Veritex (US:VBTX)2023-04-26 18:42Financial Data and Key Metrics Changes - For Q1 2023, the company reported net operating income of $43.3 million or $0.79 per share [6] - The pretax pre-provision income was $66.4 million, representing a 2.2% return on average assets [7] - Return on average tangible common equity exceeded 17.7%, while return on average assets was 1.44% [7] - Efficiency ratio remained at 45.6% [7] - Tangible book value per share increased by 5.1% quarter-over-quarter and 9.3% year-over-year to $19.43 [14] - Net interest income decreased by $2.7 million or 2.6% to $103.4 million [23] - Net interest margin decreased by 18 basis points to 3.69% [24] Business Line Data and Key Metrics Changes - Loan production declined by 73% from Q4 to Q1 due to rising interest rates and economic uncertainty [22] - C&I and owner-occupied real estate accounted for 48% of loan production, up from 41% in Q4 [22] - Non-interest income increased by $4.5 million to $18.9 million, excluding losses from investment portfolio trades [27] - Non-interest expense decreased by $949,000 to just under $56 million [28] Market Data and Key Metrics Changes - Overall deposits decreased by $88 million or 1% for the quarter, with a significant loss of 51% in correspondent money market deposits [17] - Uninsured and uncollateralized deposits decreased to 38.4% from 44.1% at the end of Q4 2022 [21] - The average account balance for deposits was $132,000 [21] Company Strategy and Development Direction - The company is focusing on transforming its balance sheet by slowing loan growth and shifting focus from commercial real estate (CRE) to C&I and small business [18] - A new banking incentive program was implemented to prioritize deposit value and volume [18] - The company aims to achieve a CET1 ratio of over 10% by the end of 2023 [34] Management's Comments on Operating Environment and Future Outlook - Management acknowledged challenges in the market but emphasized the importance of liquidity management [8] - The company expects loan growth to decline to mid-single digits going forward [10] - Management expressed optimism about the USDA business and the potential for revenue growth in the second half of the year [45] Other Important Information - The company has reduced non-core funding by $258 million, improving liquidity capacity [19] - The allowance for credit losses increased by 5 basis points to 1.07% due to economic uncertainty [35] Q&A Session Summary Question: Concerns about USDA funding running out - Management indicated that there is a lobbying effort to prevent funding issues and expressed optimism for Q2 compared to last year [44] Question: Pressure on net interest margin (NIM) - Management expects most pressure on NIM to occur in Q2, depending on Fed actions and deposit returns [48] Question: Stock buyback considerations - Management is considering stock buybacks but believes it is not prudent to act at this time [52] Question: Changes in criticized assets - A significant reduction in criticized assets was noted, primarily due to surveillance efforts [54] Question: Confidence in multifamily construction - Management expressed confidence in the multifamily construction portfolio due to high-quality products and strong metrics [56] Question: Strategy for deposit growth - The company is focusing on digital marketing for money market accounts and shorter-term CDs, aiming to reduce reliance on brokered deposits [59] Question: Expense control and future trajectory - Management believes expenses will remain stable, with no significant increases expected [68] Question: Breakeven volume for Thrive - Thrive needs approximately $450 million in funded volume to reach breakeven [80]