Veritex (VBTX) - 2024 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported earnings of $29.1 million or$ 0.53 per share for the first quarter, with a pretax pre-provision return of 1.42% or $43.7 million [5] - Net interest income decreased by$ 2.7 million to almost $93 million, primarily due to higher deposit yields and an unfavorable asset mix shift [11] - The net interest margin (NIM) decreased by 7 basis points from the previous quarter to 3.24% [11] - The allowance coverage increased to 115 basis points, up significantly over the last four quarters, with reserves increased by over$ 13 million [7] Business Line Data and Key Metrics Changes - Loans increased by $114.7 million or around 1%, while deposits rose by$ 316 million or 12% annualized [10] - The loan-to-deposit ratio improved from 107.7% to 91.7% year-over-year, with a significant reduction in reliance on wholesale funding [92] - The company experienced a 44% decrease in charge-offs from the previous quarter, totaling $5.3 million [88] Market Data and Key Metrics Changes - The company noted that deposit growth was strong, with an 18% increase over the last 12 months, while loan growth remained virtually flat [10] - The effective tax rate was higher for the quarter due to the tax treatment of equity awards, expected to return to approximately 21.5% for the remainder of the year [13] Company Strategy and Development Direction - The company is focusing on customer acquisition, particularly in the small business sector, and plans to invest in this area [2] - There is a commitment to reducing commercial real estate (CRE) concentrations, aiming to bring the ratio below 300% of total risk-based capital by the third quarter of 2024 [94] - The company is adopting a more conservative approach to economic assumptions in light of the current rate environment and geopolitical risks [90] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the progress made in strengthening the balance sheet but acknowledged that more work is needed, especially regarding deposits and credit [7] - The outlook for loan growth is projected to be in the low single digits, while deposits are expected to grow in the high single to low double digits [99] - Management highlighted the importance of credit surveillance and monitoring of the loan portfolio amid uncertainty in the market [99] Other Important Information - The company completed a securities loss trade transaction expected to add$ 0.05 annually to EPS and announced a $50 million stock repurchase program [87] - The company has maintained a strong liquidity position, with cash and borrowing capacity totaling$ 6.4 billion, representing 1.8 times the level of uninsured deposits [21] Q&A Session Summary Question: Can you discuss the changes in classified assets? - Management noted that substandard assets decreased while special mention assets increased slightly, indicating a need for better management of asset classifications [106] Question: What is the outlook for loan growth and payoffs? - Management indicated that while visibility into payoffs is somewhat uncertain, they expect to achieve close to $1 billion in payoffs for the year, though not necessarily at the same level as the previous year [46] Question: How should we think about noninterest expenses moving forward? - Management expects noninterest expenses to remain stable, with some increases due to investments in compliance and risk management [57][58]