• Net Operating Profit (Q4 2024): $29.8 million or $0.54 per share.
• Pretax Pre-Provision Earnings (Q4 2024): $41 million or 1.28%.
• Operating Earnings (Full Year 2024): $119.4 million or $2.17 per share.
• Net Interest Margin (Q4 2024): Decreased to 3.20%.
• Common Equity Tier 1 (CET1) Ratio: 11.09%, expanded by 23 basis points during the quarter.
• Tangible Book Value Per Share: $21.61, with a 10.9% increase year-over-year.
• Allowance for Credit Losses (ACL): 118 basis points, with general reserves comprising 97% of the total allowance.
• Total Loans (Q4 2024): Declined 1.2% during the quarter and 0.7% year-over-year.
• Loan-to-Deposit Ratio: Reduced from 104% to 89% over the past two years.
• Net Interest Income (Q4 2024): Decreased by $4 million.
• Operating Noninterest Income (Q4 2024): Increased by $1.3 million to $14.5 million.
• Operating Expenses (Q4 2024): Increased by $1 million.

• Warning! GuruFocus has detected 3 Warning Sign with VBTX.

Release Date: January 29, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Veritex Holdings Inc (NASDAQ:VBTX) reported a net operating profit of $29.8 million for the fourth quarter, indicating strong financial performance.
• The company has successfully reduced its reliance on wholesale funding by 20% over the past year, improving its liquidity position.
• Criticized loans have declined by 20% year-over-year, showcasing effective credit risk management.
• The CET1 ratio expanded by 80 basis points year-over-year, reflecting a stronger capital position.
• Veritex Holdings Inc (NASDAQ:VBTX) has seen strong deposit growth, allowing it to reduce its loan-to-deposit ratio from 104% to 89% over the past two years.

Negative Points

• Net interest margin (NIM) decreased by 10 basis points from Q3 to 3.20%, indicating pressure on interest income.
• Total loans declined by 1.2% during Q4 and 0.7% on a year-over-year basis, reflecting challenges in loan growth.
• Non-performing assets (NPAs) increased from $67.3 million at the end of Q3 to $79.2 million at year-end, indicating some deterioration in asset quality.
• The company experienced a decrease in tangible book value per share, down slightly from the third quarter of 2024.
• Veritex Holdings Inc (NASDAQ:VBTX) did not purchase any shares during the quarter, leaving 93% of the authorized stock buyback program unused.

Q & A Highlights

Q: Malcolm, you mentioned a target of 1% ROA in 2025. Can you confirm how you plan to achieve this and what the biggest drivers will be? A: Yes, we aim for 1% ROA by Q3 2025. The main drivers will be loan growth and repricing on the deposit side. We expect to see good movement in these areas, despite headwinds from payoffs. Our focus will be on disciplined loan growth and enhancing fee income.

Q: Regarding loan growth, what are you seeing in terms of pipeline growth, and what gives you confidence in achieving this despite payoffs? A: Our production side is strong, with robust pipelines. The Texas market remains active, and we are seeing deals with significant equity. We anticipate needing to generate $1.4 billion in new loans to maintain balance, and we are confident in achieving this.

Q: On the $1.5 billion in maturing CDs in Q1, what rates do you expect to offer, and what retention rate do you anticipate? A: We are placing new CDs at a 4.24% rate and have experienced good retention. Some migration to money market accounts is occurring, but overall retention is strong.

Q: Can you provide more color on expected expense growth for 2025? A: We anticipate low to mid-single-digit expense growth. With disciplined loan growth, NIM expansion, and strong fee execution, we expect to achieve positive operating leverage.

Q: How are you managing credit risk, and what is the expected net charge-off ratio for 2025? A: We managed charge-offs at 21 basis points in 2024 and expect a similar range for 2025. Our credit management has improved significantly, and we are confident in continued progress.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.