KBRA Upgrades Ratings for The Bancorp, Inc.

KBRA upgrades the senior unsecured debt rating to BBB+ from BBB, upgrades the subordinated debt rating to BBB from BBB-, and upgrades the short-term debt rating to K2 from K3 for Wilmington, Delaware-based The Bancorp, Inc. (NASDAQ: TBBK) ("the company"). In addition, KBRA upgrades the deposit and senior unsecured debt ratings to A- from BBB+ and upgrades the subordinated debt rating to BBB+ from BBB for its main subsidiary, The Bancorp Bank, National Association ("the bank"). Moreover, KBRA affirms the short-term deposit and debt ratings of K2 for the bank. The Outlook for all long-term ratings is revised to Stable from Positive following the upgrade.

Key Credit Considerations

The upgrade to ratings is supported by TBBK’s long standing position as a leader in the BaaS industry, particularly within the prepaid and debit card space, where it is the largest issuer by transaction volume. Through the company’s various BaaS product lines, TBBK is able to generate above-peer fee revenues, with a demonstrated ability to meaningfully grow its noninterest income as reflected by the 30% YoY growth in 1H25 (TBBK reported fee revenues of $78 million, or 1.7% of average assets, excluding the consumer fintech credit enhancement income). Additionally, with the bulk of its deposits sourced through its BaaS business lines, TBBK maintains an enviable funding position with a highly granular and durable deposit base, with comparatively lower funding costs (TBBK reported total cost of funds of 2.23% for 2Q25) and limited funding pressures, in part, due to the assumed asset cap ($10 billion) for the company related to the effects of the Durbin amendment on the bank. Benefitting from its well-executed BaaS banking strategy, TBBK has historically outperformed peers with regards to earnings, with a RoRWA tracking between 3.50% - 4.00% in recent quarters. Furthermore, the company’s robust earnings coupled with its lack of need for balance sheet growth, enable TBBK to consistently maintain above-peer capital levels (namely risk-based measures), including a 14.4% CET1 ratio at 2Q25.

Somewhat counterbalancing ratings strengths is a loan portfolio concentrated in real estate bridge lending primarily for multi-family properties that experienced deterioration throughout 2024, with criticized/classified loans representing over 9% of the REBL portfolio. However, the company has maintained loss rates at historical levels, reporting an NCO ratio of less than 10 bps for 2024 and 1H25 (NCO ratio is for all loans except consumer fintech loans). KBRA recognizes TBBK’s exposure to consumer fintech lending and its inherent risks, though the company’s current lending partnership incorporates certain mitigants with over 50% of this portfolio in secured credit cards as well as cash collateral for all consumer fintech loans from TBBK's partner covering expected losses held at the bank.

Rating Sensitivities

Given this upgrade to ratings, an additional rating upgrade is unlikely over the medium term. Should TBBK experience considerable deterioration in credit metrics, including the onset of materially elevated credit losses, the loss of an economically significant partner that results in a material reduction in revenues, or a change in the company’s management of capital, ratings pressure could result.

To access ratings and relevant documents, click here.

Methodologies