KBRA Assigns Ratings to VBT Financial Corporation, Inc

KBRA assigns a senior unsecured debt rating of BBB, a subordinated debt rating of BBB-, and a short-term debt rating of K3 to San Antonio, Texas-based VBT Financial Corporation, Inc ("VBT" or "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 to its main subsidiary, Vantage Bank Texas ("Vantage" or "the bank"). The Outlook for all long-term ratings is Stable.

The ratings are supported by the solid operating performance of Vantage’s core commercial banking franchise, which has generally reflected favorable earnings, asset quality, funding, and liquidity alongside stronger-than-peer organic growth. While the pace of expansion has resulted in relatively low core capital ratios (9.4% CET1 ratio at the consolidated level at 2Q26), which warrants monitoring, KBRA believes this growth reflects a compelling franchise value proposition, supported by Vantage’s presence in attractive Texas markets – where recent regional bank M&A has created considerable customer and talent disruption – and what we view as a meaningful technology advantage. The bank's platform supports faster execution and a differentiated customer experience, helping attract experienced commercial bankers from larger institutions while maintaining limited employee attrition and facilitating the migration of established loan and deposit relationships.

More specifically, VBT has reflected strong earnings performance in recent years, with ROA generally tracking between 1.5%-1.6%, albeit on an S-Corp basis. Adjusting for corporate income taxes to improve comparability with peers, ROA has remained solid at ~1.2%-1.3%. The primary driver of profitability is VBT's robust NIM, supported by a higher proportion of loans within earning assets and a generally higher-yielding loan portfolio given its commercial banking focus, notably within C&I and C&D lending. More recently, profitability has also benefited from improved funding costs, with the total cost of deposits declining to ~2.0% during 1H26 as lower-cost core deposit growth has accelerated. The liquidity position is also well situated, with a loan-to-deposit ratio of 89% at 2Q26 and substantial on-balance sheet liquidity, including cash representing 14% of total assets. Looking ahead, KBRA expects earnings, funding, and liquidity within the core commercial banking franchise to remain relatively sound, while successful execution of the "Novel Banking" strategy could provide additional benefits through greater fee income, deposit diversification, and liquidity over time.

KBRA also favorably views Vantage’s differentiated banking model and forward-looking "Novel Banking" strategy. The strategy includes the Hazel Network, a bank-led platform designed to facilitate tokenized deposits and blockchain-based payments among participating financial institutions, as well as Vantage Collabs, its embedded finance/BaaS platform focused primarily on providing banking and payment infrastructure to business-oriented partners. Amid rapid technological change and potential disruption to community banking from tokenized deposits, stablecoins, and next-generation payment rails, we believe Vantage is unusually well-positioned for a bank of its size to participate in, rather than be disintermediated by, these developments. Management has framed these investments around long-term franchise sustainability, including preserving deposits and payment revenues while developing new fee income and funding sources. While these initiatives have required substantial investment, have a limited operating track record, and carry execution, operational, and compliance risks, we view management’s risk-first approach and extensive regulatory engagement positively. If implemented effectively, these capabilities could represent a meaningful long-term competitive differentiator and further diversify Vantage’s funding and revenue profile.

We also acknowledge the modest capital ratios and elevated investor CRE and C&D concentrations (339% and 110% of Tier 1 capital and ACL at the bank at 2Q26, respectively). Capital has been pressured by strong growth, but KBRA expects earnings retention and a more measured growth trajectory to support the CET1 ratio reaching 10%+ over the next two years. Loan concentrations are also expected to moderate as C&I growth is emphasized and capital builds. Asset quality has weakened from historically strong levels (NPA ratio nearing 0.9% at 2Q26; NCO ratio of 0.3% during 1H26), though recent deterioration has been driven by a few idiosyncratic credits, including fraud-related C&I exposures.

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