Transcript
Coming up, something of a Dazed and Confused episode for Cornerstone’s Plugged In series with my host, Steve Williams, who might play the role of Wooderson, famously done by the one and only Matthew McConaughey.
I’m Al Dominick, and I have to admit I am just a bit dazed by the Dallas Mavericks trading Luka Dončić to the Lakers. But I am certainly not confused by the growth of a standout bank down in the Lone Star State led by our guest, Veritex CEO Malcolm Holland. Malcolm, what’s happening, my friend?
Good morning, guys. Great to be with you. Dallas is in mourning officially now that Luka is gone.
The conspiracy theorists among us will have to take a pause before we get into the future of the Mavericks and really the NBA, because there’s a lot of news that’s been coming out.
Steve Williams loves to dig into releases, earnings reports and other things that hit over the weekend. Steve, what did you find about the bank that’s worth our listeners hearing?
I’m excited we’re starting the year with Plugged In with a true entrepreneur in banking. This is a great story of a bank being started in 2009 in the middle of the financial crisis, when people were worried about TARP money, and Malcolm and the team came in and said, let’s build Texas’ bank.
It’s incredible growth that we’ve talked about, but also a place that’s really bound in mission and purpose. I hope we dig into that.
For relationship managers, professionals and even techies out there, Malcolm is someone who makes banking fun every week. Charge the hill, grow the place, have fun. Malcolm, thanks for joining us and kicking off our year in 2025. Let’s keep saluting the entrepreneurial bankers out there.
Glad to be here. I am an entrepreneur. I’m just in a banker’s body, so we look forward to talking.
As both Steve and Malcolm mentioned, it’s a really interesting time to be in the banking hot seat. We love bringing entrepreneurs onto Plugged In, and today is no exception.
I recently had an opportunity to listen to Malcolm’s CFO, Terry Earley, at Acquire or Be Acquired out in Arizona. Terry dropped some pretty compelling Texas market demographics while talking about how you’re building the smarter bank. I jotted some notes down, so forgive me if I rattle off some stats.
The population of Texas is about 30 million, second-largest in the U.S. behind California. You have projected population growth of 4.1% versus the national average of 2.1%, so we’re talking roughly twice the average U.S. rate.
What’s cool from a banking standpoint is that 54 Fortune 500 companies are headquartered in Texas, 49 of which are in the bank’s core target markets.
Living in D.C., I’m surrounded by economists, lobbyists and folks trying to pull businesses over here to the East Coast. Since 2023, there have been 24 headquarters relocated to the state of Texas, and since 2018, 465.
If Texas were its own independent entity, which we know some Texans love to talk about, it would be the eighth-largest economy in the world at more than $2.6 trillion.
For a pro-business environment with no personal or corporate state income taxes, it’s a pretty decent place to call home. I also have to imagine it’s a pretty decent place to run a bank.
There’s no question. You definitely hit the highlights. I didn’t pick Texas. I went to SMU back in the late ’70s and ended up staying here. My family’s from here. I didn’t grow up here, so it was by happenstance that we’re here.
Fortunately, we’ve had some pretty good leadership at the government level down in Austin for many decades. And let’s not forget we have this stuff that comes out of the ground that’s black and runs.
Liquid gold.
Liquid gold, and that sure does make things easier when the budgets get met every year, not to mention the climate and all those other things. We’re fortunate to be in the state of Texas for so many reasons.
Everything’s bigger in Texas. I firsthand saw this when I went to St. Mark’s in Dallas for a few years in high school, so I have an appreciation for where Malcolm is and what he’s doing.
I said Dazed and Confused, and I have some appreciation for movie and musical references. Since we love to use lyrics on Plugged In to keep the conversation going, I thought I’d borrow from that wonderful movie. It had quite a few songs that are near and dear to most of our hearts.
With apologies to Foghat and “Slow Ride,” it has not been a slow ride for your team down in Texas.
