UPDATE: This article includes comments from Commerce Street Capital President and CEO Dory Wiley, who advised Huntington on the Veritex deal.
Seeking to accelerate a Texas expansion that began last year, Huntington Bancshares said Monday that it will acquire the $12.6 billion-asset Veritex Holdings for $1.9 billion in stock.
The deal is Huntington's first since its $6 billion purchase of Detroit-based TCF Financial in 2021. It would deepen Huntington's footprint in Texas, where the $210 billion-asset Columbus, Ohio-based regional has been making commercial loans for the past 16 months.
Founded in 2010, Dallas-based Veritex has grown into one of Texas' largest commercial banks, with $9 billion of loans, $11 billion of deposits and a presence in both the Dallas-Fort Worth area and Houston. Huntington has grown rapidly since entering the Lone Star State in March 2024. It's built a team of 100 bankers, along with $6 billion of loans and $2 billion of deposits.
The merged company will have $15 billion of loans in Texas, along with $13 billion of deposits. Huntington Chief Financial Officer Zach Wasserman said the bank plans to leverage that platform with organic growth going forward, though he didn't close the door on additional merger-and-acquisition activity.
"We're open to inorganic, but the drive is organic growth, and that will remain so," Wasserman said during a conference call with analysts.
Commerce Street Capital President and CEO Dory Wiley, who advised Huntington on the Veritex acquisition, told American Banker the transaction may usher in a more active approach to M&A by larger regional banks.
"When you start to get bigger banks involved in deals, that's kind of a change in tone," Wiley said. "We haven't had that in a while ... I think [activity] is going to pick up quite a bit, as long as some of these bigger banks feel like they have a green light to do so from all of the stakeholders."
While competitors often view mergers as an opportunity to lure disaffected bankers away from the selling institution, Wiley expects Huntington to mount a determined effort to keep the Veritex team onboard. Veritex is the parent of Veritex Community Bank, which operates 34 offices in nine Texas counties.
"Their goal is to keep as many [bankers] as they can and empower them," Wiley said. "If you're Veritex, and your legal lending limit has now been supersized or the expertise and amount of product line has been supersized, your opportunity to make money, serve your clients and be a bigger producer is much greater."
Huntington Chairman and CEO Steve Steinour said that the deal reflects Huntington's long-term commitment to Texas.
"The Veritex team brings deep local relationships, a strong commercial banking franchise and customer loyalty, and this partnership will serve as a springboard for substantial future growth in the state," Steinour said in a press release.
The acquisition is expected to close early in the fourth quarter. Veritex Chairman and CEO Malcolm Holland has agreed to serve as Huntington's nonexecutive Texas chairman.
"We want Texans to do business with Texans," Steinour said on the conference call. "We recognize Malcolm as one of the preeminent business leaders in the state."
Read more on bank M&A: https://www.americanbanker.com/tag/mergers-and-acquisitions
The transaction should give Huntington an opportunity to bring more products, including in consumer banking, to bear in Texas, RBC Capital Markets analyst Jon Arfstrom wrote in a research note.
"Our sense is that [Huntington] management sees Houston and Dallas as well as other Texas markets as providing an extended runway for growth," Arfstrom wrote. "We believe Texas could become a more significant piece of the overall bank over time."
Following Huntington's acquisitions of the $22 billion-asset TCF and the $25.5 billion-asset, Akron, Ohio-based FirstMerit Corp in 2016, the Veritex merger should proceed smoothly, Arfstrom added. "We are very comfortable with management's expertise in integrating acquisitions and delivering targeted synergies," he wrote.
The $1.9 billion price tag amounts to 1.5 times of Veritex's tangible book value, which amounts to a bargain for a "pure-play Texas bank," TD Cowen analyst Steven Alexopoulos wrote in a research note.
"This transaction supports our favorable thesis on [Huntington] shares with the company clearly on offense," Alexopoulos wrote.
Huntington has been firmly in growth mode for nearly two years. In addition to Texas, the company has engaged in a significant organic expansion program in the Carolinas, where it plans to open 55 branches by 2027. In May, Huntington said it would begin commercial lending in Florida.
The expansion initiatives, including a number of new national lending and deposit verticals, have highlighted Huntington's transition from a Midwestern powerhouse into a more national institution. Indeed, the growth pushes have generated 40% of the $13 billion in loan growth Huntington has achieved since the start of 2024. Steinour expects that contribution to continue growing.
"These new initiatives are just getting started," he said on the conference call. "They're not mature. So we've got a lot of momentum even in the third quarter thus far."
Along with the news of the Veritex deal, Huntington disclosed preliminary second-quarter financial results on Monday. Huntington said it expects to report earnings of $2.1 billion, level with the first quarter of 2025 and up about 15% year over year. It anticipates average loans of $133.2 billion and average deposits of $163.4 billion, which would represent increases of 8% and 6%, respectively, from the three months ending June 30, 2024.
Huntington also forecast net charge-offs of 0.20% of average total loans in the second quarter, a six-basis-point drop from three months earlier.
Huntington isn't the only Ohio-based regional bank seeking to bolster its growth with a move into Texas. Fifth Third Bancorp in Cincinnati has been building middle market lending operations there for the past six years.
