Veritex (US:VBTX)2022-10-26 18:57Financial Data and Key Metrics Changes - The company reported a net income of $43.6 million or $0.80 per share, an increase from $0.55 per share in Q2 [7] - Pre-tax pre-provision income rose to $63 million, representing 2.2% of average assets [7] - The efficiency ratio improved to under 45%, reflecting a strong business model and growth [15] - Net interest income increased by $16.6 million or almost 20% from Q2 to $101 million in Q3 [21] - The net interest margin (NIM) increased by 35 basis points from Q2 to 3.77% [22] Business Line Data and Key Metrics Changes - Loan growth for Q3 was $595 million or 30%, with a year-to-date annualized growth of 31% [8] - Deposit growth was $231 million or 10.7% for the quarter, with noninterest-bearing deposits up $300 million or 16% over the last 12 months [10][11] - Noninterest income increased by $2.7 million to $13 million, primarily due to customer interest rate swaps [25] Market Data and Key Metrics Changes - The company noted a slowdown in growth in the DFW and Houston markets, indicating a potential market share grab rather than economic growth [10] - The pipeline for loans has decreased by one-third from the previous quarter, with over $150 million in payoffs in early October [8] Company Strategy and Development Direction - The company aims to align deposit growth with loan generation numbers, focusing on improving funding mix and deposit flows [57] - There is a strategic initiative to enhance deposit growth, including hiring consultants and focusing on community banking [56][60] - The company plans to maintain a loan-to-deposit ratio around 100% in the near term, with a longer-term goal of reaching 85% [63] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to grow both loans and deposits despite a challenging economic environment [37] - The company is preparing for potential economic downturns by conducting stress tests on its portfolio [13] - Management anticipates slower loan growth in 2023, projecting growth in the low double digits [8] Other Important Information - The company has seen a decline in nonperforming assets (NPAs) to 0.26%, marking the eighth consecutive quarter of decline [12] - The tangible book value per share declined by 1.6% but grew by 6.7% over the last four quarters when accounting for dividends [18] Q&A Session Summary Question: How should we think about total fee income going into 4Q and 2023? - Management indicated that it would be hard to replicate a strong swap quarter but expects increases in SBA and USDA income, with overall fee income remaining stable [39] Question: What are the expectations for expense growth in 2023? - Management projected high single-digit expense growth for 2023, with a focus on managing variable compensation as loan production decreases [40][41] Question: Is there still room for margin expansion? - Management believes there is still room for NIM expansion, especially with potential Fed rate hikes, but anticipates pressure on margins in Q1 as deposit betas catch up [46][47] Question: What are the deposit initiatives for the longer term? - The company is focusing on improving its funding mix and has initiated a team to enhance deposit growth, particularly in community banking [56][58] Question: Thoughts on capital return and buybacks? - Management is cautious about buybacks in the current economic climate and is focused on achieving a CET1 target of 10% before considering aggressive capital returns [86] Question: What is the outlook for loan growth and mix in 2023? - The company expects higher loan growth in the commercial and industrial (C&I) sector, with a shift away from real estate lending due to market conditions [94]