Malcolm, maybe you can kick it off by talking about how things started. If you take us back to the start of the bank, what did you envision and what has happened since then?
Those are great questions. I’ve always had this entrepreneur bug in my body. In 1985, when I was 25 years old, I started a bank from scratch with two other guys, literally a de novo.
As some people remember, 1989 to 1990 was one of the worst times in banking we’ve ever had. I’ve experienced those bad times.
Fast-forward to 2009. It was getting pretty nasty. You could buy banks with FDIC assistance, and institutions were folding. I was with Colonial Bank Group out of Montgomery, Alabama, and we were closed in August 2009.
At the time, I was actually trying to buy the Texas assets we had built up within Colonial and extract them before a potential failure. I didn’t know it was going to fail, but it felt like it was going to. Texas was doing fine.
I was unable to get that transaction done. The bank was closed, and BB&T came in that Friday and took over the bank. I was at BB&T for about three weeks. They offered me a great job: run Texas, we’ll give you the capital, keep going.
I went home to my wife and said, “Honey, I can’t do this.”
She said, “What do you mean?”
I said, “BB&T is a fine institution, but they do things in banking that I don’t understand. That’s not how we build them in Texas.”
I’m a very transparent guy. We got wiped out financially pretty much in the Colonial Bank deal. Her mom had just passed away and left her a little bit of money.
I went to my wife and said, “Honey, here’s what I want to do. I want to leave the bank, go find a bank to buy or start a new bank, and I’m going to take all the money your mom left you, not me, and invest it in this business.”
She said, “Let me get this straight. You’re 49 years old, we just got wiped out, they just offered you the best financial deal you’ve ever had in banking from a large company that’s not going anywhere, and you want to take all the money my mom left me to start this business, and you have no idea who you’re going to buy or what you’re going to do?”
I said, “Yeah, that’s pretty much it.”
She said, “All right. I believe in you.”
Man, that’s a great wife.
That literally is how it happened. I went in the next week and said, “Guys, I’m leaving.” I took that money, brought three people with me, and we started our track to do Veritex.
Fast-forward a year. We found a bank and finally closed on it in September 2010. We bought three little banks in the first 13 months. That was the start and evolution of Veritex.
The goal was to build a $1 billion to $1.5 billion bank and sell it like everybody else did. That’s what you did in community banking. You built it, sold it, took your $10 stock and hopefully got $20 for it, then moved on.
That didn’t happen that way, but that’s how it got started.
That’s awesome. Now at $12 billion or $13 billion, where is the end of the journey for you? You’ve proven that a regional bank, or at least a small regional bank, can still be fun and edgy.
Has the landscape changed so that you don’t have to exit at a few billion? Can you keep the ride going?
If you look back over our 14 and a half years, and in September it’ll be the 15-year anniversary of our first bank, one thing we’ve done really well is stay opportunistic along the entire journey. We just want to be ready for potential opportunities that come our way.
The only way you can be ready is to have the right team, the right people and capital. You have to have those ingredients in order to be successful.
That’s one of the reasons we went public in 2014. I had raised $65 million or $70 million on my own until that time, and it was a rear-end whipping. It was hard.
The landscape has changed. Once you pass certain hurdles, things look different. I don’t like to look back very often and say, “I wish I would have done that,” because you learn from all these different things.
But the one thing is, when we decided to go over $10 billion on our own, that was hard. It’s expensive, and Terry and I both missed the cost.
We find ourselves in this spot we call no man’s land, and the regulators actually mentioned that to us. The next plateau, if you will, is around $17.5 billion to $22.5 billion. That’s where we find ourselves today.
I have the team to do it. We have the markets to do it. I think that’s where we’re headed, but who knows?
The math really shows it. You go over $10 billion, your mid-50s efficiency ratio jumps into the low 60s, and that’s part of life. To do that through the Fed tightening we experienced was no fun.
Correct.
