Veritex (US:VBTX)2020-10-28 18:32Financial Data and Key Metrics Changes - The company reported operating earnings of $22.9 million or $0.46 per share, an increase of $0.03 over the previous quarter [9] - The provision for loan losses decreased to $10.1 million from $19 million in the previous quarter [9] - Pre-tax, pre-provision operating return on average assets was 1.82% for the quarter and 1.96% for the year 2020 [10] - The allowance for loan losses increased to 2.10% of total loans [24] Business Line Data and Key Metrics Changes - The company saw annualized growth of 4.4% in C&I and CRE sectors, excluding mortgage warehouse and PPP [11] - Mortgage warehouse loans grew by $103 million or 23% linked quarter [11] - Non-interest income for the quarter was $9.8 million, driven by government guaranteed business [21] Market Data and Key Metrics Changes - Transactional deposits grew by $120 million or over 10% annualized [19] - Non-interest bearing deposits accounted for 31% of total deposits, while reliance on time deposits dropped to just under 24% [19] Company Strategy and Development Direction - The company aims to maintain capital stability and flexibility for growth opportunities, both organic and through M&A [41] - Focus on building and maintaining positive operating leverage while preparing for future market needs [41] Management Comments on Operating Environment and Future Outlook - Management expressed optimism about credit clarity and positive movement in business areas [8] - The company anticipates further migration of charge-offs in Q4 and the first half of 2021 [13] - Management emphasized a conservative approach to capital preservation amid uncertainties [52] Other Important Information - The company declared a regular quarterly dividend of $0.17 per share, representing a 37% payout ratio [25] - Subsequent to the quarter end, the company issued $125 million in subordinated debt at a fixed interest rate of 4.125% [26] Q&A Session Summary Question: Share buyback appetite and future plans - Management indicated flexibility in share repurchases depending on valuations and capital behavior, with a cautious approach to future buybacks [48][50] Question: Increase in NPAs despite improving credit metrics - Management clarified that the increase in NPAs reflects a conservative approach to credit management and capital preservation [52] Question: Trends in mortgage warehouse and loan growth - Management noted strong performance in the mortgage warehouse and expected positive loan growth in Q4 [87] Question: Criteria for loan upgrades and downgrades - Management explained that upgrades were based on borrower performance assessments and interviews with lending managers [65] Question: Residual risk in the restaurant portfolio - Management acknowledged potential deferrals in the restaurant portfolio as SBA support expires, with ongoing monitoring of performance [99]