VBTX - Earnings call transcript Q1 2020

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Operator

Good day. And welcome to the Veritex Holdings First Quarter 2020 Earnings Conference Call and Webcast. All participants will be in a listen-only mode. Please note, this event is being recorded.

I will now turn the conference over to Ms. Officer to Relations Veritex Board Investor Holdings. Caudle, and the Secretary of Susan

Susan Caudle

you. Thank

started, to undertakes statements Before this would to forward-looking could we I get statements. anticipated and like to risks uncertainties include results publicly statements, cause any actual to The presentation forward-looking remind obligation and subject those company are differ. and that no may that you revise

statement please beginning if you slide our are refer webcast, to time, our including our this At Safe into Harbor on X. presentation, slide logged

For you that us available phone, the statement. All call by Safe website, Harbor are Safe today's comments our those presentation are joining of that please subject made during Harbor note statement on to veritexbank.com. and

specifically business. impact on regarding could have slide COVID-XX the update On provided have factors, X, that our we an risk to our

reconciliation addition, of the of non-GAAP core which release. our be metrics the filed X-K business. believes will the operating measures Please all basis, earnings discussed underlying some In reflects the discussed better non-GAAP of management in performance our on a financial see

me our Harper, CEO; Chief Chief Officer. Earley, our and Riebe, Chairman Officer; Credit our are Holland, Clay Joining Terry Financial Angela our Risk and Chief Malcolm today Officer;

Malcolm?

Charles Malcolm Holland

the different longer. and Stating quarter's everybody. morning, previous be may considerably this Good will than last call a obvious, minutes calls our few

live we and you we the we while things are Our a business, that more provide time, quickly clear changing today. know desire granular the and at right is very in at to our the same a tell bank understanding in-depth today only give transparent and, evolving you world now, view of look can and what

Three, Number doing status And you update bank. with two, metrics. items. sheet, as one, now. see pandemic related a we credit what want We and CECL discussion. communicate earnings balance to discuss and capital liquidity we right Four, five, our five and Number then, it a quarterly are as main and topics.

with start during is most want these pre-provision. areas, the for into five dive what we relevant I financial I to pretax Before us days, metric believe these

pre-provision X.XX% we $XX.X gives quarter, of of in. find times on the average first the or this of financial minutes. the income assets. produced Terry million in few in will the we institution confidence uncertain on power For earnings us pretax ourselves provide more that this The continued in number strength performance return a detail

We at is for First employees. doing mode XXX-plus of to pandemic healthy our a well prepared no is decision and, into the staff We of with and staff entire the a as time, functioning exclusively and confirmed for of six-week minimum are and plan. XX% foremost, rotating business go any that of unusual in made COVID-XX cases mid-March all in working currently of our physical offices. approximately our with being of the our remaining of out staff Most are days between offsite. fully in bank areas

have We have and Board meetings, team weekly of strategic I our crisis update telephonic a Directors. and with management, tactical weekly

for appointment branches only, our walk-in facilities open by access remained have Our offer drive-through business. while

this pandemic. women's local serve. and we approximately targeted shelters donations in we to needs during in in These communities donations those communities Additionally, in with the assist our need have children's are the food the which $XXX,XXX supporting and

payment pandemic in to participating been involvement on program. PPP credit deferments side SBA our the loan this the Our response has loan in initial and

booked deferments requests. breakdown with balance a and process our shows of and associated number loan the X those principal the Slide of payment

general outstanding. of C&I. have total XX, commitments with loans or of booked CRE we The of XX% of those principal million As hospitality, April deferments are balances office of retail, majority XX.X% or in deferrals $XXX CRE, total XXX and

of all April process. areas you XX. On participants. PPP X,XXX was PPP of number people say execute $XXX in million a as we We our possible. to program proud loans, PPP to from pulled participate team applications as a that totaling E-Tran have can plan many been that team we X, bank that active together see Additionally, XX the as of loans have the I'm fully over quickly approved and the to embraced implemented slide deliver funded that X,XXX

