Enhances liquidity with flexible access to approximately $5.7 billion of core deposits
Veritex Holdings, Inc., the parent holding company for Veritex Community Bank, announced that it has entered into a definitive agreement to acquire StoneCastle Cash Insured Sweep, LLC (d/b/a as interLINK), a subsidiary of StoneCastle Partners, LLC, primarily for Veritex common stock and cash in a transaction valued at approximately $91 million.
Together, Veritex and interLINK are the perfect fit combining a high-growth commercial bank with a tech-enabled core deposit gathering platform. interLINK administers approximately $8 billion of deposits through FDIC-insured cash sweep programs for several of the nation’s leading broker/dealers and clearing firms. Once integrated into Veritex’s treasury function, interLINK will provide flexible and scalable access to approximately $5.7 billion of highly diversified, stable core deposits. This core deposit base creates capacity to reliably fund significant multi-year loan growth and optimize overall funding mix over time.
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Veritex Chairman and Chief Executive Officer C. Malcolm Holland stated, “We are excited at the opportunity to enhance our funding and liquidity profile with a modern, branchless distribution channel that provides sticky core deposits to fund several years of future growth. Meeting the needs of customers and communities is priority number one and interLINK enables us to do that with low-cost, flexible funding that will continue to scale with minimal overhead to generate positive operating leverage. On top of that, the financial benefits to shareholders are expected to be significant with low-risk given the capital-light nature of the business and our significant expertise buying and integrating businesses over that last 10 years.”
interLINK is a proprietary software platform, purpose-built as a bank treasury function. Its technology is highly flexible, allowing for customized integration into broker/dealer systems and supported by white-glove customer service. Over the last five years, interLINK’s deposits under administration have increased at a 55% compound annual growth rate, with only a minimal increase in operating expenses. Supporting this growth is a compelling value proposition for all parties, whereby Veritex will provide broker/dealers white glove cash administration services at low-cost and banks participating in interLINK’s sweep programs will continue to receive flexible liquidity. Subsequent to the acquisition, Veritex will be able to provide broker/dealers with a range of added services, including private banking, securities lending, and other credit or banking services.
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Under the terms of the agreement, Veritex will purchase interLINK for $3 million in cash and issue approximately 2.1 million shares of its common stock to StoneCastle. Upon close of the transaction, StoneCastle will recognize a taxable sale and will hold a minority stake of approximately 4% in Veritex. Concurrent with this announcement, Veritex plans to launch a common stock offering of approximately $150 million with the net proceeds used to support continued growth and general corporate purposes.
On a pro forma basis, including the common stock offering announced today, the transaction is expected to increase Common Equity Tier 1 to approximately 9.9%, be accretive to tangible book value per share at closing, and be neutral to consensus earnings per share estimates in 2023, 8% accretive in 2024, and +14% accretive on a run-rate basis thereafter. The internal rate of return for this transaction is expected to exceed 25%.
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