Executive Summary

Q3 2024 delivered solid profitability and balance sheet strengthening: net income $31.0M, diluted EPS $0.56, NIM 3.30% and ROAA 0.96% with operating EPS $0.59 .
Deposit remix and growth were a clear positive: total deposits rose $311.2M QoQ; noninterest-bearing deposits +$227.2M; loan-to-deposit ratio ex-warehouse fell to 81.9% (target sub-90%) .
Credit quality improved: NPAs declined to 0.52% of assets (from 0.65% in Q2), net charge-offs were de minimis at 1bp annualized; ACL/LHI increased to 1.21% (1.30% ex-warehouse) .
Management reiterated NIM guidance of 3.25%–3.30% for Q4 and indicated 2025 NIM likely “in the 3.20s” given asset sensitivity and deposit repricing plans; a $0.20 dividend was declared (payable Nov 22, 2024) .
Potential stock reaction catalysts: deposit growth at attractive costs, NIM stability, and credit normalization (NPAs down, NCOs minimal) versus elevated operating expense in Q3 driven by incentives and OREO costs .

What Went Well and What Went Wrong

What Went Well

“Best quarter in the history of Veritex in attractively priced deposit production” with $397M raised at 2.84% average rate and wholesale reliance down to 15.7% .
NIM expanded to 3.30% and management executed deposit pricing ahead of a Fed cut, achieving ~80% beta on transactional accounts; total interest-bearing deposit costs fell 30 bps QoQ .
Credit improvement: NPAs fell to 0.52% of assets; OREO reduced from $24M to $9M via sale of a student housing property “without loss” to the bank; net charge-offs only $269K .

What Went Wrong

Operating noninterest expense rose $7.0M QoQ to $70.1M, driven by higher incentive accruals (to 80% of target), OREO-related costs (~$1M), and marketing .
Government-guaranteed loan income was softer, with USDA revenue under expectations; management is shifting mix toward SBA to recover to 2023 levels over time .
Loan growth remained pressured by elevated payoffs; total LHI decreased $180.5M QoQ, and management expects continued payoff activity through Q4 and early 2025 .

Financial Results

Income Statement and EPS vs prior periods

Metric	Q3 2023	Q1 2024	Q2 2024	Q3 2024
Net Interest Income ($M)	$99.361	$92.806	$96.236	$100.062
Noninterest Income ($M)	$9.674	$6.662	$10.578	$13.106
Net Income ($M)	$32.621	$24.156	$27.202	$31.001
Diluted EPS ($)	$0.60	$0.44	$0.50	$0.56
Operating EPS ($)	$0.60	$0.53	$0.52	$0.59

Note: Total net revenue (NII + noninterest income) rose QoQ: $105.84M in Q3 2024 vs $106.81M in Q3 2023 and $106.81M in Q2 2024; calculated from reported NII and noninterest income .

Margins and Efficiency

Metric	Q3 2023	Q1 2024	Q2 2024	Q3 2024
Net Interest Margin (%)	3.46	3.24	3.29	3.30
Efficiency Ratio (%)	54.49	62.45	59.11	61.94
ROAA (%)	1.06	0.79	0.87	0.96

Balance Sheet and Credit KPIs

KPI	Q3 2023	Q1 2024	Q2 2024	Q3 2024
Total Deposits ($B)	$10.197	$10.338	$10.725	$11.036
Total Loans ($B)	$9.670	$9.663	$9.834	$9.708
Loan/Deposit Ratio (%)	94.9	93.6	91.8	88.0
LDR ex-warehouse (%)	90.7	89.1	85.9	81.9
CET1 (%)	10.11	10.29	10.49	10.86
NPAs / Total Assets (%)	0.65	0.82	0.65	0.52
ACL / LHI (%)	1.14	1.15	1.16	1.21
Net Charge-offs / Avg Loans (bps, annualized)	8	22	28	1
Tangible BVPS ($)	$19.44	$20.33	$20.62	$21.72

Segment/Portfolio Mix (Loans & Deposits)

Loan Category ($M, %)	Q2 2024	Q3 2024
C&I	$2,798 (30.4%)	$2,729 (30.2%)
NOOCRE	$2,370 (25.7%)	$2,338 (25.9%)
Construction & Land	$1,537 (16.7%)	$1,437 (15.8%)
OOCRE	$806 (8.7%)	$807 (8.9%)
Multi-family	$749 (8.1%)	$738 (8.2%)

Deposit Category ($M, %)	Q2 2024	Q3 2024
Noninterest-bearing	$2,417 (22.5%)	$2,644 (24.0%)
Money Market	$3,268 (30.5%)	$3,463 (31.4%)
Certificates/Time	$3,745 (34.9%)	$3,626 (32.8%)
Interest-bearing Txn	$523 (4.9%)	$421 (3.8%)

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Net Interest Margin	Q4 2024	3.25%–3.30% (remainder of 2024)	3.25%–3.30% (reaffirmed)	Maintained
NIM outlook	FY 2025	Not provided	“Somewhere in the 3.20s” (best case stable, not expanding)	New qualitative
Loan-to-Deposit Ratio (ex-warehouse)	Near-term	Target <90% by YE’24	81.9% in Q3; intend to remain <90%	Achieved/maintained
Deposit pricing	Q4 2024	Execute downside repricing as Fed cuts	Continue remixing; transactional accounts -40 bps from June to Sept; further reductions planned	Reinforced execution
CRE & ADC concentration	YE 2024	<300% CRE, <100% ADC	302% CRE, 97% ADC; manage “below 300 and 100” going forward	Near target/maintained
Dividend	Q4 2024	$0.20 declared in Q2	$0.20 declared, payable Nov 22, 2024	Maintained