We are process currently of funding working the through the in second PPP. of

and an As $XXX to all funding E-Tran of we've yesterday, to we applications have nearing numbers, additional which received million. equates XXX XX% of additional date expected

some light additional the portfolio several these relative our want loan provide you of and we're living uncertainty, in and industry-specific granularity times In breakdowns. we to to with

stratifies loan portfolio including by XX details. loan our Slide category types, some additional

would the very commercial I direct balanced portfolio your categories. real in you loan-to-values our the see, for remain to average estate As attention distribution. weighted we can of each

substantial As at in XXXX will many to get I've said and was times components you transactions, are deal as at your I they equity borrowers with these you the and did working A serve difficult, to well in banks XXXX. times, XXXX when when XXXX

positions these in You slide, can equity healthy this portfolios. on see our

most healthcare, total slides our several about account for that The could next to loan they stressed hospitality, asked portfolio. are of and ones energy on some details restaurant, and X.X% you and give industries be The COVID-XX. due sectors specific our

slide at our hospitality let's look and XX, restaurant with exposure. Starting

Our with being hospitality X.X% total portfolio XXX than The of portfolio's loan less The hotels. over flag loan-to-value is our is different XX%. million, national average XX% portfolio $X the with is outstanding or of loans of balance $XXX loan approximately of comprised a book. million

noted XX% a strongest convention It borrowers. portfolio seven properties collective loans or XX%. $XXX that fortunately, represent our of And These the and on none these million should be the have this business. largest of of loan-to-value depend totaled

year. was of change back the may none XXXX, this in XX, but that non-performing, of half March this expect I portfolio of As

owners, for have industry many, years. developers in in sector the many this Our been operators,

how this going are is borrowers Although out play and us of know these none exactly, to best-in-class. seasoned

loans, of size million, portfolio $XXX The X% loan an restaurant represents of made The is with portfolio. balance average outstanding is XXX which up our of loan $XXX,XXX.

highly-recognized XX% DFW the million by secured SBA area, of are XX% of our in totaling collateral. loans, the which these portfolio. six estate. but for $XX is borrowers less in or XX are account real All of secured estate by restaurant one Our loans largest portfolio, restaurant a well-margined real the loans credits,

estate we've On some our book this almost energy color additional of secured to XX different at are borrowers, of This Three amount less an the The with small portfolio for our consists and service and de million. average portfolio company's slide continues the exposure. account $X minimis small healthcare energy half than on borrowers point. loan of it's book included and oilfield real decline facilities. by very energy XX, over

loan of additional portfolio, healthcare detail our also remains only our healthy portfolio. some total We've which and on represents included X.X%

our provides at and leverage detailed lending a retail CRE look book portfolios. XX Slide

average Our balance loans for total million or is of portfolio X.X% less Again, with substantial XXX retail CRE has our XX%. outstanding. an Weighted of portfolios. loans this portfolio loan-to-value than equity outstanding in $XXX our

credit not On detail in come advances, We on slide on of huge lines and/or XX, did did although SNCs. our on have the our we advances commercial lines, see late quarter. see you'll the ones

very is continues and well. diversified portfolio to very perform SNC Our

of remains with second levels in Overall, quarter quality asset assets recovery X.X% at net XX, a straight acceptable total position. through NPAs our and March at

touch quickly to quarter. on the for want growth did I

X%, over million. that we growth annualized non-mortgage mortgage of had see will grew warehouse while loan warehouse You $XXX

take and works. in positive until originally growth we're with we many will now that certainly back movement. very some were we situation a that than a in Obviously, expect different see the opportunities economic pipelines seat solid thought, Our we

I'll to now Terry. turn the call over

Terry Earley

CECL And you, the first results Malcolm. deposits, to earnings. allowance the to minutes you details like for a and on and morning, Thank financial good including quarter, with I'd take few loan everybody. more capital, for losses, provide Veritex's liquidity

