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VH

Veritex Holdings, Inc. (VBTX)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 operating EPS of $0.54 and GAAP diluted EPS of $0.53; NIM expanded 11 bps to 3.31% on deposit cost reductions and sub debt redemption . EPS beat S&P Global consensus ($0.54 vs $0.51), while “revenue” missed ($104.43M actual vs $110.68M est.)—driven by loan yield compression and fewer days in the quarter; deposit remixing partly offset pressure *.
  • Credit broadly stable: criticized loans -4.3% QoQ and -26% YoY; past-dues fell to $10.6M; however NPAs rose to $96.9M (0.77% of assets) as the bank accelerated resolution on select office/retail exposures .
  • Balance sheet strengthening: LDR at 88.9%; wholesale funding down to 13.7%; CET1 ~11.04%; redeemed $75M sub notes; TBV/share increased $0.72 to $22.33; dividend raised to $0.22; 377K shares repurchased; buyback program extended to Mar-2026 .
  • Management maintained NIM outlook of ~3.25–3.30% for 2025, expects 2025 loans roughly flat given elevated payoffs, and guided to mid/high-single-digit loan growth in 2026 as ADC/C&I pipelines convert; deposit costs expected to continue drifting lower as $1.9B CDs refinance at ~4.15–4.25% in Q2–Q3 .
  • Near-term stock catalysts: continued deposit repricing/NIM stability, visible resolution of nonaccruals into Q3, opportunistic buybacks (especially below TBV), and momentum in SBA/government guaranteed lending .

What Went Well and What Went Wrong

What Went Well

  • NIM up 11 bps QoQ to 3.31% on lower deposit costs and $75M sub debt redemption; management expects NIM to be stable in the 3.25–3.30% range in 2025 .
  • Operating efficiency improved: operating noninterest expense fell QoQ and operating efficiency ratio improved to ~60.6% (CFO: “attention to expenses has never been greater”) .
  • Credit execution: criticized loans down 4.3% QoQ and 26% YoY; past-due loans down to $10.6M; 2025 net charge-off forecast held at ~20 bps (annualized Q1 at 17 bps) .

Management quotes:

  • “Our continued pursuit to achieve ROAA exceeding 1% in the back half of the year is very much in focus and realistic.” — CEO Malcolm Holland .
  • “Veritex is very focused on reducing deposit pricing… Q1 ’25 was another successful quarter of deposit remixing.” — CFO Terry Earley .
  • “We expect NIM to return to the 3.25% to 3.30% range for the remainder of the year.” — Director Will Holford .

What Went Wrong

  • Loan balances declined linked-quarter: LHI fell ~$70.5M QoQ as CRE/ADC paydowns continued; management flagged industry-wide loan growth challenges .
  • NPAs increased to $96.9M (0.77% of assets) on targeted actions to resolve two office/retail loans; nonaccruals rose to $72.6M .
  • “Revenue” miss vs S&P consensus: $104.43M actual vs $110.68M estimated, as loan yields and volumes declined; fewer days in Q1 also weighed; deposit cost reductions only partially offset *.

Financial Results

Headline metrics vs prior periods:

MetricQ3 2024Q4 2024Q1 2025
Diluted EPS (GAAP) ($)0.56 0.45 0.53
Diluted Operating EPS ($)0.59 0.54 0.54
Net Interest Margin (%)3.30 3.20 3.31
Efficiency Ratio (%)61.94 67.04 60.91
ROAA (%)0.96 0.78 0.94

Revenue components:

MetricQ3 2024Q4 2024Q1 2025
Net Interest Income ($MM)$100.06 $96.14 $95.44
Noninterest Income ($MM)$13.11 $10.06 $14.29

Q1 2025 vs S&P Global consensus:

MetricConsensusActualSurprise
Primary EPS ($)0.51*0.54*+0.03*
Revenue ($MM)$110.68*$104.43*-$6.25*

Values retrieved from S&P Global.*

Segment/loan mix (Q1 2025):

LHI Category (% of LHI)Q1 2025
C&I30.7%
NOOCRE25.6%
Construction & Land (ADC)13.7%
1–4 Family Residential11.6%
Multifamily8.9%
OOCRE9.0%
Farmland0.4%
Consumer0.1%

Key KPIs:

KPIQ3 2024Q4 2024Q1 2025
Total Loans/Deposits (%)88.0 89.3 88.9
Wholesale Funding Reliance (%)16.6 13.7 13.7
CET1 (%)10.86 11.09 11.04
ACL to Total LHI (%)1.21 1.18 1.19
NPAs / Total Assets (%)0.52 0.62 0.77
Net Charge-offs / Avg Loans (bps)1 32 17
Avg Cost of Interest-bearing Deposits (%)4.44 4.07 3.74
Avg Cost of Total Deposits (%)3.42 3.16 2.91

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
NIMFY 20253.25–3.30% (prior commentary)3.25–3.30%Maintained
Loan GrowthFY 2025Modest growth targetedRoughly flat for 2025; back-half improvementLowered/tempered
Loan GrowthFY 2026N/AMid- to high single digitsIntroduced/positive
Deposit Costs (CDs)Q2–Q3 2025$1.9B maturing @ 4.57%Repricing originations ~4.15–4.25%Lowered
LDR TargetOngoing~≤90%Remain below 90%Maintained
Charge-offsFY 2025~20 bps~20 bps (unchanged)Maintained
Asset Sensitivity2025Higher sensitivityReduced; “pretty rate neutral” with lag on CDsLowered sensitivity
Capital Actions2025Consider sub debtRedeemed $75M; $125M tranche callable mid-Oct—partial paydown possible/refi optionalityExecuted/updated
DividendQ1 2025$0.20$0.22 per shareRaised
Buyback ProgramThrough 2025$50MM authorizationExtended through 3/31/2026; $13.1MM used to dateExtended