But it sounds like you believe this is still a great place for talent and relationship managers to come and grow the bank. To me, it’s keeping the place where a great RM in Texas says, “This is my best option.”
Absolutely.
As you guys are talking, what shouldn’t be lost is something Malcolm said about his team and having the right team in place to compete. You’ve got outcomes you can drive toward, but without the people, you’re not going to get the processes or financial performance.
If I caught you on a good day coming into the office, feeling positive about your wife giving you that money and seeing what happened, you could toss some Aerosmith and “Sweet Emotion” in.
I remember days like that. “Slow Ride” coming in, I’ll tell you that much.
I’m putting it in the positive sense. If you’ve got the right team, that’s really a standout comment.
What’s been the biggest challenge about getting the culture right so that, as the bank continues to grow in size, scale and complexity, you’re not losing what made you that entrepreneurial go-to?
This is all about people. Along the way, people, including me and everyone else on my team, have certain ceilings. People can grow and continue to learn, but at some point, in my 43 years doing this, I’ve seen people get to a ceiling.
As a leader and CEO, you have to be able to recognize when that happens. I’m probably slower to act on it than most because I have great compassion for great people.
But just because you have that compassion doesn’t mean you can avoid making really hard decisions.
Along my journey, I’ve had to change out different people. Terry Earley is our fourth CFO. That didn’t just happen. We had to make some changes.
I’m on my third chief credit officer, and he’s phenomenal. I’ve had to change out a chief banking officer twice in the last three years. You have to make these changes.
This has nothing to do with what kind of people they are. It has everything to do with capacity.
People can say a lot of things about me. One thing they probably wouldn’t say is that I’m unwilling to make a hard people decision. That may make me sound like a real turd, but that’s what you have to do in this position.
You have to continue to evaluate people and see if they can grow with where you’re headed.
I have a chief risk officer with a great story. She was with me at Colonial. I brought her over. She was in the CRA space 20 years ago and was a bank examiner.
About four years ago, I went to her and said, “Angela, here’s the deal. I’m probably going to have to hire you a boss. You don’t have experience in the chief risk officer space.” We were $7 billion and growing.
She said, “Okay, I understand, but I have a question. Will you allow me to educate myself, train myself and do the work necessary to be the chief risk officer?”
I said, “If you’re willing to do that, get the certificates and do the work, I’m willing to give it a try. Absolutely, go.”
Today Angela is the chief risk officer of a $13 billion bank. I’ve asked regulators, consultants and everybody I can, “Can she do it? Can she do it?”
The answer is 100% yes. She can take us to $20 billion.
Her ceiling was limited, but she wanted to reinvent herself. That’s a great success story for a 20-year employee who would literally get in front of a bus for me.
What’s so cool hearing that is that it models the type of curiosity Steve and I have talked to other CEOs about. We had Mike Daniels at Nicolet talking about how he grows his team, and curiosity is something he prizes. Clearly, that’s something you value as well.
Somebody isn’t going to go out and work their tail off if they don’t believe they have the support of the leader. It’s got to be genuine and authentic. It can’t just be, “Yeah, go do it,” so I don’t have to make the tough call of finding you a boss.
Exactly.
I think you’ve got a song about the winds of DEI and what Veritex is up to. That example ties nicely with your question.
Totally. This is Arizona’s own Alice Cooper, “School’s Out.” School is really not out at the bank because you do have a Women in Business initiative that I think is pretty compelling.
DEI has become a loaded term that some people are walking away from, but I’m also finding organizations saying the more diverse we can create our team, the better business outcomes we’re able to recognize.
Maybe you could talk a little bit about that initiative, how it started, what some of the outcomes have been and what you think is next for it.
I’ll go one step further as I talk about people around my table. I have seven direct reports and three are women. They’re not there because they’re women, I can absolutely assure you.
I just described one of them, Angela. They’re there because they’re best in class and they’re the best people for our company.