This slide to diluted were approximately credit good of Earnings we of anticipation you losses in $XXX to back Let's COVID-XX. the first as the allowance built to page a quarter million share or losses overview impact economic due future of jump X. the per gives results. for fully X.XX% $X.XX

in metrics Coming earnings metric pre-provision economic in costs assets. down the return my and important due pandemic, of In most average the opinion, box. environment our the this page, single the and is credit red pretax note on increasing uncertainty to the

that impacts have of on ability of loss capital The XXX absorb before return assets our points XXX the to approximately indicates credit we year per pre-provision points it basis base. basis average pretax

on XX, slide CECL of adopted on lays through CECL focuses XX. the each This January on ending of impact December our pool loan day most the adoption to March X. losses. out banks, on credit on for we slide Like XX allowance Now and which from

Texas unemployment and GDP model in the CECL forecast using we comes are Moody's. from

left Specifically, their April were that on the of Please on bottom part the page. the see forecasts baseline table X. updated

to X bottom over can see of Again, X% to there. is was X% the deteriorating in and forecast at and this you peak quarters. QX on GDP. the for and improve As forecast. impact three Texas the reflected expected at unemployment improve Namely, expected unemployment as COVID-XX is in GDP is next of QX this negative in out April table, the from

adoption table of top forecast incurred change adoption. labeled this the from an the loan the the coupled economic loss day to on loss of forward-looking a On model, life model X January reflects with impact,

January reserves our approach, not points to X, This by drove have to the driven previously including on in XX an change from on on were basis reserve to a loss primarily total XX incurred basis economic under acquired that forecast, XXX ACL model. portfolio our in increase loans points required December

unaccretable of reserves XX in moving mark credit of points into ACL allowance. also or the PCD Please note the the the increase reflects total $XX.X primarily million the basis

COVID-XX impacted column Focusing pooled economic $XX.X our loans labeled on and tune million. QX to reserve of PCD the declining outlook negatively the the bill, from reserves

reserves, primarily were date totaling loans came two in deteriorated $X.X Additionally, the that million portfolio to from on $X.X green in credit we impairments $X not million of acquisition. established of specific million due that the

Finally, $XXX,XXX for net the quarter. we recoveries in had

of March provision points. and reserve credit was to a loan loans to result XX an quarterly the The total loss at million in loss XXX $XX.X increase basis

forecast, of addition basis we're the adverse to build for XX To and history that economic note, end, the prepare ACL. factors loss qualitative upcoming total the to environment. that represent reserve in credit a we Please have points approximately the to trying expected

In note the we high there by be the deteriorating is look was XX% gained a overly is that optimistic pandemic. to forward, of opinion, little worthy stage as of of to to provision degree uncertainty the Also due economy. this at and our being

the discussion holding ratios, remain quarter, XX, transition strong. to the the adjustment transition CECL and assets, capital. decreased bank along to equity slide at and very losses ratios Those to earnings, Capital common weaker the with company for reflecting from repurchases, to and dividends. share loan tangible let's On CECL tangible this allowance

Veritex December, announced the buyback in Back an to stock $XXX million. in increase

returned $X.X from million During the in million $XX.X repurchase to including shares dividends. common slightly million of over quarter, shareholders, we X $XX.X the and million common

current authorization the XX buyback March expect XX, future this remain stock to open XXXX. foreseeable $XX on of and The remaining has program given the the suspended uncertainty December We for on until million pandemic. the is and sideline

