VBTX - Veritex deal scuttled by StoneCastle; Stephens downgrades Veritex to Neutral

Veritex Holdings ( NASDAQ: VBTX ) said it's considering all options after StoneCastle Partners pulled out of its agreement to sell StoneCastle Insured Sweep (known as InterLINK) to Veritex, including breach of agreement.

The company disclosed late Tuesday that StoneCastle Partners "unilaterally terminated the definitive agreement." Neither party will pay a termination fee in connection with the termination.

In the wake of the broken deal, Stephens analyst Matt Olney downgraded Veritex Holdings ( VBTX ) stock to Equal-Weight from Overweight as he expects the termination "will drive continued headwinds to stock's sentiment."

Veritex ( VBTX ) had already received the approval of the Texas Department of Banking for the acquisition and made substantial progress in pursuing the approval of the Federal Deposit Insurance Corp. ("FDIC"). The company said it believed all other conditions needed for the closing were, or were reasonably expected to be, satisfied upon receipt of the FDIC approval.

As a result of the termination, Stephens' Olney sees three primary alternatives for  Veritex ( VBTX ) to support its loan pipeline and 93% loan/deposit ratio: 1) a separate deposit-oriented acquisition, likely not in metro Texas market; 2) slow organic growth from its mid-teen guidance; 3) make no changes, which would lead to net interest margin compression through 2023.

SA's Quant rating of Sell is more bearish than Olney's Equal-Weight rating and clashes with the average Wall Street rating of Strong Buy.

Veritex ( VBTX ) agreed in March to acquire InterLINK, a tech-enabled deposit gathering platform, for $91M.

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