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 & Q4 2024)Current Period (Q1 2025)Trend
NIM trajectoryNIM 3.30% (Q3); 3.20% (Q4) as loan yields fell; deposit costs started easing NIM 3.31%; guide 3.25–3.30% for 2025; stable absent outsized rate cuts Stabilizing
Deposit remixing/costsLinked-quarter deposit growth; attractive deposits up; avg total deposit cost 3.42% (Q3), 3.16% (Q4) Avg total deposit cost down to 2.91%; CDs to reprice ~4.15–4.25%; wholesale reliance 13.7% Improving
Loan growth/payoffsLHI down; CRE/ADC concentrations managed down LHI down ~$70.5M; production strong but funding lag; 2025 flat; 2026 mid/high single-digit Near-term muted; improving later
Credit qualityNPAs reduced in Q3; ACL to LHI up to 1.21% (Q3), 1.18% (Q4) NPAs rose to 0.77% assets due to targeted actions; criticized down; ACL 1.19% Mixed: resolution work ongoing
Asset sensitivity/ratesRate sensitivity higher in prior year; sensitivity being reduced “Pretty rate neutral”; CDs lag in cuts; 76% loans floating; NIM stable with 2 cuts Lower sensitivity
Government guaranteed lendingUSDA volumes variable; OREO income elevated Momentum in SBA; investment in talent; aim for more stable revenue vs prior USDA focus Positive shift
Mortgage warehouseBalances up YoY; tied to rates/app volumes Seasonality; likes business; RWA relief sought; aim for higher averages if long end declines Dependent on rates
Capital actionsCET1 improved; TBVPS rose; dividend $0.20 Redeemed $75M sub notes; dividend $0.22; buybacks opportunistic esp. below TBV Shareholder-friendly

Management Commentary

  • Strategy and profitability: “Our continued pursuit to achieve ROAA exceeding 1% in the back half of the year is very much in focus and realistic… Our challenge… remains disciplined loan growth.” — CEO Malcolm Holland .
  • Credit stance: “We realized a net decrease in past dues and criticized loans… We expect resolution on a majority of our current nonaccrual exposure by early third quarter.” — CCO Curtis Anderson .
  • Capital and dividends: “Considering our growth outlook… the bank has increased its quarterly dividend by 10% to $0.22 per share… repurchased 377,000 shares… earn-back just over 2 years.” — CFO Terry Earley .
  • NIM outlook: “We expect NIM to return to the 3.25% to 3.30% range for the remainder of the year… deposit cost declined 33 bps, while asset yields only declined 12 bps.” — Director Will Holford .
  • Deposit strategy: “Q1 ’25 was another successful quarter of deposit remixing… Growth from our core lines of business allowed us to reduce our reliance on unattractively priced deposits.” — CFO Terry Earley .

Q&A Highlights

  • Deposit repricing: $1.9B CDs maturing at 4.57% expected to reprice to ~4.15–4.25%, supporting NIM despite hedge roll-off .
  • Expense outlook: Management continues to invest in talent; expects expenses to be up modestly from Q1 but below Q4 levels .
  • Loan growth: 2025 loans roughly flat (down 1H, improving 2H); 2026 mid/high-single-digit growth as pipelines fund .
  • Buybacks: Opportunistic, especially if shares trade below TBV; $37M remaining authorization (~>3% of shares at current price) .
  • Credit resolution: Increased nonaccruals driven by office/retail names targeted for resolution by early Q3; criticized loans trending down .
  • Government guaranteed lending: Pivot toward SBA to improve granularity and forecastability; momentum strong with new hires .
  • Mortgage warehouse and RWA relief: Business remains attractive; RWA relief is a priority; balances tied to rate/app volumes .

Estimates Context

  • EPS beat vs S&P Global consensus: Primary EPS $0.54 actual vs $0.51 estimate (+$0.03)*.
  • Revenue miss vs S&P Global consensus: $104.43M actual vs $110.68M estimate (-$6.25M)*.
  • Potential estimate revisions: Continued deposit cost declines and stable NIM could support slight EPS upward revisions; however, muted loan growth and elevated NPAs near-term may cap revenue expectations until nonaccrual resolutions and ADC funding accelerate .
    Values retrieved from S&P Global.*

Key Takeaways for Investors

  • NIM durability: Deposit cost reductions and lower wholesale reliance underpin stable NIM (3.25–3.30%) through 2025, a key support for EPS resilience .
  • Visible credit work: Near-term uptick in NPAs reflects proactive resolution; with targeted actions, management expects majority of nonaccrual resolution by early Q3, potentially reducing credit overhang .
  • Loan growth timing: Expect muted 2025 loans amid elevated payoffs; 2026 outlook improves as ADC/C&I pipelines fund—watch for 2H’25 signs of acceleration .
  • Capital return: Dividend raised to $0.22; buybacks likely opportunistic (especially <TBV) with $37M remaining authorization—supportive of per-share metrics .
  • Government guaranteed lending pivot: Increased SBA focus and talent investments should build a steadier fee stream in 2H’25/2026, diversifying revenue .
  • Rates and sensitivity: Lower asset sensitivity and CD repricing cadence suggest limited NIM downside if cuts occur; temporary lag in deposit repricing remains a watch item .
  • Trading implications: Near term, stock likely reacts to credit resolution headlines and NIM path; medium term, improving fee mix, ADC funding ramp, and capital return should support multiple and EPS growth .
Note: Company press release and 8-K (Item 2.02) constitute the Q1 2025 earnings release; dividend and investor presentation were furnished as Exhibits. All figures and commentary cited to company documents are from those filings and the Q1 2025 earnings call. S&P Global consensus/actual values are marked with an asterisk and noted accordingly.