Veritex Holdings in Dallas warned that it will record a big charge-off in its energy portfolio.
The $8 billion-asset company disclosed in a regulatory filing Monday that it expects to charge off $6 million to $6.5 million tied to a loan it inherited from its August 2017 acquisition of Sovereign Bancshares.
As a result, Vertiex said it expects to have a higher loan-loss provision in the third quarter.
The issue is tied to a $7.8 million loan to an independent oil and gas exploration firm that filed for bankruptcy protection last year and recently entered into a sales process.
Veritex said it had previously classified the acquired commercial relationship as a nonperforming asset as it “monitored the relationship and sought to find a resolution,” the filing said.
Brady Gailey, an analyst at Keefe, Bruyette & Woods, wrote in a note to clients that the charge-off is roughly equal 0.6% of the company’s tangible book value per share.
“While the size of the charge off is large and not ideal, we aren't concerned about overall credit quality at” Veritex, Gailey added. “Bigger picture, Veritex remains a high-quality, highly profitable Texas bank in some of the best Texas geographies with great scarcity value.”