Regarding after able the declared but and quarterly the anticipate impact earnings pretax pre-provision substantial scenarios. on we losses regular Again, to ability share dividend, credit its base. economy. absorb depends being dividend, capital down the our conducting multiple the a strong without gives us to burn on per of $X.XX maintain that weakening dividend We Veritex's COVID-XX Texas capital

significantly XX%. Turning mix deposits. at of and The The deposit XX at from range the of quarter-end, stood excluding of non-interest-bearing ratio, dropping beginning since warehouse the with slightly targeted. mortgage slide deposits on is above XXXX, we've XX% and to time and the to the improved XXX.X% at XX.X% total deposits reliance the loan-to-deposit portfolio deposits has

the discussed time Fed money rates aggressively have since shifting on on reducing deposit market call out index and May we deposits. and in market we've of rates cost every higher As been pivoted XXXX, earnings of interest

basis X.XX% the deposit that declined bottom accounting, purchase Home Federal the period, rates, borrowings points to December left X.X%. of on to basis excluding graph from by from Loan by basis, XXXX. declined XX page Over a XXXX Bank shows, monthly The March XX same on points

past the for first middle and repricing part of table deposit beyond. in shows quarter, the the Looking the opportunity time remainder page the XXXX of

that shows so have the inflows far in Additionally, right occurred April. bottom the significant the deposit on graph

Obviously, flush down deposits. since balance with comfortably Deposits the ratio range. almost is within have being quarter-end liquidity with million, and loan-to-deposit $XXX sheet two-thirds non-interest-bearing and increased our the target over is in

highlight three Moving to to slide is XX liquidity. on The of and purpose things. this slide

in primary $X.X have million is sources. from secondary available table under First Plus we the the billion $XXX on sources. Fed and liquidity right PPPLF. that bottom The liquidity our over another shows total the

concluded our of highest sheet. amount March Also balance that the doubled that We carrying on on note it given that we're uncertainty beginning double X, the we liquidity we've to normal prudent importance. is from liquidity pandemic, And was believe cushion. coming of the the liquidity the

Second is $X.X our investment portfolio billion. of approximately

portfolio X% XX% flow yield projected is next available over coming As sale. and projected you XX%. to the portfolio million the is The off just of the $XXX be will note, the portfolio or is cash for year in

our maintaining second we're quarter. Finally, the excess liquidity into

Note has that on deposit of the the PPP the gone inflows. box balance with reflecting even the bottom up that red loans, in liquidity at strong very funding the sheet

On graphs. page note four XX, will you

First is the return-on-average left assets return-on-average and pre-provision top our asset pretax in trend our graph.

Second build we've is been five in per the XX December top through shows a graph ratio, which the last the side on quarters. on bottom below TBV the and from that over is the efficiency share show March The share of the per right operating graphs value trend page XX% the tangible book XX. of the at

basis points X.XX% of decreased purchase accounting all adjustment, accounting XX margin impacts, X XX. in which decline lower the slide at adjusted to X.XX%. quarter excludes due On NIM, purchase with interest GAAP while points ended the The basis QX, net to the

right The that the slide the the impacted the adjusted GAAP and on table both bottom shows the of NIM. NIM items

Focusing with on loan a loans on the portfolio XX of and that accounting, impacted which impact adjusted purchase excludes the floated, XX% adjusted rates, reduced following the have by the interest points. yield short-term basis NIM coupled is NIM,

was This expansion and interest-bearing another on the by paid of basis NIM advances. rates expansion XX points FHLB from offset basis deposits from X rates points lower the on lower largely

rate funding continue on portfolio. discussed aggressive deposit we we've be side, for As including on quarters, several our to the reductions

quarter, issuance first NIM. of funding the debt. Veritex This X quarter decline million of fourth As points completed $XX basis during sub the announced in in we caused the

permit Additionally, rate interest in tied X% where to we've been LIBOR over the a able to one-month the negotiate LIBOR. floor was request loan XX% to of

excess of in excess it of Finally, on we will QX. of considerable result page the PPP should NIM has as far as be in carry through a deployed so on continue This only it pressure release, the but program, can be Much liquidity increased earnings to downward X seen the liquidity pandemic. put the QX.

