Veritex (US:VBTX)2024-10-23 16:47Financial Data and Key Metrics Changes - The company reported operating earnings of $32.2 million or $0.59 per share, with pretax pre-provision earnings at $44.6 million or 1.38% [4] - Net interest margin (NIM) increased slightly, with CET1 capital now at 10.86% [4][9] - Deposits grew by $311 million or 11.6% annualized, indicating effective deposit gathering strategies [5] - Total capital grew approximately $132 million over the last six quarters, with a tangible book value per share increasing to $21.72, a 15.8% year-over-year increase [9] Business Line Data and Key Metrics Changes - Loan growth was impacted by large payoffs, resulting in a decrease of $126 million quarter-over-quarter [6] - Operating noninterest income increased by $2.5 million to $13.1 million, driven by higher treasury management fees and loan fees [17] - The company experienced a nominal charge-off of $269,000, with past dues remaining flat at 0.8% of total loans [7] Market Data and Key Metrics Changes - The loan-to-deposit ratio decreased from almost 95% a year ago to 88% as of September 30, 2024, with expectations to remain below 90% [10] - The average rate of time deposits is 5.14%, with $2.6 billion in ceding maturities over the next two quarters [11] - The company successfully reduced reliance on wholesale funding from 21% a year ago to 15.7% [12] Company Strategy and Development Direction - The company is focused on increasing profitability and efficiency, aiming to improve its return on average assets (ROAA) [4] - There is a strategic emphasis on disciplined loan growth and improving the credit risk profile [24] - The company is engaging a consulting firm to enhance operational processes and technology, aiming for improved efficiency [18][30] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges posed by election uncertainty affecting loan growth expectations, with a focus on building pipelines in commercial and industrial sectors [21][22] - The company is optimistic about its credit metrics and overall balance sheet strength, despite ongoing challenges [19] - Future NIM is expected to remain stable in the range of 3.25% to 3.30%, with a focus on managing deposit costs effectively [15][33] Other Important Information - The company has a fixed pay hedge of $250 million at 42 basis points, maturing in March 2025, which is expected to impact net interest margin positively [16][27] - The company is not currently interested in share buybacks at current valuation levels, focusing instead on building capital [51] Q&A Session Summary Question: Loan growth expectations and pipeline trends - Management indicated that while payoffs have been strong, the pipeline remains healthy, particularly in commercial and industrial sectors, but mid-single-digit growth expectations may be overly optimistic due to high payoffs [21][22] Question: Margin outlook for 2025 - Management expressed uncertainty about margin expansion in 2025, suggesting that maintaining margins will depend on effective pricing strategies and managing excess cash [33][34] Question: USDA revenue outlook - Management noted the unpredictability of USDA revenue, emphasizing efforts to cross-pollinate USDA and SBA loan production to stabilize revenue streams [35][36] Question: Expense trends - Management indicated that expenses may remain elevated due to incentive accruals and OREO-related costs, but some reductions are expected as certain expenses normalize [39] Question: Deposit pricing strategies - Management highlighted the importance of executing effective deposit pricing strategies to maintain growth and reduce reliance on high-cost funding sources [40][41] Question: Classified criticized loans outlook - Management expressed confidence in maintaining stability in the criticized loan category, with ongoing strategies in place to manage risk effectively [47][48]