When we bought the very first bank, Professional Bank in East Dallas, it had three branches. There was a woman over there whose dad was actually a longtime Dallas banker.
She was going to get out of the business. She was kind of a business development person and said, “I don’t know if I can do this Veritex thing.”
She’s still here and leads our Women in Business initiative.
She came to me and said, “I have this idea. I want to invest in small business, which is what Veritex is best at, but I want to do it for women because I don’t think there’s an initiative out there.”
I said, “Darling, you’ve got 100% of my support. Go do it.”
With her help, because without her we wouldn’t have gotten there, she started this little thing called Women in Business. She’d invite her friends.
I used to go. I was the only guy in the room, but I’d go and meet these women and see what she was doing.
Today she has chapters in Houston, Dallas, Plano and Fort Worth. She’s built this huge thing.
It’s a conglomeration of women in the small-business space, and they all have challenges. We’re not saying you have to bank with Veritex. We just put the program on. Guess what, we end up with a fair amount of their business.
It’s been well received around the city. It’s a group that historically hasn’t been catered to as much from a business standpoint. The group is incredibly diverse across ethnicity and background.
I love it. It’s one of my favorite things that we do.
She’s helping change the default setting of commercial banking.
Totally. They need services, and actually, the smaller the business, the more partnership there is.
As you continue to move up in revenue, they start telling you how they’re going to borrow money. This is a real partnership.
What’s so cool is how organic and authentic it was. It wasn’t a corporate PR initiative. It was a movement started by someone with raw energy and vision.
That’s the cool thing about the bank. From the outside looking in, to see what’s been built, the types of people you’re attracting and the customers you’re able to support is awesome.
The three of us could probably be defined as optimists, but I’d say we also have to be pragmatists for the industry.
Let me pull some Bob Dylan and “Hurricane” out, because there are a lot of challenges facing an industry that’s getting more optimistic about its prospects.
We were just at Acquire or Be Acquired, and there was a prevailing thought that things are looking pretty good and they’re going to look better. But there are still challenges and risks.
At the C-level, I think about fraud and how it is becoming more sophisticated and difficult to address. How are you and your team thinking about fraud and cyber risks as a bank of your size?
As you get bigger, you become more of a target in the technology space. Cyber does keep most CEOs up, but we say that because it’s the cool thing to say.
We know there’s risk out there, but is it really going to happen to you? Is someone really going to tap into your system and hurt you?
As a smaller bank, you don’t think about it as much. Now that we’re somewhere around the 90th-largest bank in the United States, we’re a target.
I had senior FBI people come into town to talk to us about cyber. I’ll never forget what one of them said: “Buddy, it’s not that they’re going to get into your system. They’re there right now. It’s whether they’re going to be able to break down that wall or not.”
As we went past $10 billion, we got a CISO, a chief information security officer. I had no idea about all the things they were looking at, all of the investments we’re making and the redundant systems we have.
It’s a real deal, and we have to stay one step ahead.
One of the people I put on my board about five years ago, Greg, is a technology guy out of Atlanta.
People asked, “Why are you bringing a guy onto your board from Atlanta?”
I said, “Because he’s a technology specialist.”
They said, “He can’t help grow the bank.”
I said, “I’m not worried about him growing the bank. I’m worried about him helping us think through how we protect our bank.”
Fraud is a piece of all our business. We’ve been very fortunate not to have many substantial occurrences. Everyone gets hit to some degree, but it is definitely top of mind for me and my directors.
One thing I remember from our 2024 strategic planning season was especially veterans who were board members bringing up cyber.
They were saying, “Guys, we’re in an information war. You have to think of this as a veteran thinks about warfare.”
Even at a $13 billion bank in Texas, this can go all the way up to Russia, Iran and North Korea. That awakening is really important. Veterans seem to get it faster at the board level, and they’re warning their colleagues.
That’s funny. The tech guy I brought on is an Army veteran.