the ever reported Slide customer QX down, XX. income, important other million. offset rate in business. operating fee fees. by were this was Veritex best which swap interest Loan fee fee significantly of quarter income have $X.X had fees includes but we

on with Staying expense operating management and flat QX in line was XX, expectations. from slide non-interest to QX

the turn With over that, I'd back to to Malcolm. like call

Charles Malcolm Holland

Terry. you, Thank

our with little Our intent a today was to position operating communicate and clearly credit on more picture. granularity current

very remains Our strong. balance sheet

looks Our create ability efficiency continues at sustainable. are ratio we very with pleased levels and our to pretax very pre-provision income

They team. we've like word for pull we I'd figure my all word, the new be need now any my every want in and quick efforts to in to and lever normal weeks add to what fighting their situation team. one have grateful other I'd been colleagues, day been out about and incredible. to next. a trenches the with Like this six in for I'm are, loyalty. not

and challenging to one times banks best remaining in to the of Texas. dedicated these and We and managing remain ever-changing committed focused are

Operator, your the we'll Thank any today. now for questions. open patience line you for

Operator

Thank you. Instructions]. [Operator

from Our comes Rose first Raymond of the James. Michael of question line

please. question Your

Michael Rose

Hey, good How morning, are guys. you?

Charles Malcolm Holland

Great.

Terry Earley

Hi, Michael.

Michael Rose

color, to sorry get So, I this. this if just earnings I'm missed some Bunch of calls wanted morning. and

we And lasts do the government boost Just bit see on PPP stress? and kind greater them. at-risk Thanks temporary but of little is from this get immediate your how more – for temporary. a some on the long Where depending like EIDL, you do then, of that a categories. color programs outlining

out And like. this that there comment you So, would categories just can that lasts longer, what exposure? may other maybe broaden are Thanks. if look that on if at-risk

Charles Malcolm Holland

Yeah.

that's really hard future, Michael. looking a question, ask You into the and

don't I And so, initial know. is my response

tell be can I not what might looks able deck help. out. If you. the being flippant, you to I future promise that's to hard like, It's And really me just

that's we to as hospitality with few But We've mind quite that already. portfolio, look at guys a had comes one our conversations our the first.

would and digits. to are of it's in the just that, You're several occupancies even reading open, they're the If numbers, them doors because shut the do occupancy. single cheaper

the traveling if can we in and country people So, I we weather get can again, back the storm. think around moving

we two, a whole And then, a nobody number much. and does what day. number we that the long of have to bunch whole couple for specifically bunch money of space time, loan very, every A things very one. have then, the equity we've But around been in got us that is that experienced long, if mean a in walking folks in not equity. portfolio are of going is door Maybe

top we're is But conversations. one us. country. moving now, lots mind if right So, having certainly for Like see waiting start the that of we're that's of everyone, around people to

the The piece one. good. we grocery more pretty on actually next lot of pretty stuff. A side. retail very front be feel one Again, in And good neighborhood of in that would big equity Majority is it of that of We out box about those. or is real estate probably stuff. a small type feel

other we The looked at categories, transportation.

to less What than I'm guessing you I transportation. sure categories? other be told struggles would there's but that happen. be I going C&I stress, in point, this have would at some if I and where industry-specific some X% think We

Michael Rose

book. and front? of on thoughts construction the there? about is Anything the Construction land XX% Any

Charles Malcolm Holland

Yeah.

large, they're six deals. Clay, have one $X our that's again, on said gone months. – did going have construction industrial? is very that stopped. strong. a we stop for book Obviously, hasn't construction to industrial With We leverage large equity, funded so big – equities one and both and the not It's even construction deal. had high two building other low Our was – borrowers

a are of the still phase. construction deals so, equity And into our lot

year, is that's a when are think delivered. months, six up thing real I things actually book I So, be to these to hold construction nine because going going feel this if nice lasts months, our

than construction less of our lot about concerned book a our So, I'm books. actually

Michael Rose

Very for revenue for Terry. would then, fee the one be for and you'd helpful. for Maybe Can how PPP that? the expectations about you you maybe puts the takes? and what some the near-term estimated flow expect margin, just me what the And talk more through will with just guys maybe and program from