Earnings Call Themes & Trends

Topic	Previous Mentions (Q1, Q2)	Current Period (Q3)	Trend
Deposit strategy and pricing	Building business banking; deposit costs leveling; plan to reprice CDs (5.10–5.15% maturities)	$397M attractive deposits at 2.84%; transactional accounts beta ~80% on cut; interest-bearing costs -30 bps QoQ	Improving mix/costs
NIM outlook	Q1 troughing; Q2 3.25–3.30% guided	Reaffirmed 3.25–3.30% Q4; 2025 “3.20s”	Stable/slightly lower in 2025
Loan growth vs payoffs	Expect mid-single-digit loan growth; payoffs significant, esp. CRE	Pipeline healthy but payoffs likely heavy in Q4/early ’25; mortgage warehouse supportive	Growth constrained by payoffs
Credit normalization	NPAs down; office exposure declining	NPAs 0.52%; net charge-offs minimal; OREO sale at no loss; criticized assets managed actively	Improving risk metrics
Government-guaranteed lending (USDA/SBA)	USDA weak; pivot to SBA; revenue lowered 15–20% internal forecast	SBA momentum; USDA lumpy; target to recapture 2023 total levels via SBA mix	Mix shift to SBA
Capital & buyback	Opportunistic buybacks below TBV; capital ratios rising	CET1 +37 bps QoQ to 10.86%; buyback use limited at higher valuation; build “dry powder”	Stronger capital, cautious buybacks
Technology/process	Focus on small business franchise; efficiency initiatives	Engaged consulting firm to improve process/technology; fee income opportunities	Operational efficiency focus

Management Commentary

CEO on deposits and balance sheet: “Deposits grew $311 million or 11.6% annualized, proving out our strategy to grow an attractively priced deposit funding sources.”
CFO on NIM execution and guidance: “We believe the NIM will remain in the range of 3.25 to 3.30 over the remainder of '24... 2025... somewhere in the 3.20s.”
CFO on hedges/earnings sensitivity: “The effect of this is $1 million a month in NIM... we have hundreds of millions of dollars of fixed received hedges that are going to help mitigate this.”
CEO on credit progress: “OREO decreased from $24 million to $9 million... This sale was also the driver to a reduction in our NPAs... Charge-offs were nominal at $269,000.”
CFO on expenses: “The $6 million increase... reflects us moving our accrual up to 80% of target... OREO expenses... Recognizing the need to improve our operating leverage... we engaged a national consulting firm.”

Q&A Highlights

Loan growth/payoffs: Expect heavier payoffs Q4/early ’25; pipelines strong in C&I but growth likely below mid-single digits given payoff activity .
Margin mechanics: NIM guided 3.25–3.30 for Q4; 2025 likely “3.20s”; hedges mitigate some downside; floating loans ~75% of portfolio reset quickly with Fed moves .
Deposit costs and remix: Spot cost interest-bearing ~4.38% and total deposits ~3.33%; continue reducing high-cost deposits and wholesale/public funds .
Government-guaranteed revenue: SBA gaining momentum; USDA remains lumpy; plan to get back to 2023 total government-guaranteed revenue via heavier SBA mix .
Capital and buybacks: Build capital “dry powder”; cautious on buyback at current valuation; CRE/ADC concentrations near targets, production resuming prudently .

Estimates Context

We attempted to retrieve Wall Street consensus (EPS, revenue, EBITDA) from S&P Global but the service returned a daily request limit error; consensus estimates were unavailable at time of analysis [GetEstimates error].
Without consensus, we cannot characterize beats/misses. Observed results: diluted EPS $0.56 and operating EPS $0.59, NIM 3.30%, ROAA 0.96%, reflecting QoQ improvement in earnings, margin, and credit metrics .

Key Takeaways for Investors

Deposit franchise strengthening is tangible: higher NIB mix, lower average costs, and reduced reliance on wholesale/public funds; expect continued remix to support NIM even in a cutting cycle .
NIM is stabilizing at ~3.25–3.30 near term; 2025 likely mid-3.20s as assets reprice down—hedges and deposit repricing help mitigate downside .
Credit normalization is advancing (NPAs down, NCOs minimal, ACL up), reducing earnings volatility from interest reversals and improving risk profile .
Loan growth headwinds from heavy payoffs persist; mortgage warehouse should aid revenue, but growth will likely be modest near term .
Operating expense elevated in Q3 due to incentives and OREO costs; management is pursuing structural efficiency via process/technology initiatives to improve operating leverage in 2025 .
Capital and liquidity are strong (CET1 10.86%; total available liquidity ~$7.45B), providing strategic flexibility while supporting dividend continuity at $0.20/share .
Near-term trading: narrative favors deposit cost tailwinds/NIM stability and credit improvement versus expense noise; medium-term thesis hinges on deposit franchise expansion, disciplined loan growth, and efficiency gains .

Sources: Q3 earnings release/8-K exhibits and investor presentation , Q3 earnings call transcript , Q2 press release and call for trend , Q1 call , dividend release .

Veritex Holdings, Inc. (VBTX)·Q3 2024 Earnings Summary