KBRA Affirms Ratings for VeraBank, Inc.; Revises Outlook to Positive

KBRA affirms the senior unsecured debt rating of BBB, the subordinated debt rating of BBB-, and the short-term debt rating of K3 for Henderson, Texas-based VeraBank, Inc. (“VeraBank” or “the company”). In addition, KBRA affirms the deposit and senior unsecured debt ratings of BBB+, the subordinated debt rating of BBB, and the short-term deposit and debt ratings of K2 for its subsidiary, VeraBank, National Association. The Outlook for all long-term ratings is revised to Positive from Stable.

The revision to Positive Outlook from Stable Outlook reflects VeraBank’s sustained outperformance across most quantitative metrics over an extended period. Most notably, the company maintains one of the strongest deposit bases in our rated universe, with an average cost of ~1.5% in 4Q25. This is supported by a predominantly core-funded deposit mix (entirely core deposits excluding jumbo CDs), a meaningful proportion of noninterest-bearing accounts (29%), and solid market share within its rural East Texas footprint. This positioning allows the company to operate with less balance sheet risk than similarly rated peers, as evidenced by lower loan-to-deposit and loan-to-earning asset ratios, which are not expected to materially increase despite solid loan growth opportunities. Even with this conservative posture, competitive loan yields - driven, in part, by higher C&D exposure and pricing power in legacy markets - support a healthy NIM, which has tracked near 4.0% in recent quarters and is expected to largely persist, notwithstanding the potential for further Fed rate cuts. Coupled with strong noninterest income, which has exceeded 20% of total revenue over the past decade, VeraBank continues to generate peer-leading returns. The ratings consider the uptick in NPA levels, while acknowledging historically minimal credit losses (NCOs below 0.15% from 2009-2024). However, NCOs increased to 0.99% in 3Q25 related to an isolated fraud event. KBRA acknowledges this was isolated to one customer relationship and notes that management has since enhanced internal controls and oversight processes. With respect to potential challenges in the loan portfolio, we acknowledge that VeraBank exhibits some geographic concentration risk, with operations largely based in TX - typically, a higher-beta market. Despite the moderately elevated C&D concentration, we view positively the reduction in C&D exposure in recent years and overall investor CRE exposure remains well below average at 171% of Tier 1 capital + ALLL at the bank level. We take comfort in the company’s disciplined underwriting standards, the granular nature of the portfolio, and its focus on suburban markets, which helps mitigate associated risks. Moreover, loan loss reserves remain in line with peers and are supported by strong capital levels reflected in a CET1 ratio of 14.2% as of YE25, meaningfully above peers, partly due to a lower-risk loan mix (risk-weighted density of 63%). M&A has been a source of growth over the years, and while management indicated a willingness to pursue additional transactions opportunistically, we acknowledge the successful execution track record to date. Although such activity could result in some near-term capital pressure, we expect management to prioritize rebuilding capital levels in a timely manner.

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