Terry Earley

Yeah. Thanks, Michael.

all, of First the NIM.

things what's I quarter equally, other where way, is has it around is what's the further today my in there. bps, probably timing here. and what's to the think little I up tremendously this further. bit the working you've comments – been ended we book bit the the believe, going also CD but highlighted in where add sits or different moving is and it opportunity not XX But ways not going and on one-month versus and with here, LIBOR on and really prepared I match doesn't give a take, drop, from but there, a got little

we've one-month tied LIBOR. said, of pretty significant portfolio part we've as got the to So,

And we're QX. feel going so, to that in

X. and the And to X, be spread Qs are CDs benefit X from over going

So, the some QX, NIM show QX I be in QX. should in feel to expect in and pretty expansion pressure neutral

obviously, million and that's Malcolm as this contributions and In getting PPP $XX the total looking we're to terms the now, that light of the Obviously, the PPP, some for being from we've in is million. making, $XX we're fees and SBA revenue we're distributors of the at program. right mentioned, benefit thought of

$XX between $XX it's So, gross. million million and

under the credit bankers really good this when team is, And our to hope done what's funding, program. seven job weeks of the be have asking And and the our government us in forgivable day off. going qualifying a pay to we're we're from

expecting not huge tail. a we're So,

second we think in that as the income off, in yield or if come stuff that so, get fee we will quarter. And paid

X, a funding than phase phase Anyway, it's And been helps. got that part of what's Obviously, to for in good things that. be a X. that the probability in higher hopefully, that's funded

of under in think but Malcolm's comments, was I is much how this just really the And $XXX,XXX, our note size. loan lending –

Charles Malcolm Holland

is $XXX,XXX, the loan I Average of believe, total book.

Terry Earley

Yeah.

really it's And been small businesses. help good the so, to

Michael Rose

Okay.

hold go just not to going margin the So, for sale, held be through that for PPP because NII, you're income, it to clear, to expecting loans? the you're fee

Terry Earley

Yes.

Michael Rose

Okay, perfect. my taking guys. Thanks for questions,

Charles Malcolm Holland

bet. You

Operator

Thank you.

Brad comes from Milsaps Piper question of next Sandler. Our

Your question please.

Bradley Milsaps

morning, good Hey, guys.

Charles Malcolm Holland

Brad. Hi,

Terry Earley

Brad. Hi,

Bradley Milsaps

that. an that Really apologize uptick great in if in I Really this. loans. I details slide missed appreciate There non-performing the was provided deck. you guys

I there a I $XX color any on or apologize about was curious, Just missed earlier. it increase. so – million if there think I

Michael Riebe

that stress one, company I'll And the That are that Riebe. to are Yeah, million. that contractors liquidation. got Two is Brad. This we're total services that's payment uptick downturn. some three company, that oilfield $X.X that take of seeing. balance is an from primarily XX one that borrowers The demonstrated oilfield really yeah. in credits And loan is credits COVID the service those about Clay we've fully due some is issues reserved. having smaller

credits. So, primarily related to three

Bradley Milsaps

focus Malcolm, loan opportunities yourself of to Great. on with I'd PPP. avail down themselves know, And, advantage? and that existing expecting earning But and obviously, year. kind Obviously, growth customer I base curious guys might assume to good were that things capital of guys the and upside that a world market good do are power back around your this some just for put you have of the turned take your thoughts burner kind this you like in pre-provision momentum lot gets and how changed,

Charles Malcolm Holland

in I in going bit. State of the disassociation been side believe But going of on foxhole bunch Yes. and now, and some to my weeks right do team opportunities get kind to opportunities. whole a We're preaching the for six different is batten the fight hatches the in seeing about the a that's little Texas us going down them. is out that Obviously, I've areas. the it's banking create provide on it of this to

us had one on wish we wouldn't of quarters this, for best record our of ever. we have but All were

super been new that On been assembling stout. active. the pipelines team our growth side, were That we've commercial has

opportunities some there. there's so, And

gone. to a I of opportunities there little they've be taken think are has there, But off clients. still be So, backseat. and people, certainly with I think opportunities a pushed but going been do growth those will there's bit with think and opportunities They're don't just I