Great observation. Malcolm, as you’re talking, it strikes me that the challenge of running and protecting your bank has to be balanced with how you grow and change it.
That’s the constant dilemma for folks in your seat.
You’ve got a team that isn’t simply incentivized. They’re proud to say, “We built something. We’re not going to lose it. We’re going to continue to run and protect what is known to the community.”
But in the back of your head, you’re also thinking, “I have to figure out how to change certain things and how to grow.” That can create tension if it’s not done correctly.
To take us home, one of the things Terry presented on was how you earn the right to win and create speed and ease across your client’s journey.
Walk us through your logic about diversifying the business and preparing for the next wave of opportunity without losing sight of the fact that you’re one of the top 100 banks by size in the country.
We’ve spent a lot of time recently figuring out what it means when we say we have to earn the right to win.
We can’t just walk into offices and expect people to lay down their financial statements and say, “I can’t wait to be a client of Veritex.”
That was banking in the ’70s and ’80s, where you stood behind your desk and people walked in and asked how you could help them.
Today we have to be a lot more proactive. We’re all in the sales business.
The right to win business means you have to be informed, you have to be a specialist at some level, and you have to have products they want.
Not products that make sense for you, but products that make sense for them. You have to be nimble.
This is where you talked about the push-pull between risk and sales. In a fun way, we call Angela our chief sales prevention officer.
My chief banking officer and she are always kind of pushing and pulling because we’re in this business to return value to our shareholders, but at the same time we have to be safe.
We have to provide the right products, and we have to provide speed to decision that beats everyone else.
I can’t beat Bank of America, Chase or Wells Fargo as it relates to all of their product sets. But I can kick their rear end in responding quickly, being nimble and getting creative on solutions.
That’s what we have to do. We have to set ourselves apart.
What we’ve learned, and Steve knows this better than most, is our processes have to be streamlined.
There are so many ways we can do a better job from start to delivery. The stuff in the middle can get all whacked out, slow and costly.
We have to remove all that junk. It’s got to be quick and efficient.
I appreciate you mixing the gene pool, too, bringing in people from outside the industry like Matthew Smith, who came in and took a fresh look at the value proposition and how you put rigor around growth.
I think that’s your point about throwing out the old banking playbook. Still do great banking, but bring in new ideas.
How do other businesses and industries grow with intentionality? How do we create a clear way to differentiate?
And don’t ignore the fact that an institution like this can use data to its advantage.
It strikes me you guys really are data-driven. You’re not forecasting and letting it sit. You might do 20 forecasts in a year because conditions change and you’ve got data that gives you a little head start on your competition.
If you’re able to execute well, good things typically follow.
For those studying how Veritex has grown to its size and brand, I think it is a commercial bank, but there’s also a real data powerhouse and a bunch of data geeks who love to run the business with data behind the Veritex brand.
If you’re studying the secret sauce, data is one of the ingredients.
Absolutely. We brought in a data analytics team, and they have transformed the way we think.
It used to be, “Intuitively, I think this,” and now it’s, “This is what the data says.” We have real backup.
Shout out to Terry and his team. We don’t want to make decisions based solely on the way we feel because that can be dangerous.
We’d like to make decisions with data. But don’t lose the relational component of our business, because at the end of the day, data is great, but if you can’t communicate it and use it to build a relationship, it’s only as good as the data.
And the customer can walk across the street.
All right, I’m not sending any dartboards to Malcolm because he doesn’t need to take that type of risk.
I am going to thank him for this so I can go back down my conspiracy-theorist rabbit hole around why Luka was traded from the Mavericks.
Before we do, on behalf of Steve Williams and the whole Cornerstone team, I just want to say thanks to Malcolm Holland for giving us a little bit of his time and getting Plugged In with Cornerstone Advisors.
Thanks, Malcolm. Great discussion.
Thank you, guys. Good to be with you.
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