KBRA Affirms Ratings for TriState Capital Bank

KBRA affirms the deposit and senior unsecured debt ratings of A and the short-term deposit and debt ratings of K1 for Pittsburgh, Pennsylvania based TriState Capital Bank (“TriState”) (“the bank”). The Outlook for all long-term ratings is Stable.

Key Credit Considerations

The ratings are supported by the lower-risk nature of the bank’s operating model which includes over 60% of its loan portfolio in private banking loans (loans secured by marketable securities and other liquid financial collateral). Notably, TriState has not reported a net charge-off in this portfolio since it began offering the product in 2010. Overall, loss rates on the entire loan portfolio have been maintained at or below 0.1% since 2015. The lower-risk balance sheet is further reflected by the bank’s materially above-average risk-based capital ratios, including a CET1 ratio that has climbed to 16.5% at 2Q24. The ratings further incorporate the bank’s relationship with its parent company, Raymond James Financial, Inc. (NYSE: RJF) and the intrinsic support TriState is likely to receive from RJF should the need arise. Viewed as strategically important to RJF, TriState has received both funding and capital support since the merger completion in 2022, including $140 million in capital as well as $3 billion in deposits from the Raymond James Bank Deposit Program (KBRA notes that the capital and funding support were planned upon the completion of the merger with the bank expected to be self-sustaining going forward).

The bank’s higher-cost deposit base (TriState’s total cost of deposits was 4.45% for 2Q24) is largely attributable to its intentional lack of retail branch network, with deposits primarily sourced through its national deposit and treasury management sales teams, as well as through clients of its middle market commercial and private banking business lines. However, with over 90% of loans in variable or adjustable rates and over 60% of its deposits in market rate funds (as well as 97% of deposits on non-maturity accounts), TriState is able to more effectively reprice both sides of the balance sheet. Therefore, while TriState employs a relatively lower-risk, lower-NIM operating strategy, the bank’s NIM, and subsequently its earnings (as defined by ROAA), have proven to be less volatile (NIM was down just 5 bps from 4Q22 to 2.19% at 2Q24 while ROAA has generally tracked near 0.8% since 2021).

Rating Sensitivities

Given the higher ratings relative to KBRA’s rated universe, we view the prospect of an upgrade as primarily reliant upon positive developments in the credit profile of the bank’s parent, RJF. Should the credit profile of TriState materially change, reflected in comparatively elevated credit losses over multiple periods, or if RJF demonstrates a lack of commitment in supporting TriState, downward pressure on ratings could ensue.

To access rating and relevant documents, click here.

Methodologies