Huntington Bancshares Expands Texas Footprint with Veritex Acquisition Amid Strong Q2 Results

Huntington Bancshares (HBAN) has delivered a solid quarter and made a bold strategic move with its acquisition of Veritex Holdings (VBTX), signaling confidence in its ability to capitalize on high-growth markets. The second-quarter earnings, while stable, underscored the bank's operational resilience, while the Texas-focused deal positions it to exploit a key economic corridor. Here's why investors should take note.

Q2 2025: A Steady Foundation for Growth

Huntington's Q2 results reflect a bank in expansion mode. Net interest income rose 3% sequentially to $1.5 billion, driven by a 2% quarterly increase in average loans to $133.2 billion. Deposits also grew, climbing $1.8 billion to $163.4 billion, maintaining strong liquidity. Notably, credit quality improved, with net charge-offs dropping to 0.20% of loans—near historic lows—while the allowance for credit losses (ACL) expanded to 1.86% of total loans. This balance of growth and prudence supports the bank's long-term stability.

The crown jewel, however, is the tangible book value (TBV), which rose 4% quarter-over-quarter to $9.13 per share, a 16% annual gain. This metric is critical for investors, as it reflects the equity value available to shareholders if the bank were liquidated—a key indicator of intrinsic value.

The Texas Play: Why Veritex Matters

Huntington's acquisition of Veritex is its most significant step yet into Texas, a state with a GDP growth rate outpacing the national average and a booming commercial real estate and energy sector. Veritex's 30+ branches in Dallas/Fort Worth and Houston give Huntington an instant foothold in two of the country's fastest-growing metro areas.

The deal's terms are accretive to EPS immediately, with minimal capital dilution and a tangible book value “payback” expected within a year. Key takeaways:
- Scale in a High-Growth Market: Veritex adds $13 billion in assets, $9 billion in loans, and $11 billion in deposits, boosting Huntington's Texas footprint to $25 billion in loans and $18 billion in deposits.
- Strategic Synergies: Veritex's commercial lending expertise complements Huntington's existing strengths, while local leadership (e.g., Veritex's CEO staying on) preserves customer relationships.
- Community Commitment: A $10 million philanthropic pledge ensures Huntington can leverage Veritex's local reputation, critical for retention in competitive markets.

Valuation: A Bargain for Growth?

At a price of $33.91 per Veritex share (1.95 HBAN shares × $17.39), the $1.9 billion deal represents a 16% premium to Veritex's July 11 closing price. For Huntington, the transaction is modestly accretive to EPS, a key selling point for investors.

But how does HBAN's valuation stack up? Its current price-to-tangible-book (P/TBV) ratio of ~1.2x is below its five-year average of 1.4x and lags peers like Regions Financial (RF) at 1.5x. This suggests the market may not yet fully price in the Texas growth story.

Risks and Considerations

• Regulatory Hurdles: The deal requires approval from federal and state regulators, which could delay the Q4 2025 close.
• Integration Costs: Merging IT systems and retaining Veritex's staff could strain resources.
• Capital Dilution: While temporary, the 1.95-to-1 stock ratio may worry shareholders about equity dilution.

Investment Thesis: Buy the Dip Ahead of Merger

Huntington's Q2 results and Veritex acquisition combine to create a compelling story: a bank with strong credit metrics, a disciplined growth strategy, and an undervalued stock. The Texas market's long-term potential and the deal's accretive nature make HBAN a buy for patient investors.

Recommendation:
- Buy: For those with a 12–18 month horizon, HBAN's current valuation offers upside if the merger closes on time and Texas growth materializes.
- Hold: Investors focused on dividend income (HBAN's 3.5% yield) can ride the stock's stability while waiting for merger synergies to take hold.
- Avoid: Short-term traders may want to wait for post-merger clarity, though volatility around regulatory approvals could create dips to buy.

The key catalysts ahead are the July 14 merger call and the July 18 earnings call, both of which could provide clarity on execution risks and synergies. With Texas's economy set to outperform, Huntington's strategic bet looks like a winner—if the execution is smooth.