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VH

Veritex Holdings, Inc. (VBTX)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 GAAP diluted EPS was $0.45 (operating EPS $0.54), with net interest margin troughing at 3.20% as deposit mix improved and NII fell sequentially; management expects NIM to expand to 3.25–3.30 in Q1 2025 and targets ≥1% ROAA in 2025, likely first achieved in Q3 .
  • Balance sheet strength improved: CET1 rose to 11.09% (+80 bps YoY), LDR decreased to 89.3%, and criticized loans fell ~$78.5M QoQ with early-January payoffs reducing criticized further by ~$50M; NPAs rose to 0.62% due to an office foreclosure under LOI with expected no loss .
  • Funding remix and CD repricing are central 2025 catalysts: ~$2.3B of CDs maturing over two quarters at ~4.95% average rate, with new CDs in early Q1 2025 repriced near ~4.24% and brokered/public funds reduced in Q4 .
  • Total “net revenue” (NII + noninterest income) softened QoQ on loss from securities restructuring but surged YoY vs the prior-year equity method write-down; government-guaranteed loan income rebounded strongly in Q4 .
  • Street consensus EPS/revenue estimates were unavailable via S&P Global tool at time of review; beats/misses cannot be determined (S&P Global consensus not accessible) [GetEstimates error].

What Went Well and What Went Wrong

What Went Well

  • “We achieved significant milestones during 2024 as we improved our credit risk profile and strengthened and completed our balance sheet remake… now it’s back to what we do best; grow profitability.” — CEO C. Malcolm Holland .
  • Capital and liquidity strengthened: CET1 11.09%, tangible common equity/tangible assets 9.54%, total liquidity ~$6.6B in Q4; wholesale funding reliance reduced to 16.6% and LDR to 89.3% .
  • Operating leverage drivers: deposit cost decline (avg cost of total deposits 3.16% in Q4 vs 3.42% in Q3), fee lines (SBA/USDA, swaps, treasury) improving; management expects positive operating leverage in 2025 .

What Went Wrong

  • Sequential compression in NIM and NII: NIM down 10 bps QoQ to 3.20% and NII down 3.9% to $96.1M, primarily from lower loan yields and average balances; a $4.4M loss on AFS securities reduced noninterest income .
  • NPAs increased to 0.62% on an office property foreclosure (under LOI), and noninterest expense rose YoY (+18%) on higher salaries, other expenses, and data processing .
  • Loan balances declined: LHI fell ~$129M QoQ and ~$307M YoY, with elevated CRE payoffs continuing to challenge organic loan growth .

Financial Results

MetricQ4 2023Q3 2024Q4 2024
GAAP Diluted EPS ($)0.06 0.56 0.45
Operating Diluted EPS ($)0.58 0.59 0.54
Net Interest Income ($000s)95,533 100,062 96,141
Total Noninterest Income ($000s)(17,792) 13,106 10,056
Net “Revenue” (NII + Noninterest) ($000s)77,741 113,168 106,197
Net Interest Margin (%)3.31 3.30 3.20
Efficiency Ratio (%)77.49 61.94 67.04
ROAA (%)0.11 0.96 0.78

Segment/Portfolio composition (LHI):

LHI Mix (%)Q4 2023Q3 2024Q4 2024
C&I29.9 30.2 30.2
OOCRE8.6 8.9 8.8
NOOCRE25.5 25.9 26.7
Construction & Land18.8 15.8 14.7
1–4 Family10.2 10.5 10.7
Multifamily6.6 8.2 8.4
Consumer0.1 0.1 0.1
Total LHI ($000s)9,215,329 9,036,792 8,908,115

Key KPIs:

KPIQ4 2023Q2 2024Q3 2024Q4 2024
CET1 (%)10.29 10.49 10.86 11.09
LDR (%)93.6 91.8 88.0 89.3
ACL / LHI (%)1.14 1.16 1.21 1.18
NPAs / Assets (%)0.77 0.65 0.52 0.62
Operating Efficiency Ratio (%)55.50 58.41 60.63 62.98

KPIs are presented to show quarter-over-quarter and year-over-year trajectory.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Interest MarginQ4 20243.25–3.30% for remainder of 2024 3.25–3.30% for Q1 2025 (assumes no Fed cuts) Maintained (timing rolled forward)
ROAA TargetFY 2025N/A explicit prior≥1.0% ROAA in 2025; first hit likely Q3 2025 New explicit target
CDs RepricingQ1–Q2 2025~$2.3B CDs maturing at ~5.18% (2H 2024 view) ~$2.3B CDs maturing at ~4.95% avg; new CDs reprice ~4.24% in early Q1 2025 Lower funding cost expected
LDR (ex-MW)OngoingTarget <90% by end-2024 Remain below 90% going forward Maintained
Wholesale Funding RelianceOngoingTrending down (15.7–18.9%) ~16.6% at Q4; continue reducing Maintained downward trend
Sub Debt RepaymentFeb 2025N/A$75M sub debt to be repaid (SOFR + 347 bps) New action item

