KBRA Assigns Ratings to Veritex Holdings, Inc.

Kroll Bond Rating Agency (KBRA) assigns a senior unsecured debt rating of BBB, subordinated debt rating of BBB-, and short-term debt rating of K3 for Dallas, Texas-based Veritex Holdings, Inc. VBTX ("the company"). In addition, KBRA assigns deposit and senior unsecured debt ratings of BBB+, a subordinated debt rating of BBB, and short-term deposit and debt ratings of K2 for the subsidiary bank, Veritex Community Bank ("the bank"). The Outlook for all long-term ratings is Stable.

The ratings are supported by the company's strong capital position which includes a TCE ratio near 10%, sustained by an improved earnings profile that provides healthy capital build through increased retained earnings. Through its active M&A strategy and aggressive growth approach, VBTX bolstered core earnings (core ROA of 1.60% for 1H19) by establishing an efficient operating model buoyed by robust margins. However, VBTX has limited earnings diversity with noninterest income accounting for ~10% of company revenues, as well as increasing margin pressure stemming from the bank's comparatively high-cost funding. Furthermore, there has been some modest volatility in VBTX's asset quality, including recent fluctuation in the bank's NPA ratio and an increase in charge-offs recorded in 3Q19 (NCO ratio of 0.55%), stemming from a single credit relationship acquired from Sovereign Bancshares, Inc. in 2017. Moreover, KBRA recognizes the inherent risks associated with high growth institutions, particularly risks posed by numerous acquisitions, though VBTX's management is well versed in the M&A space and has exhibited a prudent approach when managing its many bank transactions.

To view the rating report, click here.

The ratings are based on KBRA's Bank and Bank Holding Company Global Rating Methodology published on October 16, 2019.

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About KBRA and KBRA Europe

KBRA is a full-service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a Credit Rating Provider and is a certified Credit Rating Agency (CRA) by the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency Europe Limited is registered with ESMA as a CRA.

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