And had folks with the just using wasn't some or but and account this or maybe an couldn't banked two, that able primary during we're it their PPP us. primary this here process didn't it were bank or handle to as handle We serve communicating.

opportunities, think to So, Brad. I some there's be do going

I be the we'll now future. let's think the I It's there be when and will think front we in guys credit new million" them hard credit $XX But put later commercial in to say, a know the "Hey, guarded. of right don't year. loan

Bradley Milsaps

great. They Okay, balance then, guys great quarter, year? run I kind some on And linked expenses, assume did to Terry, any a other maybe about job. flat as PPP, related additional the were of you you expenses but you'll of of rate essentially. operating costs think have thoughts the around kind expense

Terry Earley

high right thing the X% Well, of between think money spending I'm is what margin, first When and of XX% really is I about there money spending lot and that's on we're would now. of a lot somewhere But say a now. pretty locked. well right it is that's expenses, not not such just is saying you a discretionary you're percentage really

belief spending is take if of of my people dollars. we even because opportunity even some think is to should we stay not new the other we're – flat a expenses lot advantage if So, fairly I hire

– And I'm expecting the of relatively expenses so, the to look stay out flat. that be I year, rest for would as

Bradley Milsaps

to next of know great. final prepayments? predict. this of But how over Maybe should about you think fewer $X.X The quarters? how of Okay, was then just expect that hard the several curious housekeeping. trend. the I quarter. maybe accretion that loan kind And to million Just kind book one kind it's on we

Terry Earley

a Well, are environment, I certainly, it's certainly given to that's down to it slow prepayments which going And in think will Brad, just hard some. this slow. predict.

of right now ways on million three I quarter? over sheet answer a $XX way the at that not. going the got that's a come think is question X-plus-million-dollars to of I to we've meaningful it's going the balance in next stay two mark interest And think to the accretable go. to years, rate But we've pace still Likely worth do depending the most to on prepays. got

That's on out side, NIM accounting. I'd let's other – the what so on we the just I'll happens can macro our where to – but purchase I'm so you is stay side why like much is that's what of the And control, reason driven adjusted focused which factors. control so by backing out and on focus show that accretion the

Bradley Milsaps

Yeah, great. very Thanks much.

Charles Malcolm Holland

Thanks, Brad.

Operator

[Operator Instructions].

the of Our Gary of next question comes Tenner D.A. line from Davidson.

Your line is open.

Gary Tenner

I wanted to morning. the deferment Good about ask Thanks. process.

flow the thinking I'm laid perspective, how any it. You concessions chart loans loans kind borrowers of how you're that? of go just kind you extend getting curious, or an But you're from through defer the out of underwriting of to from and

Michael Riebe

Thank is standpoint an we that take Clay process Yeah, Riebe. one. This the that just I'll from you, Gary. underwriting have through is going [indiscernible].

majority And underwriting there And of your of second And we so, question, And the a is real how to in it. focusing customer program that. our giveaway effort a just our this the where and is expect need the part time a forgetting that document on, not that's each That's is base. time here? transaction. so, if we can I'm

Gary Tenner

that the really it concessions any borrowers wrapped It Well, around about you from deferring. was was that. are

Michael Riebe

got of deferred. we we loans standpoint, all of XX% concession a a that LIBOR on from think about LIBOR the based I floor

did did we those of return in for a loans on. deferrals something So that we portion get

Gary Tenner

Okay, thank kind of be would you. the COVID-specific And those obviously, on portfolios of a being that focus, viewed at lot or as risk.