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 & Q3 2024)Current Period (Q4 2024)Trend
Net interest margin and rate sensitivityNIM guided 3.25–3.30 for 2H’24; down 100 bps shock ~4.58% in Q2; excess cash headwind in Q3 NIM trough at 3.20 in Q4; guided 3.25–3.30 for Q1’25; down 100 bps shock improved to 2.55% Improving sensitivity; NIM expected to rise
Funding remix / deposit pricingTime deposits kept short; ~$2.3B CDs maturing in 2H’24; deposit cost near peak ~$2.3B CDs maturing over two quarters at ~4.95% avg; new CDs ~4.24%; brokered/public funds reduced Cost decline and mix improving
CRE/ADC concentrationsCommitted to <300% CRE and <100% ADC by year-end; organic payoffs driving reduction CRE concentration ~299%; ADC ~87%; continued pipeline of payoffs Downward trajectory maintained
Credit quality (criticized, NPAs)Criticized assets stable; NPAs down to 0.65% (Q2) and 0.52% (Q3) NPAs up to 0.62% due to office foreclosure under LOI; criticized down ~$78.5M QoQ and ~$50M more in Jan Mixed: NPAs up on one event; criticized trending down
Fee businesses (SBA/USDA, treasury, swaps)USDA underperformed; SBA momentum building; treasury fees rising Government-guaranteed income strongest quarter; building fee contributions in 2025 Improving fee trajectory
Capital and buybacksOpportunistic buyback in Q2; CET1 up; focus on profitability over buybacks CET1 11.09%; buyback authorization mostly unused; maintain strong capital Capital strengthening; cautious on buybacks

Management Commentary

  • “We are laser-focused and committed to… return on average asset levels in excess of 1% in 2025 and beyond… Q3 is probably a good quarter to hit that number.” — CEO C. Malcolm Holland .
  • “The CET1 ratio expanded by 23 basis points during the quarter… now stands at 11.09%… we intend to be opportunistic [with buyback].” — CFO Terry Earley .
  • “Criticized loans are down $100 million year-over-year and down $78.5 million from the third quarter… early January payoffs further reduced criticized by approximately $50 million.” — CCO Curtis Anderson .
  • “Net interest margin decreased 10 basis points… we believe the NIM has troughed in Q4 and should be in the range of 3.25 to 3.30 in Q1.” — CFO Terry Earley .

Additional press release items:

  • Declared quarterly cash dividend of $0.20 per share (paid Feb 28, 2025) .
  • Lithic and Veritex Community Bank announced a strategic partnership (Jan 29, 2025), underscoring technology ecosystem engagement .

Q&A Highlights

  • Path to ≥1% ROAA: Management targets Q3 2025 driven by loan growth, deposit repricing, and expanding fee businesses (treasury, cards, swaps, SBA/USDA) .
  • Loan growth vs payoffs: Elevated payoffs (especially CRE) remain headwinds; pipelines strong, expecting low-to-mid single-digit loan growth for 2025 with heavier payoffs in 2H .
  • Deposit mix and noninterest-bearing: Seasonal/intentional exits (expensive ECR) reduced NIB in Q4; expect NIB to rebuild to 21–23% through the year .
  • Funding cost trajectory: CDs repricing lower (new ~4.24%); management executing remix away from highest-rate deposits; cost of deposits near peak .
  • Margin outlook: NIM expansion contingent on deposit repricing, sub debt repayment ($75M, SOFR+347 bps), securities restructuring earn-back (~1.4 years) .

Estimates Context

  • S&P Global consensus EPS and revenue estimates for Q4 2024 and Q3 2024 were unavailable via the tool at time of request; beats/misses versus Street cannot be assessed. The absence of accessible consensus precludes an estimates comparison (S&P Global consensus not accessible) [GetEstimates error].

Key Takeaways for Investors

  • Margin inflection setup: Q4 NIM likely trough; Q1 2025 guided higher with additional tailwinds from $75M sub debt repayment and CD repricing; monitor execution on deposit cost reductions and remix .
  • Credit de-risking continues: Criticized down sharply QoQ and further in January; NPAs increase from a foreclosed office asset under LOI with expected no loss; watch subsequent NPAs trajectory and charge-offs vs ~20 bps run-rate .
  • CRE/ADC concentrations now sub-300%/~87%: Continued organic payoffs and discipline in new production should preserve regulatory comfort while enabling growth in C&I and fee-rich relationships .
  • Fee income momentum: Government-guaranteed income strongest of the year in Q4; broader fee lines (treasury, swaps, card) targeted to drive positive operating leverage in 2025 .
  • Capital strength: CET1 at 11.09% and TCE/TA at 9.54% underpin strategic flexibility; buyback usage likely opportunistic rather than core allocation .
  • Liquidity robust: Available liquidity (~$6.6B) exceeds uninsured/uncollateralized deposits; rate sensitivity improved materially in “down” scenarios .
  • Watch execution risks: Elevated payoffs, deposit repricing pace, and maintaining NIM expansion without unexpected credit reversals; fee growth and operating expense discipline remain critical to ROAA ≥1% .
Notes:
- “Net Revenue” presented as Net Interest Income + Total Noninterest Income; values derived directly from reported line items **[1501570_0001501570-25-000008_a2024annual-exhibit991q4.htm:8]**.