Veritex Holdings is acquiring North Avenue Capital for $62.5 million in cash.
The deal would make the $9.3 billion-asset Veritex’s banking unit a leading United States Department of Agriculture lender and further a strategy to diversify revenue sources, the Dallas-based company said in a Tuesday announcement.
Based in Ponte Vedra, Florida, North Avenue is a non-depository government guaranteed lender that originates and services loans exclusively through the USDA’s Business & Industry program, which offers federal guarantees on loans to rural businesses. The program is similar to the Small Business Administration’s 7(a) offering, but the B&I program specifically targets rural businesses.
The privately held North Avenue was the nation’s No. 1 USDA B&I lender in 2020, according to the agency. The lender produced 20 loans totaling more than $131 million.
“This transaction provides us the opportunity to become the top player in the USDA B&I lending space and we look forward to working with the North Avenue Capital team,” Veritex Chairman and CEO Malcolm Holland said in a press release.
The deal comes two months after the close of Veritex’s
Veritex said the two deals would boost fee income and diversify a balance sheet that is tilted to interest income.
North Avenue originates USDA loans ranging from $2 million to $35 million and sells 90% to the secondary market, generating fees, said D.A. Davidson analyst Gary Tenner. The company has a presence in 21 states.
“As with Thrive, (North Avenue) generates additional revenue diversification, with 2022 estimated fee income now over 20% of total revenue,” Tenner said. That would mark a more than 30% increase for Veritex over 2020 levels.
North Avenue will become a subsidiary of Veritex Community Bank, but it will continue to operate under its current name and brand. North Avenue lends to winery and distillery businesses as well as companies in the manufacturing, entertainment and healthcare industries, among others.
North Avenue founder and CEO Ben Chatraw will remain with the combined company for one year in a consulting role. Vertex also said that it had secured employment agreements with the top four lenders in the business for multiple years.
The transaction is expected to close in the fourth quarter.