during have but recovery of somewhat are the your curious, than Houston of franchise production. I'm a last were of kind in prices meaningful global real health of because you bit have kind energy, lower the ramifications, have higher support but the prices could as maybe right that, about thinking to secondary even assuming downturn? particularly that don't a now, longer-term a we meaningful energy from Houston, just impacts prior How where energy didn't you think you You portfolio, crisis

Charles Malcolm Holland

of of is have Yeah. minimis in the business We our outlined. direct we in which Texas. Listen, of live State de exposure, of State XX-plus-percent the energy Texas. I've a level

And conversation. we're to period, – It tertiary. of going secondary, be end so, be effective will will be it

screws we to it's business or at either type touch of the people guys a just the uniform fairly close, them. are part so, distance business. And people or selling that have whether energy that It's

hurts a little energy we're state, as So, too. to bit hurt going the

aren't as think Midland an the it's and guess, it's I think Well, catastrophic direct of I couldn't an I not I out not, you you one the out guys those multifamily Permian find as paying obligation. but can don't a in the but their apartment Midland deal maybe United bet Odessa, in probably have Odessa as States we today, that for or rent. was hotbed probably find – apartment. there

West Texas, did we're out heavy Or but or can't Or I think we one So, complex in out not really… it's I there. have gone? do we

Michael Riebe

We I Midland have exposure have Odessa exposure. we one any think hotel don't directly. in

Charles Malcolm Holland

Okay.

look do Gary. we really at So, just hard to calculate. It's it,

Terry Earley

Gary, is this Terry.

tag on to that. me Let

I the by the using Texas think pick this we're is way GDP and we Moody's unemployment the forecast. fact up

And to for going in are it. pretty industry, reflecting on what's it's those those the coming providing oil through extent the forecasts directly we're so, and

X.XX% though the impact even good with have so, of secondary oil I'm in especially the and tertiary we job don't pretty economy. direct pretty qualitative on and anticipating a exposures, doing a And in that confident, from we're included Texas factors that,

Gary Tenner

Thank much. you very

Terry Earley

Frank. Thanks,

Operator

Our from Woody comes next question Lay KBW. of

open. is line Your

Woody Lay

morning, guys. good Hey,

Charles Malcolm Holland

Good morning.

Woody Lay

just a just if on of your geographic I mentioned. touch secondary and Dallas loan curious was of the portfolio? between you and to you which Houston loan breakdown Just had energy, impacts

Charles Malcolm Holland

division close one-third be two-thirds, loan about that. to is is bank the distribution The and going to

Woody Lay

Got it.

think is the source a more or curious then, slide Okay. be can And this of I it if weekly XX influx you really the color was longer-lasting if That's bank? on deposit the nature surrounding temporary deposit interesting. helpful. in for just growth funding is

Terry Earley

I bit a think honest to be with it's you. both, of little

going it, fixed piece is out more I a significant on equity But in think move of there's somewhat is markets a PPP think some and inflows the in the of these of that everything people meaningful as banks. program. piece, sustainable I given temporary, the income the

the And so, flows been have just amazing.

And going think long? to know. so, how the I really future, don't I – foreseeable it's for

than would not in been Veritex, banks be I and think the years. significantly funding position in they've a are better but of to place going anticipate I years most just funding

Woody Lay

guys. Got Thanks, had. helpful. all I it. That's That's

Charles Malcolm Holland

you. Thank

Operator

And, Thank concludes this ladies conference and gentlemen, for participating. today's you call.

may You now disconnect.

Susan Caudle	Executive Assistant and Shareholder Relations
Charles Malcolm Holland, III	Chairman, President and Chief Executive Officer
Terry Earley	Executive Vice President and Chief Financial Officer
Michael Riebe	Senior Executive Vice President and Chief Credit Officer
Michael Rose	Raymond James & Associates
Bradley Milsaps	Piper Sandler & Co.
Gary Tenner	D.A. Davidson & Co.
Woody Lay	Keefe, Bruyette & Woods, Inc.

Veritex (VBTX) 3 May 202020 Q1 Earnings call transcript