Release Date: April 23, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Veritex Holdings Inc (VBTX, Financial) reported a net operating profit of $29 million or $0.54 per share for the first quarter.
- The company achieved a pretax pre-provision earnings of $43.4 million, indicating strong operational performance.
- Deposit growth was solid, with a focus on bringing in lower-priced relationship dollars and reducing reliance on higher-priced non-relationship dollars.
- Credit quality showed positive trends, with a net decrease in past dues and criticized loans, and charge-offs below forecast.
- The tangible book value per share increased to $22.33, marking a 13.8% year-over-year increase, including dividends paid.
Negative Points
- Loan growth was challenged, with a decrease in loans of $125 million or 5% annualized for the quarter.
- Nonaccrual loans increased by $17 million, primarily due to targeted actions on select retail and office exposures.
- Total loans declined 1.3% during Q1 and 3% on a year-over-year basis, with higher-than-normal payoffs impacting growth.
- The company's reliance on wholesale funding, although reduced, still stands at 13.7%, indicating a need for further reduction.
- Operating expenses are expected to increase slightly due to investments in new hires, despite efforts to manage costs.
Q & A Highlights
Q: Can you provide insights into the core deposit growth and the repricing of CDs in the upcoming quarters?
A: Terry Earley, CFO, explained that the deposit growth is partly due to seasonality and new customer acquisition. The DDA growth includes mortgage escrows, which typically see outflows in Q4. For CDs, the current repricing is in the 4.15% to 4.25% range, offering opportunities to offset the impact of hedge roll-offs.
Q: What is the outlook for expenses, and are there any initiatives that might increase them?
A: Malcolm Holland, CEO, noted that while expenses are a focus, investments in key personnel are ongoing. The company is hiring commercial bankers, which will increase expenses slightly, but they are managing costs by replacing less productive staff with high-performing hires.
Q: How do you view loan growth for the year, considering the current payoffs and commitments?
A: Malcolm Holland, CEO, stated that they expect loan growth to be flat year-over-year, with a decline in the first half and growth in the second half due to strong pipelines. The outlook for 2026 is more optimistic, with mid- to high-single-digit growth expected.
Q: Can you discuss the impact of potential interest rate cuts on the balance sheet?
A: Will Holford, Director of Strategic Corporate Development, mentioned that the balance sheet is now more rate-neutral. If rate cuts occur, there might be short-term NIM pressure, but it should stabilize. The company expects the NIM to remain within the guided range unless there are unexpected rate changes.
Q: What is the outlook for the government-guaranteed lending business, considering the current economic environment?
A: Malcolm Holland, CEO, expressed optimism about the government-guaranteed lending business, particularly the SBA side. They have made significant investments in this area and expect it to outperform in the latter half of the year and into 2026.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
