to total revenue of 25% - all with historically good core capitalization, though CET1 ratio has recently tracked below peers in the 7.5% range due to decreases in core capital as a result of the acquisitions in both 2020 and 2022. The company continues to work towards the cost savings and revenue guidance projections from both acquisitions that should be accretive to the core capital base in the near term prior to reaching the regulatory important $10 billion asset threshold projected for 2027. Capital had historically been maintained at adequate levels, and we primarily attribute the decline in capital ratios in the last several years to the two bank acquisitions mentioned previously. In 2Q22, the company participated in the U.S. Treasury’s Emergency Capital Investment Program (“ECIP”) and received $250 million of non-cumulative, perpetual preferred stock that carries a maximum coupon rate of 2%. While the ECIP contributes to Tier 1 capital only, the regulatory Tier 1 Ratio benefited while TCE and CET1 remain at levels not beneficial to bondholders should a potential outlier credit cycle take place, though bondholders rank higher in the capital stack over common and preferred shareholders. YoY, levels of core capital have drifted modestly higher through earnings accretion, and overall, we consider the loss absorbing capacity to be appropriate for the company’s risk profile. KBRA also acknowledges the company’s tenured and granular core deposit base, with modest increases in total core deposits during 2023 and 2024 with core deposits representing 84% of funding all while maintaining noninterest bearing to total deposits of 20%. We do note, however, that the cost of deposits when compared to peers has slipped somewhat as a result of the challenging interest rate environment and ultra-competitive deposit market though management was hopeful that funding costs appear to have plateaued during 2Q24, leading to a flat sequential quarter NIM that could represent an inflexion point. In spite of some potential credit exposure associated with BancPlus’ meaningful investor CRE (including C&D) concentrations, KBRA continues to consider the overall potential credit risk to be somewhat lower than peers even with the modest uptick in the NPA ratio from YE23. This perspective is further enhanced by the company’s long-term credit quality track record, which has generally included very low problem asset levels and nominal losses against a good ACL coverage of 1.14%.

Rating Sensitivities

The ratings reflect our continued favorable opinion of the company's earnings and credit quality. KBRA anticipates the maintenance of a sound capital position and the potential for higher capital ratios over the medium term from meaningful earnings. Conversely, an unexpected deterioration in asset quality (and a likely related slippage in core earnings), together with more aggressive capital management, could pressure ratings.

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Methodologies